29
Cultured
pearls
however, the contribution of the
plant was much more modest. It
was planned to operate only at
hours of peak demand, and at
those times would supply 20 per-
cent of the country's electricity.
Over a 20 year period, the plant's
share of peak demand would de-
cline to 8 percent. Its contribution
to total electric output would drop
in this period from 8 percent to 2.5
percent.
The gradual decline of the proj-
ect's contribution to electricity
output stemmed from a planned
Moda'i searched in
vain for private
investors for the
MDP, and kept up the
company's work on
advanced planning
for the project only by
milking the regular
development budget.
slow down in the amount of water
that would be poured into the
DeOd Sea, and from an increase in
the country's total generating
capacity that would shrink the
MDP's contribution proportion-
ately.
Bonds buyers on trips to the
planned sites of the project's in-
stallations frequently heard un-
realistic claims about the contri-
butions of the MDP to peace with
the Arab world, future alterna-
tive energy sources and develop-
ment plans for the Dead Sea —
ideas that have a leg of scientific
credibility to stand on. Pre-
sentations of the project's goals by
MDP company spokesmen were
quite modest by comparison, and
were at least based on actual
plans.
The manipulation of the figures
in the interim report which pro-
duced the $40Q million profit was
probably related to the timing of a
major Bonds conference . in
Jerusalem in February 1983.
Several weeks before the publi-
cation of the interim report,
Moda'i was interviewed on the
MDP by this reporter. At that
time he said that economicaly
speaking, the MDP was only a
break-even proposition. That con-
clusion was based on the applica-
tion of a realistic discount rate of 8
percent, as specified by the Treas-
tl Y.
After his statement that the
MDP was not going to show a pro-
fit was published, someone must
have concluded that this was not a
very exciting prospect for the Is-
raeli public or for the hundreds of
enthusiastic Bonds buyers that
were soon to visit Jerusalem to
celebrate "their" Canal. Thus
several weeks after the interview,
Moda'i unveiled the report show-
ing a $400m. profit, based on the
unrealistic discount rate of 6 per-
cent, in contradiction to Treasury
instructions.
It was important for Moda'i
then to keep up the enthusiasm
7. .
for the MDP among the Bonds
purchasers, since he was counting
on several hundred million dol-
lars of the project's ultimate costs
to be financed by the Bonds. This
intention was included in a sec-
tion of the company's report that
was not made public.
Moda'i's goal of using the Bonds
to finance a good chunk of the
MDP came to nought several
months later. In May, Aridor or-
dered a stop to Canal fundraising
through the Bonds, and put the
word out through the organiza-
tion that the project was not eco-
nomically viable and would not be
built. The Bonds organization
swore off future earmarked fun-
draising campaigns as too risky.
At the, next major Bonds. confer-
ence in Israel, no mention was
made of the MDP, and the Canal
Founders were never even given a
summary of the company's final•
report portraying their dream in
glowing terms.
The Comptroller concluded that
the state had no legal obligations
towards the Canal Founders con-
cerning any rights in the MDP
should it be built in .the futOre.
But he added that the government
still had some explaining to do to
Bonds purchasers who had been
led to think that their money was
going to be used for a specific pur-
pose.
Throughout the rest of 1983 and
most of 1984, Moda'i searched in
vain for private investors for the
MDP, and kept up the company's
work on advanced planning for
the project only by milking the
regular development budget of his
ministry, thus shortchanging
other energy projects.,
The controversy about the proj-
ect's economic viability that was
stirred up in the press and in the
Knesset eventually shifted to the
Knesset State Control Commit-
tee. There hearings were held on
the work of the company and the
decisions that led the project into
the advanced planning stage,
which eventually resulted in the
highly critical report by the Com-
ptroller in November 1984.
About the same time, the proj-
ect received another blow when
an international consulting firm,
B.W. Engineers, published a re-
port showing that given present
economic conditions, the project
would lose money. The factors
cited were the steadily falling
crude oil prices, steadily rising
interest rates, and Israel's huge
external debt. When the govern-
ment began to seriously consider
the project in the early 1980s, oil
prices were hovering at about $34
a barrel. But they have dropped
about $10 a barrel in the last five
years, and according to current
Energy Ministry forecasts, oil
prices are headed down even
further. •
By late 1984 Moshe Shahal had
taken over as Energy Minister,
and was able to put the project in a
more objective light. Early last
year he appointed an expert com-
mittee independent of the com-
pany to evaluate the project. This
committee gave the MDP the coup
de grace, and for the past six
Continued on next page
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