International concerns are showing interest in Israel and Jordan's Red-Dead Sea pipeline. Sources inform "Globes" that 17 groups of Israeli and international companies yesterday bid in the tender for construction and operation of the project. Among the Israeli companies bidding were Shari Arison-controlled Shikun & Binui Holdings Ltd. (TASE: SKBN), Kardan NV (TASE: KRNV;AEX:KARD) subsidiary Tahal Group International BV, Yitzhak Tshuva-controlled IDE Technologies, and GES, controlled by Azrieli Group Ltd. (TASE: AZRG) subsidiary Granite Hacarmel. A sizeable number of Chinese government companies bid in the tender, as well as European companies. The tender is estimated at over $800 million.
The project is designed to save the Dead Sea, whose level has been falling year by year, and arrange the division of water between Israel and Jordan. The parties signed a letter of intent as early as December 2013 in the World Bank headquarters in New York. Under the agreement, the first pipeline to be laid will be 200 kilometers long. It will pipe water from the Red Sea to the Dead Sea, and its route will pass through Jordanian territory. Work on laying the pipeline is scheduled to take three years.
A desalinization facility and power station on the Jordanian side
Some of the water passing through the pipeline will be sent to a desalinization plant in Aqaba, Jordan with an annual capacity of 65-85 million cubic meters. The plant will also serve Israel, which will buy water from it and supply it to the Arava region and Eilat. In exchange, Israel is undertaking to supply water from Lake Kinneret (the Sea of Galilee) to northern Jordan. The desalinization plant will be built and operated according to the build, operate, and transfer (BOT) model. The company that wins the tender will operate the plant for 25 years, after which ownership will pass to the state. The tender also includes the construction of a 10-megawatt hydroelectric power plant on the Jordanian side.
Israel and Jordan last December published a tender for carrying out and operating the project, and 94 companies purchased the tender documents. Bidders had until yesterday to submit their candidacy, and the list of bidders is being published today. Sources inform "Globes" that four of the 17 bidders are Israeli companies. Tahal has joined forces with Spanish company Abengoa, which made headlines in recent months as a partner with Shikun & Binui in the solar project in Ashalim by getting into financial trouble and being replaced in that project. Sources close to Abengoa say that the company is back on its feet, after having come to arrangements with the banks.
GES is cooperating with a subsidiary of Chinese company PetroChina, and Shikun & Binui is surprisingly joining forces with Israeli government water company Mekorot National Water Company. Another company is IDE, owned in equal parts by Israel Chemicals (TASE: ICL: NYSE: ICL) and Delek Group Ltd. (TASE: DLEKG). Quite a few Chinese companies, some of them government companies, also bid in the tender, including water corporation Hutchison and government company Sinohydro, which is making a joint bid with an Italian company, Chinese government construction company CSCEC (the third largest in the world), which is cooperating with South Korean companies and a Japanese company, and the Shanghai national electricity company, which is entering the tender on its own.
Other interesting candidates are Lebanese company Butec, which is bidding together with international company Veolia, and Egyptian company Orascom, which is bidding together with Spanish company Cobra. Other bidders are from Canada, Austria, Spain, and France. Japanese company Mitsubishi is also making a bid. The Ministry of Regional Cooperation declined to comment today on the bids submitted by the groups, saying that it was checking together with the Jordanian government to see which bids met the conditions.
Prime Minister's Office working on a separate plan
Last March, "Globes" revealed that Israel was considering an alternative or simultaneous plan for a project currently being promoted by the Ministry of Regional Cooperation together with the Jordanians, based on a tunnel instead of pipelines.
For several months, Israel Electric Corporation (IEC) (TASE: ELEC.B22), Mekorot, and private development groups have been considering whether 100-kilometer tunnels can be dug to transport water from the Mediterranean Sea to the Dead Sea and a hydroelectric power station built underground to produce electricity utilizing the difference in elevation between the Mediterranean and Dead Seas. The plan is being checked by an inter-ministerial team coordinated by Prime Minister's Office director general Eli Groner. If the alternative plan goes ahead, however, Jordan is liable to regard it as a breach of the agreement with it.
EcoPeace Middle East (formerly Friends of the Earth Middle East) Israel director Adv. Gidon Bromberg, representing Jordanian and Palestinian activists, said, "Without the consent of Jordan and the Palestinian Authority, investors and international companies will oppose the project, and won't invest a dollar here. Under international law governing the joint Mediterranean basin, the consent of all parties is required."
Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2016
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