Pressure mounts on PM to condition sale of oil refineries on closure within a decade

Approval of a controversial deal allowing a petrochemical company to take over Israel’s largest oil refinery fell solely within the purview of Prime Minister Yair Lapid on Monday after a court gave the green light to a restructuring plan related debt that will cost the public one billion shekels (just under $300 million). The ministries of finance and energy have already approved the sale.

Knesset lawmakers are pressuring Lapid to condition the sale of the Ofer family’s shares in the Bazan oil refineries in northern Israel to Israel Petrochemical Enterprises Ltd. closure of the complex within a decade, in line with the government’s decision to do so in March.

To the disappointment of environmental groups, this decision did not include a detailed timetable or budget for the redevelopment of this area of ​​Haifa Bay.

The closure vote follows years of campaigning by Haifa residents, backed by environmental activists, amid heavy air pollution and above-average incidences of cancer and respiratory disease in the city by the bay.

In a letter, MK Alon Tal (Blue and White) asks Lapid to clearly condition the sale of Bazan on its closure within a decade and a written commitment from the buyer to abide by it and not expand polluting operations.

He also called on Lapid to use his authority to ensure that the public is not harmed by the debt settlement reached in favor of the buyer, Israel Petrochemical Enterprises Ltd.

Plans for a new Innovation Bay in the northern city of Haifa following the retreat of the polluting oil refining industry, June 29, 2020. (Screenshot, Knesset Internal Affairs and Environment Committee )

Israel Petrochemicals, which owns 15% of shares in Bazan’s oil refineries – enough to become a co-owner – used its right of refusal to veto an earlier bid for Bazan by property developer Hagag Group.

Hagag evidently saw the potential for a master plan to replace petrochemical companies with large-scale infrastructure, residential and transportation projects in the region worth billions of shekels.

But to acquire sole ownership of Bazan, Israel Petrochemicals – which exists only through its shared control of the refining conglomerate – needed cash, as it was bankrupt. She had more debt than assets.

More than half of its bonds are held by institutional investors such as banks, savings and insurance companies and pension funds, all of which manage and invest the public’s money.

The company sought – and obtained – the agreement of representatives of these institutions to waive approximately one billion shekels of debt, and this agreement was approved by the Tel Aviv District Court on Monday. The court’s reasons were not immediately released.

Known as “haircuts”, debt settlements apply to situations where a company cannot service its debts and bondholders think a deal is probably the best arrangement they can make. obtain.

In this undated photo, Orly Aharoni, Advisor for Climate Regulation and Policy and Chair of the Climate Investment Index Committee at the Clean Money Forum, is pictured with senior executives from Migdal Mutual Funds, Migal Capital Markets and the Tel Aviv Stock Exchange. (Sivan Farag)

Orly Aharoni, a regulatory legal expert who runs the Clean Money Forum, said the court’s decision added insult to injury.

“This (deal) is not about real estate or high tech, it’s about continuing to pollute,” she said. “Sometimes you authorize a debt settlement for a company that is doing well but has had a hard time. The danger here is that they continue to pollute the area and oppose the evacuation, and the other thing is that a billion shekels of public money has been wasted because of this.

“It’s an industry that causes so much damage to public health, so much air and soil pollution.”

Hagag’s candidacy contained at least hope for a better future, when petrochemicals were a thing of the past, she added.

The debt settlement was approved on Monday after the judge rejected a petition against the sale filed by local authorities in the Haifa area.

Sarit Golan, the attorney for those authorities, echoed Tal’s call for the sale to be conditional on Bazan’s closure.

Lawmaker Alon Tal. (Courtesy)

Israel Petrochemical Enterprises Ltd. was also able to raise new funds from new partners, including Yona Fogel.

Fogel’s company is part of MED-RED Land Bridge, an Israeli-Emirati joint venture that has signed with Israeli state-owned Europe Asia Pipeline Company to transport Gulf oil overland across Israel from Eilat on the Red Sea to Ashkelon on the Mediterranean.

This highly controversial agreement has effectively been frozen for the time being by the Ministry of Environmental Protection.

On Sunday, it emerged that – despite the cabinet decision in March – Finance Minister Avigdor Liberman and Energy Minister Karine Elharrar had given their blessing to Israel Petrochemicals’ takeover of Bazan.

Tal wrote to Lapid on Thursday, in a letter he posted on Facebook on Sunday, that allowing debt settlement would only deepen investment in a polluting industry that, in a time of emissions-fueled climate change of fossil fuels, should be relegated to the past. .

“If a discounted settlement is approved, in exchange for shares…there will be an incentive to maximize the value of the shares by expanding the refining operation. This type of expansion is completely contrary to the objectives of Government Decision 1232 of March 2022…. to shut down petrochemical and chemical plants in Haifa Bay,” Tal wrote.

Haifa Bay Industrial Zone (photo credit: Shay Levy/Flash90)

Haifa Bay Industrial Area (Shay Levy/Flash90)

Tal attended Monday’s hearing, along with Labor MK Naama Lazimi, a Haifa resident. She said: “It is impossible to ignore the government’s decision and intention to phase out pollutants within a decade. Lapid needs to make it clear to them (buyers) that they need to evacuate. That’s what you have to do, that’s why I’m here. It’s my house.”

Omer Shavit of The Times of Israel’s partner site Zman Israel contributed to this report.

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