Israel Electric Corporation (IEC) (TASE: ELEC.B22) may withdraw a $4.2 billion lawsuit that it filed against Egyptian government gas companies for halting the gas-flow to Israel. Senior IEC officials have dropped hints recently that pressure had been applied to the company, apparently by Israeli government figures, to end the arbitration proceedings. IEC said in response, “There is no truth to this.”
The complaint was filed with an international arbitration tribunal based in Paris, and is close to reaching a verdict. The withdrawal of the mega-claim would eliminate the chances that Israeli consumers will receive any compensation for the 30% increase in their electric bills between 2011 and 2014.
In 2011, Egypt halted the flow of natural gas to Israel following a series of explosions in the Sinai pipelines. The cessation of gas-flow forced IEC to purchase more expensive fuels in order to make electricity. The added expense – more than $2.56 billion – threatened to topple the company, causing then Ministry of Finance Director General Doron Cohen to promote a recovery plan that allowed the company to raise $2.30 million with State guarantees. In parallel, electricity rates were gradually increased by close to 30% in a process that is expected to end this year.
In a debate that took place in the Knesset in July 2011, IEC Chairman Yiftach Ron-Tal said to Likud MK Miri Regev: “We will both be retired before the courts give a shekel.”
Despite this, the IEC board of directors approved the filing of the claim with the international arbitration tribunal in February, 2012. The claim was filed against Egyptian companies E-Gas, and EGPC, by EMG, which is owned by Josef Maiman and foreign partners. IEC and EMG claimed in the arbitration that a trilateral agreement between the parties made in 2009 had been violated, while the Egyptians claimed that cessation of gas-flow was caused by higher powers. IEC was represented by UK firm Norton Rose Fulbright Adv. Neil Miller.
Meanwhile, it appears that the parties’ footdragging is delaying the conclusion of the arbitration process. In its second quarter financial report, IEC said that the verdict was to be reached in September. In its third quarter financial reports, the company said that the announcement of the verdict had been postponed until January.
Published by Globes [online], Israel business news – www.globes-online.com