Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL) announced today that it has been advised by East Mediterranean Gas Co. (EMG) that EMG has signed an amendment to the Gas Sales & Purchase Agreement with its natural gas supplier on the repricing at a higher price, as well as periodic price adjustments, and new gas delivery targets.
The agreement comes after EMG reached an agreement in principle with the Egyptian government on the repricing of the gas. Ampal added that it could not determine at this time the effect of the new agreement on EMG's profitability, because natural gas prices are also affected by fluctuations in the world's natural gas and energy markets, as well as the global economic environment, both in Israel and worldwide.
"Globes" earlier reported that the price for natural gas that EMG buys from Egypt will now probably rise to at least $3.50 per million British Thermal Units (BTU), up from the current $1.50-1.60 per million BTU set in the 2000 agreement with the Egyptian government.
Israel energy market sources believe that EMG will try to maintain its margin of $1.25 per million BTU in its supply contracts, which means that customers will pay $4-5 per million BTU, or 70-80% more than the price in EMG's contract with Israel Electric Corporation (IEC) (TASE: ELEC.B22).
Sources inform ''Globes'' that in the wake of the new agreement, EMG may begin gas deliveries to the Nesher Israel Cement Enterprises Ltd.factory in Ramle in August or September. The IDB Holding Corp. Ltd. (TASE:IDBH) unit is EMG's second customer IEC
Responding to a "Globes" inquiry, Ampal chairman and CEO Yossi Maiman, the Israeli partner in EMG, said, “Any suggestion that the EMG purchase price from the Government of Egypt is lower than the Egyptian domestic price of $3 is flat wrong. Indeed, these figures were not featured in the Ampal announcement.”
Maiman added that “the current EMG purchase price, hence also the selling price to the Israeli market, is subject to periodic review and adjustment every few years, based on changing conditions in the relevant natural gas markets.” He also said that “the Government of Egypt has concluded new price arrangements with all exporters of Egyptian gas; these arrangements were designed to secure a higher income for the Government of Egypt from exported gas; all without harming the economic viability of the exporting companies, including EMG.”
Maiman concluded that “the projected growth in demand on the Israeli market is strong enough to accommodate both gas from Egypt and from Israeli domestic discoveries.”
Ampal owns 12.5% of EMG.
Published by Globes [online], Israel business news - www.globes-online.com - on June 2, 2009
© Copyright of Globes Publisher Itonut (1983) Ltd. 2009