IES's Palmachim Path: What Sits Between the Purchase Right and a New Concession

The main article argued that Palmachim is the place where IES could move from interim-use land income into an infrastructure platform. This follow-up isolates the bridge in the middle. Not the land value itself, and not today's NOI, but the path between the right to buy the existing desalination plant and a new concession that could create a new operating business.

What makes this interesting is that the company already holds something real, but not something closed. Under the lease agreement, Park Palmachim has the right to buy the entire desalination plant at the end of the lease in January 2030, and the company itself says that this right has economic value. In the same breath, it also says the right still cannot be measured reliably, so it is carried at symbolic value. That is the gap this follow-up is trying to break down. The contractual right is real, but its conversion into a business with a new concession still depends on several gates that have not closed.

The clock does not really start in 2030 either. Via Maris's current concession ends partly in 2027 and the remainder in 2029, while the land lease expires in January 2030. So what looks from the outside like a long-dated option is, in practice, a process that has to be settled earlier, through valuation, a new ownership structure and coordination with the state. The January 1, 2026 addendum to the memorandum of understanding, which extended the deadline for a detailed agreement to March 31, 2026, did not solve that gap. It mainly bought time.

What IES owns today is not an operating desalination plant in hand. It is a preferred route, but still not an outcome.

The Contractual Mechanism Gives IES More Leverage Than It First Appears

The starting position is stronger than the headline word "option" suggests. The lease sets out a two-track end-of-term mechanism. In the first route, Park Palmachim may buy the plant at its economic value. In the second route, if it does not buy, it must publish an invitation to bid 12 months before the end of the lease for a new 10-year lease with an option for another 10 years. In that case, the winner must pay Via Maris the same economic value of the facilities. If no adequate bids are submitted, Via Maris must dismantle the plant and return the land vacant.

The analytical meaning is that the plant's economic value matters not only for the question of whether IES buys 100%. It is the reference price for the entire post-2030 path. Even if the company does not buy the plant itself, someone else would have to pay that same value to stay. So the fight over the valuation mechanism is not a side legal issue. It is the pricing spine of the whole scenario.

There is an even more important layer. The lease says Via Maris cannot participate in such a bid, directly or indirectly. The filing goes further and states this explicitly: under the agreement, Generation cannot remain at Palmachim after the end of the lease, directly or indirectly. That is the heart of the story. IES's value is not only in the right to buy. It is also in the fact that the current operator cannot simply roll forward as if nothing changes.

The company has already acted as if the decision window has opened. In August 2024, Via Maris received written notice regarding the end of the lease term and the end of its activity at the plant, together with a demand for early preparation under the evacuation mechanism. That shows the company is not reading 2030 as a distant date. It is treating it as a handover point that has to be prepared well in advance.

That Is Why the Appraiser Lawsuit Is the First Real Milestone

The easiest point to miss is that the July 2024 lawsuit is not just a procedural fight. Park Palmachim asked the court to appoint an appraiser-economist to determine the plant's economic value after, according to the filing, earlier requests to appoint a valuer were mostly ignored. The company itself says that this appointment is the first milestone on the way to exercising the right.

That is dramatic language, but it is also precise. Without a valuation anchor, it is hard to know whether the company is moving toward a 100% acquisition, hard to build a clean alternative with a new operator, and hard to negotiate coherently with any other party that enters the picture. In other words, the question is not only whether IES has a right. The question is whether it can turn that right into a price, and that price into a deal structure.

There is another reason the appraiser matters. The company itself highlights an economic gap. The filing says that if the site is leased to a new operator as part of a new concession, there is a high probability of rent materially above the current rent. The company's explanation is that the current lease is a historical agreement linked only to CPI and does not reflect the rise in industrial land values or the economics of a national infrastructure asset that already exists and no longer carries construction risk. So enforcing the valuation mechanism is not only a way to buy the plant. It is also the way IES tries to capture the gap between an old rent profile and the economics of a mature infrastructure asset.

The MoU Opens Another Route, But It Does Not Erase the 100% Route

On July 2, 2025, IES Infrastructures signed a non-binding memorandum of understanding with Palmachim Partnership. If completed, the company would acquire half of the concession vehicle and half of the operating company, and through that chain would hold 50% of the plant for a new concession period estimated through 2054. A new lease agreement is also meant to be signed between Park Palmachim and the plant under its new ownership structure.

At first glance, this looks like a natural shift from confrontation to partnership. But the documents show something more complicated. The transaction is subject to a detailed agreement, a new concession agreement with the state, and authorization for IES Infrastructures to submit a National Infrastructure Committee planning file for the entire roughly 110-dunam land block covered by TAMA 34. Until a detailed agreement is signed, the parties' rights remain in place, including Park Palmachim's right to buy the desalination plant in full under the lease.

That is a material point. The MoU did not replace the purchase right. It created a softer alternative route above it, one in which IES does not necessarily need 100% ownership to participate in the plant's next chapter. The reasonable inference, and it is an inference, is that the 50% route could reduce the level of confrontation and the capital burden relative to a full acquisition. But the same documents also show that this easier structure comes at the price of much heavier dependence on outside conditions, mainly the state and a signed detailed agreement.

The clearest proof is what happened at the end of 2025. Competition approval had already arrived on September 3, 2025, but that was not enough. On December 31, 2025, the parties signed an addendum, and in the January 1, 2026 report the company explains that the conditions for a detailed agreement had still not been completed, so the deadline was extended to March 31, 2026. That same report also warns explicitly that circumstances have changed since the original MoU, that the material terms are still not final, and that they may change materially if and when a detailed agreement is eventually signed.

So the extension is not evidence that the deal is nearly closed. It points in the opposite direction. It says the parties are still in substantive negotiations. More than that, as part of the same addendum the parties filed a joint request to stay the legal proceedings until March 31, 2026. The partnership route bought time, but it bought that time partly by pausing the enforcement route.

Even If Ownership Is Solved, The New Concession Is Still the Real Bottleneck

The documents show that IES is already in a real dialogue with the state, not just expressing ambition. In the last quarter of 2024, the company began formal discussions with state representatives about preparation for a new 25-year concession starting in 2029 and about expansion of the existing plant. In December 2024, the state also provided engineering upgrade requirements for the plant for the next concession term.

Then on December 31, 2025, the company received a letter from the chair of the special desalination tenders committee stating that the Palmachim plant is an integral part of Israel's desalination system. According to that letter, the Ministry of Finance and the Water Authority are promoting a government decision to authorize the company to prepare a national infrastructure plan for the refurbishment of Palmachim A, additional desalination capacity at Palmachim B, and a small power station of up to 250 MW. The stated intention was to bring the matter to a joint discussion no later than the end of the first quarter of 2026.

This is no longer only the language of a land owner trying to push a planning right. It is a real regulatory signal that the state views Palmachim as a system asset, not only as a private site. And that is also exactly where restraint matters. There is still no government decision. There is still no new concession agreement. And there is still no approved planning path in force.

That is why the right is still carried at symbolic value. Not because it has no value, but because the layers that determine its value have not been closed yet. The transfer price of the existing plant still has to become clear, the next ownership structure still has to be fixed, and the state still has to move Palmachim from a preparatory stage into an actual concession and planning track. Only then does it make sense to speak about a new infrastructure business rather than only about a strong right surrounding one.

Bottom Line

In the main article, Palmachim was presented as IES's central value engine. This follow-up sharpens the point that the engine still sits in the middle of the bridge. Not on the land alone, and not on the future concession alone, but on the sequence between them.

The strong side of the thesis is that IES now has more than a planning dream. It has a right to buy 100% of the plant, a mechanism that blocks the current operator from the next chapter, formal dialogue with the state, and an MoU that could place it inside the next phase even without a full acquisition. The weak side is that all four gates are still open: valuation, the detailed agreement, the government decision, and the new concession.

Current thesis in one line: Palmachim gives IES an unusual starting position on the road to a new concession, but until valuation, structure and the state process are closed, this is still a strategic right rather than a new income source.

What will decide the read from here is not another optimistic sentence about potential, but dates and decisions. March 31, 2026 needs to bring either a detailed agreement, another extension, or a sharper return to the enforcement route. In parallel, any real sign of a government decision, planning authorization, or renewed movement on the valuation mechanism would start to shift Palmachim from an option carried at symbolic value into an operating path that can actually be measured.