Gas Subsidiaries Update

The following updates are based on information released by Delek Group gas subsidiaries, Delek Energy Systems Ltd., Avner Oil & Exploration L.P and Delek Drilling L.P. All financial and business information is given only for the convenience of the reader. The only official financial and business information, is that which is included in the officially published immediate reports and financial reports of Delek Group and its gas subsidiaries, to the Israeli Securities Authority and the Tel Aviv Stock Exchange, in Hebrew. In the event of any conflict between financial and business information given on this site and the Hebrew published immediate reports, the Hebrew published immediate reports shall prevail. More on Delek Group's disclaimer.

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Signature on Agreement to Finance the Partnerships Share in the Costs of Developing the Tamar Project

Tel Aviv, April 23, 2012. Delek Group (TASE: DLEKG, OTCQX: DGRLY) ("the Company") announced that the following reports were published by each of the Partnerships, Delek Drilling LP and Avner Oil Exploration LP, with regard to Tamar Project finance agreement;

Delek Drilling LP reported as follows; Notice is hereby given that on April 20, 2012 loan agreements were signed ("Financing Agreement") or ("the Agreement") between Delek Drilling - Limited Partnership ("the Partnership") and a consortium of eleven foreign and local banks headed by HSBC Bank Plc and Barclays Bank Plc, (hereinafter jointly: "the Financing Banks"), according to which the Partnership will receive project financing of the limited recourse type of 400 million dollars (hereinafter: "the Loan"). An amount of 190 million dollars of the Loan is expected to be used to repay the balance of a bridgeloan received in June 2010 to finance the Partnership's share in the development plan of the Tamar Project ("the Interim Financing") (for additional details about the Interim Financing, see the Immediate Report dated June 27, 2010 - document No. 2010 - 01-532350), and the balance to finance the Partnership's share in the balance of the investment to complete the development of the "Tamar" project ("Tamar Project"). Together with signing the Financing Agreement by the Partnership, financing agreements were signed under the same conditions and the same purposes between the financing banks and between Avner Oil Exploration - Limited Partnership ("Avner") to receive a loan of an amount of 400 million dollars, and between the financing banks and Dor Gas Exploration Limited Partnership ('Dor Gas") to receive a loan for an amount of 102 million dollars.

The loan is for a period of 8 years which is likely to be shortened as a result of a cash sweep mechanism stated in the Agreement, according to which 25% of the free cash flows (after servicing the debt for the relevant quarter) will serve to advance the repayment of the loan. The loan agreement stipulates the events on whose occurrence the loan must be repaid early, including, inter alia: illegality, transfer of control, a decline in the rate of minimum holdings (as determined in the Agreement) in the Partnership's participation units, transfer of control in the Electric Corporation where the credit rating (of the Electric Corporation) is lower than the rating determined in the Agreement, and partial of repayment in the event of a partial sale of the rights of the Partnership in the Tamar Project. The Partnership has the right, at any time, to make an early repayment of the loan - fully or partly. The loan is in dollars and bears interest calculated according to Libor for 3 months + a margin at an annual rate as detailed below: (I) From signing the Agreement until completing the Project according to the terms defined in the Loan Agreement ("completing the project") 4.75%; (II) From completing the Project and until two years thereafter - 4.25%; (III) From the end of the period mentioned in clause (II) above until two years thereafter - 4.75%; (IV) From the end of the period mentioned in clause (III) above until the date of final repayment of the loan - 5.5%. In addition, the Partnership undertook to pay commission for providing the loan at the rate of 40% of the margin which will apply to the loan for every amount not drawn. According the Financing Agreement the Partnership undertook to carry out hedging transactions in order to "fix" the Libor rate of interest regarding at least 75% of the balance of the loan. In addition, the Partnership undertook to pay commissions, including organization, consulting and success fees to the financing banks and to the financing consultants, in an amount of 13 million dollars for the whole loan period, which will paid from the amounts of the loan. The loan will be repaid as from January 31, 2014 in 26 quarterly installments according to the repayment schedule determined between the parties.

The withdrawal of surpluses from the account pledged in favor of the financing banks subject to the terms set forth in the Financing Agreement. Withdrawal of the amount is conditional on meeting pre-conditions, the main ones being: Registration of the liens in the relevant register and receiving the confirmation of the Director of Oil Matters on the pledge of Tamar's holding, the signature and coming into force of the Agreement which will arrange the use of Tamar's partners in the installations of Yam Tethys ("the Use of the Installations Agreement"), meeting Agreement's suspending conditions regarding the sale of gas of the Tamar Partnership to the Electric Corporation (see the Immediate Report dated March 15, 2012, document N. 2012-01-068460), receipt of a confirmation regarding the inclusion of the facilities of the Tamar Project with insurance coverage in accordance with the Property Tax Law, receipt of the required certificates, to the extent required, according the Financing Agreement based on the Yam Tethys project, for the signature and coming into force of the Use of the Installations Agreement, and receiving the approval of the technical consultant that no significant detrimental technical change will be caused by the arrangement the subject of the Agreement for the use of the installations. On meeting the prior conditions, the Partnership will deliver a supplementary Immediate Report.

The amounts of the loan will be transferred to Delek Drilling (Tamar Financing) Ltd., a dedicated company established in order to receive interim financing according to the payment demand that the Operator will issue to the Partnership for the development costs of the Project and in order to finance part of the loan costs, and will be transferred as a loan to the Partnership under the same conditions (back to back). To secure the repayment of the loan, the Partnership pledges its rights in the assets connected with the Tamar Project, including, inter alia, holding Tamar, the Joint Operation Agreement, the Project's equipment and the insurance policies, the agreements for the sale of gas (including agreements which will be signed in the future, should any be signed), and the use the installations agreement and rights of the Partnership in those installations. The loan is a limited recourse type and the lenders do not have a right of recourse to the Partnership's assets not pledged in their favor. It should be mentioned, that the liens mentioned above are subject to the rights of royalties of the State and to the rights of other holders of royalties rights who are entitled to receive royalties from the Partnership (including interested parties), and that liens will be registered in favor of the above recipients of royalties on the holding for the period of the Financing Agreement to secure the right for royalties.

As customary in the financing agreements of this type, the Partnership took on itself covenants which include, inter alia, the following main obligations: Restrictions on taking additional credit (these restrictions will not apply to non recourse type credit, subordinate loans from related parties and credits in amounts of up to 10 million dollars until completing the Project and up to 50 million dollars after completing the Project); meeting the liquidity test, according to which on the dates of the examination set forth in the Financing Agreement the Partnership will have to prove that it has enough financial resources in order to meet its obligations in the following 12 months; Restrictions on a change in the fields of operation; Restrictions on purchasing significant assets not in the field of its operations; Restrictions on the sale of rights in the Yam Tethys Project, not according to the terms of the Financing Agreement; Restrictions on carrying out actions which can have a significant detrimental effect; Restrictions on approving sole risk activities in the Tamar Project not according to what has been stipulated in the Financing Agreement, etc.

As is customary in financing transactions of this type, in the Financing Agreement events of default are defined which, on their occurrence, the financing banks will have the right to make the loan immediately repayable, including, inter alia, the following significant events: Non-payment of amounts due to lenders; The Partnership does not have available all the financial means required to invest in the Project until its commercial completion (as this is defined in the Agreement); A breach of the covenants including not meeting the projected debts service cover ratio, i.e. the ratio between the surplus cash flows expected during a certain period (as defined in the Financing Agreement (and the expected payments according the Financing Agreement for that period are less than 1.05:1 until the date of the fourth repayment, and less than 1.15:1 after the date of the fourth repayment and not meeting the loan life cover ratio, i.e. the ratio between the surplus capitalized cash flows expected for the financing banks (as defined in the Financing Agreement) until the final repayment of the loan (plus the balance of the cash deposited in pledged accounts on the date of the examination) and between the balance of the loan is less than 1.05:1 until the date of fourth repayment and less than 1.15:1 after the date of the fourth repayment. Completion of the project (will not be done until June 1, 2014; not meeting the additional credit terms (financial indebtedness) as detailed above; Engagements in hedging transactions in connection with the Tamar Project, excluding as agreed in the Agreement; a breach of presentations; abandoning the Project; problems of the flow of gas, as determined in the Agreement, during a continuous period of 15 days; Cross default of another financial debt which is not subordinate to the Financing Agreement; events of insolvency; The occurrence of events which are likely to have a material adverse effect on the ability of the Partnership to meet its significant obligations in connection with the Financing Agreement, or the Project's documents (as defined in the Financing Agreement); a material adverse effect on the main assets and liabilities or financial position of the Partnership; a breach or cancellation of the Project's documents (as defined in the Financing Agreement), in such a way that they would have an adverse effect; Non receipt of approval of the relevant authority to include the installations of the Tamar Project in insurance cover according to the Property Tax Law; Non receipt of the approval of the Minister of Energy and Water to the pledge of the Yam Tetis Ltd. shares, in the even of a continuing force majeure in connection with the Project, etc.

The Partnership submitted an application to the Tax Authorities to receive an exemption from tax deduction at source to the foreign lenders. Should it not receive the exemption, the Partnership will carry out a grossing-up of the withholding tax deduction according to the composition of the foreign lenders as will exist on the date of the payment of interest.

Avner Oil Exploration reported as follows; Notice is hereby given that on April 20, 2012 loan agreements were signed ("Financing Agreement") or ("the Agreement") between Avner Oil Exploration - Limited Partnership ("the Partnership") and a consortium of eleven foreign and local banks headed by HSBC Bank Plc and Barclays Bank Plc, (hereinafter jointly: "the Financing Banks"), according to which the Partnership will receive project financing of the limited recourse type of 400 million dollars (hereinafter: "the Loan"). An amount of 190 million dollars of the Loan is expected to be used to repay the balance of a bridgeloan received in June 2010 to finance the Partnership's share in the development plan of the Tamar Project ("the Interim Financing") (for additional details about the Interim Financing, see the Immediate Report dated June 27, 2010 - document No. 2010 - 01-532350), and the balance to finance the Partnership's share in the balance of the investment to complete the development of the "Tamar" project ("Tamar Project"). Together with signing the Financing Agreement by the Partnership, financing agreements were signed under the same conditions and the same purposes between the financing banks and between Delek Drilling - Limited Partnership ("Delek Drilling") to receive a loan of an amount of 400 million dollars, and between the financing banks and Dor Gas Exploration Limited Partnership ('Dor Gas") to receive a loan for an amount of 102 million dollars .

The loan is for a period of 8 years which is likely to be shortened as a result of a cash sweep mechanism stated in the Agreement, according to which 25% of the free cash flows (after servicing the debt for the relevant quarter) will serve to advance the repayment of the loan. The loan agreement stipulates the events on whose occurrence the loan must be repaid early, including, inter alia: illegality, transfer of control, a decline in the rate of minimum holdings (as determined in the Agreement) in the Partnership's participation units, transfer of control in the Electric Corporation where the credit rating (of the Electric Corporation) is lower than the rating determined in the Agreement, and partial of repayment in the event of a partial sale of the rights of the Partnership in the Tamar Project. The Partnership has the right, at any time, to make an early repayment of the loan - fully or partly. The loan is in dollars and bears interest calculated according to Libor for 3 months + a margin at an annual rate as detailed below: (I) From signing the Agreement until completing the Project according to the terms defined in the Loan Agreement ("completing the project") 4.75%; (II) From completing the Project and until two years thereafter - 4.25%; (III) From the end of the period mentioned in clause (II) above until two years thereafter - 4.75%; (IV) From the end of the period mentioned in clause (III) above until the date of final repayment of the loan - 5.5%. In addition, the Partnership undertook to pay commission for providing the loan at the rate of 40% of the margin which will apply to the loan for every amount not drawn. According the Financing Agreement the Partnership undertook to carry out hedging transactions in order to "fix" the Libor rate of interest regarding at least 75% of the balance of the loan. In addition, the Partnership undertook to pay commissions, including organization, consulting and success fees to the financing banks and to the financing consultants, in an amount of 13 million dollars for the whole loan period, which will paid from the amounts of the loan. The loan will be repaid as from January 31, 2014 in 26 quarterly installments according to the repayment schedule determined between the parties .

The withdrawal of surpluses from the account pledged in favor of the financing banks subject to the terms set forth in the Financing Agreement. Withdrawal of the amount is conditional on meeting pre-conditions, the main ones being: Registration of the liens in the relevant register and receiving the confirmation of the Director of Oil Matters on the pledge of Tamar's holding, the signature and coming into force of the Agreement which will arrange the use of Tamar's partners in the installations of Yam Tethys ("the Use of the Installations Agreement"), meeting Agreement's suspending conditions regarding the sale of gas of the Tamar Partnership to the Electric Corporation (see the Immediate Report dated March 15, 2012, document N. 2012-01-068460), receipt of a confirmation regarding the inclusion of the facilities of the Tamar Project with insurance coverage in accordance with the Property Tax Law, receipt of the required certificates, to the extent required, according the Financing Agreement based on the Yam Tethys project, for the signature and coming into force of the Use of the Installations Agreement, and receiving the approval of the technical consultant that no significant detrimental technical change will be caused by the arrangement the subject of the Agreement for the use of the installations. On meeting the prior conditions, the Partnership will deliver a supplementary Immediate Report .

The amounts of the loan will be transferred to Avner Oil Exploration (Tamar Financing) Ltd., a dedicated company established in order to receive interim financing according to the payment demand that the Operator will issue to the Partnership for the development costs of the Project and in order to finance part of the loan costs, and will be transferred as a loan to the Partnership under the same conditions (back to back). To secure the repayment of the loan, the Partnership pledges its rights in the assets connected with the Tamar Project, including, inter alia, holding Tamar, the Joint Operation Agreement, the Project's equipment and the insurance policies, the agreements for the sale of gas (including agreements which will be signed in the future, should any be signed), and the use the installations agreement and rights of the Partnership in those installations. The loan is a limited recourse type and the lenders do not have a right of recourse to the Partnership's assets not pledged in their favor. It should be mentioned, that the liens mentioned above are subject to the rights of royalties of the State and to the rights of other holders of royalties rights who are entitled to receive royalties from the Partnership (including interested parties), and that liens will be registered in favor of the above recipients of royalties on the holding for the period of the Financing Agreement to secure the right for royalties .

As customary in the financing agreements of this type, the Partnership took on itself covenants which include, inter alia, the following main obligations: Restrictions on taking additional credit (these restrictions will not apply to non recourse type credit, subordinate loans from related parties and credits in amounts of up to 10 million dollars until completing the Project and up to 50 million dollars after completing the Project); meeting the liquidity test, according to which on the dates of the examination set forth in the Financing Agreement the Partnership will have to prove that it has enough financial resources in order to meet its obligations in the following 12 months; Restrictions on a change in the fields of operation; Restrictions on purchasing significant assets not in the field of its operations; Restrictions on the sale of rights in the Yam Tethys Project, not according to the terms of the Financing Agreement; Restrictions on carrying out actions which can have a significant detrimental effect; Restrictions on approving sole risk activities in the Tamar Project not according to what has been stipulated in the Financing Agreement, etc .

As is customary in financing transactions of this type, in the Financing Agreement events of default are defined which, on their occurrence, the financing banks will have the right to make the loan immediately repayable, including, inter alia, the following significant events: Non-payment of amounts due to lenders; The Partnership does not have available all the financial means required to invest in the Project until its commercial completion (as this is defined in the Agreement); A breach of the covenants including not meeting the projected debts service cover ratio, i.e. the ratio between the surplus cash flows expected during a certain period (as defined in the Financing Agreement (and the expected payments according the Financing Agreement for that period are less than 1.05:1 until the date of the fourth repayment, and less than 1.15:1 after the date of the fourth repayment and not meeting the loan life cover ratio, i.e. the ratio between the surplus capitalized cash flows expected for the financing banks (as defined in the Financing Agreement) until the final repayment of the loan (plus the balance of the cash deposited in pledged accounts on the date of the examination) and between the balance of the loan is less than 1.05:1 until the date of fourth repayment and less than 1.15:1 after the date of the fourth repayment. Completion of the project (will not be done until June 1, 2014; not meeting the additional credit terms (financial indebtedness) as detailed above; Engagements in hedging transactions in connection with the Tamar Project, excluding as agreed in the Agreement; a breach of presentations; abandoning the Project; problems of the flow of gas, as determined in the Agreement, during a continuous period of 15 days; Cross default of another financial debt which is not subordinate to the Financing Agreement; events of insolvency; The occurrence of events which are likely to have a material adverse effect on the ability of the Partnership to meet its significant obligations in connection with the Financing Agreement, or the Project's documents (as defined in the Financing Agreement); a material adverse effect on the main assets and liabilities or financial position of the Partnership; a breach or cancellation of the Project's documents (as defined in the Financing Agreement), in such a way that they would have an adverse effect; Non receipt of approval of the relevant authority to include the installations of the Tamar Project in insurance cover according to the Property Tax Law; Non receipt of the approval of the Minister of Energy and Water to the pledge of the Yam Tetis Ltd. shares, in the even of a continuing force majeure in connection with the Project, etc .

The Partnership submitted an application to the Tax Authorities to receive an exemption from tax deduction at source to the foreign lenders. Should it not receive the exemption, the Partnership will carry out a grossing-up of the withholding tax deduction according to the composition of the foreign lenders as will exist on the date of the payment of interest .

This is a convenience translation of the recent HEBREW immediate reports issued to the Tel Aviv Stock Exchange by the Partnerships on April 22, 2012.

About The Delek Group

The Delek Group, Israel's dominant integrated energy company, is the pioneering leader of the natural gas exploration and production activities that are transforming the Eastern Mediterranean's Levant Basin into one of the energy industry's most promising emerging regions. Having discovered Tamar and Leviathan, two of the world's largest natural gas finds since 2000, Delek and its partners are now developing a balanced, world-class portfolio of exploration, development and production assets with total gross natural gas resources discovered since 2009 of approximately 33 TCF .
In addition, Delek has built an extensive network of global downstream assets, including 1,900 gas stations and convenience stores in the U.S., Europe and Israel, and petroleum refineries in the U.S. Delek also holds significant interests in leading water desalination, power generation, insurance and automotive companies .
In 2011, the Company's revenues were NIS 59 billion. Delek Group's shares are traded on the Tel Aviv Stock Exchange (TASE: DKLG) as part of the TA25 Index.

Contact

Dalia Black / Dina Vince
Investor Relations
Delek Group
Tel: +972 9 863 8444
Email: investor@delek-group.com

Ehud Helft / Kenny Green
International Investor Relations
CCG Investor Relations
Tel: (US) 1 646 201 9246
E-mail: delek-group-ir@ccgisrael.com

 

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