Israeli Businessman May Be Unable to Purchase Massive Israeli Conglomerate After His U.K. Energy Business Collapses

The latest development comes after Moti Ben-Moshe wrote off another half-billion shekels due to his failed investment in IDB Holding, Israel’s largest holding company

Israeli-German businessman, Moti Ben-Moshe, 2014.
Eyal Toueg

A British energy company owned by Israeli-German businessman Moti Ben-Moshe collapsed over the weekend, throwing into question whether he can pull together the 1 billion shekels ($270 million) that he needs to complete his acquisition of Africa Israel, one of Israel’s largest conglomerates. U.K.-based Extra Energy announced on Wednesday that it has ceased to operate. It had 129,000 customers.

The British energy regulatory agency Ofgem said Extra Energy customers’ outstanding credit balances would be protected and there would be no disruption to supplies. As of February 2018, Extra Energy owed 105 million euros ($119 million) to Ben-Moshe's German subsidiary Extra Energie, money some fear will not be repaid - according to the two company’s financial statements.

The latest development comes after Ben-Moshe wrote off another half-billion shekels due to his failed investment in IDB Holding, Israel’s largest holding company. These two investments bring Ben-Moshe’s total losses to nearly 1 billion shekels. Prior to his IDB investment five years ago, Ben-Moshe was an unknown on Israel’s business scene.

Extra Energy began selling electricity and natural gas plans to individual and corporate customers in 2014. A push to increase competitiveness in Britain’s energy market reduced the market share of the country's six largest providers to 70% from more than 95% in recent years, with 60 smaller independent companies now in operation. But their rapid rise has led to questions over their viability, because with less capital available for long-term price hedging, some may have been vulnerable to soaring wholesale commodity price increases.

The Endole British Credit Report, a business credit research service, recently recommended companies controlled by Ben-Moshe, including the German company Extra Energie, its parent company, Extra Holdings and Extra Energy in Britain, be granted a credit line of no more than 54,000 British pounds ($69,000).

A press release issued Sunday quoted Ben-Moshe as saying that his British energy firm had had losses of 17 million British pounds ($22 million) in 2017, due mainly to marketing expenses and investments in technology such as billing systems and customer relationship management. Ben-Moshe said these systems were developed in his corporate group by Extra Energy Cyprus.

The British company transferred 30 million euros to the Cypriot company, and the German company transferred more than 70 million euros to it. That raises questions as to the financial stability of the German company, as well as questions about the massive sums being transferred to Cyprus.

Ben-Moshe tried to allay the fears of Africa Israel’s bondholders, assuring them that the German company is still financially stable, having finished 2017 with a net profit of 38 million euros. If there are no last-minute changes, on December 13, Alon Blue Square Israel, which is controlled by Ben-Moshe, is scheduled to complete a cash buyout of 56% of Africa Israel Properties for 1.3 billion shekels, plus another 130 million shekels to be paid in the future.

Another privately held Israeli company controlled by Ben-Moshe is slated to pay 340 million shekels to buy the remainder of Africa Israel’s assets — Africa Israel Residences, Danya Cebus and Africa Israel's stake in the Route 6 toll road. Africa Israel had been controlled by embattled businessman Lev Leviev.

Ben-Moshe said in response: “Moti Ben-Moshe’s subsidiary in the British energy market, Extra Energy, informed the British regulator yesterday that given the significant changes in the regulatory environment regarding electricity and natural gas suppliers as of the end of October, particularly given the regulation imposing a price cap and new rules governing competition, the group, which operates primarily in the German energy market, has decided to halt its current operations in Britain. Ben-Moshe has decided to stop subsidizing the group’s operations for the development of the British energy market and to return the license to the British regulator, Ofgem.” Five British energy companies have shut down in the past few weeks, the statement noted.

With reporting by Reuters.