Telecommunications company Bezeq (TASE: BEZQ) and infrastructure investment fund Generation Capital (TASE: GNRS) have announced a memorandum of understanding (MOU) on collaboration between Bezeq and Generation Capital subsidiary PowerGen in forming a company jointly owned in equal parts to supply electricity to domestic and small business customers.
The MOU comes at a time when Dalia Energy Companies (TASE: DLIA) is nearing the financial closing of its purchase of the Eshkol power station in Ashdod for NIS 9 billion, a deal that will end Israel Electric Corporation’s monopoly status in the power production segment, as called for in the 2018 power industry reform. Bezeq and Generation Capital’s joint venture will face stiff competition from major players such as Hot, Partner, Electra, Pazgaz, Amisragas, and Cellcom.
The venture’s target is 400,000 customers by the end of 2030, by which time, according to consultancy BDO, the market share that is expected to switch to Israel Electric Corporation’s competitors will be worth some NIS 10 billion.
In the joint venture, Bezeq will be responsible for marketing, sales, and service, while PowerGen, which has natural gas-fueled power stations, solar installations, and storage solutions, will provide the power from its various means of production.
A constraint that could hinder Bezeq in entering the power supply market is dependence on smart meters. In order for households to be able to choose between suppliers, their existing electricity meters need to be replaced with smart meters, and Bezeq will be dependent on the rate of replacement, which is carried out by Israel Electric Corporation itself.
"For the first time ever, Bezeq is initiating a strategic move and entering an important field that is not part of the telecommunications industry," said Bezeq CEO Ran Guron. "We will operate in a market worth billions of shekels annually, leveraging the company’s strengths and advantages. The new venture will spur development of the power market, and spearhead competition in a critical area for Israel."
Generation Capital co-founder and CEO Erez Balasha said, "We have been gearing up for this change for a long time. The formation of the supply venture with Bezeq is part of the implementation of Generation Capital’s strategic plan to become a market leader in power supply to a variety of customers on the basis of power from the production and storage assets that it owns."
Published by Globes, Israel business news - en.globes.co.il - on January 28, 2024.
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