Nati Yefet
The Electric Corporation will save $1.34 million on its fuel costs.
Sources inform "Globes" that Israel Electric Corporation (IEC) (TASE: ELEC.B22) board of directors last Thursday approved a deal to buy surplus natural gas from Dalia Energies, owner of the Dalia power station, for 50 days at a price that will save the company at least $1 million. While IEC buys gas from the Tamar reservoir at $5.80 per mmbtu, it will pay less than $5 for the gas from Dalia. Dalia, the largest power station in Israel, has a 900 megawatt capacity, enabling it to supply 7% of Israel's electricity.
The IEC decision followed the start of a two-month shutdown of one of Dalia's two turbines earlier this month, shortly after the other turbine ended a two-month shutdown. As reported to "Globes," each turbine generates NIS 32 million a month in revenue, meaning that the four-month shutdown of one turbine will reduce Dalia's revenue by nearly NIS 130 million. Adding several million dollars for repairing each turbine brings the projected damage suffered by Dalia to NIS 150 million. A malfunctioning turbine is not a rare event; IEC combined cycle turbines are shut down an average of 29 days.
The new gas agreement between IEC and Dalia includes the purchase of up to 33,600 mmbtu a day for 50 days, in other words 1.68 million mmbtu. This is nearly 0.05 BCM, which at $5.80 per mmbtu costs IEC $9.74 million, but only $8.4 million at $5 per mmbtu, a saving of at $1.34 million.
One of the reasons why the deal between IEC and Dalia is possible is that IEC's purchases from Tamar have been substantially greater than stipulated by the take or pay mechanism requiring IEC to buy at least 3.5 BCM a year. IEC's 2016 actual gas purchases from Tamar are projected to total over 5 BCM, leaving room for flexibility.
In response to a question from "Globes," IEC said that the company had reached understandings with Dalia Energies, and was "glad to take advantage of any business opportunity for lowering the costs of the company's basket of fuels." IEC pays NIS 4.5 billion a year for natural gas; were it paying $4 per mmbtu as a strategic anchor customer crucial for the development of the reservoirs, it would save NIS 1.5 billion a year on natural gas, a saving that would be rolled over on to the consumers. A price of $3 per mmbtu, which would still be profitable for the gas partnerships, would save IEC NIS 2.2 billion.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 24, 2017
© Copyright of Globes Publisher Itonut (1983) Ltd. 2017
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