Generation Capital and Rafeq Energy Negotiate Asset Swap to Facilitate Shikun & Binui Energy Acquisition

Generation Capital and Rafeq Energy are negotiating an asset swap deal in the electricity production sector to ease the approval process for Generation's planned 4.5 billion shekel acquisition of Shikun & Binui Energy. Under the proposed arrangement, Rafeq would receive Generation's stake in the MRC power plant and its operating company, while Generation would acquire Rafeq's share in the future Reindeer power plant project. If completed, Rafeq's holding in the operational MRC plant would increase to 33.3%, and Generation's control over the Reindeer project would rise to 52.5%. This swap would allow Rafeq to increase its exposure to an active revenue-generating power plant rather than a project still in development, with potential for further expansion through an additional production unit at MRC.

The asset exchange aims to improve Generation's chances of obtaining regulatory approval from the Competition Authority and the Electricity Authority for the Shikun & Binui Energy purchase. Regulators have expressed concerns that the acquisition could reduce competition in the electricity market by concentrating production assets under one player. Generation hopes that reducing its stake in MRC will alleviate these concerns. However, senior electricity sector officials told Calcalist that even if the swap is completed, it will not resolve the main regulatory issues. The Electricity Authority has indicated a low likelihood of approving the acquisition, citing its failure to enhance market competition amid a lack of new entrants to increase the number of players.

A senior industry figure commented that changes in ownership structure do not improve Generation's regulatory standing because they do not foster competition. Such a deal is considered a secondary factor and unlikely to help Generation overcome the regulatory hurdles ahead.