September Edition 2019

6 7 Partnering with private contractors and banks, both Israeli and foreign, marks a policy shift for theGovernment,which has, until recently, preferred to financemost projects through the state budget, giving it more control and access to cheaper financing than the private sector. Accountant General Rony Hizkiyahu, who oversees government spending, told Reuters that the infrastructure push could double investment from companies to some USD16 billion a year. “These are companies that were never before interested in Israel. The moment you create this certainty, they are here,” said Hizkiyahu. This push has not gone unnoticed internationally. In a recent Bloomberg article, global money manager, BlackRock, which has nearly USD 7 trillion in assets under management, was rumored to be interested in moving into infrastructure after opening its first office in the country two years ago. “What we generally see in these projects is that local construction companies (Shikun & Binui, Shapir, Electra, Minrav), public transport operators (Egged, Dan andothers) andfinancial investors teamupwith international trainmanufacturers and light rail operators (mainly from France, Germany, Spain and China) to submit bids in the tenders. The groups have already been pre-qualified so there is limited scope for changes to them at this stage,” says Phillips. He adds: “Given the size of these projects and that the international banks tend to follow their clients' business, these projects are also interesting for major international banks as well as multinational organizations (development banks, export credit agencies and others). We do expect to see international lenders alongside Israeli banks and institutional investors in the financing of the Tel Aviv project.” “Light Rail is definitely a focus of the market, ” says Meidan, of Tadmor, which acts for NTAMetropolitanMass Transit SystemLtd. (“NTA”), the governmental company responsible for the publication of tenders for the design and construction of a mass transit system in Tel Aviv. The Tel Aviv Light Rail is the flagship project in the city and already comprises international companies. While the NTA is building the underground stations and installing the various systems along the length of the Red Line , China’s construction giants are very much involved. For example, the China Railway Tunnel Group (CRTG) subsidiary is responsible for constructing the western segment of the Red Line in a joint venture with Israel’s Shikun & Binui. The remainder of the Red Line and the construction of the major Carlebach Station fall under the joint responsibility of China Civil Engineering Construction Corporation Israel Branch (CCECC), a subsidiary of China Railway Construction Corporation (CRCC), in joint venture with Israeli construction company Danya Cebus. Arguably unrivalled in both experience and size, these Chinese companies often provide thousands of Chinese workers who can relocate en masse in order to carry out the projects in a timely fashion. The Red Line is officially due for completion in October 2021. In February 2019, six international consortiasubmittedfor theNIS15billiontenders for GreenandPurpleLines of the Tel Aviv Light Rail, including, among others, Canada’s Bombardier, Germany’s Siemens, China’s CRRC and CREC, and Spain’s CAF, underlining the vast potential seen by global players. “There is definite appetite for these projects with most of the tenders being keenly contested,often by the same group of 'repeat players',” states Phillips. In fact, Spanish rail firm, CAF is already involved in the Jerusalem Light Rail . The tender by the inter-ministerial tender committee (represented by Tadmor) for the financing, construction, operation and maintenance of the new Green Line was awarded to Spanish-Israeli owned company, TransJerusalem J-Net Ltd. (“JNET”) in August 2019. Owned by Israel’s Shapir Civil & Marine Engineering (“Shapir”) and CAF, JNET will also take over the operation, maintenance and extension of the Red Line , operational since 2011, from the CityPass Group. Before selecting the winners of the tender, the Ministry of Finance had already screened groups that included Greece’s GEK Terna, Portuguese corporation EFACEC and Polish service provider MPK. If Shapir is partnering with a Spanish company on Jerusalem’s Light Rail, it is working with China’s Shanghai International Port Group regarding the construction and operation of Haifa port , while Pan-Mediterranean Engineering Company (PMEC), a subsidiary of China Harbour Engineering Company (CHEC) won the tender in 2014 to build the NIS 3.3 billion Ashdod port , with the project due to finish ahead of its originally stated 7.5-year schedule. Tenders Draw More and More International Players The Transformation of Rail Transport China’s Role in Israel’s Ports