Regulatory and Land Disputes Threaten Israel's Dorad 2 Power Plant Expansion
Israel's Dorad 2 power plant project, one of the country's largest planned energy initiatives with an estimated investment of around 3 billion shekels, faces significant delays due to two major obstacles emerging within days. First, a sharp dispute over land rights where the existing Dorad 1 plant operates threatens to stall the project's financial closure. Dorad currently pays about 3.7 million shekels annually in rent to Eilat-Ashkelon Infrastructure Services (Shet'a), a subsidiary of the Asia-Europe Pipeline Company (Ktz'a), under an agreement valid until 2038. However, Shet'a recently demanded a rent increase to 120 million shekels per year starting next year as a condition for extending the lease, complicating Dorad 2's development on adjacent land.
Second, the Israeli Competition Authority has opposed approving the license for Dorad 2's construction under its current ownership structure, citing concerns that it would harm competition and increase market concentration in the electricity sector. The authority's analysis highlights that Adaltak Group, holding 18.75% of Dorad and stakes in other power plants totaling about 3.6 gigawatts, would control over 20% of Israel's conventional power generation capacity by the decade's end, exceeding regulatory thresholds designed to promote competition. The Competition Authority labeled Dorad 2 as the "worst competitive scenario" among several private power plant projects approved for planning but limited by current regulations to four plants.
Michal Cohen, the Competition Authority commissioner, emphasized that the issue is not only the additional capacity but also the identity of the controlling entity and its market influence. The authority's position is based on the current ownership structure and Adaltak's holdings, noting that significant changes in ownership could alter the competitive assessment. Adaltak responded by rejecting the authority's analysis as factually incorrect and economically biased, submitting a detailed economic opinion from Dr. Asaf Eilat, former head of the Competition Authority's economic department and chairman of the Electricity Authority, which disputes the authority's conclusions.
Meanwhile, the financial market has reacted negatively to these developments. Luzon Group, controlled by Amos Luzon and holding 37.5% of Dorad, saw its stock fall 16.7% over two trading days, erasing 450 million shekels from its market value, now standing at 2.27 billion shekels. The ongoing land dispute with Shet'a and the regulatory challenges from the Competition Authority together cast a shadow over the project's future and timeline.
