Jerusalem water firm going public
Haaretz
June7, 2007
By Avi Bar-Eli
Hagihon, the largest water and sewage company in Israel, is preparing to issue 20 percent of its shares at a company valuation of NIS 1 billion, TheMarker has learned. The company, which serves Jerusalem and the surrounding area, intends to raise NIS 200 million, in order to finance infrastructure development.
The company's management has met with the heads of the Israel Securities Authority to examine the necessary arrangements, and hopes to complete the issue within a few months.
Hagihon has operated as a municipal company since 1996, and as a water and waste corporation since 2001. The company invoices about NIS 500 million annually in some 1.2 million water and sewage bills, of which more than 90 percent is collectable. Demand for water increases at a rate of about 2 percent annually. The company's annual report has not yet been completed, but its profits are estimated at only a few thousand shekels.
The company also owns a controlling share in its subsidiary, the Jerusalem Sewage Treatment Plant, which operates the country's largest sewage treatment plant, in Nahal Soreq. Hagihon raised NIS 80 million for infrastructure renovation from institutional investors, paying 5.8 percent interest, in an April 2005 issue.
The company is currently updating its survey of assets, which include the Nahal Soreq sewage treatment plant, established at a cost of NIS 350 million; a 10-dunam water reservoir, the largest in Israel, located in the Bayit v'Gan neighborhood of Jerusalem; and 20 other water reservoirs in Jerusalem and the vicinity. The company also intends to issue a build-operate-transfer tender for a new NIS 80 million desalination plant that will serve residents of eastern Jerusalem and the neighborhoods of Pisgat Ze'ev and Mount Scopus.
Hagihon chair Moshe Klatzin confirmed the news yesterday, saying, "Water is a monopoly, the collection rate is high and the company operates very well. If the Tel Aviv municipality were rated AAA (for a municipal offering), we will certainly rate AA+ at least." Klatzin added that Hagihon has already begun some water projects, and is about to sign a cooperation agreement with Siemens and General Electric to develop water purification technology.
Raising of capital, like the issue itself, was made possible by virtue of the law for water and waste corporations (2001). The law enables local authorities to establish independent corporations for management of municipal water and waste facilities. It also enables the issue of 25 percent of the corporation's stock.
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