East Mediterranean Gas Co. (EMG) partner Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL) has announced that EMG has reached an agreement in principle with the Egyptian authorities to revise the price of natural gas to EMG. EMG still has to finalize the deal through an amendment to the Gas Sales and Purchase Agreement (GSPA) with its upstream supplier, the Egyptian National Gas Company.
Ampal's share jumped 26.4% to NIS 6.43 in early trading on the TASE following the announcement. The share closed at $1.29 on Nasdaq yesterday.
The agreement comes after months of negotiations. Sources believe that, on the basis of the new agreement, EMG will renew negotiations with potential Israeli customers and private electricity producers. These negotiations were suspended six months ago.
Ampal added that EMG's agreement includes various provisions designed to avoid adverse economic impact to EMG. The two parties have also committed to a good faith intensive effort to reach an amendment to the GSPA, but it cautioned that there is no assurance that the negotiations would be completed or that the outcome would not adversely affect EMG.
Global natural gas prices have risen since EMG's last agreement signed in 2000.
EMG says that it is not concerned by the natural gas discovery at the Tamar prospect because the Israeli market will probably consume very large quantities of gas and need at least two suppliers. A source close to the negotiations with the Egyptians said, "Competition against Tamar underscores the good price of Egyptian gas."
The Egyptian government updated the parliament and Israeli energy officials about the new agreement with EMG.
Egyptian businessman Hussain Salem owns 28% of EMG, the Egyptian National Gas Company owns 10%, Thai energy giant PTT Public Co. Ltd. owns 25%, Joseph Maiman owns 20% through Ampal and his private company Merhav MNF Ltd., and Israeli institutional investors own 4.4%.
Published by Globes [online], Israel business news - www.globes-online.com - on February 24, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009