South Israel 100 million m3/year Seawater Desalination Facility

Abstract- This paper presents the structure and features of the South Israel (Ashkelon) Project, which consists of the financing, design, construction, operation and transfer of a seawater desalination facility with guaranteed production capability of 100 Mm³/year for a term of 25 years. The facility which started operating in August 2005, achieved an initial water price of US¢ 52.7/m³, one of the lowest prices ever offered in a BOT project for seawater desalination.

Fredi Lokiec

IDE Technologies Ltd.

1. Introduction

Water is the source of life, especially in Israel where water resources are scarce, and the water problem is one of the most severe. Israel has won international acclaim for its achievements in the fields of water use efficiency, irrigation, enhanced R&D and high-quality water related technological systems. All of these allowed a balanced demand for water and enabled the authorities to manage water allocations without decreasing the net income of the production sectors. Nevertheless, Israel’s water balance shows an increasing deficit throughout the years. Bearing in mind other regional demands, the desalination of seawater constitutes an almost unique solution for Israel and its neighbors.

In the year 2000, the authorities and decision makers in Israel launched a Desalination Master Plan, comprising large-scale seawater plants along the Mediterranean, envisaging a total volume of approximately 400 Mm³/year in five years, and in parallel, the development of local inland basins brackish waters desalination systems.

The South Israel 100 Mm³/year seawater desalination facility is the first of the envisaged large-scale projects to materialize. Pursuant to an extensive Bid process that started in July 2000, the State of Israel, through the Ministries of National Infrastructures and Finance, has awarded on the 3^rd September 2001, the 25 years BOT Project in Ashkelon, South Israel, to V.I.D. Desalination Company Ltd., a single purpose company created especially for this Project. The BOT contracts, at the initial price of US¢ 52.7/m³, were signed in Jerusalem on November 25, 2001 (for the first 50 Mm³/year) and on April 28, 2002 (for additional 50 Mm³/year).

The BOT Project comprises the financing, design, construction, operation and transfer of a seawater desalination facility with guaranteed production capability of 100,000,000 m³/year for a term of 25 years. The production of the plant is sold to the Water and Desalination Authority (WDA), whose obligations under the BOT agreement are deemed to be the obligations of the State of Israel. Following termination of the Agreement, the Facility will be transferred to the State.

The facility has been built at the Ashkelon site of the Eilat‑Ashkelon Pipeline Corporation (EAPC). The site is located at the Ashkelon Industrial zone, on Israel’s southern Mediterranean shore, 700 meters north of an existing IEC (Israel Electrical Company) power station.

The feed water to the plant is pumped from the Mediterranean Sea. The pumping station is located on the sea shore, 400 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 is discharged back to the sea, diluted with the coolant outfall of the adjacent IEC Power Plant. The electrical power for the plant is provided from two independent sources: overhead line from the national grid and self-generating energy supply system (IPP) installed at the site.

2. Overview of the Consortium and the Project Structure

V.I.D. Desalination comprises 3 shareholders:

IDE Technologies Ltd. (50%), leading the Joint-Venture;
Veolia Water S.A. (25%);
Elran (D.D.) Infrastructures Ltd. (25%).

IDE Technologies Ltd. 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. IDE has 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. In the Indian Sub-Continent alone, IDE has established 20 thermal desalination references in the industrial sector, with an overall capacity close to 200,000 cu.m/day!

Veolia Water S.A. is wholly owned by the Veolia (formerly Vivendi) Group, world leader in the environmental sector and the second largest communication company in the world. 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 D.D. (formerly Dankner Ellern) Infrastructures Ltd. 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.

The tender documents outlined, among other things, the fundamental principles of the Agreement. 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).

Construction of the first 50Mm³/y took 27 months and the second 50Mm³/y, 3 additional months (total of 30 months) from Issuance of Notice to Proceed. The Construction was undertaken under an Engineering and Procurement Contract (“EPC Contract”) entered into 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 is governed by an Operation & Maintenance Agreement (“O&M Agreement”) entered into between the Consortium and the Operating and Maintenance Company (named ADOM) made up jointly of Veolia Group, IDE Technologies Ltd., and Elran.

3. Project Milestone Dates

It took a record 14 months from issuance of the Tender Documents until the announcement by the Tender Committee of the Successful Bidder:

July 2000: Issuance of the Tender Documents, except for Tender Document D (the Agreement)
27 September 2000: Issuance of the Agreement
21 November 2000: Pre-Qualification Submissions
21 December 2000: Announcement of Pre-Qualified Bidders
25 February 2001: Issuance of Amended Agreement
1 May 2001: First Bid Submission
15 August 2001: Second Bid Submission
3 September 2001: Best and Final Offer and Award of the Project to the Consortium
25 November 2001: Signature Date (execution of the Agreement for 50MCM/y);
December 2001: Selection of Arranger
February-April 2002: Negotiations between VID and WDA for additional 50MCM/year
28 April 2002: Signature of Agreement for additional 50 MCM/year
31 October 2002: Effective Date (beginning of the 25 years Contractual Term)
22 January 2003: Financial Close
22 April 2003: Issuance of Notice to Proceed
August - Sept. 2005: Completion Date of Sub-Phase 1 (50 Mm³/year)
Nov. – Dec. 2005: Completion Date of Sub-Phase 2 (100 Mm³/year)
October 2027: Term of Agreement (24 years and 11 months from Effective Date)

4. Financing Plan

The Facility Agreement of the 100 Mm³/year was signed on 22 January 2003. The whole project debt was raised locally and is NIS-denominated. The project sponsors provided the project equity which comprised approx. 24% of the capital cost. The remaining 76% of the project funds has been raised as a limited recourse debt through a special financing arrangement.

Doubling the capacity somewhat complicated the finance raising exercise, since it nearly doubled the financing needs up to NIS 800 million, i.e., USD 165 million equivalent. Hence an institutional bond issue that took place in October 2002 and enabled VID to raise over 60 % of the project debt from more than 60 pension and provident funds, after having secured the necessary AA^- rating from Maalot, the Israeli rating company. The institutional financing comprised two tranches, an upfront tranche fully disbursed at the time of the institutional tender, and a drawdown tranche to be disbursed after Financial Close. In parallel, Israel’s Bank Leumi provided approximately 40 % of the project debt.

The three tranches have similar terms, i.e., CPI-indexed fixed interest rate over 23 years - compared to the BOT agreement term of 25 years - with an average life of approx. 14.5 years. Such a long maturity and large amount could only be secured from local financing sources.

PriceWaterhouseCoopers advised VID from bid preparation to financial close, with Goren Capital Group acting as Israeli advisor and coordinator of the institutional financing. The structuring of a mixed bank/institutional financing was a challenging achievement, and a “premiere” in the Israeli financial markets by the remarkably high level of institutional financing in the overall limited recourse facility.

In addition, Standby Facilities were provided by Shareholders and by Lenders to cover unforeseen cost overruns during the Availability Period of the Facilities (2.5 years), with all undrawn amounts being cancelled at the end of the Availability Period. The Standby Facilities represent 10% of the total Financing Requirements.

5. Facility Overview and Systems Design Approach

The desalination process selected for this Project is the Seawater Reverse Osmosis (SWRO), which resulted in the most feasible option from technical and economical points of view, based on the Project’s needs, site conditions and the Tender Committee's requirements.

The basic concept for the construction of the 100 Mm³/year plant is to have two plants of 50 Mm³/year able to operate separately and independently from each other. Most subsystems are double (one for each 50 Mm³/year plant), with the exception of the Intake System, the Post-treatment and the Independent Power Plant. Those systems are unified for the entire 100 Mm³/year plant, but are designed with the required redundancy to serve each plant separately.

The System Design Approach has been established after a comprehensive analysis of the different parameters that may have a direct and/or an indirect influence on the Plant’s feasibility, reliability and availability. A brief description of the main segments of the Facility and their key features is presented below. The figure below shows an aerial view of the facility.

Aerial view of the Ashkelon SWRO facility

A) Intake System

Three alternatives have been initially considered:

Open (submerged) Intake Sub-system
Seawater Wells Sub-system
IEC’s Seawater Supply Point (Power Station’s cooling water discharge)

Due to site constrains and hydrogeological limitations, the Open (submerged) Intake alternative has been selected as the most feasible for this Project. This technical solution is well-known and allows to pump seawater with a better quality than the other alternatives that have been considered. Among design parameters selected, the following should be mentioned:

safety margins in feed-water flow rate;
three parallel pipelines, thus increasing both the availability and reliability (ensuring that at least 67% of the plant remains operable, in case of failure or shut-down of one of the pipelines);
non-turbulent in-flow rates;
high-density plastic pipelines, which demand low maintenance, have a lower tendency for bio-growth, are simpler to clean and have no hazardous materials for the membrane elements;
hydrocarbon pollution pre-warning system.

B) Intake Pumping Station

Vertical pumps are installed. The key features of this selection are:

Long-term successful experience of this approach widely used in Power Stations intake systems (large flow rates/small water head);
Higher efficiencies are achieved (pumps and motors);
Lower capital and operating expenditures, directly related to economies of scale, also reflected on the ancillary components (controls, electrical equipment, pipeline manifolds, etc.).
High flexibility in the operational mode, allowing for a quick and easy activation (or de-activation).

C) Interconnection and Static Mixers

The design contemplates two parallel lines interconnecting between the Intake Pumping Station and the Pre-Treatment section of the Plant. This approach increases Plant availability and reliability (ensuring that at least 50% of the plant remains operable in case of failure in one of the pipelines or static mixers).

D) Chemicals dosing (at the Pre-Treatment segment of the Plant)

Full redundancy is provided for each dosing station. Each pump is supplied with a device adjusting pump flow rate to Plant’s real-time needs. All the dosing pumps have a long track record in similar applications.

E) Gravity Dual Media Filters

The Plant comprises gravity filters containing gravel, quartz sand and anthracite media. The main features of this approach are:

High filtration efficiency;
Low weighted average filtration velocity, approx. 50% of the max. allowed ;
Distribution system which prevents clogging, short-circuits and channelling;
Low energy consumption;
Automatic back washing without interrupting Plant operation;
Overall “spare filtration capacity” (standby) of 33.3%.

It should be noted that the main principles of the design and operation modes of the Media Filters have been tested and piloted, including the ability of the system to handle higher (storm-induced) turbidities.

F) Micronic (cartridge) Filters

A battery of filters is implemented, grouped in two parallel branches.

The main features of this approach are:

High filtration efficiency;
Low weighted average filtration rate;
Distribution system which prevents clogging, short-circuits and channelling;
Low energy consumption;
“Spare filters” (standby) of 40%.

G) Three Center Design Concept

The concept of several identical outsized trains is not suitable for large scale desalination plants, because this approach does not allow reaching scale up benefit. In large scale desalination plants, where each RO train includes a high pressure pump, energy recovery turbine and membranes, enlargement of each of these components leads to contradictions in their optimal sizes.

The high-pressure pump has to be disconnected from the energy recovery device. The pump capacity should not be equal to RO bank capacity, because the optimal size of the pump is not equal to the optimal size of the RO block.

Large scale desalination plants should be arranged in three centers: a pumping center, optimal sized membrane banks and an energy recovery center. This arrangement provides significant technological flexibility, high availability and reduction in overall water cost.

In Ashkelon, the concept of several identical RO trains was changed to a Three-Center Design. The Three-Center Design is an arrangement where high pressure pumps, energy recovery devices and membrane banks operate independently, flexibly and efficiently.

H) High Pressure Pumps/Energy Recovery Devices (ERD)

High-pressure pumps and couples of ERD of the type Double Work Exchanger Energy Recovery (DWEER) are implemented. The high-pressure and energy recovery components can be operated independently, thus increasing the number of alternative operation modes of the system. The key features of this approach are:

Plant availability and reliability;
Higher efficiencies are achieved;
Lower capital and operating expenditures, directly related to economies of scale, also reflected on the ancillary components (controls, electrical equipment, pipeline manifolds, etc.), improved efficiencies of pumps and motors;
High flexibility in the operational mode, allowing for quick and easy activation (or de-activation)
Long term successful experience with this type of equipment

I) SWRO Desalination System and Boron Removal

The design of the Reverse Osmosis system adopted for this Project comprises multiple RO stages, implementing a process for Boron ions removal from the desalinated water, each one operating at optimum design point.

The proposed multiple RO-stage desalination and Boron removal system has the following features:

High removal efficiency and product yield for Boron removal. The system can reach a Boron removal efficiency of more than 92%, as required;
Low specific power consumption;
Low chemical consumption;
Lower capital investment required for achieving low Boron and Total Dissolved Solids (TDS) contents in product;
The Boron removal system is flexible and easily adjustable to changes in feed water temperature;
Lower tendency for membrane fouling;
If required, the same configuration can produce larger quantities of permeate. This is achieved by increasing the flow through the membrane elements, still under the limits of manufacturer recommendations.

J) Post-Treatment

While the final Boron levels are achieved by the multiple stage membrane process, the Post-Treatment envisages mainly the re-hardening of the permeate, bringing the water quality up to the levels required in the Tender Documents. The Post-Treatment incorporates limestone treatment (and, optionally, Caustic Soda dosing). This approach, based on several Pilot Tests and experience gained in similar projects, achieves the lowest capital and operational costs.

K) Auxiliaries

The “auxiliaries” systems and equipment comprise the cleaning system and the flushing and suck-back system. In the event of power failure, a diesel driven pump for flushing is also provided.

L) Energy Supply

The Electrical Power for the Project is provided from two redundant sources:

a Self-Generating Energy Supply System that has been built as a part of the Project adjacent to the desalination plant .
a 161 KV overhead line from the Israel Electric Company Grid .

This approach contributes to the high reliability of the Project and increases its availability. From an operational point of view, the desalination system works most of the time on a continuous “base load”, thus avoiding frequent (daily) changes in the operation mode.

The self-generating energy supply system will be fueled by natural gas, expected to be available at the site by the end of 2006. Minimal environmental constraints are expected and lower electricity costs are achieved.

M) Others

In addition to the above-described key features and benefits, the Plant comprises high quality construction materials, stand-by and redundant equipment, standardization of equipment and facilities that contribute to higher Plant reliability and expected annual availability. The implementation of instrumentation, controls, alarms, testing procedures, etc., is also part of the Quality Assurance policy adopted in order to assure the highest standards of safety and reliability of the Plant.

6. 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. The main contracts under which the Project is conducted are described in the image attached. The Laws of Israel are the Governing Law which applies to all contracts.

Tue, 2006-01-03