ISRAEL Trends and Developments Contributed by: Benjamin (Benny) Sheffer and Lance Blumenthal, S. Horowitz & Co.
• Portfolio rebalancing – sponsors swapping or selling assets to focus on specific subsectors (for example, selling roads to focus on energy). • Refinancing-linked M&A – equity reshuffles aligned with long-term refinancing once construction risk is largely behind the project. From a client perspective, PPP-related M&A requires a close reading of the concession agreement, direct agreements with lenders, and any consent require- Global trends in infrastructure finance such as higher interest rates, more conservative bank capital, and a more significant role for institutional investors, are clearly visible in Israel. Banks remain active, as shown by large recent financings such as Bank Hapoalim’s USD1.5 billion package for Dalia Energy’s new Avs- hal power plant and the acquisition and expansion of the Eshkol plant. However, lenders are more selective, and covenant packages on new deals are tighter than a few years ago. At the same time, institutional investors (pension funds, insurance companies) are increasingly willing to provide long-tenor debt or to co-invest alongside sponsors, particularly on energy and transport assets with predictable cash flows. Global trends in M&A show that companies with strong balance sheets are best placed to execute deals in this environment, and the same is true in Israel: well-capitalised sponsors and strategic investors are out-competing highly lev- eraged bidders. Regulatory and Policy Themes Regulation is a key driver of value in Israeli infrastruc- ture, perhaps even more so in the current environment. Recent policy developments include the following. • Climate and emissions taxation – the government has approved a mechanism to gradually increase fuel and purchase taxes between 2025 and 2030, with the aim of internalising the environmental cost of fuel use and reducing emissions. This will affect the relative economics of different transport and energy assets. ments from the state. Financing Conditions
• Energy security focus – government and industry reports emphasise that Israel’s gas sector has maintained supply and stable prices even during the conflict, and policy continues to prioritise gas as a bridge fuel alongside renewables. • Evolving electricity and gas regulation – discus- sions over extending licences, adjusting tariffs and enabling ancillary services markets for storage and renewables are ongoing, and can significantly impact project revenues. For foreign investors, a practical takeaway is that regulatory risk is not static. Government decisions on tariffs, licensing, emissions and planning can move quickly, particularly under political and fiscal pressure. Transaction documents should therefore include clear change protections, and financial models should be considered against adverse regulatory scenarios. War, ESG and Reputation ESG must be considered alongside traditional finan- cial and legal due diligence. The 7 October war has drawn intense international scrutiny of Israel’s military actions and the environmental impact of the war, with recent studies estimating that emissions from the con- flict and the destruction and eventual reconstruction needs will have a very significant carbon footprint. Risks include future changes in gas export policy, potential regional security incidents affecting offshore infrastructure, and the evolving design of electricity market rules (especially for storage and ancillary ser- vices). For investors, the key is to combine clear commercial objectives with early, integrated advice across corpo- rate, projects, regulatory, finance, tax and disputes. Done well, this can turn a fertile, albeit challenging, environment into a portfolio of resilient, cash-gener- ating assets with real strategic value.
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