Yosef Maimon, one of the leading shareholders in East Mediterranean Gas Company (EMG), is the Israeli face of the Egyptian-Israeli venture. Instead of putting all his cards on the table, and explaining to his customers what exactly is going on, or what he thinks is happening, his company, Ampal-American Israel Corporation (Nasdaq: AMPL; TASE:AMPL) sends repeated notices to the TASE, quoting EMG as saying that natural gas deliveries will resume within days.
Maiman presumably knows who EMG's largest shareholder Hussein Salem is, whom his associates are, and exactly how deals are contracted in Egypt. Nonetheless, Ampal's notices to the TASE, especially the latest one, asking for help from foreign governments, indicate that the EMG story is greater than Maiman and his partners. They move aside as if EMG is not a company that signed contracts with Israel Electric Corporation (IEC) (TASE: ELEC.B22) and Israel Corporation (TASE: ILCO).
Now, according to Maiman and his partners, the deal should be solved by a higher power, by government leaders. Maiman's private company Merhav MNF Ltd. has asked the Israeli and Thai government (Thai energy giant PTT Public Co. Ltd. owns 25% of EMG), and the US president to ask the Egyptian interim government to resume the supply of gas.
In effect, Maiman is saying, "Who am I? I am only a small cog in EMG, which is supposed to make money from the supply of gas to Israel. Prime Minister Benjamin Netanyahu and US President Barack Obama should get the headaches."
It will be interesting to imagine what would have happened had a purely Israeli company with an Israeli controlling shareholder had sent such muddled notices to the TASE. We would have torn the company to shreds, but we are forgiving toward Ampal and Maiman. Over the years, the gas delivery agreement with Egypt has been considered as a strategic asset to the peace treaty, as an answer to the ostensible threat of a monopoly by Yitzhak Tshuva and a way of pressuring him on gas prices from Delek Group Ltd's (TASE: DLEKG) gas fields. The price Israel pays for Egyptian gas is cheaper by every measure, which may explain EMG's sweeping tax exemptions until recently in both Israel and Egypt.
Minister of Finance Yuval Steinitz likes to attack Israel's natural gas developers and threaten them with nationalization unless they quickly develop the Tamar gas field. He ought to attack Egyptian gas suppliers, too, regardless if they are called Maiman or the Egyptian government, who are currently responsible for 20% of the fuel for IEC's electricity production. "Honor the contracts you signed." Maiman wants government intervention? Go ahead, hand over your shares in EMG to the Israeli government (after all, Steinitz likes to threaten nationalization), or pay a mediator's fee to the Israeli government for settling gas deliveries on your behalf.
Arguments over the supply of Israeli or Egyptian gas pass over the head of Israeli consumers, who correctly want only one thing: the amount of their electricity bill. They don’t care about Steinitz's fight with Tshuva. As it is, the 10% cut in electricity rates last year is liable to be erased if Egypt does not resume deliveries of gas to Israel. Things do not look rosy: until gas begins to flow from Tamar in two years, IEC will have to generate electricity from the costlier alternatives of coal, heavy industrial oil, diesel, or liquefied natural gas, which could increase electricity bills by 30%.
This could be considered as the consequence of the business relationship with the close associate of ousted Egyptian President Hosni Mubarak, Hussein Salem: if you sign a deal with him, don’t complain if things go wrong one day. There are some thing that are not done, even for the peace treaty with Egypt.
Published by Globes [online], Israel business news - www.globes-online.com - on March 6, 2011
© Copyright of Globes Publisher Itonut (1983) Ltd. 2011