Giant Investment: IIF acquires 20% of the recycling company Veridis at a value of half a billion dollars
05, July 2017
Asset: Veridis

Israel Infrastructure Fund (IIF) is entering the waste treatment and recycling sector for the first time, and is planning to enter the soil remediation industry. The annual turnover of Veridis, formerly Veolia Israel, is estimated at NIS 1.3 billion.

IIF – owned by the Harel Insurance Company, Adv. Yehuda Raveh and Managing Partner Yaron Kestenbaum – will make one of the largest investments in its history and will enter the field of treatment and recycling of waste. The fund will acquire 20% of the shares of Veridis (formerly Veolia Israel) from Oaktree Capital Management at the value of its operations (the value of the shares plus the net financial debt) – $500 million.

Veridis’ estimated turnover is NIS 1.3 billion a year, and its net profit is NIS 135 million. Veridis was founded in 1993 as part of the Veolia Group, and is one of the largest companies in the field of environment and infrastructure in Israel.

Veridis holds 20% of the shares of the OPC Rotem power plant. OPC – the first private power plant in Israel – was established at an investment of $460 million and is responsible for 3% of electricity production in Israel and 19% of private electricity production. The station recorded operating profit inflows (EBITDA) of $28 million in the first quarter 2017.

Veridis also owns 50% of the Ashkelon desalination plant, which supplies 127 million cubic meters a year of fresh water, and owns 25% of the company that operates the largest landfill in Israel. The landfill, located near the Dead Sea, treats 4,000 tons of garbage a day, producing biogas instead, and its financial turnover is estimated at NIS 120 million a year. Veridis also manages the Ayalon Wastewater Treatment Plant, which treats polluted soils through the Windex consultancy company.

Waste in place of Coal

It appears that the main factor in the investment by Israel Infrastructure Fund in Veridis is the company’s activity in the development and implementation of Refuse Derived Fuel (RDF) technologies for the manufacture of solid fuel products and fuel products made from non-hazardous dry waste. These fuel products, generated by the re-use of municipal waste and non-hazardous industrial and commercial waste, are used as a cleaner fuel alternative by the “Nesher” cement manufacture facility.

In 2015, Veridis inaugurated the RDF plant at the Hiriya site at an investment of NIS 400 million. The plant will handle 1,500 tons of waste per day, about half the amount of waste that enters the Hiriya recycling site on a daily basis. The plant will produce 500 tons of alternative fuel each day, replacing 10% of the fuel used by the Nesher cement plant in Ramle.

The Veolia Group is traded at a value of $12 billion. The group sold control of Veolia Israel to Oaktree in April 2015 for $450 million.

Israel Infrastructure Fund (IIF), under the management of Yaron Kestenbaum, specializes in investing in infrastructure in the fields of energy, transportation, services, logistics and communications, and manages $1.8 billion on behalf of its managed funds and co-investors. It is backed by leading financial institutions in Israel, as well as investors from Europe and North America.

IIF’s main investments include 3.5% of the rights in the Tamar gas reservoir (acquired in December 2016 for $ 404 million), 50% of Swissport, which operates a cargo terminal at Ben-Gurion Airport, and 75% of Hayovel Lines which operates and maintains Highway 431, from Ayalon South to Modi’in.

It is also the owner of Via Maris, which operates the Palmahim desalination plant, supplying approximately 100 million cubic meters of clean water per year.

IIF has made several realizations over the past two years, including the sale of its direct holding in Highway 6 for NIS 135 million to Clal Insurance in February 2015, recording a 100% return on a four-year investment; the sale of preferred shares in Dalia Energy, which built the largest private power station in Israel at the Tzafit site, for NIS 250 million for institutional investors, headed by Amitim. In July 2016, the fund sold its shares in Dalia Energies to a group led by the Teachers and Kindergarten Teachers’ Funds, for NIS 430 million, and recorded 8x return on its investment.