NewMed and Ratio Cancel $6.7 Billion Gas Deal With Dalia Energies
Translated & summarized from Calcalist by baba
NewMed Energy and Ratio have canceled a $6.7 billion, 20-year natural gas supply deal with Dalia Energies, citing unmet conditions related to regulatory approval timing. Industry experts believe the true reason is the contract's long duration, with partners potentially seeking shorter terms for higher future export revenues. The cancellation could lead to arbitration in London if a new agreement isn't reached. Dalia Energies plans to enforce its rights under the original contract.
The story in 6 lines · by baba
- NewMed Energy and Ratio canceled a $6.7 billion gas deal with Dalia Energies.
- The official reason for cancellation is unmet conditions regarding regulatory approval timing.
- Industry insiders suggest the contract's long duration, extending beyond 2040, is the primary issue.
- Partners may be seeking shorter contract terms for potentially higher future export revenues.
- The dispute could lead to a lengthy arbitration process in London.
- Dalia Energies plans to pursue all its rights under the agreement and the law.
NewMed Energy and Ratio, partners in the Leviathan gas field, have canceled a significant agreement to supply natural gas to two new power stations being built by Dalia Energies. The deal, valued at $6.7 billion over two decades, was called off despite the Competition Authority approving it and finding no anti-competitive issues. The official reason cited for the cancellation is the "non-fulfillment of all conditions precedent," specifically a dispute over the timing of the Competition Authority's approval, which allegedly arrived late. However, industry insiders suggest the delay, less than two weeks, is not the primary reason for canceling such a large-scale agreement.
Industry sources believe the core issue is the contract's duration. While the Competition Authority's approval was based partly on the agreement's long-term nature, NewMed and Ratio may be seeking a shorter contract. This could be driven by the potential for higher revenues after 2040, when the Energy Ministry's price cap is set to expire, and the Leviathan partners could secure more favorable export prices. The agreement with Dalia was set to last until 2050, a decade beyond the price cap.
Further complicating matters are other clauses in the deal that NewMed and Ratio might wish to renegotiate. These include Dalia's option to sell surplus gas to other companies and potentially reduce its gas consumption by up to 30%, subject to price adjustments. It remains unclear whether the companies are using this cancellation as leverage to renegotiate terms or if they intend to pursue higher-priced export deals, which would require Energy Ministry approval.
If the parties cannot reach a new understanding, the dispute will likely proceed to arbitration in London, a process expected to take at least a year. Dalia Energies stated its intention to pursue all its rights under the agreement and the law. The gas in question is destined for two new 850-megawatt power stations in Ashdod and Tzafit, with a combined construction cost of approximately NIS 10 billion, scheduled to begin operation by July 2029. Dalia has secured financing for these projects and also has a partial gas supply agreement with Energean.
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