Israel Electric Corporation (IEC) bought surplus gas from the Tamar partnership to the tune of $800 million, according to a prospectus published by IEC last week. The Tamar partnership allowed IEC to extend the agreement with it in the event that IEC fails to utilize the extra amount of gas.
In 2012, IEC signed a gas supply contract with the Tamar partnership in which it undertook to buy a minimum amount of gas even if it did not consume all of it (take or pay). It tuned out that IEC's estimate of its gas consumption rate was excessive. "IEC is not to blame. The company was unable to gauge how many private power plants would enter the market, and that the Electricity Authority's incentives would be for them," a senior power industry source told "Globes", who added, "Furthermore, IEC provides a vital service, and so it preferred to err on the safe side and buy more gas rather than too little. The hourly cost of failure to supply electricity is estimated at NIS 700 million."
Two weeks ago, the Tamar partnership wrote to IEC allowing it to extend the period of its contract if it not use all of the gas (make up aggregate). "This is something standard between a gas supplier and a gas consumer," the source said, "The buyer can never foresee exactly how much gas it will consume."
Published by Globes [online], Israel business news - www.globes-online.com - on November 29, 2015
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