Siemens exec: Bribery affair must never be repeated

Willi Meixner Photo: Eyal Yizhar

Siemens Global Power and Gas Division CEO Willi Meixner says his company seeks investment in Israeli gas-fuelled power plants.

Siemens Global is interested in playing a key role in building power plants and developing gas fields in Israel and asserts that it has taken all necessary measures to prevent incidents such as the bribing of Israel Electric Corporation (IEC) (TASE: ELEC.B22) executives from being repeated, Siemens Global Power and Gas Division CEO Willi Meixner told "Globes". In a rare comment on the bribery affair, Meixner said, "The concerns of the Israeli public about the reports of this affair are understandable. I can only say that Siemens Global has introduced extensive organizational change on compliance. The company has launched internal and external mechanisms to control fund transfers and payments and in certain countries, such as Israel, we are being especially vigilant. What happened must never happen again."

Over the years, Siemens has been one of IEC's main suppliers and claims to have supplied 35% of Israel power production array. In conventional power production, Siemens is the construction and operation contractor for IPM's future power plant in Beer Tuvia, a $400 million project, and provides turbines for smaller power plants employing cogeneration technology, which produces steam in addition to power.

However, in renewable energy Siemens has encountered severe disappointments, primarily the failed acquisition of the Solel Solar Systems plant in Beit Shemesh - a deal which resulted in Siemens losing almost one billion euros. Meixner says that Siemens does not rule out investing in private power production ventures, as a financial investor controlling 10%-25% of the equity.

What new investments are you examining in Israel's energy sector?

"We are mainly considering the construction of power plants run on natural gas and the supply of systems to the gas industry. In the current visit, we have been impressed with the progress made by small private power producers, such as Alon Tavor and Ramat Gabriel. We are highly interested in the recent announcement made by your energy minister on terminating the use of coal and developing new gas fields in Israel's economic waters."

"The investment horizon of the projects we are interested in, in the construction of natural gas power plants (combined cycle power plants) is 10-15 years. On the basis of what I have heard during my visit here, we believe that in the next few years, power plants with a total output of 3-6 gigawatt (3,000-6,000 megawatt) will be installed here."

On a global scale, isn't Israel a small market?

"No, there are significant fluctuations in the market, and we estimate that the annual global demand is for the construction of natural gas power plants with a total output of 50-60 gigawatt. Therefore, Israel is a key market for us."

Why does the demand for natural gas in Europe keep dropping?

"You are right, at present the market is difficult in Europe, the US and Australia. In any place where veteran power corporations compete with renewable energy producers, the company producing power using fossil fuel with a higher marginal cost has a problem. Europe has zero demand for combined cycle power plants and this forced us to undergo extensive organizational changes. Nevertheless, there are numerous opportunities in the developing world. As long as the world is committed to the Copenhagen 2021 Accord, and we see a move from coal to natural gas in China, India, Africa and other countries, there will be a demand for power plants run on natural gas."

Is renewable energy already capable of competing with natural gas in free market conditions, without subsidies?

Solar power prices have dropped for seven successive years by 20% annually and it is clear that the costs of photovoltaic power producers are nearing those of power producers using fuel. Some wind power producers are also nearing that point. Eventually, there will be a mixture of various fuel types and energy sources. Estimates are that fossil fuels (coal, oil and gas) will remain with us for at least 50 years. Furthermore, we should remember that heavy industry is highly dependent on steam - which can be generated only in fossil fuel power plants."

Siemens gained immunity for NIS 160 million and a promise to invest in Israel

In May 2016, State Attorney Shai Nitzan agreed to sign an agreement providing Siemens Global executives with immunity from criminal suit in Israel for bribes to IEC employees. As part of the settlement, Siemens committed to paying the State of Israel NIS 160 million, to the appointment of an external inspector to supervise its business in Israel who will oversee the integration of a culture of compliance on bribery offenses in the corporation. Siemens also announced that it intends to continue making extensive investments in Israel.

The agreement was signed in parallel to the filing of indictments for bribery offenses against six former and present IEC executives, charged with accepting bribes totaling millions of shekels from Siemens. According to the charges, the bribes had been used, among other things, to rig tenders for turbine acquisition totaling NIS 2.5 billion. According to the indictments, bribes totaling $13.5 million were transferred by Siemens using Hong Kong-registered company Oakfield Ltd. The main state witness in this affair is the then-CEO of Siemens Israel, Oren Aharonson. Siemens claimed that the parent company did not know and could not have known about the bribes, since they were not mentioned in the reports provided by Aharonson to the company.

Siemens Israel CEO Dr. Shmuel Fledel told "Globes", "Siemens has disclosed all the information it possessed to the law enforcement authorities, and has not concealed anything. We provided any information or documents requested by the State Attorney's Office that was in our possession and that we knew about. We should remember that in this affair, Siemens was not been aware of everything and that a state witness is also involved."

Published by Globes [online], Israel business news - www.globes-online.com - on September 26, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Willi Meixner Photo: Eyal Yizhar
Willi Meixner Photo: Eyal Yizhar
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