Generation Sets 300 Million Shekel Penalty to Protect Shikun Energy Deal
Shikun & Binui has established tiered penalties for withdrawing from the sale of Shikun Energy to the Generation fund. The compensation reaches 300 million shekels if the company accepts a competing offer from a major industry player.
Shikun & Binui has set a tiered penalty structure for withdrawing from the deal to sell all shares of Shikun Energy to the Generation fund (via Generation Capital) in favor of another company.
Unlike the 300 million shekel penalty payable to Generation if Shikun & Binui receives a competing offer from Keystone or another major energy company, the penalty for accepting an offer from a non-major player or a company with no presence in the energy sector will be lower, at 180 million shekels—a 120 million shekel difference. Generation retains the right to match any competing offer. Furthermore, if Generation fails to complete the deal due to regulatory hurdles, it must compensate Shikun & Binui with 300 million shekels; however, if it withdraws for reasons within its control, the penalty rises to 600 million shekels.
Last week, Shikun & Binui signed a deal to sell Shikun Energy to the infrastructure fund Generation for 4.45 billion shekels. Sources familiar with the transaction claim that Generation insisted on a higher penalty for sales to industry peers to prevent the involvement of its rival, Keystone, which Generation accuses of attempting to snatch the deal through illegitimate means. Shikun & Binui's legal counsel declined to name specific companies in the clause, opting for the definition of a "significant player in the energy field."
The rivalry between Generation and Keystone is intense, with no professional contact between the fund managers. If approved, the two funds would become partners in two major power stations: Hagit Mizrach and Neot Hovav.
The deal remains subject to approval by the Electricity Authority and the Competition Authority. Although the Electricity Authority has expressed skepticism, Generation, led by Yossi Zinger and Erez Blasha, has prepared several solutions to address regulatory concerns. Last week, Generation executed a share swap with Rapac Energy, trading its stake in the Alon Tavor power station for Rapac’s shares in the Reindeer station in the Sharon region.
For Generation, this deal is a strategic move to become the country's largest electricity producer alongside Adaltic. While the initial terms included 4.2 billion shekels in cash and a 300 million shekel deferred payment over five years, negotiations led to an increase in the cash component to 4.45 billion shekels.
