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22/08/18
 

IDE will divest itself of holdings in an existing desalinization plant, as a condition of participating in a tender for the construction of a new desalinization plant

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Date of Publication:
22/08/2018

August 22, 2018

-Press release-

IDE will divest itself of holdings in an existing desalinization plant, as a condition of participating in a tender for the construction of a new desalinization plant

The divestiture will take place even if IDE does not win the "Sorek B" tender ("fix it anyway")

The Director-General of the Antitrust Authority, the Committee for the Reduction of Concentration, the Inter-Ministerial Price Committee for Seawater Desalinization, and IDE, have reached agreements, by which IDE will be allowed to participate in the tender to construct and operate a new desalinization plant at Sorek, subject to divesting from its holdings in an existing plant.

IDE is obliged to sell its holdings in the plant whether or not it wins the tender, and thus after the tender IDE will hold no more than three desalinization plants out of six ("fix it anyway"). If IDE does not win the tender for Sorek B, the company will be able to bid in future additional tenders. In such a case, where IDE participates and wins a tender for another plant, it will own no more than three out of seven desalinization plants.

Unlike in other markets, in the field of desalinization the commercial terms (quantities and prices of water) are set in advance in the terms of the tender to construct the plants;  and the entire quantity of water demanded by the state is sold to it by the terms set in the tender.

Therefore, there is significance to the number of bidders in a tender to construct and operate a desalinization plant – where the price the state will pay for water from the plant is set for many years.

Sometimes, the state will request existing plants increase their production capacity (either temporarily or in a permanent increase of capacity). In such cases the number of competitors able to increase the quantity of desalinated water is important.

On the one hand, IDE's participation in the tender increases competition for the tender, but on the other hand should IDE win the tender this increases the concern that competition for production increases (temporary or permanent) might be harmed.

Divestiture from an existing plant in return for the right to participate in a tender for the construction of a new plant allows both maximum competition in the tender, and a reduction in the competitive concern if and when an increase in capacity is carried out.

IDE is controlled by Delek Group and Alpha Water Partners (50% each). Delek, controlled by Mr. Yitzhak Tshuva, is a concentrated entity according to the terms of the Anti-Concentration Law. Therefore, the Committee for the Reduction of Concentration's position was solicited regarding IDE's participation in an additional desalinization tender. The committee took account of the position of Delek Group, which holds the "Tamar" and "Leviathan" holdings, desalination plants, significant holdings in gasoline filling stations, an the "Phoenix" – a significant financial entity. IDE's undertakings allow the public to have the benefit of the participation of IDE in the tender – as a worldwide leader in desalinization – and also reduces Delek Group's concentrated power in desalination, while lowering economy-wide concentration.

As stated, the divesture will occur in any case, even if IDE does not win the tender for Sorek B. To ensure the divestiture, IDE is subject to financial penalties. In additions, should IDE not divest its holdings in the desalinization plant in the time period allotted, the Desalinization Administration may transfer the sale to a trustee. In addition, the right to participate in future tenders to construct desalinization plants is subject to the obligation to complete the sale in the period set in advance.