Israel rejects Chinese bid to build Sorek 2 amid pressure from the US

Israel chose local company IDE technologies to construct the world's largest desalination plant, the government announced on Tuesday, rather than a Chinese company, thus preventing another undesirable showdown with the Trump administration over Chinese participation in major infrastructure projects.

Three groups bid to build Sorek 2, a private-public partnership (PPP) which will be the world’s largest desalination plant when completed in 2023. Among them was Israeli Hutchison Company, an affiliate of the Chinese Hutchison Company based in Hong Kong.

The US has asked its allies, including Israel, in recent weeks to sever ties with China – Israel’s third-largest trading partner - in areas with security risks, a US official with knowledge of talks on the matter said last week.

The Trump administration specifically flagged Hutchison's possible involvement in the construction of the desalination plant, which will be in Kibbutz Palmachim and cost more than NIS 5 billion. In addition to being an important infrastructure project for Israel, the plant is near the Sorek Nuclear Center and the Palmachim airbase.

The US concern about Chinese companies’ involvement in major infrastructure projects in Israel in recent years, is due partly to the ability of Chinese operatives to gather intelligence while working on them, as well as the massive economic, social and environmental losses, and even casualties, that could be inflicted if that infrastructure is damaged.

The official statement from the Finance Ministry, Energy Ministry and Water Resources Ministry does not mention Hutchison or China and simply states that Kadima-headquartered IDE Technologies, which partnered with Bank Leumi, submitted the winning PPP bid, promising desalinated water at the cost of approximately NIS 1.45 per cubic meter (cu.m.) - some 65 agorot cheaper than all desalination solutions today.

The reduced cost is expected to save households a total of NIS 3.3 billion during the lifetime of the plant, which is expected to produce 200 million cubic meters of potable water per year, increasing the country’s annual desalinated water production by 35% to 785 million cu.m. – approximately 85% of Israel’s household and municipal water needs.

IDE Technologies, a subsidiary of Alpha Water Partnership, was formerly the sole owner of the Sorek A facility, but sold its shares in February 2019 to bid for the latest desalination project. In mid-2019, a committee headed by Energy Ministry director-general Udi Adiri discovered “systematic and continuous deviations” in the concentration of chloride in water produced by the facility over a period of more than two years.

"About two years ago, I passed a revolutionary government program to deal with future periods of drought, during which I decided to double desalination targets by 2030," said Energy Minister Yuval Steinitz.

"The desalination plant being initiated today, which will be the largest of its kind worldwide, is the result of the implementation of this program, and together with the desalination facility in the Western Galilee that has already in progress, a significant increase in the scope of development and additional steps, the state of the Israeli water market and its readiness for the future are excellent."