Israel's Competition Authority Decision Threatens $1.8 Billion Gas Deal
Translated & summarized from Calcalist by baba
NewMed Energy and Ratio are moving to cancel a $6.7 billion natural gas deal with Dalia Energies, despite Competition Authority approval. The companies cite an unresolved condition regarding Dalia's ability to resell gas as grounds for cancellation. Dalia Energies considers the deal effective and anticipates legal action or renegotiations. The dispute centers on a clause that could impact market competition, with the Competition Authority seeking further clarification.
The story in 5 lines · by baba
- NewMed Energy and Ratio seek to cancel a $6.7 billion gas deal with Dalia Energies over an unresolved condition.
- The unresolved condition concerns Dalia Energies' right to resell up to 15% of purchased natural gas.
- Dalia Energies states the deal is effective and expects legal battles or renegotiations.
- The Competition Authority approved the deal but sent parties back to discuss the resale clause.
- The 20-year agreement involves supplying gas from the Leviathan field to two Dalia power plants.
NewMed Energy and Ratio, controlled by Yitzhak Tshuva and the Landau family respectively, are leaning towards canceling a $6.7 billion (approximately 25 billion shekels) natural gas deal with Dalia Energies, owned by George Horesh. The 20-year agreement, signed in May, involves supplying gas from the Leviathan field to two Dalia power plants. Despite the Competition Authority granting approval, NewMed Energy claims the deal is void because one of three conditions remains unresolved. This condition concerns whether Dalia can resell up to 15% of the gas it purchases to a third party if it doesn't need the full amount, a clause that could impact market competition.
Dalia Energies, however, maintains that the agreement became effective upon the Competition Authority's announcement and anticipates a legal battle or renewed negotiations. The unresolved issue stems from the authority's request for further discussion on the resale clause, as they did not receive sufficient explanations from the parties involved. NewMed Energy is using this as grounds to declare the agreement null and void, as the conditions for its execution were not met by the stipulated deadline.
The deal, which would see NewMed and Ratio supply Dalia with 1.3 billion cubic meters of natural gas annually, increasing to 1.7 billion cubic meters from 2035, is significant for the Israeli energy market. It is the first in a series of expected deals for NewMed and Ratio. The Competition Authority had initially set three conditions for approval. Two of these were resolved: the contract duration was adjusted to allow Dalia renegotiation rights in 2041, and the "take or pay" clause was modified to include a minimum purchase commitment, balancing industry norms with flexibility for the power plant.
The authority's stance on the resale clause, however, has provided NewMed Energy with a basis for cancellation. The Competition Authority does not consider its position on this single issue sufficient to invalidate the entire deal, but NewMed Energy is not bound by this interpretation. The situation has led to a dispute that could escalate to legal proceedings or necessitate a renegotiation of the terms.
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