Paz Wins Ashdod Refinery Tender

Paz corporation yesterday won the tender for the Ashdod Oil Refineries with a NIS 3.5 billion bid. The acquisition makes Paz the country's most powerful energy company, and owner Zadik Bino the industry's most powerful figure.

Paz was declared the winner after seven hours of nerve-wracking bidding, during which Dor-Alon and then Yitzhak Tshuva's Delek Group left the table.

"The final price was 60 percent above the company's initial bid, which had been submitted at 10:00 A.M.," said Eyal Gabbai, the director of the Government Companies Authority who was in charge of the tender process. "A three-and-a-half hour process to privatize the Ashdod refinery ended with superlative success. The state's meticulous groundwork proved itself, and the results speak for themselves."

Gabbai said the GCA is now preparing to forge ahead with reform of the energy sector by floating the Haifa refinery.

After buying out The Israel Corporation's stake in Ashdod Oil Refineries, the state was free to privatize the company, which has a monopoly over refining crude oil in Israel. The Ashdod facility is the smaller of the two, and the state decided to sell that one outright and float the larger Haifa facility.

Paz's offer was for 100 percent of the refinery shares, including $315 million in fuel inventory and a $114 million debt to the banks. The refinery's book value is $360 million. The refinery's estimated profits for 2005 are about NIS 500 million.

Gabbai can justifiably call the high sales price a coup for the state, which has been accused in the past of selling off state assets to wealthy families for a pittance. Bino is paying roughly three times the valuations discussed prior to the privatization process, which had ranged from $200 million to $300 million.

While local appraisers hired by the state had reached figures of $405.25 million and $540 million, foreign appraises commissioned by Paz estimated the company's worth at a price even higher than the winning bid.

Paz is borrowing the money for the deal from a consortium of Israeli banks, with no foreign financing. Energy sources believe that Bino is likely to float Paz, which is still privately held and safeguards its privacy.

It was far from clear that the tender would come transpire at the start of the week. The Movement for Quality Government in Israel and the Ashdod refinery union had petitioned the High Court of Justice to halt the process. The court rejected the motions just hours before the bidding began to the relief of government authorities.

The GCA expects to float the Haifa refinery toward year's end.

Finance Minister Abraham Hirchson said yesterday's sale portends an era of competition, calling the process crucial to Israel's economy on the whole, and the energy sector in particular. "I thank the manager of the Government Companies Authority and Finance Ministry personnel who were involved, by virtue of whose professional and diligent work achieved impressive results for the state," Hirchson said.

National Infrastructures Minister Binyamin Ben-Eliezer said the price Bino is paying represents a vote of confidence in the Israeli economy.

HSBC energy division manager Philip Wolf commented that the price is an excellent one that reflects the refinery's true value.