Big plant – cheap at the price

Three consecutive years of drought have dwindled Israel’s water resources,

especially the main reservoir for fresh water, the Sea of Galilee, which this

year reached its lowest level ever.

Public pressure moved the Knesset (Parliament) to form a special investigation

committee to resolve the most serious water crisis in Israel’s history, and

prompted the government to act swiftly in regard to the national water policy

and management. The practical, and the most economically feasible solution,

pointed to sea water and brackish water desalination. It also calls for expanding

the recycling infrastructure and investing in new reservoirs to catch about

200M metres³/year of water, that otherwise flow each year to the Mediterranean

Sea. An interim emergency measure is the plan to import by tanker from Antalya,

Turkey, 50M metres³ of fresh water a year.

World’s largest RO facility

Among these measures, the most ambitious and significant move is sea water desalination.

As it stands now, the national plan calls for desalinating 215 million metres³

of sea water a year by 2004. The first step was the decision to establish the

Ashkelon Desalination Plant, which will produce 50M metres³ annually.

An international tender was published earlier this year, and in September,

a consortium comprising Israel’s IDE Technologies, Vivendi and the Dankner-Ellern

Group won the bid, setting a global breakthrough in price-setting for desalinated

sea water – $0.527 per metre³ – reportedly the lowest to date.

IDE Technologies Ltd has 50% of the shares; Vivendi, a 25% stake, and the Dankner-Ellern

Group with 25% – together now called the VID Desalination Company.

Some $150M will be invested for building the Ashkelon plant under a BOT scheme,

for a period of 25 years, using Sea Water Reverse Osmosis (SWRO) to produce

water with 20mg chlorine/L and under 0.4mg of boron/L, thus enabling the water

to be used for irrigated agriculture. The extremely low content of chlorine

and boron in the desalinated sea water is another ‘first’ in the desalination

business.

Ashkelon will be the first, and the largest, of a series of small desalination

plants along the Mediterranean coast. The 2004 target figure is based on Ashkelon’s

annual production of 100M metres³ (after expansion, as the government has

an option to double the quantity); the Hadera Plant (50M metres³/yr, and

an additional 65M metres³/yr from several small desalination plants, under

the BOO system. These small plants are scheduled to desalinate 15-30M metres³/yr.

The government issued an international tender following the approval of 17 sites

by the National Planning Authority for constructing these plants. The bid deadline

was mid-November.

Price-cutting desalination

Mr Gustavo Kronenberg, IDE Technologies’ Vice President for Marketing &

Sales, said that the trend in the global desalination business, ‘based on recent

tenders, is toward lowering the price per cubic metre of desalinated sea water,

in view of technological developments and the application of business and financial

efficiency measures.’

The low price for one cubic metre of desalinated sea water asked by the VID

group startled the world’s water business circles. Mr Kronenberg said the four

main factors that enabled VID to lower the price are:

1. The financial security of the project – as the government guarantees to

buy the Ashkelon desalinated water for a period of 25 years, the money required

to finance the project is expected to be low. The $150M estimated cost is to

be financed by VID (20-25% as equity), 75-80% by Israeli and international commercial

banks and investments group.

2. The contractors must have ‘proven capabilities’ for constructing and operating

an efficient infrastructure for desalinating sea water at a competitive price.

IDE and Vivendi established a joint company, in equal shares, for the plant

construction.

3. The company is committed to operate and maintain (OM) the plant based on

their proven capabilities and experience. Both IDE and Vivendi have these qualifications.

4. Low cost electricity – the Delek Fuel Company, which owns 50% of IDE (Israel

Chemicals Ltd owns the remaining 50%), signed an agreement with VID for constructing

a power plant dedicated to supply the plant with low-cost electricity.

Desalination is economically feasible, says Mr Kronenberg. The price of water

asked by VID is lower than the cost of marginal water from the national grid,

and by far lower than the price of water to be imported from Turkey, estimated

at no less than $0.75 per metre³.

As far as capabilities and experience are concerned, IDE has 30 years of experience

in building and operating desalination plants throughout the world. A new plant

in Larnaca, Cyprus, was inaugurated earlier this year and is now operative.

More recently, IDE and a consortium from Spain won the bid to build, under

a 20-year BOT, a desalination plant in Hermosillo, in northern Mexico’s Sonora

district, at a cost of $250M.