|Binding Agreement to Supply Gas to the Israel Electric Company|
Tel Aviv, March 15, 2012. Delek Group (TASE: DLEKG, OTCQX: DGRLY) ("the Company") announced that on March 14, 2012 an agreement for the supply of natural gas was signed between the Partnerships in the Tamar Lease, and among them, the subsidiaries, Delek Drilling L.P. and Avner Oil & Gas Exploration L.P. ("the Sellers" and "Tamar Project", respectively) and the Israel Electric Company Ltd ("IEC") whose main points are stated below ("the Supply Agreement").
In the Agreement IEC has undertaken to purchase an overall contractual amount as fixed and defined below and not greater than 78 BCM ("the overall contractual amount"). Under the Agreement the IEC has an option, which can be exercised until April 2, 2013, to increase the overall contractual amount purchased from the Tamar Project to 99 BCM ("The Option"). It is pointed out that in the event of exercise of the Option the Sellers will be required to increase the supply capacity of the handling and transport system of the Tamar Project, subject inter alia to receiving the authorizations required by law.
Under the Supply Agreement, the IEC is expected to purchase natural gas from the Tamar Project in a minimum amount (Take or Pay) of 42.5 BCM (billion cubic meters), or in a minimum amount (Take or Pay) of 5 BCM per year if the IEC exercises the Option (subject to adjustments based upon the gas sales of the Tamar Project partners and the electricity production of the IEC).
The period of the Supply Agreement will start from the beginning of gas flowing from the Tamar Project and shall end after 15 years, or at the date that IEC shall purchase the overall contractual amount, whichever is the earlier. The IEC is entitled to extend the Agreement period by up to two additional years, if by end of the period (15 years after the start of the gas flow from the Tamar project) IEC has not purchased the overall contractual amount, as stipulated above.
In the agreement two dates are set for price adjustment (according to the formula as laid out within the agreement), after 8 and 11 years from the start of the flow of gas from the Tamar Project. At the first adjustment date (after 8 years) the adjustment made to the price shall be in a range up to 25% (increase or reduction), and at the second adjustment date the adjustment to be made shall be in a range up to 10% (increase or reduction).
The partners in the Tamar Project estimate (based upon the formula, on estimates of the US CPI-U and on a forecast of IEC's gas consumption at the time of signing the Agreement) that the cumulative revenues from the sale of natural gas to the IEC (relative to 100% of the rights in the Tamar Project) are likely to be about USD 14 billion in the event the Option is not exercised, and USD 23 billion if the option is exercised. It is stipulated that the actual revenues shall derive inter alia from the actual amounts of gas that will be purchased by the IEC, exercise of the Option and date of exercise (if exercised), and from the price of gas as calculated in accordance with the above formula.
The Agreement includes several contingent conditions, of which the main ones are receipt of the authorization from the Anti-Trust Authority, the Public Services Authority - Electricity, and the Government Companies Authority.
Warning of forward looking information:
The above estimates concerning the financial amounts included in the Agreement, the amount of natural gas to be purchased, and the start date for supply under the Agreement are forward looking information in its meaning in section 32A of the Securities Law, for which there can be no certainty that it will happen, in whole or in part, and might happen in a materially different manner, on account of various factors including non-fulfillment of the contingent conditions, in whole or in part, changes in volume, rate and timing of natural gas consumption by the IEC, exercise of the Option by the IEC and date of exercise (if exercised), the price for gas as set in accordance with the formula in the Supply Agreement, linkage to the US CPI-U etc.
Percentage holdings in the Tamar Leases are as follows:
This is a convenience translation of the recent HEBREW immediate report issued to the Tel Aviv Stock Exchange by the Company on March 14, 2012, as amended on March 15, 2012.
About The Delek Group
Delek Group is the leading energy & infrastructure group based out of Israel with investments in upstream & downstream energy, water desalination and power plants globally. In addition, Delek, through its subsidiaries, is a leading importer & distributor of vehicles in Israel and owns insurance assets in Israel and the US. Recently, Delek Group, through its subsidiaries, discovered significant quantities of high quality natural gas off the coast of Israel. Delek Group sales reached over 43 billion Israeli shekel in 2010.