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UPDATE 1-Group including China Harbour wins tender for Israeli power plant

Steven Scheer

(Adds details, background, chairman quote)

JERUSALEM, July 2 (Reuters) - Israel Electric Corp (IEC) said on Tuesday it would sell its Alon Tavor power plant to a group that includes China Harbour Engineering for 1.87 billion shekels ($523 million).

The group - also comprised of investment firm Mivtach Shamir Holdings and Rapac Energy - won a tender for the plant in the wake of a government reform from 2018 that opens the electricity sector to competition and breaks up the monopoly held by IEC, Israel's state utility.

The deal requires various approvals and licenses but the companies are expected to take possession of the plant, which is in Israel's north, by Dec. 3.

Eleven groups sought to buy Alon Tavor and the tender's committee examined seven proposals, IEC said.

"Israel Electric today is starting a new era of competition in the energy market," said IEC Chairman Yiftach Ron-Tal. "The company is parting ways with the monopoly of production and embarking on a new path of competition."

IEC, which for decades has managed every aspect of electricity from running power plants to connecting households, last year agreed to sell 19 production units in five sites over five years. Alon Tavor is the first to be sold.

IEC will remain a monopoly in distribution.

China Harbour Engineering is a subsidiary of China Communications Construction Co, providing infrastructure construction, such as marine engineering, road and bridge, railways, airports and plant construction.

Chinese companies have been increasing their investment in Israel in recent years, with Bright Food Group buying control of Israel's largest food maker Tnuva and Shanghai International Port Group planning to build a port near Haifa.

Earlier this year, a U.S. official cautioned Israel over investments from China, citing cybersecurity concerns and the prospect of Israels allies limiting intelligence-sharing with it.

($1 = 3.5779 shekels) (Additional reporting by Tova Cohen; Editing by Mark Potter)