Delek, Supergas win hospitals natural gas tender

Sheba Hospital Tel Hashomer Photo: Tamar Matsafi

Conversion to natural gas will save Israel's 13 government hospitals NIS 60 million a year.

Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, and Supergas, controlled by Azrieli Group Ltd. (TASE: AZRG), have won a tender for converting government hospitals to natural gas, sources inform "Globes." The tender is for 11 general hospitals and two psychiatric hospitals. Together with Baran Group (TASE: BRAN; Nasdaq: BRANF), Delek will convert six hospitals, and together with Ludan Engineering Co. Ltd. (TASE: LUDN), Supergas will convert seven others. The companies will also be responsible for supplying natural gas to the hospitals for five years. The companies' bids were far lower than expected by the Ministry of Health.

Two other companies bid in the tender: Ofer Eini's Dorgas and Shraga Brosh's Oshrad. The hospitals spend NIS 150-200 million a year on energy, and the transition to natural gas is expected to save them NIS 60 million. For example, the Sheba Medical Center (Tel Hashomer Hospital) will save NIS 8 million a year, and the other hospitals will save NIS 2-3 million a year each.

The hospitals plan to use natural gas for kitchens, sanitation, and heating.

While the Ministry of Health estimated the cost of converting the hospital at more than NIS 60 million, the bids by the two companies for the conversion totaled less than NIS 30 million. A senior source at one of the losing companies accused Delek and Supergas of bidding less than the work would cost them, and claimed that the two winners would be unable to meet their bid. The two tender winners also offered a relatively low price of less than $5.50 per MMbtu. The total worth of the gas is estimated at NIS 60 million for five years.

Supergas CEO Eyal Henkin said today, "This is excellent news for the Israeli energy sector. It is another significant step in the market's switch to natural gas. We're glad to have won the tender, and are looking ahead in expectation of full cooperation with the hospitals in implementing and applying the transition to natural gas."

GKH Law Offices energy and infrastructure partner Anat Klein, who wrote the tender, together with the Halevi Dweck firm, managed by Arnon Rund, said, "At this time, when the introduction of natural gas is slowing down because of the plunge in oil prices and the regulatory imbroglio, the Ministry of Health tender is praiseworthy." She added, "At the same time, it should be verified that the gas distribution companies can extend the pipelines to the hospitals within a reasonable time."

Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2016

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

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Sheba Hospital Tel Hashomer Photo: Tamar Matsafi
Sheba Hospital Tel Hashomer Photo: Tamar Matsafi
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