ICL bows to state, will shoulder bill for saving Dead Sea hotels
Finance Minister Yuval Steinitz threatened to convene a public committee to discuss company's responsibilities if ICL didn't accept proposal for cost-sharing, royalties.
Spooked by a last-ditch ultimatum that followed long negotiations, Israel Chemicals yesterday accepted the state's position on sharing the cost of rescuing the Dead Sea hotels from inundation, and on the scale of royalties it must pay for mining minerals in the area.
Finance Minister Yuval Steinitz had threatened to convene a public committee to discuss the company's responsibilities if ICL didn't accept his proposal for cost-sharing and royalties.
Dead Sea Works, a unit of ICL, agreed yesterday to shoulder NIS 3.04 billion of the cost of dredging salt from the southern part of the Dead Sea, to lower the water level. The state will shoulder NIS 760 million.
DSW alone will be responsible for carrying out the project, both operationally and economically. DSW will have to bear any extra cost beyond NIS 3.8 billion (in capitalized terms ) if the increase does not stem from a change in position by Israel's planning authorities. That had been a sticking point as negotiations wound to a close; the company didn't think it should have to bear all the extra cost, if any.
The part of the Dead Sea that Israelis think of as its southern half is actually a giant evaporation pool from which DSW extracts potash and other minerals, most of which are exported. The company transports mineral-rich water from the northern part of the sea to its southern-end canal.
The snag is that the water also bears silt. This silt builds up in the southern part, raising the water level. The hotels along the shore would have been inundated long ago if not for huge earth berms.
As for royalties, ICL agreed to double them from 5% of revenues to 10% of revenues on amounts of potash beyond 3 million tons a year, retroactive to 2010. From 2012 it will pay 10% of revenues above 1.5 million tons a year. The increase should add NIS 175 million to state revenues a year.
No agreement has been reached on the state's claim to be owed $291 million on royalties due from 2000. That claim remains in arbitration.
The agreement between the Finance Ministry and ICL will be brought before the cabinet during its regular Sunday session, or the following Sunday at the latest, Steinitz said yesterday at a press conference. It also has to receive the imprimatur of the ICL board, after which the parties can formally sign it.
ICL will meet the target of dredging the silt from the bottom of the southern pool by 2017, Steinitz predicted. "Dead Sea Works operates based on a license from the state. Therefore, they have an interest in finishing by 2017," Steinitz said, presumably intending to obliquely threaten that if the job isn't done by then, the state would refuse to renew its license.
Steinitz also said the government's take of ICL's revenues from potash mining would be rising from 36% of sales today to between 49% and 57%. The exact proportion depends on talks between ICL and the Tax Authority over the effective corporate tax rate the company would pay, which Steinitz estimated at between 16% to 24% (the highest rate ). ICL currently pays 12.96% corporate tax.
The royalties ICL will be paying are now in line with the world norm, the minister said. Pressed on why ICL shouldn't actually pay more than the norm, since it doesn't face risks like other companies (for instance it doesn't pay for storage and can keep mining and piling up potash when prices are low and it doesn't want to sell ), Steinitz said the current correction is a huge one and should therefore be proportional.