Disputes and Regulatory Hurdles Threaten Dorad Power Plant Expansion Near Ashkelon
The planned expansion of the Dorad power plant, located south of Ashkelon and valued at around three billion shekels, faces significant challenges due to escalating disputes among its shareholders and regulatory concerns. The project, which includes the construction of Dorad 2, aims to double the plant's electricity production and make it one of Israel's largest power producers. However, conflicts between key stakeholders, particularly between Shita"a (Eilat Ashkelon Infrastructure Services), a subsidiary of the government-owned Asia-Europe Pipeline Company (KZEA), and other shareholders, have cast doubt on the project's viability.
Shita"a, which owns 37.5% of the land and is the largest stakeholder, recently demanded a thirtyfold increase in land lease payments from Dorad, from 3.7 million to 120 million shekels annually starting in 2027. This demand surprised Dorad and raised concerns about the economic feasibility of Dorad 2. Without agreement on lease terms, Dorad risks failing to secure financial closure with Bank Hapoalim, the project's main financier, and jeopardizes obtaining a preferred electricity tariff from the Electricity Authority.
A proposed compromise to pay Shita"a 60 million shekels annually plus additional costs was rejected by Dorad's board, deepening shareholder tensions. Notably, Shita"a was excluded from the vote due to conflict of interest, with the Luzon Group (33.75%) supporting the deal, while Adaltak (18.5%) and Phoenix Insurance (10%) opposed it. The failure to finalize lease agreements also caused Dorad to miss a June 30 deadline for a favorable electricity availability tariff, though a lower tariff remains possible if financial closure is reached by the end of 2026.
Complicating matters, the Israeli Competition Authority, led by Michal Cohen, opposed the expansion citing Adaltak's excessive market concentration, which conflicts with Electricity Authority regulations limiting ownership stakes in natural gas power production to 20%. Adaltak controls multiple power plants, including Dorad, Ashdod Energy, Ramat Negev Energy, and others, with a combined capacity nearing 3.6 gigawatts. This regulatory stance aligns with the Electricity Authority's goal to increase competition in the sector.
The shareholder disputes have also spilled into personal conflicts, notably between Adaltak's owner Uri Adelsburg and Michal Abadi-Boiangiu, the Ministry of Finance's Accountant General. Adaltak filed a petition with the Supreme Court seeking to bar Abadi-Boiangiu from involvement in decisions related to the Shorak power plant project, which Adaltak won in a 2024 tender. The petition highlights accusations of personal animosity and alleged unfair treatment by Abadi-Boiangiu, who previously chaired Dorad and Shita"a.
Despite these challenges, Luzon Group's controlling shareholder Amos Luzon remains confident in Dorad 2's future, recently increasing his stake and calling a shareholders meeting to find solutions. The project timeline anticipates Dorad 2's operation starting in 2032, coinciding with the next Electricity Authority allocation round for new power plants. Dorad stated it continues to advance the project according to schedule, emphasizing the need for significant capacity expansion to meet Israel's electricity demand.
