There are concerns that Israel Electric Corporation (IEC) (TASE: ELEC.B22) could be facing a conflict of interest. Sources inform ''Globes'' that the company is in talks on a strategic collaboration with French engineering group Alstom SA (LSE: ALS; Euronext: ALO), at a time when Alstom is a key supplier of the company and bidding for tenders to supply it with equipment worth hundreds of millions of dollars.
A senior delegation from Alstom, including the company VP for engineering and planning, was in Israel this week to hold further talks with IEC. One of the options being considered in the collaboration talks is that IEC will provide Alstom with design, management and engineering services on various projects worldwide. Among the projects under consideration is the building of four natural gas-fired power plants in the UK, at an investment totaling tens of millions of dollars.
Energy market sources claim that IEC's collaboration with Alstom has raised concerns of a profound conflict of interest that could affect the decisions IEC will make on the choice of equipment for the power plants in the tenders now in progress.
"On the one hand, IEC needs Alstom so that it can expand overseas, yet at the same time, Alstom is bidding for company tenders worth hundreds of millions of dollars. It would be okay if we were talking about a localized collaboration, but a strategic collaboration raises concerns of a severe conflict of interest on the part of IEC," said a source.
Earlier this month, bids were submitted for the major tender, worth €500-600 million that IEC has issued for the building of a coal-fired power plant in Ashkelon (Project D). Alstom is partnering with Siemens AG (NYSE: SI; XETRA: SIE) in a joint bid for the contract to supply the power plant's turbines, and with Italian firm Ansoldo Energia for the contract for its steam generators.
The fact that Alstom is the only company that bid for both the turbine and steam generator contracts, could give it an advantage in the tender, since IEC sources say that achieving integration between components is a priority for them, and that working with one supplier reduces maintenance costs.
Published by Globes [online], Israel business news - www.globes-online.com - on August 14, 2008
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