Generation Fund Acquires Full Control of Shikun & Binui Energy in Major Israeli Power Market Deal

A significant transaction in Israel's energy sector was announced on Wednesday, with the Generation Infrastructure Fund acquiring full ownership of Shikun & Binui Energy for 4.45 billion shekels. This deal includes stakes in several power plants and renewable energy projects, positioning Generation's subsidiary, PowerGen, as a leading electricity producer in Israel. Due to the deal's scale, the Israel Electricity Authority is expected to require PowerGen to adjust its holdings as a condition for approval.

The transaction involves a share swap with another energy company, Rafek Energy, allowing Generation to increase its stake in the planned Reindeer power plant in southern Sharon from 27.5% to 52.5%, while transferring its 16.7% stake in the Alon Tavor power plant to Rafek. Concurrently, Nofar Energy, owned by Ofer Yanai, announced it will purchase the remaining 47.5% of Reindeer from Phoenix Insurance and other investors for 855 million shekels. If the Electricity Authority is not satisfied with the share swap, Generation plans to sell its Reindeer shares to Nofar, which would then hold full ownership, with ownership alternating every five years.

Regulatory approval is pending from the Electricity Authority and the Competition Authority, both concerned about market concentration. To mitigate regulatory risks, Generation agreed to pay Shikun & Binui Energy a penalty of 300-350 million shekels if the deal is blocked, while Shikun & Binui would pay the same amount if it accepts a competing offer from another infrastructure fund, Keystone. Delays beyond 8.5 months would incur 10% interest on the deal amount.

Shikun & Binui Energy, managed by Yuval Skornik and controlled by Shikun & Binui Group, holds about 3.2 gigawatts of power generation projects, including renewable energy and energy storage assets. The acquisition strengthens PowerGen's position, especially in renewable energy, which currently is the only source allowed to sell discounted electricity to private suppliers like BezeqGen, Israel's largest private home electricity provider.

The sale will inject approximately 3 billion shekels in cash into Shikun & Binui, enabling it to significantly reduce its debt and improve financial stability. CEO Amit Birman stated the deal will increase equity, eliminate solo debt, and reduce consolidated debt by about 5.5 billion shekels. Shikun & Binui's consolidated debt stood at 11.5 billion shekels at the end of Q1 and is expected to drop by more than half. The company plans to use the proceeds to realize synergies within the group and improve its credit rating.

PowerGen's share swap with Rafek Energy includes a cash payment of 24 million shekels and provisions for compensation depending on the financial closing of the Reindeer plant. The alternating ownership arrangement every five years aims to reduce regulatory concerns. Generation has 67 days to secure all regulatory and financing approvals or face additional penalties. This deal marks a major reshaping of ownership in Israel's power generation market amid regulatory scrutiny and a push towards renewable energy.