Bazan privatization clears another hurdle

The government is buying the stake from Israel Corp. for more than NIS 570m. and thereby increasing its holding to 100%.

bazan logo 88 (photo credit: )
bazan logo 88
(photo credit: )
Another hurdle in the privatization of Israel Oil Refineries (Bazan) was overcome on Wednesday, when the High Court rejected a petition that sought to prevent the government's purchase of a 26% stake in the company. The government is buying the stake from Israel Corp. for more than NIS 570 million and thereby increasing its holding to 100%. It then plans to split the monopoly's refineries in Ashdod and Haifa into two companies and sell them separately. "The decision gives a green light for the government ... to quickly begin the process of splitting Bazan, which is good for the economy," said Finance Minister Ehud Olmert. Kobi Haber, the director of the budgets department, said the ruling allows the introduction of competition in the refineries sector. "This will bring a reduction in prices in the future and an improvement in the efficiency of the energy market," he said. However, the Movement for Quality Government (MQG), which brought the petition, maintains that Israel Corp. is not entitled to receive any money for the stake. It claims that, under the terms with which it holds the shares (based on a licensing agreement from 1933), they should have passed to the state for free in 2003. The High Court didn't agree, but hasn't yet given an explanation for its decision. A spokesman for the MQG expressed disappointment with the ruling and said the organization would respond in full once it receives the court's reasoning. Government Companies Authority Director Eyal Gabbai said that now that the High Court has made its decision, the government would start the process of selling the Ashdod refinery to a private company in the next few weeks. Under the privatization plans, the government would then sell the Haifa facility through an initial public offering on the Tel Aviv Stock Exchange or to a private group. To prevent concentration in the sector, the large fuel companies would not be allowed to bid for the Haifa refinery but would be allowed to bid for the Ashdod plant - a decision backed by anti-trust commissioner Dror Strum before he left the post last month. Israel Corp. has said in the past it would be interested in taking part in the privatization, as has Alon Oil Group. The privatization of Bazan has been plagued by delays, due to opposition from within the government to the plans and to disputes between Israel Corp. and the Treasury about the value of the 26% stake.