Hadera Paper to sell power station to Mashav

The sale will include agreements on the sale and use of equipment and the purchase of electricity and steam.

The board of directors of Hadera Paper Ltd. (TASE: AIP; Pink Sheets: HAIPF) considered several offers from potential buyers for its power station, and decided to accept the offer of fellow subsidiary Mashav Initiating and Development (which owns the Nesher Israel Cement Enterprises Ltd. monopoly). Hadera Paper, which is part of the Clal Industries and Investments Ltd. (TASE: CII) group, previously announced its intention to sell 50.1% of the shares in the power station it was building near the plant of fellow subsidiary Clal Energy for NIS 40 million.

Due to the opposition of Entropy, a consultant company for investment institutions, however, and after discussing the matter with Entropy, Hadera Paper announced three months ago that it would take steps to obtain additional offers for the investment. The company today reported that after considering several offers, its board of directors committee had recommended the Mashav offer "as the best of the offers presented to the company, and as a fair and reasonable offer." The current format is a sale of complete ownership in the power station. Mashav is controlled by Clal Industries, which owns 75% of its share capital, as well as 59.1% of Hadera Paper. Clal Energy, which initially was to have invested in the power station, is another fully owned subsidiary of Clal Industries. Clal Industries, controlled by Len Blavatnik, is managed by chairman and CEO Avi Fischer.

Heavy loss in third quarter

Today's report by Hadera Paper indicates that company management will continue its negotiations with Mashav for the purchase of the shares, and that the deal will include a number of accompanying agreements, among other things concerning the sale and use of equipment and an agreement to purchase electricity and steam. Hadera Paper notes that if and when a detailed agreement with Mashav is formulated, it will be brought before the company's board of directors and general shareholders meeting for approval.

The power plant is expected to produce 120 megawatts, and to supply electricity and steam to the nearby Hadera Paper plant's production system. The surplus electricity will be sold to Israel Electric Corporation (IEC) (TASE: ELEC.B22) and private customers.

Hadera Paper has a NIS 340 million market cap. The company finished the third quarter of 2014 with a NIS 59 million loss, following two quarters during which it showed signs of recovery, after a difficult period since 2011. A thorough housecleaning by new CEO Shlomo Liran, who replaced Ofer Bloch in August after a five-year term, cannot be ruled out.

NIS 32 million, the bulk of Hadera Paper's third-quarter loss, was caused by a drop in the value of writing and printing paper, which led to a six-fold rise in to NIS 47 million in the company's operating loss. The company reported that together with the slide in paper prices, caused by supply surpluses, "the downtrend in demand for paper products worldwide and in Israel continued, as a result of technological changes and a change in customer attitudes."

Hadera Paper's loss in the first three quarters of the year totaled NIS 23 million, 32% less than in the corresponding period in 2013. The company has lost a total of NIS 210 million since 2010.

Published by Globes [online], Israel business news - www.globes-online.com - on December 25, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

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