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Li Ka-Shing Hong Kong Group Loses Israel Deal Amid U.S. Push

Li Ka-Shing’s Hong Kong Group Loses Israel Deal on U.S. Push

(Bloomberg) -- The Hong Kong conglomerate founded by billionaire Li Ka-shing lost a bid for a major infrastructure project in Israel, weeks after the U.S. asked its Middle Eastern ally to review potential security threats posed by China-based companies.

An affiliate of CK Hutchison Holdings Ltd., the flagship of the tycoon’s sprawling business empire, lost out on the contract to build and operate Israel’s biggest desalination plant to IDE Technologies, a local company, the Israeli government said. In the past, Hutchison Water International Holdings Pte. had operated a desalination plant in the vicinity of the planned facility in partnership with IDE.

Israel’s decision to choose a domestic bidder is the latest blow to Li’s son and successor, CK Hutchison Chairman Victor Li, two years after his bid to buy a gas pipeline operator in Australia was blocked on national security concerns. Representatives for CK Hutchison in Hong Kong didn’t immediately respond to requests for comment, and the U.S. Embassy in Israel had no comment.

Hutchison lost its Israeli bid at a time of rising frictions between the U.S. and Beijing over trade and the deadly coronavirus that originated in China. Israel has found itself caught in this conflict, under pressure from the U.S. to cool its relations with Beijing, rather than expand them as it had hoped. Just two weeks ago, U.S. Secretary of State Mike Pompeo flew to Israel for discussions with Prime Minister Benjamin Netanyahu on issues including China’s role in the Israeli economy.

The Trump administration is pushing allies to avoid Chinese businesses perceived as threats to their national security, and according to a report on Tuesday on the Ynet news website, Pompeo specifically raised concerns regarding Hutchison’s participation in Israel’s desalination plant tender.

“We do not want the Chinese Communist Party to have access to Israeli infrastructure, Israeli communication systems, all of the things that put Israeli citizens at risk and in turn put the capacity for America to work alongside Israel on important projects at risk as well,” Pompeo told Israeli media after his meeting with Netanyahu.

Israel may also find itself under pressure to reject Hutchison again as it tries to re-enter the country’s telecommunications sector. After foreclosing on a failed loan to Israeli-born media mogul Haim Saban, the Hong Kong-based group is waiting for Israeli government permission to retake control of mobile-phone operator Partner Communications Co.

Overseas acquisitions and projects have been central to CK Group’s push to diversify from its mainstay businesses of telecommunications, retail, property and ports, and infrastructure has remained one of its most defensive investments during economic downturns such as the coronavirus pandemic crisis.

The group’s infrastructure division operates projects around the world, including a natural-gas distributor in Australia, a water and sewerage company in the U.K. and waste-treatment plants in the Netherlands.

Lowest Price

The Israeli Finance Ministry and Energy Minister Yuval Steinitz, who was involved in the tender, said the decision to award the desalination project to IDE came down to cost.

“The Israeli company’s proposal was better by a significant margin compared to all the competitors, including the Chinese,” Steinitz told Israeli radio on Tuesday. “I was in a meeting with Pompeo and Netanyahu, and it didn’t seem to me that this facility is at the top of the Americans’ issues.”

The IDE bid of 1.45 shekels per cubic meter of water was the “lowest price in the world for desalinated water,” saving the country an estimated 3.3 billion shekels ($940 million) during the lifetime of the facility, the Finance Ministry said.

The plant will have an annual output of 200 million cubic meters of water and is expected to be the largest of its in the world, increasing Israel’s desalination potential by 35%, the ministry said.

The project will be financed by a consortium led by Bank Leumi Le-Israel, it said. The European Investment Bank will lend 150 million euro ($164 million).

©2020 Bloomberg L.P.