Sources inform ''Globes'' that Deutsche Bank AG (NYSE: DB; XETRA: DBG) has approached Israeli institutions to participate with it in the financing of development of the Tamar gas field. The bank has approached Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), and Menorah Mivtachim Holdings Ltd. (TASE: MORA). Capital market sources that a new trend was emerging of bringing in Israeli institutional investors into what was hitherto a preserve of the banks.
Deutsche Bank has been in prolonged negotiations with Tamar partner Isramco Ltd. (Nasdaq: ISRL; TASE: ISRA.L) for a $350 million bridge loan to finance its share of the Tamar project, and the bank is trying to raise an additional $400 million for the company. Isramco's share of the development cost is $850 million, of which $100 million will come from equity.
Noble Energy Inc. (NYSE NBL) owns 36% of Tamar, Delek Group Ltd. (TASE: DLEKG) subsidiaries Avner Oil and Gas LP (TASE: AVNR.L) and Delek Drilling LP (TASE: DEDR.L) each own 15.625%, Isramco owns 28.7%, and Dor Alon Energy in Israel (1988) Ltd. (TASE:DRAL) Dor Alon Energy Exploration Ltd. owns 4%.
Delek Group and Dor Alon need to raise $1 billion for their share of the development, and are in talks with HSBC Holdings plc (LSE:HSBA; HKSE: 005; NYSE, Paris: HBC) and Barclays Bank plc (LSE: BARC).
The Tamar partners estimate the cost of developing the field and bringing the natural gas to market in Israel at $2.8 billion, making it the largest infrastructure project in Israel in many years.
There are two advantages for the Israeli institutional investors to participate in syndicates financing multi-billion dollar infrastructure projects. The first is that these projects are an investment with fairly low exposure to the capital market, and the second is that the projects generate a stable long-term cash flow. The institutions' high liquidity, with tens of billions of shekels under management, gives them the wherewithal to participate in the Tamar financing and lower its financing costs.
In addition, Israeli institutional investors, in contrast to foreign institutions, do not demand a special premium on investment in Israel.
Published by Globes [online], Israel business news - www.globes-online.com - on June 17, 2010
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