Israeli EMG investors must rely on Egyptian army

Military figures who now control the state said yesterday that Egypt is bound by all its regional and international agreements.

Investors in Yosef Maiman's Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL) certainly followed with concern the departure of Egyptian president Mubarak, and the transfer of control there to the army. The concern lies in the consequences of regime change on the operations of Egyptian gas supplier EMG, in which Ampal holds a 12.5% stake.

Military figures who now control the state said yesterday that Egypt is bound by all its regional and international agreements. That slightly reduced the uncertainty regarding the future operations of EMG, which is set in an amendment on energy that was signed by ministers of both countries as part of the peace treaty between Israel and Egypt.

Ampal's share price strengthened on the Tel Aviv Stock Exchange (TASE) by 2.1% today, and its three series of bonds rose by up to 0.9%.

Since the beginning of the upheaval in Egypt, Ampal's share has weakened by 19%, and at its low was down about 22.5%. That was last Sunday, after a weekend explosion near the gas pipeline that supplies gas to EMG. Following that explosion, the supply of gas to Israel was halted. Ampal reported last week that supply is expected to resume this Thursday, February 17th. Today, in response to a query from "Globes", it was claimed that there was no change in that deadline.

EMG is a private company registered in Egypt, and serves as the second natural gas supplier to Israel. The company set up a gas pipeline from El-Arish to Ashkelon at a cost of $460 million, and gas began to flow in 2008. In 2010, EMG supplied about 40% of Israel's gas needs, with the remainder supplied by Yam Tethys, a Noble Energy-Delek Group Ltd. (TASE: DLEKG) venture.

Egyptian businessman Hussain Salem, with close ties to the Mubarak regime, owns 28% of EMG, the Egyptian National Gas Company owns 10%, Thai energy giant PTT Public Co. Ltd. owns 25%, Yosef Maiman owns 20.6% through Ampal and his private company Merhav MNF Ltd., Sam Zell and David Fisher together own 12%, and Israeli institutional investors own 4.3%.

The Israeli institutional investors, who bought their stakes in 2007 from Maiman for $93 million, include Menorah Mivtachim Holdings Ltd. (TASE: MORA), Clal, Israel Infrastructure Fund (IIF), Psagot Investment House Ltd., and Israel Phoenix Assurance Ltd. (TASE: PHOE1;PHOE5).

From the point of view of the Israeli institutional investors, the investment is not a tradable one, and the return on investment comes from dividends paid out based on EMG policy. 2010 is supposed to be the first year that EMG pays dividends, after the company turned profitable.

Published by Globes [online], Israel business news - www.globes-online.com - on February 13, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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