Egyptian Prime Minister Sherif Ismail has told journalists in Cairo that an understanding has been reached over the compensation his country owes Israel Electric Corporation (IEC) (TASE: ELEC.B22) for terminating the agreement to supply Israel with natural gas. An arbitration court in Switzerland ruled that Egypt must pay the Israeli power company $1.8 billion.
In contradiction to sources in Israel, media agencies claim there is an inextricable link between the $15 billion gas deal signed by Egyptian company Dolphinus Holdings earlier this week to buy gas from the Tamar partners and the Leviathan partners and resolving the compensation issues with IEC and EMG, the company that owned the pipeline between Egypt and Israel. This week's gas deal was reportedly held up for several years because of the arbitration proceedings and the money owed as a result of disruptions in gas supply and its termination in 2011-2012. Consequently, Egypt froze talks to buy Israeli gas in 2015 and said they would not continue them while demand for compensation from arbitration remained on the agenda.
Ismail said, "We reached an agreement to receive part of the gas in Egypt via EMG's pipelines and this is part of the resolution to the arbitration."
He then added that Egypt has reached an understanding with IEC but refused to disclose details.
The issue of compensation to EMG was resolved earlier this week when a Cairo court ordered the Egyptian gas companies to pay EMG over $1 billion compensation. Under a deal signed in 2005, EMG, owned by Israeli businessman Josef Maiman, Egyptian partners and investors from the US and Thailand had sole rights to buy gas from Egypt, convey it to Israel and sell it to IEC.
From 2009, there were disruptions in supply and the Egyptians unilaterally hiked the price by 40%. From 2011 the pipeline was subject to a series of explosions in the Sinai before the deal was terminated, forcing IEC extra costs of NIS 15 billion in buying more polluting diesel before Tamar gas came on stream. IEC was forced to put up electricity rates by 30%.
IEC said in response, "IEC knows of no relinquishing of the debt. We will not relinquish the debt and the company will continue to work towards collecting it."
Published by Globes [online], Israel business news - www.globes-online.com - on February 23, 2018
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