Water industry sources have told "Globes" that governmental parties trying to push through the sale of Mekorot National Water Company's desalinization facility to private investors at a negligible price were behind the wave of reports about the alleged collapse of Mekorot subsidiary Mekorot Initiation. The sources alleged that the facility could be made operationally profitable with a relatively small investment.
The sources stated, "We are concerned that the write-off is designed to justify the sale of assets at a negligible price to private parties. A year from now, after the repairs of the facility are completed, we will suddenly see that it is making a profit."
The sources were referring to a decision by the Mekorot board of directors to write off the company's entire investment in its Mekorot Initiation subsidiary. The sources added, "This measures stems from the attitude that as long as the facility is losing money, the asset will be written off, but as soon as the operational defects are corrected, the entire asset will be returned - and the repairs can be completed in less than a year." The sources explain that the main concern is that the write-off will be used as a precedent for introducing a partner in the company that will inject capital in return for shares. "Since when does someone with an assets in need of repair and having money in the bank write off the equity just before bringing in a partner? Now, they're already saying we should sell other assets, such as the desalinization facilities in Cyprus and the sewage purification plant in Nabi Musa. No private shareholder would do such stupid things," the sources declared.
The sources asserted that up until now, Mekorot Initiation had made all of its payments to banks, and that the state's lawsuit against it for late delivery amounted to NIS 160 million, and was backed by the contractors' guarantee. "The company's exposure amounts to IS 0.70 per cubic meter per year to the state. The contractor's exposure is NIS 0.70 plus another NIS 1.20," the sources stated.
Mekorot is suing the franchise holder, IVM, a company held by Spanish company Sadyt and Minrav Holdings Ltd. (TASE: MNRV), for NIS 700 million. The claim is being heard in an arbitration proceeding.
Published by Globes [online], Israel Business News - www.globes-online.com - on May 4, 2017
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