Regulator approves "Tamar" agreements

The conditions set by the Public Utilities Authority (Electricity) will cost the "Tamar" partnerships about $1 billion.

14 June 12 22:14, Amiram Barkat

As first reported by "Globes", the Public Utilities Authority (Electricity) this evening approved the 15-year gas supply agreements worth upwards of $20 billion entered into by the "Tamar" drilling partnerships with the Israel Electric Corporation (IEC) and the private power producers. The approval is subject to fulfillment of a series of conditions that will have a substantial adverse effect on the profitability of the "Tamar" project, to the tune of about $1 billion, but that will improve the position of the "Tamar" customers, IEC and the private power producers, as mentioned.

The agreements still require approval by Antitrust Authority director David Gilo, who is due to announce his decision in the next few days.

The gas supply agreement between the "Tamar" partners (Noble Energy, Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L), Avner Oil and Gas LP (TASE: AVNR.L), and Delek Drilling) and IEC is worth $10-16 billion. The agreement with Dalia Power Energies is worth $5 billion, and there are further agreements with private power producers worth a total of more than $1 billion.

Sources inform "Globes" that the wording of the decision approved a short time ago is not substantially different from the draft published for the purposes of the hearing, including almost complete cancellation of the index-linkage of the price of the further quantities of gas that IEC will purchase from "Tamar" if it execises it option to do so (restriction of linkage to the US CPI to 30% of the price, i.e. 70% of the price will be fixed). Furthermore, in the gas supply agreements with the private producers there will be an option for the producers to give notice at the end of six years of termination of the agreement or of a 50% reduction in the quantity of gas that must be paid for.

The agreement was approved despite the objections of two out of five of the members of the Public Utilities Authority plenum (the representative of the Ministry of Energy and Water Resources Doron Aharon, and the representative of the public on behalf of the ministry Ofir Buchnik CPA), who argued that the price of the gas in the agreement was too high. Sources involved in the approval of the agreement told "Globes" that in their view the battle over the price of the gas had not ended.

Published by Globes [online], Israel business news - www.globes-online.com - on June 14, 2012

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