Chinese government co wins ports construction tender

Haifa Port
Haifa Port

Industry sources: The bid was low because China sees construction of the ports as a strategic project.

Pan Mediterranean, an affiliate of the Chinese government's China Harbour Engineering Company Ltd. has won the tenders to build the new ports at Haifa and Ashdod. Sources inform ''Globes'' that, in a few days, Israel Ports Development & Assets Company Ltd. will ask the company which of the ports it wants to build.

China Harbor's bid was substantially lower than the bids by Shapir Civil and Marine Engineering Ltd., Ashtrom Properties Ltd. (TASE:ASPR), Shikun & Binui Holdings Ltd. (TASE: SKBN), and Ludreco, a unit of Belgium's Jan De Nul Group. Industry sources believe that the Chinese bid was so low because they see construction of the ports as a strategic project. Pan Mediterranean's win in the tender should make it easier for a Chinese company to win the port operation tender, which is in the prequalification stage.

Under the tender terms set by the Ports Development Company, the winner of the tenders may build only one port. After Pan Mediterranean notifies the company which port it will build, the Ports Development Company will ask the runner-up to build the second port at the same terms offered by Pan Mediterranean. If the runner-up refuses, the Ports Development Company will ask the third-place finisher.

Market sources said, off the record, that Pan Mediterranean's financial bid was NIS 600 million to NIS 1 billion less than the bid by the runner-up. "Globes" earlier reported that China Harbor bid NIS 3.35-3.5 billion, Shapir and Ashtrom each bid over NIS 4 billion for each port, and Shikun & Binui and Ludeco's bids were nearly NIS 5 billion. The financial bid accounted for 70% of the bid and the technical component was 30%.

The Ports Development Company originally estimated the cost of building each port at NIS 4 billion, and that they would take 6-8 years to build. Each port will have a capacity of one million TEU (20-foot equivalent container), compared with the aggregate capacity of 3 million TEU of Ashdod Port Company Ltd. and Haifa Port Company Ltd. In view of the Ministry of Finance's reservations against building the two ports simultaneously, the Ministry of Transport and the Ports Development Company agreed to reduce the project by 15% and shorten the wharfs by 100-200 meters, lowering the cost.

This decision was backed by a Bank of Israel report, published on Tuesday, which states that the construction of two small ports is better than the construction of one big port, because this would create real competition that will lower costs for users.

Nonetheless, the Ministry of Finance continues to doubt the worthwhileness of building two ports and is waiting for the results of the international tender for the ports' operator. If operators are not found for the two ports, the ministry may intervene and try and delay construction of the second port.

Four companies bid in the prequalification stage of the ports operator tender, which was closed in April: Germany's Eurogate GmbH & Co., the Netherlands' Terminal Investment Ltd. (TIL), International Container Terminal Services Inc. (ICTSI) and China's Shanghai International Port (Group) Co., which made a last-minute bid. The winner will receive a franchise to operate the two ports for 25-30 years.

Published by Globes [online], Israel business news - - on June 18, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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