ISRAEL Trends and Developments Contributed by: Benjamin (Benny) Sheffer and Lance Blumenthal, S. Horowitz & Co.
Israeli infrastructure M&A is currently positioned in an interesting place: dynamic deal appetite and a large project pipeline on the one hand, and post war-related uncertainty, political tension and cost inflation on the other. Investors who can price and contract around this tension are still finding attractive opportunities, particularly in energy, transport, digital infrastructure and utilities infrastructure. Global capital looking for long-term cash flows and exposure to the energy tran- sition continues to see Israel as a compelling and fer- tile market. At the same time, domestic sponsors are recycling capital and partnering with foreign investors to deliver an ambitious national infrastructure plan. For investors, there is a clear message that deal struc- tures, risk allocation and regulatory navigation have become more important than ever. Understanding how the war, politics, regulation and financing condi- tions intersect with specific projects is now central to any transaction. The main themes and concomitantly, pressure points, noticeable in Israeli infrastructure M&A constitute the content hereunder. War, Politics and Capital Flow The 7 October 2023 attacks and the prolonged Gaza conflict have had a severe humanitarian and economic impact in the region, including large-scale destruc- tion of Israeli homes and infrastructure, necessitat- ing major reconstruction needs. Israel has also seen slower growth, higher security-related spending and a more challenging political environment, including internal debate over judicial reforms and the balance of powers. Despite this, Israel’s broader capital markets and high-tech economy have shown notable resilience. Energy transition infrastructure tenders remain active, which indirectly supports infrastructure sponsors and lenders by maintaining overall investor confidence in the jurisdiction. Regional sovereign wealth funds and government-related entities, particularly from the Gulf, continue to look for opportunities in renewables, digital infrastructure and logistics across the Middle East, with Israel included in many regional strategies despite political sensitivities. For infrastructure investors, this means that where risks are properly and contractually managed and
supported by strong counterparties, capital is still available even if pricing and covenants are tighter. The Infrastructure Pipeline Israel has a structural infrastructure gap built over decades: congestion on roads, lagging public trans- port, grid constraints, and pressure on water and social infrastructure. In response, the government has developed a multi-year pipeline across transport (metro, light rail, roads, ports), energy (generation, gas, storage, renewables), water (desalination, waste- water) and social assets (health, education, prisons and others). Public-private partnership (PPP) models such as BOT have been used for more than two decades and remain central to delivery. According to recent US and World Bank sources, there are roughly 18 PPP projects operating, five under construction and 16 in evaluation or tender, with an overall value (operational and under construction) of around ILS52 billion (about USD14.5 billion). Transport and energy still dominate the headline numbers, but there is growing interest in digital, hospital and education PPPs. From an M&A perspective, this pipeline matters in two ways. First, construction-stage projects often need equity recycling once they move closer to operation, creating secondary-market deal flow. Second, the existence of a visible pipeline encourages long-term market entry via platform deals, for example, foreign investors partnering with local developers or acquiring stakes in established sponsors. Energy – Gas, Renewables and Storage Energy is a vital component of Israeli infrastructure M&A. Israel has transformed itself from a gas importer to a significant regional gas exporter, owing largely to the Tamar and Leviathan fields. Production has grown rapidly over the past five years, with further expansion planned, and gas now accounts for roughly 70% of power generation. Recent announcements underline that this is still a growth story. The Leviathan partners (including NewMed, Chevron and Ratio) have submitted plans to expand capacity from around 12 billion cubic metres (bcm) per year to potentially more than 20 bcm,
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