Strategic investors threaten to withdraw from Tower's Fab 2 project

Investors fret that if state froze grant for Fab 1, it could torpedo the new facility
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By Ora Coren

Strategic partners in Fab 2, the facility being built by Tower Semiconductors (Nasdaq:TSEM) in Migdal Haemek, are reconsidering their commitments.

Construction of Fab 2 is estimated to cost $1.5 billion. The state has committed to providing some if the amount. Strategic investors are providing sums of money in exchange for rights to the fab's products.

But the strategic investors are worrying about the state freeze on an $8 million grant to Tower's first facility, Fab 1, after Tower reneged from job creation commitments.

Ministry of Industry and Trade officials clarified that the dispute does not touch on Fab 2. But the strategic investors, unimpressed, worry that the state could wind up withholding sums designated for the new facility too.

The investors say the ministry should make its subsidies conditional on their investment plan, not the company's compliance with employment commitments and exports.

They say that ministerial mulishness on making state support contingent on future sales and job creation, could discourage foreign investors from targeting Israel.

Tower co-CEO Yoav Nissan-Cohen said that the state could torpedo the entire Fab 2 project if it withholds grant money. Commitments from banks, strategic investors and the state are co-dependent, he said.

Meanwhile, Nissan-Cohen is negotiating with ministry officials, together with top executives from Tower's parent company, the Israel Corporation. The ministry negotiators hope to avert Tower's plan to fire 170 people from Fab 1, which directly contradicts its job-creation commitments to the state, while Tower hopes to free its $8 million grant for Fab 1 without having to provide guarantees.

Industry and Trade Minister Dalia Itzik has frozen the $8 million grant until Tower promises to save those 170 jobs.