The energy exploration partnerships controlled by Delek Group Ltd. (TASE: DLEKG) unit Delek Energy Systems Ltd. (TASE: DLEN) Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling Limited Partnership (TASE: DEDR.L) are considering issuing a $1.5 billion bond to recycle the debt that will be raised to develop the Tamar gas field in which they are partners. This would happen after completion of the Tamar field's development in the second quarter of 2013. Sources inform "Globes" that the partnerships' financing agreement allows early redemption of the debt.
As revealed at the "Globes" Capital Market Conference in May, the Israel Securities Authority decided to permit the gas and oil exploration limited partnerships to raise debt subject to protecting rules of corporate governance similar to the rules for public companies.
Although receipt of the main funding for Tamar was delayed by six months, Delek Drilling and Avner, and another Tamar partner Alon Natural Gas Exploration Ltd. (TASE: ALGS) have succeeded in financing part of the project without being compelled to issue new rights. This has been accomplished through "creative" ways including loans from controlling shareholders, other loans, and liens on rights in the Leviathan gas field.
Today the huge amended gas agreement between the Tamar partners and the Israel Electric Corporation (IEC) (TASE: ELEC.B22) was finally signed. The scale of the completed deal could range between $10 and $23 billion. Signing the deal paves the way for the Israeli partners to receive financing for their part in developing the prospect. The development of the project should be completed by April 1 2013 at an estimated cost of $3.1 billion.
The principle loan has been dependent of receiving all the regulatory approvals for the gas agreement with the IEC as well as an agreement between the Tamar partners and the Yam Tethys partners for using the latter's gas conveyance infrastructure, and approval of a lien on the partnerships' rights on Tamar.
The agreement with the IEC was finally signed today and the agreement with Yam Tethys should be signed in the coming few days. At the same time, the Tamar partners announced this morning that they have received approval to place a lien on their rights in the project to financing institutions. The main loan to develop the field worth $900 million is a non-recourse loan guaranteed by the project's partners through the infrastructure installations and gas supply agreement.
Avner and Delek Drilling, which each hold a 15.67% stake in the Tamar field, will receive $800 million in equal parts, while Alon, which holds a 4% stake, will receive $100 million.
The financing will be provided by a consortium of 11 banks led by HSBC and Barclays Bank and including Japanese and French banks as well as Israeli banks Mizrahi Tefahot Bank (TASE:MZTF), Israel Discount Bank (TASE: DSCT), and Bank Hapoalim (TASE: POLI). The Israeli banks together will provide loans for about NIS 250 million. The loan is over eight years at an interest rate starting at LIBOR plus 4.75% and subsequently falling by 0.5%.
At the same time, Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), which holds a 28.75% stake in Tamar, will receive a loan of $400 million from Deutsche Bank linked to Israel's Consumer Price Index (CPI) at an annual interest rate of 5%.
Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2012
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