"A tender is the right way to maximize the public's share in Dead Sea natural resources," Accountant General Michal Abadi-Boiangiu wrote in a letter, a copy of which was sent to Minister of Finance Moshe Kahlon. In the letter, addressed to Yoel Naveh, chairman of the committee on the end of the franchise period, Abadi-Boiangiu writes that she has completed her study concerning a valuation of the assets of Israel Chemicals (TASE: ICL: NYSE: ICL), but is leaving further handling of the matter to her successor, Rony Hizkiyahu, who will become Accountant General at the end of this month.
Underlying the letter is Israel Chemicals' expectation that the state will extend its franchise for mining natural resources in the Dead Sea when the franchise expires. Although the current franchise expires only in 2030, Israel Chemicals has announced a halt in its investments in Dead Sea Works until the matter is cleared up - an announcement that was interpreted as an attempt by the Idan Ofer-controlled group to exert pressure on the state to renew its franchise.
Abadi-Boiangiu's study, on which she worked for two years, presents a method for calculating the value of the assets that Israel Chemicals will transfer to the state at the end of the franchise period, under the assumption that the state will have to pay Israel Chemicals for them. The study concerning the assets arrangement is an important element in the government's preparations for the franchise expiry, which the committee headed by Naveh is handling.
Instead of publishing her study findings, Abadi-Boiangiu chose to leave them to Hizkiyahu. "In view of the upcoming replacement of the accountant general by Hizkiyahu, and given that fact that the accountant general will be responsible for maintaining the department's position to the company, the cabinet, and the public, and in view of the complexity and scope of the matter, I believe that it would not be right to present the incoming accountant general with an accomplished fact on the assets arrangements," Abadi-Boiangiu wrote in her letter.
During her six-year term as accountant general, Abadi-Boiangiu dealt with six main issues involving Israel Chemicals: the salt mining agreement, the offer by Potash Corporation of Saskatchewan to acquire Israel Chemicals, arbitration over royalties, the Sheshinski 2 Committee, the state's golden share in Israel Chemicals, and the assets arrangement.
In her letter, Abadi-Boiangiu, an expert on the subject, listed issues she believed required attention from the committee, the Ministry of Finance, and the entire government in the framework of the decision about the future of the franchise. Among other things, this involves whether to allow foreign parties, such as Potash Corporation, to take part in the future tender, and in what way (controlling interest, minority partnership, etc.), the question of precedence (Israel Chemicals' first refusal rights under Section 25 of the franchise deed, the fate of the assets - whether to make them part of the tender, together with the future franchise, taxation and working capital issues, and the golden share in Israel Chemicals currently possessed by the state, as well as the question of whether to retain the golden share in a future franchise holder or to guarantee the public's rights in some other way.
Abadi-Boiangiu does not state her study's findings, but notes that it raises complicated accounting and legal questions. Among other things, these involve the difficulty in dealing with individual assets and the fact that the lifespan of the assets is sometimes significantly longer than their accounting lifespan.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 17, 2017
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