Israel’s Ashkelon desalination DBFO project


The question of water - where should it be obtained from, who should manage it, how much is really needed - has long got people hot under the collar in the Middle East and Israel is no exception. But with the start of operations at Ashkelon - the Israeli desalination mega-plant - in August of this year, developers, politicians and agri-business hope that an alternative path between demand reduction and over exploitation of groundwater will have been found.

The plant has made news globally for the string of superlatives it holds to its name. At 100,000 m3/year it will be the world's largest desalination plant, it will also be one of the cheapest, with a tariff of US$0.527/m3 being offered. And the capacity and economic benefits mean that it could come to be considered one of the most politically significant initiatives in this sector.

The Ashkelon build, operate and transfer project is comprised of financing, design, construction, operation and transfer of a sea water desalination plant with guaranteed production capacity of up to 100,000,000 m3/year. This plant is being constructed at the Ashkelon site of the Eilat Ashkelon Pipeline Corporation and enables the production capacity during the operating phase of the project to be extended.

The plant is designed, constructed and operated by a consortium made up of three international sponsors, who have created a special purpose company, namely, VID Desalination Company (the SPC or VID) in order to carry out the project.

The companies and their respective initial participation in the SPC's share capital are: IDE Technologies with 50 per cent, Veolia Water (25 per cent) and Elran (DD) Infrastructures with the remaining 25 per cent.

The Project is governed by a BOT agreement (the agreement) entered into between the consortium and a government agency, the Water and Desalination Authority (WDA) of Israel. The agreement is awarded for a period of 24 years and 11 months from the effective date.

Several factors contribute to the low water price offered by the Consortium (US$)0.527/m3):

  • contractual structure with proper risks allocation
  • adaptation of SWRO technology for large-scale plants (pressure centers concept)
  • advance energy recovery system (low energy consumption)
  • self-generating energy supply system (low electricity cost)

 

Technology

The project will use the Membrane Reverse Osmosis technology. This is a modern process technology used to purify water for a wide range of applications, including semiconductors, food processing, biotechnology, pharmaceuticals, power generation, seawater desalting, and municipal drinking water. The reverse osmosis industry today represents a combined world-wide production in excess of 7.7 million m³ per day.

 

The Consortium

The Consortium is made up of IDE Technologies Ltd (IDE), Veolia Water SA (Veolia) and Elran (DD) Infrastructures (Elran).

IDE Technologies is a 50/50 subsidiary of the Delek Group, a leading Israeli group of companies, and Israel Chemicals Ltd, a leading Israeli chemical company whose shares are traded on the Tel Aviv Stock Exchange. IDE is recognised as the world leader in low temperature distillation and has also considerable experience in reverse osmosis. It is specialised in the design, research, development and manufacture of sophisticated desalination plants and equipment, including saline water desalination processes, water treatment and purification of industrial streams, heat pumps and ice machines.

Veolia Water is wholly-owned by the Veolia (formerly Vivendi) Group, the world leader in the environmental sector. More specifically, Veolia Water is part of Veolia Environment, the world leader in environmental services operating in more than 100 countries. Veolia Water, created by the merger between Générale des Eaux and US Filter in September 1999, is the international brand name of Veolia's water business.

Elran DD (formerly Dankner Ellern) Infrastructures is a subsidiary of Dor Gas and the Dankner Group, one of Israel's leading privately-owned companies, with diversified interests in energy, chemical, petrochemical and plastic industries, residential and commercial development, cable TV and telecommunications. Dankner Group is traded on the Tel-Aviv Stock Exchange. Dankner is regularly searching for new investment opportunities. 

 

Project timetable

 Date Event  Comments 
 November 2002  Effective Date  beginning of a 25 year contractual term
 January 2003  Financial Close  
 April 2003  Notice to Proceed  approval for go ahead of works
 August- Sep 2005  Completion of 1st Facility  50mcm/year
 Nov-Dec 2005  Completion of 2nd Facility  100mcm/year
 October 2007  End of agreement term  24 years & 11 months from Effective Date

 

Overview of the Contractual Structure

The main contracts are the BOT Agreement, the Engineering Procurement and Construction Contract (EPC Contract), the Operation and Maintenance Contract (O&M Contract), the Power Purchase Agreement (PPA) and the Financial Agreement(s).

The general contractual structure of the Project is described below:


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Construction of the first 50MCM/y is expected to last 24 months and for the second 50MCM/y, additional 6 months (total 30 months).The Construction is undertaken under an Engineering and Procurement Contract (EPC Contract) between the Consortium and the Construction Company made up jointly of OTV (Veolia Group) and IDE Technologies Ltd. The name of the EPC Consortium is OTID. Operations will be governed by an Operation & Maintenance Agreement (O&M Agreement) entered into between the Consortium and the Operating and Maintenance Company made up jointly of Veolia Group, IDE Technologies Ltd, and Elran, the latter being a financial partner. The name of the O&M Company is ADOM.

 

Three centre design concept

The typical concept of equipment arrangement in desalination plants is based on several identical RO trains. Each RO train includes a high-pressure pump, an energy recovery device, and a bank of RO membranes. This concept began its transformation with the appearance of large desalination projects. The designers of desalination systems tried to reduce water cost by increasing size of high pressure pumps, since larger pumps have higher efficiency at lower specific cost.

The necessity of flow proportionality for each component of RO train calls for the enlargement of membrane bank.

What is beneficial for pumps is detrimental for membranes bank. The relation between pump size and membrane bank size was the first contradiction.

Coupling the pump with the motor and turbine in one aggregate was beneficial up to a certain size.  For large capacities, integration of pump and turbine in one machine limited variation in recovery range. Pump combination with two and more Pelton wheels leads to complications in maintenance. 

The relation between pump size and number of turbine wheels on the same shaft creates the second contradiction. A further increase of RO train size is detrimental.

This vicious circle is broken in Ashkelon Plant. The high-pressure pump was disconnected from the energy recovery device. Pump capacity has not been equal to RO bank capacity, because the optimal size of the pump is not equal to the optimal size of the RO block. So an individual high-pressure pump has to be disconnected from the individual RO bank.

Half of the Ashkelon desalination plant has a capacity of 163,000m3/day. Different sizes of identical RO trains, (between five and 40) were checked during project preparation in all aspects. The concept of several identical RO trains was changed to a Three-Centre Design.

The Three-Centre Design is a form of installation of high pressure pumps, energy recovery devices and membrane banks.

Several large high-pressure pumps will form a Pumping Center, which will supply seawater via common feed lines to all RO banks. Forty DWEER units will form an Energy Recovery Center, which will collect pressurized brine from all RO banks, transfer the energy to seawater, and pump it into a common feed line to all RO banks.

The new approach of the Three-Center Design allows size optimization of each system element independently.

 

Information related to the Site

Site Description

The desalination plant is located at the Ashkelon Industrial zone, 700 meters north of an existing IEC (Israel Electrical Company) power station, within the EAP (Eilat-Ashkelon Pipeline Corp.) facility.

The feed water to the plant is pumped from the Mediterranean sea. The pumping station is located on the sea shore, 200 meters from the Site. The water quality is typical Mediterranean sea water.

The desalinated water delivery point is at the site battery limit. The brine (concentrated feed water) will be discharged back to the sea diluted with the coolant outfall of the adjacent IEC Power Plant.

The electrical power for the plant will be provided from two independent sources: overhead line from the national grid and self-generating energy supply system (IPP) installed at the site.

 

Lease Agreements

The Accountant General leases the Site from EAP in accordance with the provisions of the Lease Agreement.
Under the Agreement, VID is granted the right to utilize the Site or any part thereof concurrently with the issuance of the Notice to Proceed for the term of the Agreement. VID has no other right than the right to use the Site for the Construction, Operation and Maintenance of the desalination plant.

 

Contractual structure

The Project's contractual structure has been designed with a view to allocating the different risks to those parties that are the most qualified to manage and control them.

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EPC Contract

The Heads of Terms of the EPC Contract include the following. The parties to the EPC Contract are (i) VID Desalination Company Limited (as the Seller) and (ii) a consortium comprised of the following companies:

  • IDE Technologies Ltd (IDE): 50 per cent
  • Omnium de Traitement et de Valorisation SA (OTV): 50 per cent

The EPC contract is of a turnkey nature. The EPC Contractor is responsible for the development, engineering, design, construction, manufacture, procurement, inspection, supply, transportation and testing of the water desalination plant so as to achieve minimum performance criteria for a fixed lump sum price and in accordance with a final date certain Construction Schedule. The EPC Contractor shall achieve Construction Completion by the date set in the BOT Agreement, within 30 months after the issuance of the Notice to Proceed to allow the Seller to meet its obligations under the BOT Agreement.

The minimum performance criteria of the EPC Contractor are in accordance with the BOT Agreement allowing the Seller to meet its obligations under this agreement.

 

O&M Agreement

The Heads of the Agreement of the O&M Agreement (OMA) include, but are not limited to, the following. The parties are: (i) VID Desalination Company Limited as the "Seller" and (ii) the O&M Company which shall be formed by:

  • Veolia Water S.A. (represented by its affiliates GdE and OTV): 49.5 per cent
  • IDE Technologies Ltd: 40.5 per cent
  • Elran Infrastructures Ltd: 10 per cent

 

Scope of Work

The O&M Company's scope of works will include:

  • Operation and maintenance of the water desalination plant except the supply of energy;
  • Delivery of guaranteed quality water at the delivery point treated water in accordance with the provisions of the BOT Agreement;

Pre-operation works including:

  • Review and approve the EPC design and process, the EPC equipment and contracts with equipment suppliers
  • Participation in the Functional and Completion tests and Commissioning
  • Provide personnel for training by the EPCC
  • Write O&M Manual under EPC supervision.

 

IPP Agreement

The Heads of Terms of the IPP Agreement include, but are not limited to, the following. The parties are: (i) VID Desalination Company Limited, the Seller and (ii) the IPP developer which shall be Mishor Rotem - Delek Energy Limited Partnership (MRD).

 

Scope of supply

MRD undertakes to finance, design, supply, erect, commission, operation and maintain the power plant and to supply all the net output of the power plant, at its own cost. The power plant is being erected on the Site.

 

Description of the Water Tariff Structure

The water tariff is composed of Fixed component - to cover capital expenditure, fixed O&M costs and part of the profit - and Variable component (to cover energy costs, variable O&M costs, membranes and chemicals costs and also part of the profit) the indexation of each component is as described below:

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Volumes requirements

Desalinated volumes requirements are within a minimum and maximum range defined for Daily, Bi-monthly and Annual quantities as described below:

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Ashkelon brings together a French/Israeli consortium to construct an innovative desalination project which has the potential to supply Israel and its neighbours with an unprecedented volume of water at low cost.

It is able to deliver this low pricing because of a solid contractural structure, modern technology and low energy consumptionThe new facility is set to be a pathfinder for Israel as it maps out its water strategy for the 21st century.

  • Gustavo Kronenberg - General manager and chief executive officer at VID Desalination Company
    This is based upon a paper given at the International Desalination Association World Congress in Singapore