Manufacturers are threatening to petition the High Court of Justice against the Ministry of Finance's intervention in the gas supply contracts between the Tamar partners and independent power producers (IPPs). The manufacturers say there will be no gas left for industry, which desperately needs it, because the ministry is trying to force the Tamar partners to allocate the balance of gas for distribution from the Tamar pipeline to the two big IPPs: Israel Corporation (TASE: ILCO) subsidiary IPC Rotem Ltd., and Dorad Energy Ltd.
In an urgent letter to top Ministry of Finance officials and the heads of the Public Utilities Authority (Electricity), the Antitrust Authority, and the Natural Gas Authority, Shaniv Paper Industry Ltd. (TASE: SHAN) warned that it and other companies would take legal action if the Ministry of Finance forces the Tamar partners to sign gas supply contracts with the big IPPs, while discriminating against small and mid-sized companies, which also need natural gas to survive.
Ofakim-based Shaniv has 200 employees, and has been forced to spend millions of shekels a year to buy more expensive diesel to power its production lines, because the government has not yet hooked it up to the natural gas pipeline network.
The Public Utilities Authority is holding a critical meeting today to discuss whether to approve the Tamar partners' gas supply contracts with Israel Electric Corporation (IEC) (TASE: ELEC.B22) and IPPs Dalia Power Energies Ltd. and Edeltech Ltd. These contracts are worth more than $20 billion altogether, and will shape Israel's energy market for years.
Last week, "Globes" revealed that the Ministry of Finance is trying to compel the Tamar partners to sign gas contracts with OPC and Dorad as well, which are due to become the first IPPs to come online in 2013. Both companies signed contracts with Egypt's East Mediterranean Gas Company (EMG), but Egypt has suspended gas deliveries to Israel.
Due to the limited capacity of the Tamar pipeline, there will not be enough gas to meet demand if the Tamar partners sign contracts with OPC and Dorad. This would be the death knell for factories to switch to natural gas, which will save billions of shekels in their energy costs, improve their competitiveness, and prevent hundreds of layoffs.
Manufacturers need relatively little natural gas, no more than one billion cubic meters (BCM) a year altogether, compared with the three BCM a year by OPC and Dorad. The Tamar pipeline has a capacity of 7-8 BCM a year, of which 3.5 BCM is slated for IEC.
In its letter, Shaniv's attorney Prof. Yuval Levy says that the government has created a situation in which his client and other manufacturers face built-in discrimination compares with Tamar's big customers, because only the latter have the right to directly sign contracts with Tamar's partners, whereas small customers have to go through gas marketing companies.
As a consequence of this distortion, Shaniv would have expected the Ministry of Finance to protect the interests of small and mid-sized gas customers, which have no representation. It contends, however, that in practice, the ministry is seeking to secure the interests of big and powerful customers. "It is easy to understand how surprised and disappointed Shaniv is to learn that the Ministry of Finance and parties on its behalf are intervening, and this is the opposite of what should happen. Instead of standing guard against discrimination of companies such as Shaniv, this intervention is intended to ensure that the discrimination will take place," states Levy. "The intervention lacks authority, is extremely unreasonable and severely harms the principle of equality and the ability of Shaniv to compete."
Published by Globes [online], Israel business news - www.globes-online.com - on June 14, 2012
© Copyright of Globes Publisher Itonut (1983) Ltd. 2012