ISRAEL Law and Practice Contributed by: Benjamin (Benny) Sheffer and Lance Blumenthal, S. Horowitz & Co.
1. Market Trends 1.1 Energy and Infrastructure M&A Market Over the past year, energy and infrastructure M&A activity in Israel has slowed compared to the previ- ous 12 months. The market is still active, but the focus has shifted. Instead of headline acquisitions by foreign investors, most activity has been in project financing and upgrades to existing assets. A clear example is Dalia Energy’s major financing agreement for ILS5.3 billion (USD1.5 billion) from Bank Hapoalim for the construction of a new 850 MW power plant at Eshkol. Deals like this show that local investors and lenders remain confident in building new capacity, even while large international buyers cur- rently appear more cautious. Observable Changes • Inflation eased slightly, making valuations clearer and reducing price uncertainty. • Financing is available, especially from Israeli banks, though interest rates are still higher than they were a few years ago. • Geopolitical risks including the conflicts in Gaza and concerns on Israel’s northern border have had the effect of causing some international buyers to be more hesitant. A major planned acquisition involving NewMed Energy was paused for these reasons. This cooling of cross-border investment is the biggest difference from a year ago. Comparison to the Global Position • Globally, energy and infrastructure M&A contin- ues to benefit from demand for clean power, grid upgrades and digital development like data cen- tres. While the global market is not booming to the extent it was prior to the 7 October War, it has stayed relatively active. • Across the Middle East, deal activity has increased (for example, in the UAE and Saudi Arabia). By comparison, Israel is currently performing below both global and regional levels in terms of large M&A deals. However, Israel remains strong in pro- ject development and financing and construction is moving ahead even if ownership changes are fewer.
If inflation stays stable and regional risks ease, for- eign strategic buyers are likely to re-enter the market. Growth in renewables, power storage, grid improve- ments and energy supply for data centres is expect- ed to generate new opportunities. Accordingly, Israel is definitely not in a downturn. More correctly, it is in a holding pattern for increased major M&A deals with the market being well positioned for a profitable rebound. 1.2 Energy and Infrastructure Trends Offshore natural gas remains central to Israel’s energy strategy. Major expansion projects and new export arrangements have reinforced Israel’s role as a region- al supplier, for example, an export deal with Egypt (130 billion cubic metres over 15 years). At the same time, temporary shutdowns during the Iranian attacks reminded investors and developers of the need for strong risk planning and system resilience. Energy storage Large-scale storage projects have moved from con- cept to reality. National tenders have awarded signifi- cant new capacity, for example, an award to Enlight to deploy large-scale energy storage systems designed to integrate more renewable energy into the grid with total investments estimated at ILS3 billion (USD840 million), thus helping to support the integration of more solar power and reduce pressure on the grid at peak demand times. Gradual market liberalisation Key Trends Natural gas Electricity market reforms continue to expand con- sumer choice and enable more private-sector par- ticipation. Regulatory updates around tariffs, rooftop solar and private supply agreements mean that busi- nesses must now pay closer attention to pricing struc- tures and negotiation opportunities, as more competi- tors become suppliers. Rising demand from data centres and AI growth The rapid expansion of digital infrastructure and arti- ficial intelligence has put new pressure on electricity planning. Developers and regulators are accelerating work on grid upgrades, flexible capacity and backup solutions to keep pace.
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