On June 5, 2007, a United Nations conference took place on the subject of project financing. Below are the main points of the Minister of National Infrastructures speech at the conference.

Distinguished Guests,

Ladies and Gentlemen,

Public Private Partnerships have changed in the whole concept of project financing the past years. In Israel PPP has turned to an inherent tool of the economy and the infrastructure sector.

I would like However to start by taking this opportunity to review the activities of the Israeli Ministry of National Infrastructures, on behalf of the Israeli Government

One does not have to go into detail when speaking of the energy dependence of each and every one of us. Imagine a world in which the supplies of oil, gas and coal are running out, where no technologies for the sufficient generation of electricity using alternative fuels are being developed, generation capacity is waning as is the ability to fuel machinery, transport etc.

True – the above scenario is extreme and frightening, however even less extreme scenarios are not particularly encouraging either. Imagine, for instance, a sudden, dramatic rise in fuel prices – an increase that would make it difficult for the economy to function. That is a scenario which we clearly saw over the past years.

In the past years, more and more western countries have recognized the importance in creating a sufficiently secure supply of energy to their economies.

This need is even more acute for Israel, for the most part due to Israel’s problematic geopolitical location, on the one hand and the fact that the lion’s share of the world’s energy sources lie in the Arab world.

In its capacity as the Ministry responsible for assuring energy supply to the economy, the Ministry of National Infrastructures is simultaneously acting in a number of ways so as to assure that the scenarios I described before never occur.

For the past two years, Israel and turkey have been discussing the creation of an “infrastructure corridor” from Ceyhan in Turkey to Israel.

Turkey is a country of supreme strategic importance to Israel, both from the political perspective and the energy perspective. Due to its location, Turkey has relatively simple access to both energy and water sources. The planned infrastructure corridor between our two countries would include pipelines for the transport of natural gas, oil, water and, possibly, even electricity.

This kind of project is exactly where the private sector can make a major contribution while assuring legitimate profit for itself. A project of this magnitude 2-3 Billion dollars - can be financed only by PPP.

A number of months ago, I had the honor and pleasure of hosting Dr. Hilmi Guler, the Turkish Minister of Energy. During his visit to Israel, Dr. Guler and I signed a Memorandum of Understanding which set out the action plan between our two governments to see the project through. The first step will be to carry out a feasibility study to determine the technical and economic feasibility of this ambitious project. I am already acting to obtain a part of the financing for the feasibility study from the European Investment Bank for the project.

The final implementation of the infrastructure corridor will assure Israel continuous supply of energy and water. As well creating a potential foe export to the far east, via Eilat.

The importance of the corridor as a conduit of natural gas must also be emphasized. Israel is now revolutionizing its energy mix, making a massive effort to integrate natural gas into the electricity and industrial sectors, in replacement of the more polluting and costly fuels such as diesel and heavy oil.

Up until now, Israel has completed the conversion of two of its major power stations to natural gas, supplied with “Israeli” gas. In May of 2005, I signed a Memorandum of Understanding with the Egyptian Oil Minister, which serves as a framework agreement for the sale of Egyptian gas to Israel.  The Israel Electric Corporation has already taken advantage of the agreement and has signed a purchase agreement with EMG for the purchase of Egyptian gas. The Ministry of National Infrastructures, together with the Prime Minister’s Office and with the Ministry of Finance, continues to negotiate with British Gas in order to tap into the gas field discovered off the coast of Gaza.

All this, however, is not sufficient. The Ministry’s demand projections show that there is already a need to identify additional sources of gas. As a result, the Mediterranean offshore zones have been re-opened for exploration, and there are already a number of potential drilling sites.

In addition, the Ministry has been holding discussions for the past two years with Gazprom, the Russian gas company, exploring the possibility of importing its gas to Israel and we have commenced negotiations with Azerbaijan on this issue as well.

I should add that the Ministry is exploring the possibility of publishing a tender for the construction of an LNG facility, which will allow Israel to import liquefied natural gas from all over the world.

This project it self is a great opportunity for the private sector and we plan to carry out this project as a PPP project as well.

Israel water sector has proved to be one of the most active sectors for project finance with the focus being on, of course, desalination plants. Project financing played a major role in the development of Ashkelon desalination facility, which with an annual capacity of 100 million cubic meters is the largest facility of its kind in the world. The Palmachim facility which was commissioned last week with its annual 30 Million cubic meters of water is another good example for the involvement of the private sector.

Project financing is also a very clear component of the Hadera desalination facility – which will produce 100 million cubic meters annually as Ashkelon in two years time. As I understand this will be the first project that will be financed solely by foreign funding. Yet, there are at least two more of these facilities being planned.

As for the development of alternative and renewable energy as a PPP incentive – Israel is already known for development of alternative energy technologies, enabling generation of electricity, especially in the area of solar energy. In addition to the vast sources of knowledge and know-how to be found in Israel’s various research institutes, at least two Israeli companies – Ormat and Solel, are world renowned forerunners of development in alternative and renewable energy.

In order to increase Israel’s “footprint” in the field of alternative and renewable energies, I recently inaugurated the establishment of a start-up fund, financed, presently, by the Ministry, aimed at the entrepreneurs at the very earliest stages of their development. I see this as a small initial step aimed at turning Israel into a center of excellence in these areas, in the same manner as Israel became a center of excellence in the areas of electronics. It is clear that to truly succeed in this effort; the Ministry will have to create a network that will provide these new players – and others – with the environment necessary to progress.

In the area energy efficiency, Israel seeking to implement the performance coutracting method, using project finance structures for financing these projects.

While, presently, economic factors still require generation of electricity using fossil fuels in order to be cost-effective, I believe that great steps can be taken in the area of energy efficiency in addition the time will come when alternative and renewable energy will be able to play a major role in electricity generation. I believe our efforts will be able to contribute to that substantially. In conclusion, as you can see, we have a variety of projects which welcome the private sector - we await you.

Benjamin (Fuad) Ben-Eliezer