Desalination plans bogged in red tape

Finance Ministry criticized for delaying the building of plants.

By GLOBES / AMIRAM BARKAT
August 3, 2011 02:10
3 minute read.
Desalination plant (illustrative)

Desalination Plant 311. (photo credit: Courtesy)

 
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The Finance Ministry, which has been sharply criticized for delaying the building of Israel’s seawater desalination plants, is dragging its feet in implementing the cabinet decision in January to expand these plants. An investigation by Globes found that the production expansion is almost six months behind the schedule set by the government.

Moreover, the Finance Ministry’s efforts to achieve the lowest price for the water produced by the plants, in order to save millions of shekels, is liable to torpedo the entire desalination expansion program, according to the plants’ franchisees. They recently told the ministry they could not expand the plants at the prices dictated to them.

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“The price is viable for desalinated water,” the ministry said.

On January 30, the government decided that the first step to deal with Israel’s water shortage was to expand the production of desalinated water.

Excluding Mekorot’s ( the national water company) Sabha plant in Eilat, Israel has three facilities in operation along the Mediterranean coast: at Ashkelon, Palmahim and Hadera. The aggregate production of these plants, currently 250 million cubic meters a year, is to be increased by 100 m.cu.m. to 120 m.cu.m.

The government instructed the seawater desalination tenders committee, headed by Deputy Accountant-General Gil Shabtai, to close new contracts with the plants’ franchisees by June 1. But the ministry first contacted the franchisees only in early July, a month after the deadline for signing the contracts.

The delay apparently frightened the tenders committee into trying to dictate to the franchisees a very tight timetable, by demanding bids by August 15, just six weeks from the notification.



The franchisees say they need three months to prepare bids.

Under the tender committee’s model, the Finance Ministry will dictate the price for desalinated water, while each franchisee will offer additional water at that price. The price of water for each plant will be derived from the balance of the franchise period, and allowing the plant’s new facilities the option of receiving the same conditions as the original facilities, but not the opposite, because the original contracts with the state expire earlier (each lease is for 25 years).

The Finance Ministry’s prices were unrealistic and substantially lower than the highest price achieved in latest competitive tender to build and operate the Soreq desalination plan, representatives of the franchisees told Globes.

The Finance Ministry said in response: “The claim that the Finance Ministry is delaying the desalination enterprise is groundless. The opposite is true. Since 2000, the Finance Ministry is the party that has promoted the desalination enterprise. Immediately following the government decision, the tenders committee has been working in accordance with the priorities given it.”

The Finance Ministry says the tenders committee is undertaking several processes simultaneously, including reaching agreements with the Palmahim and Hadera desalination plants on expanding production to most of the day, securing financing for the Soreq plant and the contract process with Mekorot for the Ashdod desalination plant.

Expanding desalination production is complicated and requires thorough legal, statutory, engineering and financial preparation, the ministry said.

“Taking this into account, the tenders committee has acted expeditiously and meticulously to complete the process in the shortest possible time,” it said.

The timetable is reasonable, given that preliminary procedures were already carried out, enabling the plants to prepare in time, the ministry said.

“This is not the first expansion process that the government has undertaken with the desalination plants,” it said, adding: “The prices, which were set on the basis of engineering financial work by the tenders committee, are a proper financial price for the desalinated water. It is superfluous to mention that franchisees’ comments received as part of the process will be discussed by the committee, which will respond accordingly.”

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