Israel famously claims to have detached itself from nature, meaning it uses a significant amount of desalinated water rather than relying on rain- and groundwater. But it hasn’t really divorced the skies. Now, with the seasonal rains delayed and in anticipation of a winter drought, the state is asking the country’s desalination plants to maximize their output until near the end of 2018.
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The winter of 2016-17 was a dry one, with rainfall about 71 percent of the multi-annual average. That is considered to be very low. Weather forecasters are predicting about the same this winter.
The effects of the paucity of rainfall are legion, and include greater dependence on other sources of water – crucially, in Israel, desalination. However, one of the country’s five desalination plants, in Ashdod, is only operating at partial capacity.
On Wednesday, the Finance Ministry wrote to the other four desalination companies – in Ashkelon, Hadera, Palmahim and Soreq – asking if they might like to increase their production to maximum for this year and 2018. The ministry gave the companies until November 7 to respond.
In the letter, Deputy Accountant General Nehemia Kind notes that the state would like the companies to step up water production this year – and given that it’s already nearly November, that seems to indicate how parlous the state of the water economy is locally.
Altogether this year, the four plants were supposed to supply 484 million cubic meters of water; the malfunctioning Ashdod plant was supposed to supply another 100 million cubic meters, and rainwater was expected to provide 1 billion cubic meters.
Kind also advised the companies of the maximum the state is prepared to pay for the treated water per cubic meter.
Commercial desalination uses a lot of electricity, and producing at maximum capacity means the plants will have to use more electricity at peak rates. That means its cost of production will be increasing, and so will the price the companies charge the state.
Given that the state is prepared to pay more for the additional water supplied beyond the contractually agreed amount, at least until November 2018, the price of water to households is likely to increase.
The November cutoff may be based on an assumption that the state thinks the Ashdod facility will be working properly, at full capacity, by that time.
The Ashdod desalination plant – the only one of the five plants built by the state-owned Mekorot Water Co. Ltd. itself (with subcontractors) – was built well after schedule, which has been a source of legal problems. Though it managed to supply 15 percent of Israel’s total consumption of desalinated water, its production was only 85 percent of what it should be, due to technical problems. At present it’s only operating at about 50 percent capacity.
The upshot of that production shortfall is that the Ashdod plant’s income did not cover its costs and in April the desalination subsidiary, Mekorot Development & Enterprise, defaulted on its debt.
In May, Haaretz reported, the board of the Mekorot parent company approved writing off 366 million shekels ($103 million) because of the “collapse” of the Ashdod desalination facility, and attached a "going concern" warning to the financial statements of Development & Enterprise. “Our situation is terrible, there’s nothing else to say,” a government source told Haaretz at the time, adding, “It’s difficult to see a failure like this at a government company.”
In late September, the outgoing head of the Government Companies Authority, Uri Yogev, chided parent company Mekorot for failing to sell Mekorot Development & Enterprise through a competitive bidding format. At this point, the subsidiary has accrued losses of about 500 million shekels.
The Finance Ministry is expected to decide within a few weeks whether to allow Mekorot to sell the Ashdod plant, without an auction process, for a mere 100 million shekels to the contractor that built it, IVM – a partnership between the Israeli company Minrav and the Spanish firm Sedyt.
Another alternative is to hold a quick process inviting bids in the hope that somebody offers more. Some groundwork has been done: In August, Mekorot Development & Enterprise held a road show, offering its charms to potential buyers – but an auction would take time and the facility needs repairs to continue to operate.
Meanwhile, since the company’s production is short of the capacity it agreed to supply, it is also accruing fines payable to the state.