Generation Capital Nears Deal to Acquire Shikun & Binui Energy Amid Regulatory Hurdles
Generation Capital's infrastructure fund is in advanced negotiations to acquire Shikun & Binui's energy division, Shikun & Binui Energy, for 4.2 billion shekels plus an additional 300 million contingent on project milestones. The energy arm includes two conventional power plants and extensive solar production assets. The parties have extended the exclusivity period several times, currently until July 24, signaling they are in the final stages of the deal, though some details remain unresolved.
Generation Capital's energy subsidiary, PowerGen, aims to strengthen its market position by acquiring Shikun & Binui Energy, which holds a current electricity production portfolio of about 3.2 gigawatts. This includes stakes in the Ramat Hovav, Orot Penina (Hagit), and Etgal power stations, as well as renewable energy and energy storage projects. PowerGen recently received approval to build the Reindeer power plant and plans to expand through this acquisition.
A key attraction for PowerGen is Shikun & Binui Energy's renewable assets, which can sell discounted electricity to private suppliers like BezeqGen, Israel's largest private home electricity provider, co-owned with Bezeq. This aligns with the current shortage of cheap electricity and the Electricity Authority's halt on discounted electricity tenders.
However, the deal faces regulatory challenges from the Competition Authority and the Electricity Authority, concerned about market concentration. To address this, PowerGen plans a swap deal with Rafek, exchanging shares in Alon Tavor and Reindeer power plants to reduce market share concentration. While Generation Capital is confident this will satisfy regulators, the Electricity Authority's recent strict stance on grid connections and market concentration adds uncertainty.
Shikun & Binui's CEO, Amit Birman, faces a tight timeline and financial risks. If regulatory approval fails, negotiations include compensation mechanisms or a potential exit right for Shikun & Binui, which could impact the company's financial outlook. Meanwhile, a competing bid from Keystone offers 4.35 billion shekels in a single payment and awaits board consideration after the exclusivity with Generation Capital expires. Keystone's willingness to increase its offer to cover exit penalties remains uncertain.
Decisions on the deal and its terms are expected within days, with significant implications for Israel's energy market structure and the involved companies.
