Client updates / Infrastructure

Contracts in the construction sector utilize various models for calculating the consideration. These models range from contracts aimed at maximizing accuracy to contracts aimed at maximizing certainty. A new Israeli court ruling creates ambiguity between the models and adversely impacts the status of lump-sum contracts.

On March 22, 2020, emergency regulations were published in Israel on limiting market activity for the purposes of managing the spread of the coronavirus. The construction and infrastructure sectors were declared exempt.

In light of the rise of investments in transportation projects, new guidelines were issued for infrastructure companies operating on behalf of the Ministry of Transport, requesting such companies adopt binding standards on several issues regarding contracts and tenders.

2018 was characterized by the promotion and development of numerous infrastructure and energy projects. A government decision in September 2017 led to the formulation of a multi-year plan for the development of 147 infrastructure projects in Israel at a total cost of NIS 116 billion. One of the goals of the plan is to promote public-private partnership (PPP) projects.

The Israeli Ministry of Energy published on November 26, 2018, a second call for bids, inviting international energy players to submit offers for the exploration of offshore soil.

At the end of last week, the Israeli Knesset approved a historic reform to the electricity sector. The selling process of the first power plant, Alon Tavor, is expected to begin within a few months.

On June 2018, the Israeli government adopted decision no. 3859, entitled “The Reform in the Electricity Sector and Structural Change in the Israel Electric Corporation.” This decision constitutes a milestone in the long history of the IEC, which was incorporated in 1923.

In September 2017, the Electricity Authority published a Call for Bids for the purpose of determining the rate for electricity generation using photovoltaic (PV) technology at PV plants to be connected to the high-voltage and low-voltage grids.

Further to the recent hearing held in October 2016 (see our clients update dated 01 December 2016), the Electricity Authority published on 19 December 2016, a decision detailing the main principles of the upcoming competitive process for the construction of Solar Power Plants in Israel, with a capacity of up to 1,000 MW.

November 2016 marked the first time that the Ministry of Infrastructures and Energy invited an open international call for bids for 24 licenses to 24 blocks (each not exceeding 400 km²) in Israel’s economic waters at a distance of at least 7 kilometers from the shore.

In October 2016, the Electricity Authority published a draft resolution to hold a hearing regarding the arrangement of a competitive proceeding to set the tariff payable for electricity generation using photovoltaic technology.

As part of the global trend towards finding energy alternatives and towards encouraging the establishment of renewable-energy projects, the State of Israel has issued several significant tenders in recent years with the aim of securing cleaner and more sustainable energy sources. Such tenders include two separate tenders for the construction and operation of two solar-thermal power plants (Plot A and Plot B) in the vicinity of Kibbutz Ashalim in southern Israel and the Gilboa hydroelectric pumped storage power station.

The recent decision of the Antitrust Commissioner with regard to the existence of a natural gas monopoly illustrates all the more emphatically the absence of an orderly legislative framework to regulate all matters pertaining to oil and gas exploration and production in Israel.

Nevertheless, moves are being made to clarify the regulatory framework concerning off shore Oil & Gas. A few weeks beforethe Commissioner’s decision,  the government had submitted a draft bill to the knesset on the matter of Israel’s maritime zones.

The draft bill is worded in a way that adopts the customary provisions of the international Convention of the Law of the Sea of 1982, even though the State of Israel is not one of its signatories.

The draft bill defines five maritime zones, including the exclusive economic zone of the State of Israel. Besides defining the boundaries of the exclusive economic zone, the draft bill also prescribes the State’s powers and authorities and the laws that shall apply to that zone.

The adoption of the draft bill by the knesset will create certainty and reduce the ambiguity surrounding all issues pertaining to oil and gas exploration, production, utilization and management in Israel’s economic waters. and should encourage foreign companies to consider entry into the Israeli market.