Citing their past misdeeds, court nixes bidders for massive desalination plant

Citing their past misdeeds, court nixes bidders for massive desalination plant

Judge rules committee was wrong to advance proposals by Yitzhak Tshuva’s IDE, as well as Hutchison Water, in light of water quality having been faked at another plant they owned

Sue Surkes is The Times of Israel's environment reporter.

Inside the Sorek A Desalination Plant, November 2015. (Yossi Zamir/FLASH90)
Inside the Sorek A Desalination Plant, November 2015. (Yossi Zamir/FLASH90)

A court this week overturned the decision of a government committee to allow the owners of an existing desalination plant, whose workers were found to have faked water quality data, to bid to construct what will be Israel’s largest desalination facility and one of the biggest in the world.

Judge Arnon Drael of the Administrative Affairs Court in Jerusalem accepted a petition claiming that the tenders committee — jointly set up by the ministries of finance and energy to deal with desalination tenders — had acted with extreme lack of reason when it allowed IDE Technologies and Hutchison Water, separately, to proceed to the final stage of the tender to build and operate the Sorek B desalination plant despite the fraud uncovered at Sorek A. The committee will now have to reconsider the entire issue.

IDE and Hutchison had formerly jointly owned Sorek A.

Drael also implicitly criticized the tenders committee for having relied on the findings of an Energy Ministry inquiry into the rigging of the figures, suggesting that it might want to look more deeply into the involvement or otherwise of the Sorek A plant’s directors and shareholders in the ruse.

The inquiry committee’s report, published in September, found that Sorek A, the country’s biggest desalination plant to date, had allowed levels of chloride — the main ingredient in salt — to exceed four times what was specified in its franchise agreement, in order to save what amounted to NIS 12 million ($3.4 million), until the story broke.

Inside the Sorek A desalination plant, located about 15 kilometers (nine miles) south of Tel Aviv, November 1, 2015. (Yossi Zamir/FLASH90)

Monday’s petition was brought by a third bidder for Sorek B, now out of the running, 4A Desalination. It combines Allied Infrastructures, Afcon Holdings, and Acciona Agua SA, a major player in the international water desalination business.

4A Desalination had asked for an urgent hearing given that the final stage of the tender was ongoing, with IDE and Hutchison preparing competing bids, on the basis of which the government would pick the winner.

The petitioners argued that IDE and Hutchison Water’s claim that their experience in Sorek A was sufficient to meet the threshold conditions for the Sorek B tender was unreasonable.

Israeli businessman Yitzhak Tshuva speaks at an energy conference in Tel Aviv, February 27, 2018. (Flash90)

IDE Technologies, jointly and equally owned by ALFA Partners and Yitzhak Tshuva’s Delek Group, held the franchise to build and operate Sorek A together with Hutchison Water. Last year, IDE sold its shares in Sorek A to Dan Capital Investments and Infrastructures Ltd., the infrastructure company of the Dan bus company, in order to meet antitrust rules and be able to compete for the tender to finance, construct, and operate Sorek B for 25 years.

IDE and Hutchison Water still own 50% of the shares each in the Hadera and Ashkelon desalination plants.

‘Cheapest should win’

The Jerusalem District Attorney’s Office, which represents the tenders committee, submitted an opinion to the court warning that because IDE and Hutchson’s bids were so much cheaper than that of the third competitor, victory for 4A Desalination could mean higher water costs and harm to the public interest. It also argued that the inquiry committee had absolved the boards of IDE and Hutchison Water of responsibility for the fraud because neither had been told about what was going on.

Illustrative photo of an Israeli desalination plant. (Ben Sales/JTA)

The inquiry committee, headed by Energy Ministry director general Udi Adiri, had found that the shenanigans at Sorek A had been “carried out with the full knowledge of the plant’s management.”

The Adiri committee called in its report for “effective and deterrent enforcement” and a “significant financial sanction” to be applied in the case of Sorek A, which is liable for an estimated NIS 46 million ($13 million) in fines within the terms of its contract with the state.

Separately, the ministry inquiry also fingered the Palmachim plant — whose owners are not connected to IDE or Hutchison Water — where there were “tens of cases” in which chloride levels exceeded the limits by around 20 percent, an excess concealed behind doctored reports.The committee recommended turning the Palmachim case over to the “authorized enforcement authorities” for criminal investigation.

The report also lambasted the state for not taking its own responsibilities as regulator seriously enough. It had failed to use tools such as random water quality checks and more in-depth monitoring, and officials had “relied more than necessary” on the credibility of the desalination plants’ reports, failing to compare the data supplied by the plants with information from other sources.

Both Palmachim and Sorek A are located south of Tel Aviv on the Mediterranean coast. Sorek B will be built next to Sorek A.

Visitors top up their glasses with treated sea water at a desalination plant near Hadera (photo credit: Shay Levy/Flash90)
Visitors top up their glasses with treated sea water at a desalination plant near Hadera, Israel. (Shay Levy/Flash90)

Today some 585 million cubic meters (205 million tons) of desalinated water per year (mcm/pa) are produced by five plants in Israel. This supplies around 80 percent of the country’s drinking water. Sorek A provides 150 mcm/pa, Hadera 127, Ashkelon 118, Palmachim 90 and Ashdod 100. Sorek B will eventually desalinate 200 mcm/pa. Further plants are also planned for the western Galilee.

Hutchison Water also forms part of a Singaporean consortium that wants to bid for a large project to convey water from the Red Sea to a desalination plant in Jordan and to channel the salty byproduct to the Dead Sea to help reduce the latter’s drying up.

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