Energean signs two new gas sales deals in Israel

Energean announced on Wednesday that Energean Israel, of which it owns 70%, has signed two new gas sales and purchase agreements which, combined, represent quantities of gas of up to 1.4 billion cubic metres per year.

The FTSE 250 firm said they increased total firm contracted gas sales from its flagship Karish project to around seven billion cubic metres per year on plateau.

It said the new agreements represent contracted revenues of more than $2.5bn (£1.94bn) over the life of the contracts, but required no further capital investment beyond Karish North, upon which Energean Israel expected to take final investment decision later in the year.

The agreements were signed at levels that were in line with the other large, long-term contracts within Energean's portfolio, and were only subject to buyers' lenders' consent

Energy said the majority of the quantities were represented by a gas sales and purchase agreement to supply gas to the Ramat Hovav Power Plant partnership, which is a partnership between the Edeltech Group and Shikun & Binui.

The partnership was the winning bidder in the Israel Electric Corporation Ramat Hovav tender process, being the second IEC power plant in a series of five to be privatised.

Energean said the gas sales and purchase agreement was for a term of up to 20 years, and contained provisions regarding floor pricing for the main plateau period and exclusivity.

The annual contract quantity reduced after the first seven years following first gas from Karish.

Energean said the rest of the quantities were represented by a second new gas sales and purchase agreement that had been signed with an affiliate of the RH Partnership for the supply of gas for other existing power stations.

Gas supply would start following first gas from Karish, achieving the plateau rate from January 2024.

The contract term was for up to 15 years, and the agreement contained provisions regarding floor pricing for the main plateau period and take-or-pay.

“We are delighted to have signed these additional gas sales agreements, which increase firm gas sales to 7 bcm/yr on plateau from our flagship Karish gas project, which is on track to deliver first gas in the second half of 2021,” said chief executive officer Mathios Rigas.

“We remain committed to continue bringing competition and security of supply to the Israeli gas market even after we fill the Karish FPSO to its maximum eight billion cubic metres per year capacity.

“The new contracts we signed today further strengthen our secured revenues stream, which is well-insulated against future commodity price fluctuations, and provide cash flows that will support our strategic goal of paying a sustainable dividend to our shareholders.”

At 0932 BST, shares in Energean were up 16.68% at 610p.