Egged won the public transportation cluster in the area surrounding West Jerusalem

Egged announced that it won the public transportation cluster in the area surrounding West Jerusalem. The shares of the Keystone Fund, the controlling shareholder of Aged (60%), rose by 1.2% with the publication of the announcement on the Tel Aviv Stock Exchange. Egged won the Eshkol to operate intercity bus lines between Bnei Brak and Jerusalem, Rosh Ha'Ein to Jerusalem, Petah Tikva to Jerusalem, and urban and suburban lines in the western outskirts of Jerusalem (Mebasheret Zion and Givat Ze'ev).

The company estimates that the revenues resulting from the operation of the cluster will reach NIS 220 million per year. Egged replaces Electra Afikim, a subsidiary of Electra, which operated the cluster for the past ten years.
In the cluster that surrounds Jerusalem, there are about 15.2 million km of service lines per year according to the base map, which is an addition of about 8% to the km of service lines operated by Egged today in all the clusters. As part of the promotion of competition in the transportation market, Egged is allowed to compete for clusters of up to 35 million kilometers per year, so that now the company can compete for an additional 20 million kilometers in public transportation clusters.
The cluster activation will start in two pulses; The first phase will begin within 9 months from the date of the announcement of the win and will include the operation of intercity lines, and the second phase will begin within 21 months from the date of the announcement of the win and will include the operation of all the lines in the cluster.
The cost of establishing the cluster is estimated by Egged at about 340 million shekels, and according to Keystone (+0.7% 648.1) most of the financing will be in a non-recourse loan (a loan against which the property purchased is the collateral) and in an injection of equity by Egged. Keystone recently applied to the court for approval of a distribution of NIS 500 million to the shareholders, which does not meet the profit test.
Egged ended the first quarter of 2023 with a 14% increase in revenues to NIS 1.2 billion compared to the corresponding quarter in 2022. The operating profit increased by a similar rate to NIS 146 million and the net profit increased by about 20% to about NIS 79 million. The company's balance sheet amounted to NIS 6 billion and the equity amounted to NIS 827 million. The distribution of NIS 500 million to the shareholders will reduce the leverage taken by Keystone and its partner, the Teachers and Kindergarten Fund, to purchase Egged by approximately NIS 5 billion in 2022.
The opening of the public transportation sector to competition, which includes, among other things, the release of approximately 50 million km of service lines from Egged to competition and the privatization of Egged, has led to the entry of new players into the field in recent years, among them: Valio Base, which acquired approximately 40% of Dan in 2019; Keren C Narration Capital, which acquired Bon Tour, which owns the Metropolitan public transportation company; Electra, which owns Electra Afikim; and Blue Square Oak, which owns the Extra public transportation company.
The companies benefit from the long concession periods for clusters, about 10 years, and from the fact that it is a sector subsidized by the government. The Eshkol Otaf Jerusalem alone will generate more than NIS 2 billion in revenue for Agged in the coming decade. Generation Capital's Metropolis recently won the operation of lines in the Ono-Elad cluster, which is expected to generate revenues of NIS 300 million a year.