Avner Oil - Annual Report 2011 - Delek Energy Systems

7.11.3 Agreements to sell natural gas from the Yam Tethys project(A)Agreement to sell natural gas to IEC;(1) On June 25, 2002 the Yam Tethys project partners (in this section: the sellers) andIsrael Electric Corporation (in this section: "IEC" or "the buyer”) signed an agreementfor delivery of natural gas to IEC.(2) The agreement is valid through July 1, 2014 or by such date as the sellers havedelivered to the buyer a cumulative gas volume equal to 18 BCM (in this section: “thetotal contract quantity”), whichever is earlier.(3) The buyer or the sellers may terminate the agreement should the other party (and forthe sellers, any of them) take any bankruptcy action (as defined in the agreement)which is likely to have an adverse effect on the discharge of their obligations pursuantto the agreement, by giving at last 30 days' written notice. The buyer and the sellersagreed not to exercise any right they may have to lawfully terminate the agreementother than in connection with significant or continued breach of material provisions ofthe agreement, and only after granting a 90-day period to the party in breach toremedy such breach (unless a shorter period is stipulated in the agreement).(4) Without derogating from the sellers’ obligations under the agreement with regard tomaintaining reserves, the sellers will not be limited to any sources of natural gas(either from Israel or imported) which they supply to the buyer under the agreement.(5) The sellers will ensure that at any time during the term of the agreement they shallhave available remaining reserves in reservoirs amounting to 130% of the remainingtotal contract quantity (“the remaining TCQ”) (the remaining TCQ after deduction ofquantities of gas delivered by the sellers under the agreement). The agreement setsforth instructions for reporting on and supervision of the remaining reserves and foradjustment of certain provisions in the agreement should the sellers fail to maintainsufficient reserves as required. At the date of the report, the sellers are in compliancewith the requirements of the reserve balances 149 .(6) The agreement stipulates the annual contract quantity of gas, which changes over theterm of the agreement depending, inter alia, on the pace of completion of thetransmission system and its connection to IEC power stations for delivery of gas to thestations (in this section: "the annual contract quantity”).(7) According to the agreement, gas is supplied on an hourly basis with a minimum andmaximum volume per hour, according to procedures and mechanisms set out in theagreement.(8) Gas is delivered to the connection point at the INGL pipeline near the permanentreceiving terminal on Ashdod shore.(9) Minimum bill quantity: The agreement determines the annual minimum bill quantity(the "minimum bill quantity"), at 80% of the annual contract quantity (subject toadjustments) for which the buyer has committed to pay even if it does not consumethat quantity, subject to provisions of the agreement, as well as instructions regardingcalculation and adjustments of the minimum bill quantity, including for cause of forcemajeure or failure to supply by the sellers. The agreement also specifies a mechanismfor the accumulation of excess volume consumed by the buyer in the course of anyyear, and its use to reduce IEC's undertaking to purchase a minimum quantity, as setout above, in subsequent years. Furthermore, the agreement specifies provisions andmechanisms allowing IEC to receive gas at no additional charge up to the volume paidfor, on account of gas not consumed due to activation of the minimum bill quantity.(10) At agreement signing date the Partnership estimated that the net revenues (lessroyalties to the State and third parties, including interested parties, but before taxes)that it will receive from the agreement is approximately USD 300 million.149 Backlog of orders on the minimum quantity of gas fixed in the agreements that the customers undertook to take andpay. The Partnership estimates that, due to the decrease in the ability to supply gas from the Mari B reservoir, thePartnership is unable to supply the foregoing quantities, but it will be able to supply the quantities in the discountedcash flows as specified in section ‎7.3.10(a)(3) above.A-123