Bethel Finances: IEC to build $1.3b Chinese solar energy project

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Sources inform ''Globes'' that Israel Electric Corporation (IEC) (TASE: ELEC.B22) will build a $1.3 billion project of three photovoltaic solar energy arrays in northern China. IEC's board of directors approved the project, the utility's first investment in China, at its last meeting. As the project's chief contractor, IEC will not invest equity in the project.

The project is also IEC's first investment in a solar energy project, and it is the utility's largest foreign project to date. The Government Companies Authority still has to approve IEC's participation in the project. The Ministry of Finance has blocked IEC's entry into new fields until negotiations on reforming the company are completed.

The 240-megawatt PV solar arrays will be built on private land owned by a Chinese businessman and his Israeli partner, who approached IEC about the project three months ago. IEC will own 50% of the engineering, procurement and construction (EPC) company that will build the project, the Chinese partner will own 25%, as required by Chinese law, and a large foreign contractor of solar arrays will own the remaining 25%. A Chinese manufacturer will supply the PV panels. IEC has no experience in building solar energy projects, and is banned from the business in Israel.

The Chinese project will enable IEC to acquire experience in the field. It will provide a small team who will coordinate between the project's subcontractors.

The project will comprise three 50-MW PV fields and rooftop PV systems installed on the farm's greenhouses to generate an additional 90 MW. The three PV solar farms will cost $750 million to build, and the rooftop arrays will cost $540 million.

On Thursday, IEC's board also decided to establish a subsidiary, IEC International Ltd., to handle the utilities foreign ventures. IEC International will be registered in Cyprus, in order to operate in countries without diplomatic relations with Israel, and because of Cyprus's low tax regime.

IEC's foreign projects to date include the design of a coal-fired power station in South Africa in a joint project with France's Alstom SA (Euronext: ALO), a wind energy project in Bulgaria, and the construction of power stations in Cyprus and Greece. IEC is also in talks on designing power stations in India and Nigeria.