Derech-Eretz Highways (1997) Ltd.
Project: Road 6 Cross Israel Highway
Category: Innovative Finance
Project Summary
The Cross Israel Highway (CIH), also known as Highway 6, is the largest Build-Operate-Transfer (BOT) transportation infrastructure project ever implemented in Israel. The Free-Flow Toll Road is the first of its kind in the country and perceived internationally as one of the most advanced toll roads in the world.
The consortium’s shareholder companies are Aecon / Canadian Highways Investment Corp., based in Canada; Africa-Israel Investments Ltd., based in Israel; and Housing & Construction Holding Co. Ltd., also in Israel.
Derech-Eretz Highways was awarded the 30 year concession for the design, execute, operate, collect tolls, enforce and maintain the Cross Israel Highway. The total investment is about $1.4 billion US$ of private financing accomplished with a syndicate of domestic banks, US / Canadian banks and share holders equity.
The central section of Highway No. 6 covers about 87 km, and includes 10 interchanges, 94 bridges, 2 tunnels, 100 km of agricultural service roads and 44 km of lateral roads integrated into the project. The Cross Israel Highway has expended to the north by 17 Km and to the south by 32 Km.
Section 18 is the northern section of road 6 which was opened to traffic on July 2009. This section of the road includes 12 bridges, with a total length of 2.5 kilometers, and two tunnels – one of which creates the first ecological corridor constructed in Israel.
Section 18 financial close was finalized in June 2007. The construction work started two months prior to the financial close with the risk being taken by the Derech-Eretz Shareholders. Section 18 is unique in its advanced architectural plan and construction system as well as in its financial structure. Section 18 opened for traffic after 24 months of construction work (8 months before the scheduled date).
The original financing of the project included two tranches of senior debt, a $850 million NIS denominated financing lead arranged by Bank Hapoalim (Israel’s largest bank, responsible for having lead arranged most of Israel's project financings) and CIT which lead arranged and syndicated a $250 million private placement.
For Section 18, Bank Hapoalim lead arranged a senior debt financing to DEC 18 of a NIS denominated amount of [$130m]. Many of the participants in the financing to DEC 18 are existing senior lenders to DEC (as part of the NIS denominated tranche). The dollar lenders to the existing project did not participate in the Section 18 financing.
In addition, another innovative aspect of the financing of Section 18 was the raising by DEC of third party mezzanine financing. The mezzanine financing was raised by DEC rather than by DEC 18 because DEC had the proven track record and the ability to repay the mezzanine (based on the fact that the central section is outperforming the traffic forecasts and other financial parameters).
With all standards procedures taking care off during the project we kept on a highest Environmental and Safety Standards. More than 70 million $ was invested in environmental protection and minimizing noise and air pollution, including greenery on the highway slopes, acoustic walls, and crossings for animals and preserving archeological sites. The highway’s operations center is manned 24/7 to locate malfunctions and hazards, and is in contact with the service cars that regularly patrol the highway.
