Shikun u'Binui Holdings Ltd. (TASE: SKBN), controlled by Shari Arison, is selling its holdings in the company operating the Hadera desalination plant to its partner in the facility, IDE, for NIS 80 million. S&B believes nearly the entire payout will be reported as pre-tax profit in its financial statements. The company’s share price was boosted by the news on Thursday.
IDE holds the rest of the shares in the operator of the facility, Omis Water.
Under the sale agreement, the parties decided the purchase will include “further annual compensation based on the volume of desalination in the years left on the license.”
The sale is still conditional on the approval of other agents and does not include S&B’s rights to 50% of the company which holds the contract for the facility (H2ID). IDE is also a partner in the H2ID consortium.
S&B said the Hadera plant was built in 2010 and the contract for its operations ends in 2032; it was launched as part of a policy to diversify Israel’s water sources. The compensation for the desalinated water from the plant is split in two a fixed component and a variable component conditional on the volume of water supplied to the state.
The company reported the facility cost NIS 1.5 billion to build in its 2014 statements; its investment balance left in the facility for that same year was NIS 34 million in capital and NIS 165 million in loans from the owners.
In total, for the funding of the facility and its expansion, the tender winner took on financing of €389 million nearly half from the European Investment Bank and the rest from foreign and domestic organizations. In order to receive the loans, the two partners in the venture put up €63 million and mortgaged the rights of the operator in the facility.
At the end of 2014, the outstanding loan balance for the project totaled NIS 1.1 billion.
In recent weeks, S&B was in the headlines because of the financial crisis in Nigeria, where it is involved in several projects. The crisis followed the sharp fall in oil prices around the globe, and it raised concerns it might adversely affect S&B projects in the country.
The fears dragged S&B shares down by 20% within a few days at the start of February, though it later almost completely recovered.
However, an annual account shows S&B share price fell by 25%; its market cap is currently NIS 2.5 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on March 4, 2016
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