Last update - 00:00 07/06/2007
Jerusalem water and sewage services to be partially privatized
By Zafrir Rinat, Haaretz Correspondent and Avi Bar-Eli, TheMarker
Hagihon, the largest public water and sewage company in Israel, is preparing to transfer a portion of its control of water and sewage services to private hands, by issuing 20 percent of its shares ,at a company valuation of NIS 1 billion, to the public.
The company, which serves Jerusalem and the surrounding area, intends to raise NIS 200 million, in order to finance infrastructure development.
This move comes after a law was passed in 2001 which called for the establishment of independent public water and sewage companies by 2008. The law also stated that the companies established can be privatized after three years, but that it can only sell 25 percent of its shares.
The company's management has met with the heads of the Israel Securities Authority to examine the necessary arrangements, and hopes to complete the issue within a few months.
Hagihon has operated as a municipal company since 1996, and as a water and waste corporation since 2001. The company invoices about NIS 500 million annually in some 1.2 million water and sewage bills, of which more than 90 percent is collectable.
The company's annual report has not yet been completed, but its profits are estimated at only a few thousand shekels.
Hagihon chair Moshe Klatzin confirmed the news Wednesday, saying, "Water is a monopoly, the collection rate is high and the company operates very well. If the Tel Aviv municipality were rated AAA (for a municipal offering), we will certainly rate AA+ at least."
Environmental organizations supported the establishment of independent public companies as it prevents local authorities from using the money collected from water taxes to be invested elsewhere. On the other hand, the greens oppose the privatization of the companies.
"If the public companies work properly, there is no need to privatize them", Shimon Zuk, a hydrology expert, told Haaretz in the past. "Privatization will create a situation in which the public will pay more for the company's services just so that capitalists can make a profit. Furthermore, the state won?t be able to oversee the private company's workings because the body that can do this ? the Water Authority ? no longer exists."
Zuk's stance was surprisingly supported by Finance Ministry officials in the past, who admitted that the private companies would be properly supervised.
The green organizations have presented many examples from overseas, in which the privatization of water services brought with it a hike in the cost of water, violations of health and environmental standards and the deteriorating of employee's rights because the private companies have an obligation to the stock holders and not the consumers.