Short licenses spell trouble for Israel's private power plants

The Zionist regime’s Energy and Water Resources Ministry announced last week, in a surprise move, that licenses issued to private electricity plants will be valid for one year only, despite the fact that many such companies have already signed agreements with customers to supply power for anywhere between five and 20 years.

Also, the regime is already committed to paying the new plants availability fees for a period of 20 years, which together with the long-term customer contracts formed the basis for the funding arrangements needed to build the projects.

The announcement has caused confusion for regulators and is provoking anger from the financial institutions that have put up billions of shekels for projects that are now shrouded in doubt.

Some industry figures believe the ministry’s decision was the result of pressure from Israel Electric Corporation, which is hoping to avoid further competition before it negotiates a new collective bargaining agreement with its employees.

In 2013, around 40 large customers cut ties with the IEC, opting for private electricity suppliers, primarily OPC.

In 2014, 50 additional major electricity users are expected to turn to private suppliers, primarily the Dorad power plant near Ashdod.

According to IEC estimates, the company stands to lose about 15% of sales to competitors over the next two tears.

In a financial report published about six months ago, the IEC estimated that it will lose around 3.2 billion shekels in revenues from in 2015 as a result of increased competition.

The first victim of the licensing decision was Clal Industries’ generating plant for the Nesher cement factory, which was completed a few months ago at a cost of $90 million dollars (313 million shekels.) The plant recently received a license valid for one year only.

The next victim is likely to be Dorad, one of the largest private power plants in Israel, which is due to be dedicated in about two weeks.

Located near Ashkelon, the plant was built over three years at a cost of 4.3 billion shekels, using external funding of 3.5 billion from five banks and a similar number of financial institutions.