Thursday, Aug 16, 2012

The state-owned Israel Electric Corp. said Thursday night the government has extended it an additional two billion shekels ($497 million)in guarantees so it can continue to issue bonds and meet payments for tax and fuel.

That brings the total government guarantees to the electric company to ILS6 billion.

The electric company recently issued $2.9 billion in bonds to help cover rising fuel costs in the face of a natural-gas shortage. The power company has been forced to rely on alternative, more expensive fuel sources, including diesel, since the natural-gas supply from Egypt has become less reliable. Since the fall of former president Hosni Mubarak's regime last year, incidents of sabotage to the pipeline in Egypt's Sinai Peninsula have interrupted the flow of natural gas to Israel dozens of times.

In recent years, two major natural-gas fields were discovered offshore Israel, giving the country hope for energy independence and even raising the possibility of it becoming a net exporter of energy. The first of these fields, Tamar, which contains nine trillion cubic feet of gas, is scheduled to begin production next year.

The electric company recently signed a $15 billion agreement to buy natural gas from the Tamar reserve, but new government regulations may prevent the electric company from buying that much gas from Tamar under a clause that would give all Israeli companies equal access to the local gas. A final decision has yet to be made on this issue.

Write to Sara Toth Stub at londonequ.slot@dowjones.com

(END) Dow Jones Newswires

16-08-12 1812GMT