Israel Corporation Mulling $430m Sale of Stake in Peruvian Power Company

Divestment comes as holding company seeks to raise cash ahead of June 2015 deadline for repaying $950 million in debt.

Facing a cash crunch, the Israel Corporation is weighing the sale of its 21.1% stake in Peruvian electricity producer Edegel. The market value of the holding company's share in the private energy company is $430 million.

The likely buyer is Spanish utility Endesa, which is a partner with the Israel Corp. in Edegel. The two companies are joint shareholders in Generandes Peru, which controls 54% of Edegel.

Edegel is traded on the Lima Stock Exchange at a market capitalization of about $4 billion. Israel Corp. has retained investment banks Citi Group and Credit Suisse to conduct the sale.

The move comes amid plans by the Israel Corp. to sell its 80% stake in Israeli energy producer OPC, which is estimated to be worth NIS 1.1 billion. The divestments are being made as the holding company and its energy subsidiary IC Power wrestle with a cash flow crunch.

The Israel Corp. has some $950 million of debt coming due by June 2015 and faces another $67 million cash call if it goes ahead with its plans to subscribe to a $177 million rights offering to be made by its Oil Refineries Limited unit.

But, in a sign that the Israel Corp. is not giving up on the energy sector, the holding company said Tuesday that its IC Green Energy unit signed a memorandum of understanding with the Chinese energy company Taiqing to build a $340 million, 220-megawatt solar boosting capability for coal-powered generating stations in Mongolia.

Peru's largest private power producer, Edegel has 1,668 megawatts generating capacity and is in the midst of building a hydroelectric power station at a site called Curibamba that will add another 195 megawatts at a cost of $450 million.

The Israel Corporation, which is controlled by Idan Ofer, acquired its Edegel stake in two steps. It bought an initial 14% in 2007 as part of a deal to acquire for $542 million the energy holding company Globeleq Americas. Israel Corporation subsequently changed Globeleq Americas' name to Inkia and merged it with its subsidiary IC Power. In 2010, the Israel Corporation paid $53 million to increase its stake in to 21.1%, an acquisition that valued the company at that time at $781 million.

Shares of Israel Corporation were up 2.7% at NIS 1,729 in Tel Aviv Stock Exchange trading late Tuesday.

Yaron Kaminsky
Bloomberg