Egypt is set to pay two Israeli companies an estimated US$3 billion in compensation after the country abruptly cut off natural gas supplies to Israel in 2012.
A French court ordered two Egyptian energy companies last year to pay US$2 billion in compensation to state-owned Israel Electric Corporation (IEC). The Egyptian energy firms then appealed to a Swiss court, but it was rejected.
Egypt had agreed to sell gas to Israel under a 20-year agreement that collapsed in 2012 after repeated attacks by insurgents on the pipeline delivering the gas to Israel. Three years later, an international arbitrator ruled Egyptian Natural Gas and Egyptian General Petroleum Corporation should pay nearly US$2 billion in compensation because IEC has been forced to use more expensive fuel to drive its generators until supplies of Israel gas could replace it.
The decision comes three weeks after arbitrators in Cairo accepted claims related to the gas cut-off filed by EMG, the company that had built and operated the pipeline.
In that case, the Egyptian companies have sued EMG for hundreds of millions of dollars, saying the company failed to pay it for gas they had supplied. EMG, which was jointly owned by Egyptian interests and the Israeli investment company Ampal, countersued, asking US$3.56 billion in damages, saying the Egyptians had canceled their contract with EMG in violation of the law.
Market sources said EMG would like to get about US$1 billion in compensation, less than a third the amount it sought, because the panel didn’t accept all its claims.
Still, the ruling is welcome news for Ampal creditors. The holding company, which is domiciled in the US and counted its 12% stake in EMG as its main asset, was forced into liquidation over the canceled contract four years ago.
The company’s Israeli bondholders were left holding 800 million shekels (US$221 million) in debt and banks another US$70 million.