ISRAEL Law and Practice Contributed by: Benjamin (Benny) Sheffer and Lance Blumenthal, S. Horowitz & Co.
Delays in transport megaprojects Major urban rail initiatives, including the Tel Aviv Light Rail and Metro projects, have encountered timeline extensions and cost challenges. While all projects remain ongoing and reflect progress, international contractors and financiers have been compelled to reassess risk allocation and delivery models for mega- projects. Supply chain disruptions Conflicts in the region and disruptions to shipping through the Red Sea had the effect of increasing costs and delivery times for imported materials. For a period of several months, contractors had to embed explicit protections in project contracts and make accommo- Companies continue to align their development pipe- lines with Israel’s renewable energy goals, including the 2030 emissions-reduction target of 30%. While the regulatory framework for ESG is still developing, international partners increasingly expect climate- aligned standards in project finance and reporting. A climate bill has made some progress in the Knesset, though it has not yet been fully enacted. In the interim, projects are still framed against the Paris Agreement narratives and storage, grid resilience and gas peaks are preferred when their environmental impact is far less risky. Risk and flexibility dations in their budgeting strategies. Changes in the Business Approach ESG and climate commitments Force majeure, price adjustment and logistics provi- sions have become significantly more detailed in new contracts. Developers are also pursuing storage- backed renewable projects and bilateral power agree- ments to help manage exposure to market volatility, especially since the Israeli government has introduced new provisions that authorise bilateral PPAs between independent power producers and final clients. Gas and storage in the near term Investors are directing capital to assets that strengthen reliability: natural gas expansions, hybrid renewable solutions and grid upgrades. Longer-dated transport and interconnection projects remain part of strategic
planning but are more sensitive to policy and cost risks. Looking Ahead Israel is continuing to balance climate commitments with energy security and unlocking private investment while managing cost and geopolitical pressures. Despite the uncertainties, the market has shown strong adaptability. The combination of established gas resources, ambitious renewable goals and dig- ital-driven demand means Israel’s energy and infra- structure sector will remain a key investment arena, provided that risk is managed properly, and project planning stays flexible. 1.3 Access to the Energy and Infrastructure M&A Market How Investors are Entering the Market • Government tenders and concessions – investors respond to public tenders where the Israeli govern- ment invites private companies to build, operate and transfer large assets (such as power plants, desalination facilities or transport infrastructure). • Joint ventures and local partnerships – a common route is through partnering with a local firm that already has development and operational experi- ence. By teaming up, foreign or new investors can share the risk and comply with threshold require- ments when submitting their tender bids. • Buying existing operational assets – rather than starting from scratch, investors may purchase assets that are already built and running such as solar parks, storage facilities or power plants, from developers who want to recycle their capital. • Corporate divestments and privatisations – some companies or government-owned entities sell off parts of their infrastructure portfolios. Investors buy these carve-outs or privatised assets. • Using capital markets and project finance – infra- structure assets are increasingly being financed by institutional investors (for example, pension funds and insurance companies) and via local bond mar- kets, in addition to bank loans. This gives investors multiple ways to structure deals. • Co-development and flip strategies – some inves- tors join early-stage development partnerships, help fund and build a project, then either hold it for
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