Israel rejects Chinese bid to build Sorek 2 amid pressure from the US

MAY 26, 2020 20:41

Israel has selected local company IDE Technologies, rather than a Chinese firm, to construct the world’s largest desalination plant, the government announced Tuesday. The decision avoids another undesirable showdown with the Trump administration over Chinese participation in major infrastructure projects.

Three groups bid to build Sorek 2, a private-public partnership (PPP) that will be the world’s largest reverse-osmosis seawater desalination plant when completed in 2023. Among them was Israeli Hutchison Company, an affiliate of Hong Kong-based Hutchison Company.

The US has asked its allies, including Israel, in recent weeks to sever ties with China – Israel’s third-largest trading partner – in areas with security risks, a US official with knowledge of talks on the matter said last week.

In the same vein, US Ambassador to Israel David Friedman chose Communications Minister Yoaz Hendel as the first minister in the new government with whom he held a meeting, along with Knesset Foreign Affairs and Defense Committee chairman Zvi Hauser, the other member of the Derech Eretz faction.

Sources in Derech Eretz confirmed that the matter of 5G and Chinese technological investments in Israel came up in the meeting. Friedman invited Hendel to Washington to meet with government officials in his field and deepen cooperation between the countries on communication technologies.

The US has argued that Chinese companies will use their involvement in building 5G networks for espionage or possibly sabotage of communications infrastructure. Earlier this year, US Attorney-General William Barr said Chinese dominance in this sphere would be a “monumental danger” because of its use for spying, adding that America’s “economic future is at stake.”

Regarding Sorek 2, the Trump administration specifically flagged Hutchison’s possible involvement in the construction of the desalination plant, which will be in Kibbutz Palmahim and cost more than NIS 5 billion. In addition to being an important infrastructure project for Israel, the plant is near the Sorek Nuclear Center and the Palmahim airbase.

US concern about Chinese companies’ involvement in major infrastructure projects in Israel in recent years is partly due to the ability of Chinese operatives to gather intelligence while working on them, as well as the massive economic, social and environmental losses, and even casualties, which could be inflicted if that infrastructure is damaged.

The official statement from the Finance, Energy and Water Resources ministries does not mention Hutchison or China. It simply states that Kadima-headquartered IDE Technologies, which partnered with Bank Leumi, submitted the winning PPP bid, promising desalinated water at the cost of approximately NIS 1.45 per cubic meter, about 65 agorot cheaper than existing desalination solutions in Israel today.

The reduced cost is expected to save households a total of NIS 3.3b. ($940m.) during the lifetime of the plant, which is expected to produce 200 million cu.m. of potable water per year, increasing the country’s annual desalinated-water production by 35% to 785 million cu.m., approximately 85% of Israel’s household and municipal water needs.

The project will be financed by an international consortium, including Bank Leumi, German state-owned KfW and a €150m. ($165m.) loan from the European Investment Bank.

IDE Technologies, a subsidiary of Alpha Water Partnership, was formerly the sole owner of the Sorek A facility. It sold its shares in February 2019 to bid for the latest desalination project.

In mid-2019, a committee headed by Energy Ministry director-general Udi Adiri discovered “systematic and continuous deviations” in the concentration of chloride in water produced by the facility over a period of more than two years.

“About two years ago, I passed a revolutionary government program to deal with future periods of drought, during which I decided to double desalination targets by 2030,” Energy Minister Yuval Steinitz said. “The desalination plant being initiated today, which will be the largest of its kind worldwide, is the result of the implementation of this program, and together with the desalination facility in the Western Galilee… the state of the Israeli water market and its readiness for the future are excellent.”