Generation Fund Nears $4.2 Billion Deal to Acquire Shikun & Binui Energy Amid Regulatory Hurdles

The Generation Fund is close to finalizing a major acquisition in Israel's electricity sector, aiming to purchase Shikun & Binui Energy and merge it with its existing energy company, PowerGen. The deal is valued at 4.2 billion shekels, with an additional conditional payment of up to 300 million shekels tied to key project milestones. The exclusivity period for negotiations is set to expire today, though extensions are likely if the agreement is not signed by then.

A significant dispute over mutual penalties if regulators reject the deal or if Shikun & Binui opts for a competing offer from the Keystone Fund has been resolved. Now, the parties must agree on the conditional payments linked to the expansion of electricity production. Concurrently, two related transactions are progressing: a swap deal with Rafek Energy to reduce market concentration and regulatory concerns, and a management restructuring of the Reindeer power station involving new partner Ofer Yanai from Nofar Energy.

PowerGen, controlled by Generation, is building the Reindeer power station recently approved by the Electricity Authority and seeks to expand via Shikun & Binui Energy, which holds about 3.2 gigawatts of power assets including renewable energy projects. The acquisition focuses on Shikun & Binui’s renewable assets, crucial as only renewable energy can currently sell discounted electricity to private suppliers like BezeqGen, Israel’s largest private home electricity provider.

Regulatory approval remains the main obstacle, with the Competition Authority and Electricity Authority wary of increased market concentration. To address this, Generation is advancing a swap deal with Rafek Energy to exchange shares in joint power stations, thereby reducing each party’s market share. Both sides have agreed on compensation mechanisms if regulators block the deal or if Shikun & Binui accepts Keystone’s offer, which would impose financial penalties on Keystone, discouraging their bid.

Following these agreements, the boards will review the competing Keystone proposal. The final steps include agreeing on milestone-based payments and completing the side deals with Rafek Energy and the Reindeer station’s management transition. Once completed, PowerGen under Generation will become one of Israel’s leading electricity producers.