Harel Climbing Aboard Jerusalem Light Rail Venture

Israel Infrastructure Fund and Harel insurance firm are on their way to taking over of Jerusalem light rail project, which is nearing completion.

Avi Bar-Eli
Avi Bar-Eli
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Avi Bar-Eli
Avi Bar-Eli

The Israel Infrastructure Fund and the Harel insurance firm are on their way to taking over of the Jerusalem light rail project, which is nearing completion. IIF is advanced stages of negotiations to buy 20% of the shares in the light rail franchisee CityPass from French transportation giant Alstom.

Two weeks ago the other French partner in CityPass, Veolia Transportation, agreed in principle to sell its 5% share in CityPass to the Egged bus cooperative, along with its 80% share of the operating company for the trains.

Yair Hamburger - Harel Group.Credit: Michal Fattal

IIF now owns about 10% of CityPass and Harel owns 20% directly. Harel also controls 40% of IIF.

The Veolia-Egged deal is in the NIS 40 million to NIS 50 million range, giving the entire project a value of about NIS 900 million. But this amount also includes Veolia's share of the operating company. CityPass has three parts: the concessionaire, the contractor and the operating company.

Alstom also built the trains for the project, and has an 80% share in the contractor building the light rail, Engineering Procurement Construction. Ashtrom Properties is the other partner in EPC.

Six months ago, the media reported Harel was interested in gaining control of CityPass. First IIF approached the third financial partner in the franchisee, Polar Investments, which holds a 17.5% share. IIF wanted to buy Polar out - but nothing came of it.

Oded Sarig.Credit: Michal Fattal

The deal with Alstom will need the approval of both the Finance and Transportation Ministries, as well as that of the other partners in CityPass: Ashtrom and Polar. In addition, Harel will need the approval of the Finance Ministry's insurance commissioner Oded Sarig. Institutional investors, including insurance companies, are limited to holding 30% of a company.

Sarig placed a number of regulatory limits on Harel and CityPass six months ago, and as a result the chairman of Harel, Yair Hamburger, resigned his position as chairman of CityPass after five years.

Harel also reduced its holdings in IIF to 40%. All told Harel's total holdings in CityPass, including its relative share via IIF, is now 24%. As a result IIF is expected to limit its purchase of more CityPass shares and lead a consortium of institutional investors to purchase the remainder of the shares, similar to the model it used in buying control of the Derch Eretz operator of the Trans-Israel Highway recently. (see page 8 )

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