September Edition 2019

8 9 In the country’s energy sector, it is the U.S. companies that are prevalent. After major offshore discoveries of natural gas off the Haifa coast in the past decade, Houston-based Noble Energy has been at the forefront. Between 2004 and 2013, the Yam Tethys Project heralded Israel’s natural gas revolution, providing natural gas to Israeli consumers from the Mari-B and Noa reservoirs; the third natural gas field, Tamar, started production in 2013; Leviathan , the fourth gas field, is expected to start suppling natural gas at the end of 2019; and two additional fields, Karish and Tanin , involve Greek company, Energean Oil and Gas, expecting to supply gas by 2020. There is also an ambitious proposal to build the world’s deepest and longest gas pipeline, to Italy through Greece and Cyprus, which has the support of the EU, Cyprus and Greece. “Exploration of natural gas in Israeli territorial waters is subject to an exploration license which is granted by the Ministry of Energy,” adds Noy of EBN, the external legal advisor of INGL – the governmental monopoly responsible for the design, construction, maintenance and operation of the natural gas transmission system in Israel. “Following the approval that the production from a gas field is financially profitable, the holder of the exploration license will be granted with a lease to produce gas, for a period of 30 years with the option to extend it to 20 additional years.” Opening up the country’s electricity sector looks set to attract more foreign investment as the Government looks to break up of the monopoly of the State utility, IEC, which, for decades, has managed every aspect of electricity from running power plants to connecting households. Having agreed to sell 19 production units in five sites over five years, IEC announced in July the sale of its Alon Tavor power plant - the first of five power plants it is required to sell. The buyer was an international consortium - comprising Israel’s Mivtach Shamir Holdings and Rapac Energy, together with China Harbour Engineering Company – agreed to pay NIS 1.9 billion, although the sale requires various approvals. The companies are expected to take possession of the plant in northern Israel by December 2019. The opportunities presented by the Israeli energy market will be of interest to PowerChina – its subsidiary SinoHydro was part of a consortium that won a contract to build the 344-MW capacity hydroelectric pumped storage power station at Kokhav HaYarden in the Jordan Valley, which is due to be completed in November 2022. Israel has emerged as a world leader in water technology , with its wave of state-of-the art desalination plants in the spotlight. Today, up to 80% of water for domestic use flows from large coastal desalination plants in Soreq, Ashkelon, Ashdod, Palmachim and Hadera and more are under construction, including Soreq B, planned to be the world’s largest, with a capacity of 200 million cubicmeters of water annually. Bids to finance, construct, and operate the plant for 25 years were received from Israel’s IDE Technology, Hutchison Water, whose main investor is Hong Kong’s CK Hutchison Holdings, and a partnership of Afcon, Spain’s Acciona, and Allied Investments. The winning bid will also build a private 150-megawatt power station to help power the facility near Soreq. While the financing of all these projects is opening up, there are key regulatory issues to address and be aware of. "In general, infrastructure projects in Israel are heavily regulated, and their regulation is fairly complicated,” says Noy at EBN. “Part of this regulation is being implemented in the governmental tenders and the other part is implemented through various authorities and regulators, which control the specific area: For example, the Electricity Authority with respect to energy projects, the Water Authority with respect to desalination, NTA with respect to light rail. Furthermore, most of the Israeli Land Authority – most of the land in Israel is owned by the State, and any transaction with respect to such land is subject to the Israeli Land Authority's approval, which in case of foreign entities requires a specific approval.” Furthermore, while navigating the complex regulatory issues, there are points to note with regards to the concession agreements for the projects. “The State is moving towards a fairly standard concession agreement for most of its projects and is increasingly reluctant to depart from its terms. For the international players, the risk allocation in these concession agreements is less balanced than what they are used to seeing in other countries, which does create some challenges,” says Phillips at HFN. Electricity Sparks Foreign Interest The Desalination Era Projects Bring Myriad of Challenges