The Israeli companies negotiating to construct a port in Haifa bay are demanding hundreds of millions of shekels more than the bid by Pan Mediterranean Engineering (PMEC), the Chinese company that won the tender, sources inform “Globes”. The negotiations are being conducted by the Israel Ports Development and Assets Company, to which the government has given responsibility for the new private ports in Ashdod and Haifa.
The two competing Israeli consortiums, one that includes Shapir Civil and Marine Engineering Ltd. Engineering and Ashtrom Properties Ltd. (TASE:ASPR) and one that includes Housing and Construction Holding Co.(Shikun u'Binui) (TASE: HUCN) and JV Ludreco, have refused to build the northern port at the price offered by PMEC. Under the tender terms, Israel Ports is negotiating simultaneously with the two groups - a pricing policy to see which will make the lowest bid. If no compromise is reached with either of them, Israel Ports will have to publish a new tender.
PMEC, a subsidiary of Chinese government company China Harbor, won tenders for building two ports: one for NIS 3.35 billion in Ashdod, and one for NIS 3.5 billion in Haifa bay. The company was given the option of selecting which of the two it wished to build. After the Chinese company elected to build the port in Ashdod, Israel Ports proposed that the Shapir Engineering and Ashtrom group build the Haifa bay port on similar terms to those proposed by the Chinese company. Sources inform "Globes," however, that the group declined to match the terms offered by the winning bid submitted by the Chinese company. Israel Ports therefore contacted the third group in the tender, Housing and Construction and Luxembourg company Ludreco, but they also declined.
Market sources assert that the Chinese company, a government company not constrained by measures of profit and loss, could afford to make such a low bid. The sources said that the Chinese had submitted such a low bid because they regarded building the ports as a strategic enterprise; furthermore, construction of the port by a Chinese company is likely to make it easier for a Chinese company to win the tender for operating the port, a tender that is currently in the advanced selection stage.
Other sources in the sector, however, claims that the Chinese bid was not lower at all than the estimate by Israel Ports, and that the price was an exact reflection of the cost of construction. According to these sources, Israel Ports initially estimated construction at NIS 4 billion, but as soon as the company decided to cut the extent of the ports by 15-20%, their evaluation dropped to NIS 3.4 billion, which is very close to the Chinese company's bid.
Israel Ports said, "The tender process has not ended, and we therefore decline comment."
Published by Globes [online], Israel business news - www.globes-online.com - on September 7, 2014
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