Pressure mounts on PM to condition sale of oil refineries on shutdown within decade
Court approves billion-shekel debt settlement at public’s expense, while finance and energy ministers approve Bazan Oil Refineries takeover by Israel Petrochemical Enterprises
Sue Surkes is The Times of Israel's environment reporter
Approval of a controversial deal allowing a petrochemicals company to take over Israel’s biggest oil refinery rested with Prime Minister Yair Lapid alone on Monday after a court greenlit a related debt-restructuring plan that will cost the public a billion shekels (just under $300 million). The finance and energy ministries have already approved the sale.
Knesset lawmakers are pressing Lapid to condition the sale of the Ofer family’s shares in Bazan oil refineries in northern Israel to Israel Petrochemical Enterprises Ltd. on the complex being shuttered within a decade, in line with a government decision to do so in March.
To the disappointment of environmental groups, that decision included neither a detailed timetable nor a budget for the redevelopment of that area of the Haifa Bay.
The shutdown vote followed years of campaigning by Haifa residents, backed by environmental activists, against a backdrop of significant air pollution and above-average incidences of cancer and respiratory disease in the bay city.
In a letter, MK Alon Tal (Blue and White) has asked Lapid to clearly condition the sale of Bazan on its closure within a decade and on a written commitment by the buyer to abide by this and not to expand polluting operations.
He also appealed to Lapid to use his authority to ensure that the public was not harmed by whatever debt settlement was reached in favor of the buyer, Israel Petrochemical Enterprises Ltd.
Israel Petrochemicals, which holds 15% of the Bazan oil refineries stock — enough to become a joint owner — used its right of refusal to veto an earlier bid for Bazan by the Hagag Group of property developers.
Hagag evidently saw the potential in a masterplan to replace the petrochemical companies with large-scale infrastructure, residential and transportation projects in the area amounting to billions of shekels.
But in order to buy sole ownership of Bazan, Israel Petrochemicals — which only exists because of its shared control of the refining conglomerate — needed cash, because it was broke. It had more debts than assets.
More than half of its bonds are owned by institutional investors such as banks, savings and insurance companies, and pension funds, all of which manage and invest the public’s money.
The company asked for — and secured — the agreement of representatives of these institutions to waive around a billion shekels of debt, and that agreement was approved by the Tel Aviv District Court on Monday. The court’s reasons were not immediately published.
Known as “haircuts,” debt settlements apply to situations where a company cannot meet its debts and the bondholders believe that a deal is probably the best arrangement that they can get.
Orly Aharoni, a legal expert in regulation, who heads the Clean Money Forum, said the court’s decision added insult to injury.
“This (deal) is not about real estate or high tech, it’s about continuing to pollute,” she said. “Sometimes you allow a debt settlement for a company that does good but has fallen on hard times. Here, the danger is that they will continue to pollute the area and will object to evacuation, and the other thing is that a billion shekels of public money have gone down the drain because of it.”
“This is an industry that causes so much damage to public health, so much pollution to the air and the ground.”
The Hagag bid at least held the hope of a better future, whereas petrochemicals belonged to the past, she added.
The debt resettlement was approved Monday after the judge rejected a petition against the sale submitted by Haifa area local authorities.
Sarit Golan, the lawyer acting for those authorities, echoed Tal’s call for the sale to be conditioned on Bazan’s closure.
Israel Petrochemical Enterprises Ltd. has also been able to raise new funds from new partners that include Yona Fogel.
Fogel’s company forms part of MED-RED Land Bridge, a joint Israeli-United Arab Emirates venture that signed with the Israeli state-owned Europe Asia Pipeline Company to channel Gulf oil overland through Israel from Eilat on the Red Sea to Ashkelon on the Mediterranean.
That highly controversial deal has effectively been frozen for the time being by the Environmental Protection Ministry.
On Sunday, it emerged that — despite the cabinet’s March decision — Finance Minister Avigdor Liberman and Energy Minister Karine Elharrar had given their blessing to the Israel Petrochemicals takeover of Bazan.
Tal wrote to Lapid on Thursday, in a letter he posted to Facebook on Sunday, that allowing the debt settlement would simply deepen investment in a polluting industry that, in an era of climate change stoked by fossil fuel emissions, should be consigned to the past.
“If a haircut settlement is approved, in return for shares… there will be an incentive to maximize the value of the shares by developing the refining operation. This kind of expansion is totally contrary to the aims of government decision 1232 from March 2022…. to close the petrochemical and chemical factories in Haifa Bay,” Tal wrote.
Tal attended Monday’s court hearing, along with Labor MK Naama Lazimi, a Haifa resident. She said, “It’s impossible to ignore the government’s decision and intention to remove pollutants within a decade. Lapid needs to make it clear to them (the buyers) that they need to evacuate. That’s what needs to be done, that’s what I’m here for. This is my home.”
Omer Shavit, from The Times of Israel’s sister site, Zman Israel, contributed to this report.
