$215m first quarter loss for Ampal

Rafael to pay state NIS 444m dividend

The company wrote off its investment in Egyptian gas supplier EMG.

Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL), controlled by chairman Yosef Maiman, posted a net loss of $215 million ($3.83 per share) for the first quarter of 2012, compared with a net profit of $17.2 million for the corresponding quarter of 2011. Revenue fell to $133.2 million from $136.6 million.

Ampal said that due to the purported termination of the gas supply and purchase agreement between East Mediterranean Gas SAE (EMG), in which Ampal holds a 12.5% stake, and its gas suppliers, and the uncertainties in Egypt, the company has written off its entire investment in EMG. The write off totaled $260.4 million in the first quarter. In addition, Ampal did not record future compensation from the arbitrations between EMG and its gas suppliers and between Ampal and the Arab Republic of Egypt as an asset.

Ampal said that, based on advice of its legal counsel, there a reasonable chance of recovering significant monetary compensation for damages through the arbitrations

Cash and cash equivalents totaled $89.6 million at the end of March, and its assets totaled $572.9 million, down from $846.6 million at the end of 2011.

Earlier this month, Ampal and other EMG shareholders petitioned for international arbitration against the Egyptian government for failing to meet its commitments under international agreements. The petitioners contend that the Egyptian government's non-compliance with the gas supply agreements caused severe damage to their investments in EMG and to the value of the company. They contend that the petition for arbitration was made after lengthy, but unsuccessful, talks with the Egyptian government to settle the dispute.

The present international arbitration comes after EMG petitioned for arbitration against Egyptian Natural Gas Holding Company (EGAS) in October 2011. EGAS is responsible for the gas pipelines, which carry natural gas to EMG and other customers for delivery to Israel and other countries. Gas deliveries were suspended several times over the past year, due to attacks on the pipelines, putting in doubt the ability to rely on a regular supply of Egyptian gas.

EMG contends that the Egyptians are in breach of their contractual commitments, by not guaranteeing the regular flow of natural gas and for failing to protect the pipelines from repeated attacks by terrorist groups in Sinai, thereby causing serious damage to EMG. The petitioners are seeking compensation from the Egyptian government for the damage caused by the repeated stoppages in gas deliveries, which EMG estimates at billions of dollars.