(Communicated by the Ministry of Finance)

Minister of Finance, Dr. Yuval Steinitz, Minister of National Infrastructures, Dr. Uzi Landau and Mekorot Chairman, Mr. Alex Vijneitzer signed today a franchise agreement for the Ashdod desalination project with Mekorot subsidiary Mekorot Development & Enterprise, which will plan, build and operate the plant. The Ashdod plant is expected to produce 100 million cubic meters per year. Mekorot Development & Enterprise was chosen, subject to the granting of an exemption from tender, pursuant to a government decision from November 2008. The purchase price for the water has been set at NIS 2.40 per cubic meter.

The Ashdod desalination plant will provide 100 million cubic meters per year, beginning in 2013, constituting approximately 15% of Israel's domestic water consumption. The plant, which will be based on the reverse osmosis method, will be the fifth plant set up in Israel, after the construction of the plants in Ashkelon (120 million cubic meters), Palmachim (45 million cubic meters), Hadera (127 million cubic meters) and Sorek, which will also begin supplying water in 2013. As of the end of 2013, the five plants are expected to produce around 540 million cubic meters, constituting around 75% of the domestic water consumption. Concurrently, the Tenders Committee is promoting a procedure for expanding the existing desalination
plants.

The Ashdod desalination plant, like the plants in Ashkelon, Hadera and Sorek, will be a BOT project, in which the franchisee undertakes to design, build and operate the desalination plant for a period of 26 and a half years, after which ownership of the plant will be transferred to the State. The winning company undertook to build the plant within a period of 27 months from financial close at the latest, with the plant supplying half of its overall capacity 24 months from financial close. The terms of the agreement also include economic incentives for shortening the construction timetables.

Minister of Finance, Dr. Yuval Steinitz, said that "Today we are taking another important step towards guaranteeing the ability to supply water to the Israeli economy. On completion of the plant in Ashdod, Israel will have five desalination plants, one of which is one of the largest in the world. Together they will supply around 75% of the domestic water consumption. Desalination of water from the Mediterranean Sea as an alternative to pumping water from the Sea of Galilee is essential for us, and we will continue to work to expand the capacity of the existing plants."

Minister of National Infrastructures, Dr. Uzi Landau, said that "This ceremony is being held more than a year and a half late. By now, the plant was supposed to be in its advanced stages of construction. We are signing the agreement over 10 years after the government of Israel decided to set up the plant. Doing so involved a major battle in order to enable Mekorot to build it. We insisted on governmental involvement in the area of desalination and I am proud to say that we have succeeded. At a time when many projects are in the hands of the private sector, in the case of such an important infrastructure project, the government and the nation must be involved in order to preserve the technological know-how and performance capability. The Ashdod plant will join the plants that we have built in Hadera, Ashkelon, Palmachim and Sorek. By the end of the desalination revolution in the year 2020, 750 million cubic meters per year will be desalinated."

Mekorot Chairman, Mr. Alex Vijneitzer, said that "Mekorot will invest every effort in building the plant in record time of two years and, as early as 2013, will supply another 100 million cubic meters of desalinated water to the water sector. This is an infrastructure project at a cost of NIS 1.5 billion that will contribute to the growth of the economy. On completion of the plant, Mekorot will also complete construction of the New National Carrier, which will receive water from all the desalination plants and bring about a revolution in the direction in which water is supplied in Israel - from west to east and to the other directions. The water sector's reliance on desalinated water will also enable the rehabilitation of Israel's natural water reserves."

The Inter-Ministerial Tenders Committee for Seawater Desalination comprises representatives from the Water Authority, the Ministry of National Infrastructures and the Ministry of Finance, and is coordinated by the Projects Division of Inbal Ltd.