The giant solar venture of Shikun & Binui Holdings Ltd. (TASE: SKBN) at Ashelim will continue as planned, the Ministry of Finance today decided. After the company announced last November that its 50% Spanish partner in the venture, Abengoa, was on the verge of bankruptcy, the government considered halting the enterprise, or replacing the technology for the plant with different and much cheaper technology that would save the Israeli economy billions of shekels in the life of the venture. It has now been decided regardless to go ahead as planned with the same technology.
The plant will produce 110 megawatts of electricity using thermo-solar technology. The plant's construction will cost as estimated NIS 3.5-4 billion, of which NIS 1.1 billion has been invested to date. When Shikun & Binui and Abengoa won the tender in June 2013, the state promised to buy the electricity produced at NIS 0.85 per kilowatt-hour.
Since then, however, the price of photovoltaic (PV) energy, another solar technology, has plummeted, and the rate promised to developers of solar plants has fallen to NIS 0.27-0.31 per kilowatt-hour, a drop of 65%. That may not sound significant, but over the decades in which the plant is projected to operate, it amounts to a difference of NIS 5-6 billion. This cost will, of course, be borne by electricity consumers in Israel.
Government ministries therefore considered forcing the developers to replace the technology, but decided not to do so. The Ministry of Finance Accountant General department today explained that the change in technology would delay the plant's operation, currently slated for 2018, by 3-5 years. It was also explained that beyond the compensation that the state would have to pay to Shikun & Binui, substantial changes would drive away investors, who would think twice before operating in Israel, already not considered an easy country in which to do business.
Additional considerations involve energy security. Both the Ministry of Finance and the Ministry of National Infrastructure, Energy, and Water Resources explained that the state had to diversify its sources of energy, and that different solar energy technologies were one way of doing this. Furthermore, in contrast to PV, which does not work on cloudy and rainy days, and therefore makes it difficult to stabilize electrical tension, an electricity storage facility was being built on the site of the thermo-solar venture. Finally, in contrast to other solar ventures, of which the developer will retain ownership after the agreement with the state expires, the Shikun & Binui plant will revert to state ownership after 25 years.
Published by Globes [online], Israel business news - www.globes-online.com - on June 26, 2016
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