Even as Israel Electric Corporation (IEC) (TASE: ELEC.B22) battles private power producers and warns about superfluous power plants, the company faces the founding of a second government electricity company that plans to build power stations on state land. Sources inform ''Globes'' that the government will allocate New Power Stations for the Production of Electricity in Israel Ltd. NIS 7-8 million in 2012 to find suitable sites, such as on land of government-owned Petroleum and Energy Infrastructures Ltd. (PEI) in Haifa Bay.
After finding suitable sites, New Power Stations will initiate planning procedures for them in order to sell the land to developers. The Ministry of Finance believes that the company can fill an important role in creating competition in the electricity market.
New Power Stations was founded following a government decision to forbid IEC from building new power stations and because of the problems plaguing private power producers. The private market treats the company as a curiosity. After years with no executives, a chairman and CEO were appointed a year ago. Chairman Ilan Omer, the son of the mayor of Nesher, is an associate of Minister of Finance Yuval Steinitz.
An investigation by "Globes" found that bureaucratic idiocy unnecessarily delayed the establishment of New Power Stations: an embarrassing error resulted in the company receiving an allocation of NIS 1 billion in shareholders' equity, an amount that would allow the company to demand massive capital injections. The company received an operating budget of NIS 750,000 for 2011, and after half the amount was transferred, the Ministry of Finance demanded that the company make a capital reduction to receive the rest. This process can only be implemented by the courts.
Despite the delays, the Ministry of Finance continues to believe in New Power Stations' importance as a tool for fostering competition in the electricity market. One of the main barriers to the construction of power stations is the shortage of available land, but as a government company, New Power Stations can obtain government land without a tender. The obligation to market government land by tender was a key reason for the failure of Israel Corporation's (TASE: ILCO) plan to build the Alon Tavor power station in collaboration with IEC a year ago. "Globes" broke the story about the initiative, which had the support of then-Ministry of Finance director general Haim Shani.
The government believes that one of the best sites for building a new power station is on the PEI site at Haifa Bay. The land is already zoned for energy use, so there is no need for the protected rezoning process, which can drag on for years. Environmental organizations and local residents can block construction of power stations on land that is not already zoned for energy.
Sources inform ''Globes'' that the Government Companies Authority has already begun the process of using the PEI site for a power station, much in the same way as the site of government owned Eilat Ashkelon Pipeline Company's site in Ashkelon is the site of the Dorad Energy Ltd. power station, which now under construction.
Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2011
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