Doron clears a major hurdle and shifts the race for the new power plant
In a notice to the stock exchange, the Luzon Group, one of the main shareholders in the Dorad power plant, revealed that the construction contract for “Dorad 2,” worth NIS 3 billion, was unanimously approved by the plant’s board. At any other power plant this would have been routine news. But at Dorad, which is burdened by shareholder disputes, unanimous approval hides a drama: Adeltec, the minority shareholder, with 18.75% of the plant, are now approving progress in the project, after previously opposing it strongly because of regulatory concerns. Resolving the dispute between the shareholders would put Dorad in the favorite’s position to win the last remaining slot in the race launched by the Electricity Authority to build power plants in central Israel, at the expense of Generation Fund’s Reindeer power plant.● Exclusive | Doral raised NIS 920 million and was hit by the sharp declines on the stock exchange● Israel’s renewable energy installations broke an all-time record
Dorad power plant is notorious for shareholder disputes, which have even reached the courts several times. One of the main disputes that remains concerns the plant’s expansion, Dorad 2, which would make it one of the largest power plants in Israel. The plant’s main shareholders, the State of Israel, through the Sheta”a company owned by the state-run Trans-Israel Pipeline Company, and the Luzon Group, are very interested in expanding the plant and realizing its full potential, given the huge demand for electricity expected with the rise of data centers amid the artificial intelligence revolution. However, Adeltac, the energy company of businessman Uri Adelsburg, have been worried. Today it is Israel’s largest private electricity producer, second only to the state-owned Electric Company. That has put it in the regulatory spotlight, because the goal is for the electricity market to be competitive and for there to be no improper incentives for certain power plants to slow down production in order to manipulate the market and generate higher profits at another plant.
The regulatory concern was nevertheless removed. Recently, the Competition Authority created a new and sophisticated model that calculates the actual ability to manipulate the market. Adeltac believe the new method opens a path for them to keep their position in the power plant while it expands significantly. Moreover, Dorad is expected to connect to the grid in 2032, and by then new generation capacity is expected to come online, reducing Adeltac’s relative market share. The Electricity Authority, whose regulatory approval is also required, says it is waiting for a final decision from the Competition Authority, which has not yet been issued. On June 8, the Competition Authority published a similar approval regarding the main competitor, Reindeer, and now the parties are waiting for a decision on Dorad, which is expected by the end of June. Assuming the approvals are granted, Adeltac are even considering increasing their position at the expense of Sheta”a once it sells its stake, and they are also expected to slightly increase their share at the expense of Phoenix.
The Electricity Authority has opened four possible slots for power plants in the central region. Three of them are already effectively taken, Kesem, Dalia 2, and recently OPC announced financial close. One slot remains, and two major plants are competing for it, Dorad, as noted, and Reindeer, the PowerGen power company owned by Generation Fund. So far, Reindeer had appeared to be the favorite, because of Dorad’s internal problems. But now, as Adeltac appear more optimistic about the regulatory restriction, the construction contract they signed, which Reindeer has not yet signed, changes the picture and positions Dorad as the main contender. It should be noted that neither has yet signed a gas supply agreement.
If Dorad manages to reach financial close by the end of June, it will receive “availability payments” from the Electricity Authority, worth 3.31 agorot for each available kilowatt in each hour of availability, about NIS 25,000 for every hour of availability for a plant the size of Dorad. A later closing would yield a lower payment. These availability payments, considered relatively generous, are intended to encourage the rapid construction of gas-fired power plants near demand centers.
Another hurdle, however, has recently emerged between Dorad and Sheta”a, which are not only the largest shareholders but also the owners of the land on which the plant sits. They are demanding to raise the rent from just NIS 4 million a year to NIS 120 million, a sum considered especially high. Adeltac argue that according to appraisal estimates, the cost should be even lower than it is today. These rental payments are expected to become significant when Sheta”a eventually sells its shares in the power plant, after it realizes the plant’s potential with Dorad 2. It is not yet clear how the dispute will be resolved, but the estimates are that it is more solvable than rigid regulatory problems.
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