Israel Corp, Egypt's EMG near $8b gas deal

Israel Corp.'s three power plants will consume 2-2.25 billion cubic meters of natural gas a year.

Israel Corporation (TASE: ILCO) is moving closer to signing an $8 billion natural gas deal with Egypt's East Mediterranean Gas Company (EMG). Sources inform ''Globes'' that an EMG negotiating team arrived in Israel earlier this week for marathon talks with Israel Corp.'s negotiating team headed by Shuki Gold, the CEO of the company's power plants subsidiary, IC Power Ltd.

For the past 18 months, Israel Corp. has been in talks to buy natural gas for three power plants at its subsidiaries: Israel Chemicals Ltd. (TASE: ICL), Oil Refineries Ltd. (TASE:ORL), and OPC Rotem Ltd. Gold, formerly Israel Chemicals deputy CEO, is in charge of the talks, which are aimed at increasing the company bargaining power

Israel Corp. reportedly wants to complete the negotiations soon, because Oil Refineries' power plant needs gas to begin operating when the national natural gas pipeline reaches the Haifa Bay area in the first quarter of 2011. Oil Refineries must begin operations on the basis of a directive issued by the Ministry of Environmental Protection.

OPC Rotem will need natural gas beginning in 2012 for its power station under construction at Mishor Rotem. Israel Chemicals has a five-year gas supply contract, signed in 2008, with Yam Tethys, owned by Delek Group Ltd. (TASE: DLEKG) and Noble Energy Inc. (NYSE: NBL), but the company will probably need to buy more gas for its planned in-house power plant.

Israel Corp.'s three power plants will consume 2-2.25 billion cubic meters of natural gas a year, a quantity that will turn the company into Israel's second largest natural gas customer, after Israel Electric Corporation (IEC) (TASE: ELEC.B22). The value of the 15-contract, plus the option to extend is estimated at $8 billion.

Delek Group, Noble Energy, and the other partners in the Tamar license have been trying for a long time to get Israel Corp. as their anchor customer. However, the companies do not yet have a signed contract, but only letters of intent from IEC and private power producer Dalia Power Energies Ltd.

EMG partner, Merhav Group, owned by Yosef Maiman, said in response, "The EMG team visits Israel at least once a month to meet with several customers. It goes without saying that not every meeting yields a signed contract. That is the case here too. Another other comment would be speculation."

Published by Globes [online], Israel business news - - on November 24, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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