Generation Capital Acquires Shikun & Binui Energy for 4.45 Billion Shekels

Generation Capital announced the acquisition of Shikun & Binui Energy for 4.45 billion shekels, surpassing a competing bid from Keystone Capital. The deal positions Generation as a major player in Israel's electricity production sector, prompting anticipated regulatory scrutiny from the Competition Authority over concerns of market concentration. If regulators reject the deal, Generation has agreed to pay a 300 million dollar penalty to Shikun & Binui Energy, while Shikun & Binui would owe 300 million shekels to Generation if it accepts Keystone's offer instead.

The acquisition will be executed through a merger, with the payment consolidated into a single reduced sum due to confidence in the progress of Shikun & Binui Energy’s existing projects. To finance the deal, Generation plans to partner with institutional investors who will invest in its energy subsidiary, PowerGen. PowerGen is developing the recently approved Reindeer power station and aims to expand by acquiring Shikun & Binui Energy’s portfolio, which currently includes 3.2 gigawatts of power generation capacity from assets like Ramat Hovav, Orot Rabin (Hagit), Etgal, and renewable energy and storage projects.

A key strategic asset for PowerGen is Shikun & Binui Energy’s renewable energy holdings, which can sell discounted electricity to private suppliers, complementing Generation’s stake in BezeqGen, Israel’s largest private home electricity supplier. This expansion comes amid a national shortage of cheap electricity and a halt on discounted electricity tenders by the Electricity Authority.

Regulatory challenges are expected from both the Competition Authority and the Electricity Authority, which recently blocked the expansion of the Dorad power station due to concentration concerns. To address this, Generation and Shikun & Binui plan a swap deal with Rafeq Energy to redistribute ownership stakes in power stations Alon Tabor and Reindeer, effectively reducing market concentration. Generation also intends to coordinate the management of the Reindeer station with new partner Ofer Yanai from Nofar Energy.

The Electricity Authority has recently taken a strict stance on market concentration and infrastructure approvals, including a 140-day freeze on server farm connection requests. It remains uncertain if the proposed swap and other adjustments will satisfy regulators. Negotiations over the deal were prolonged due to disagreements on regulatory responses. The acquisition marks a significant consolidation in Israel’s energy sector, with Generation Capital aiming to become a leading electricity producer through this strategic purchase.