The IEC is accelerating the organizational reform approved by the government at the end of 2018. The company is expected to approve this week the tender for the sale of the power plant at the Hagit site in the north (Ein Tut interchange). This is what Calcalist has learned.
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Hagit will be the third station to be transferred from the IEC to the private market according to the reform provisions that forced the IEC to drop a market share of about 70% in the field of electricity production, to a share of only about 35%.
The information room for those interested will open in January, and the selection of the winning group will be made by mid-2021. The transfer of control of the power plant is planned for early 2022. This move will reduce the IEC’s market share in electricity generation to only 55%. With the sale of another station (Reading or Eshkol) the IEC will cease to function approxmonopoly In the field of electricity generation.
On the way to breaking the monopoly
The sale of the Hagit power plant is ahead of schedule by about a year. According to the reform, the IEC is expected to complete the sale of the stations by 2026. At the end of 2019, the sale of the power plant in Alon Tavor was completed to a group consisting of Mivtach, Shafir and the Chinese government PMEC. Last June, the sale of the power plant in Ramat Hovav was announced to a group of Shikun VeBinui, Edelcom and Adletech.
The installed capacity of the Hagit station is about 1,400 megawatts (about 11% of the company’s current production capacity). As part of the tender, the IEC sells only 50% of the station, ie about 700 megawatts. The reason: the company undertook to go down to a market share of about 35%, and in mathematical calculation the ability to reach this goal embodies the sale of half of the station. The second half will remain owned and operated by the IEC.
Originally, the third station that was to be sold was Reading, but the IEC decided to take advantage of the success of selling two stations in less than a year, rather than wait for the authorities who have yet to determine whether Reading will continue to generate electricity after its sale, so change the order of sale.
Rates will be reduced
The Hagit site has several power units that operate on natural gas. The book value of half of the station to be sold is about a billion shekels, but as past experience shows, this is only a theoretical price. The power plant in Alon Tavor was sold for NIS 1.9 billion (compared with a book value of NIS 850 million), with the surplus returned to the public through a 4% reduction in the electricity tariff.
According to IEC chairman Yiftach Ron Tal, the power plant in Ramat Hovav was also sold at a high price (NIS 4.25 billion, twice the value in the books) and this surplus will return to the public in early 2021 by lowering the tariff, which will help the economic distress caused by the corona crisis.
Buyers will receive the station without the hump of the IEC’s problematic gas contract, which is the most expensive in the economy (about $ 6.4 per unit of heat) and will be able to purchase gas from the three existing suppliers (Tamar Reservoirs, Whale and Crocodile Shark) at a cheap price. By comparison, Greek energy company Ramat Hovav sold 20-year-old gas for about $ 3.8 per unit of heat earlier this month. According to IEC CEO Ofer Bloch, the sale of the power plants will lead to a reduction in the IEC’s production share to less than 50%.
Among the players expected to compete at Hagit Station is the OPC controlled by Idan Ofer, which missed by a gap of less than half a percent in the pricing it offered compared to the winning team. The winners of the previous tenders are expected to compete this time and Keren Noy and Shafir Engineering may join.
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