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	Israel		Info-Prod Country Guide
CHARACTERISTICS   INDICATORS   THE ECONOMY   PRINCIPAL SECTORS   INVESTMENT ISSUES   PROJECTS   PROSPECTS

Current and Projected Projects General As Israel has grown economically, its electricity capacity has struggled to keep up. State-owned monopoly power utility, Israel Electric Corporation (IEC), has been forced to accept competition from private producers. In March 1996, the Israeli parliament passed a law allowing 20 percent of total capacity to be allocated to private generators; 10 percent from within Israel itself and 10 percent from cross-border projects. All the independent power projects are obliged to sell electricity to the Israeli Electric Company (IEC). Enron is planning a 2,000 MW plant in Aqaba, Jordan, and Amoco and Cogen Technologies are planning a joint 1,000 MW project in Egypt's Sinai Desert, both to sell power to Israel and to run on natural gas. An Israeli investment company, Nordan, is to build a 12 MW diesel plant at Erez, worth US$ 15 million, while Enhro Energy, 50 percent owned by John Hancock, is to build a 26 MW diesel plant at Ashdod, worth US$ 30 million. US-based MidAtlantic has agreed to an offtake agreement with the IEC for its 150 MW project at Mishor Rotem, in the Negev Desert. MidAtlantic is looking for Israeli partners for the US$ 300 million project. Also in Mishor Rotem, two Israeli companies, Ormat and Pama, and one Russian group, OSE, are proposing plants, all to run on shale. Opportunities in natural gas projects are also expected to increase due to their environmental advantages. Interest has been high in a planned 320 MW plant, to be fueled by Egyptian natural gas. Enron and Gaz de France have shown interest in developing the US$ 1 billion pipeline from Egypt, while ABB, British Gas and Amoco are among interested bidders for the plant. In the construction sector, the Shalom Project will be the largest project ever undertaken in the Middle East. With an expected cost of US$ 400 million, it includes the construction of three business skyscrapers, the tallest of which reaches a height of 180 meters, and is expected to become the leading shopping mall in Israel. A Canadian firm, Magil, and its local Israeli partner, Cementcal Ltd., will build more than 300,000 square meters of the project, including a parking lot. The project will be run by a single management company belonging to Canit Hashalom Investments Ltd. Build Operate Transfer The transportation sector presents three major projects over the next seven years, worth a combined US$ 5 billion; the Cross-Israel Highway, the Tel Aviv Metro and the Carmel Tunnel. All could potentially be realized via the Build-Operate-Transfer (BOT) basis. BZW and Poalim Capital Markets and Investments, the investment banking arm of Bank Hapoalim, are advising the government on the Cross-Israel Highway, which will be the country's first toll-road. Tender documents for the construction of phase one of the cross-Israel highway were issued in August 1996. The first phase of the project, to be constructed on a BOT basis, consists of a ninety kilometer central section of the road stretching from the Yad Benjamin region, near Gedera, to Hadera, in the north of the country. Four consortia of international and local firms have been invited to bid for the project: Housing and Construction and Mashav, both of Israel; France's Bouygues; Germany's Hochtief; and Italy's Autostrade; France's Transroute; Atkinson Middle East and Parsons Brinckerhoff International, both of the US; Germany's Philipp Holzmann; France's Fougerolle; and Israel's Yonah Group, Ramet, Ravad and Shapir; Spain's Dragados y Construcciones; the UK-based Tarmac Overseas; the US-based PEC; Israel's Traffic and Building, Israel Corporation, Ashtrom Engineering, Roichmann Brothers and Property and Building; Canadian Highways Corporation International; Israel's Africa Israel Investments; the US-based Hughes Aircraft Systems; and France's Societe Generale d'Entreprises; The winning consortium will build and operate the highway for up to thirty years before returning it to the government. The US$ 750 million estimated cost of the project will be met by toll levies. Analysts say that financing proposals will be the key factor behind the contract award. Canadian Highways and Hughes are expected to offer a highly competitive bid since both companies are believed to be the only bidders experienced with electronic systems that permit drivers to pay tolls automatically without stopping at booths. The Tel Aviv Metro project is expected to be awarded on a BOT basis, although discussions are at an early stage. The Tel Aviv City Council, neighboring authorities and the government have established a preliminary group to oversee the launch of the US$ 1 billion project. The proposed Carmel Tunnel, which would alleviate the traffic bottleneck into Haifa, has moved further than both the Cross-Israel Highway and the Tel Aviv Metro projects. A short-list of five bidders, mostly foreign joint-ventures, has been drawn up for the US$ 150 million toll-tunnel. In other sectors, the scope for project finance is more limited. Water and sewerage is a municipal sphere, but some BOTs are being discussed. Many are hopeful that Israeli-Jordanian joint venture water projects would be better able to draw adequate financing. Over US$ 650 million worth of deals have already been proposed for joint water projects. Airport and port expansions and modernizations are also areas where private money is being considered. There are plans for a US$ 500 million expansion of Ben Gurion Airport, for instance, while the ports of Ashdod and Haifa are expecting US$ 100 million expansions each. Franchising Franchising, a relatively new concept in Israel, has become popular in a short period of time, especially in the fast food industry. Franchising nearly doubled from US$ 90 million in 1992 to an estimated US$ 160 million by the end of 1995. With such companies as Domino's Pizza, Pizza Hut, McDonald's, Kentucky Fried Chicken, Kenny Rogers Roasters, Burger King, Ben and Jerry's and more recently, Haagen Dazs, the US share of the Israeli fast food industry alone is about 35 percent. Franchising is slowly penetrating into other industry sectors. Ace Hardware and Office Depot opened franchises in 1993 and 1994, and already operate branches in the main commercial centers of the country. Toys-R-Us opened its first outlet in the summer of 1995. The key to success in Israel lies in strong management and ongoing, in-country training programs. Shopping Malls Consumer malls have become an overnight success story in Israeli retailing. Several large shopping malls now exist, and many others are planned. Trendy, specialized national chain stores and franchises have become increasingly popular, replacing traditional food and consumer goods monopolies. The key to this success has been the increasing variety of new products, the impin the services offered and the changes in consumption habits of the Israeli consumer. Previous Chapter Contents Menu Next Chapter

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