Delek Group (TASE: DLEKG, US ADR: DGRLY) (“the Company”) announces that attached is an Immediate Report submitted by each of Avner Oil Exploration Limited Partnership and Delek Drilling Limited Partnership ("the Partnerships") with regard to an agreement that was signed for the supply of natural gas between the Partnerships and the other Leviathan Partners and Edeltech Ltd.
Further to the provisions of the Partnerships’ immediate reports of January 7, 2016 regarding the holding of talks and/or negotiations of the partners in the Leviathan project, including the Partnership (the “Leviathan Partners”) for the marketing of natural gas to potential consumers in the local market, the Partnerships hereby respectfully announce as follows:
On Saturday evening, January 30, 2016, an agreement was signed for the supply of natural gas between the Partnerships and the other Leviathan Partners and Edeltech Ltd. (“Edeltech” or the “Buyer”), whereby Edeltech will buy from the Leviathan Partners natural gas for the purpose of operating power plants which it is due to build, together with its Turkish partner Zorlu, in Ashdod and Mishor Rotem (the “Supply Agreement”).
According to the Supply Agreement, the Leviathan Partners undertook to supply to the Buyer natural gas at a total scope of approx. 6 BCM (billion cubic meters) (the “Total Contractual Quantity”), in accordance with the terms and conditions specified in the Supply Agreement.
The Supply Agreement determines a mechanism whereby the Buyer will be entitled to adjust the quantities purchased (including the Total Contractual Quantity) until the date of commencement of the gas flow, according to the size of the power plants that will be built, and the gas quantities that it will require at such time, all subject to the restrictions set forth in the agreement.
The term of the Supply Agreement will commence on the date of the gas flow in commercial quantities from the Leviathan reservoir to the Buyer (the “Date of Commercial Operation”) and shall end 18 years after this date or on the date on which the Buyer shall consume the Total Contractual Quantity, whichever is earlier. The parties are entitled to extend the term of the Supply Agreement by a period of up to two additional years or until the date of consumption of the Total Contractual Quantity, whichever is earlier.
The Buyer undertook to take or pay for a minimum annual quantity of gas at the scope and according to the mechanism set forth in the Supply Agreement (the “Minimum Annual Quantity”).
According to government decision no. 476 of August 16, 2015 regarding the framework for increasing the quantity of natural gas extracted from the Tamar natural gas field and swift development of the “Leviathan”, “Karish” and “Tanin” natural gas fields and other gas fields (the “Gas Framework”), the Supply Agreement determined that the Buyer will have an option to reduce the Minimum Annual Quantity to an amount equal to 50% of the average annual quantity it actually consumed in the three years preceding the date of the notice of exercise of the option, subject to adjustments, as determined in the Supply Agreement. Upon reduction of the Minimum Annual Quantity, the other contractual quantities, which were determined in the Supply Agreement, will be reduced accordingly. Reduction of the Minimum Annual Quantity will be possible at any time during a period of 3 years commencing in the beginning of the six year from the Date of Commercial Operation or 4 years from the date on which the Petroleum Commissioner approved the transfer of the rights in the Karish and Tanin leases according to the Gas Framework (whichever is later). If the Buyer gives notice of exercise of the option for reduction of the Minimum Annual Quantity as aforesaid, the quantity shall be reduced as aforesaid after a period of 12 months from delivery of the notice.
The gas price determined in the Supply Agreement shall be linked to the electricity production tariff, as determined from time to time by the Public Utilities Authority-Electricity, and includes a “floor price”.
The Leviathan Partners estimate that the aggregate revenues from the sale of natural gas to Edeltech (in relation to 100% of the rights in the Leviathan project) during the term of the Supply Agreement (based on the partners’ estimate with respect to the price and quantity of the natural gas that shall be purchased during the supply period), may amount to approx. U.S. $1.3 billion, assuming that the Buyer shall consume the foregoing Total Contractual Quantity. A change in the Total Contractual Quantity (up or down, as described above) will result in a change in the projected revenues. It shall be clarified that the actual revenues will derive from a gamut of factors, including the gas quantities that shall actually be purchased by the Buyer and the electricity production tariff.
The Supply Agreement includes several conditions precedent, and mainly approval of the Leviathan reservoir’s development plan, receipt of a license for the gas transportation system from the Leviathan reservoir in accordance with the Natural Gas Sector Law, 5762-2002, adoption of a final investment decision (FID) by the Leviathan Partners by the end of 2016 and adoption of a final investment decision by the Buyer.
To the best of the Partnership’s knowledge, the Buyer is a private company owned by the Edelsburg family. The Buyer and Zorlu are partners also in the Dorad power plant (43.75%) and hold, jointly, additional cogeneration plants, Ashdod Energy and Ramat Negev Energy.
Warning regarding forward-looking information:
The above estimates with respect to the total financial scope of the Supply Agreement, the quantity of natural gas that shall be purchased and the date of commencement of supply according to the agreement, constitute forward-looking information, within the meaning thereof in the Securities Law, 5728-1968, in respect of which there is no certainty that it will materialize, in whole or in part, and may materialize in a materially different manner, due to various factors including due to non-fulfillment of the conditions precedent, in whole or in part, changes in the quantity, the pace and the timing of consumption of the natural gas by the Buyer, the gas price that shall be determined in accordance with the formula set forth in the Supply Agreement, the electricity production tariff, exercise of the option to reduce the quantities as aforesaid (if exercised) and the date of exercise thereof etc.
The partners in the Leviathan project and their holding rates are as follows:
Noble Energy Mediterranean Ltd. 39.66%
Delek Drilling - Limited Partnership 22.67%
Avner Oil Exploration - Limited Partnership 22.67%
Ratio Oil Exploration (1992) - Limited Partnership 15%
This is a convenience translation of the original HEBREW immediate report issued to the Tel Aviv Stock Exchange by the Company on January 31, 2016.
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