Naturgy, Eni and Egypt have reached a new agreement to resolve the disputes affecting Unión Fenosa Gas (UFG), a 50/50 joint venture between Naturgy and Eni.
The parties have signed an agreement whereby Naturgy will receive a series of cash payments adding up to approximately $0.6 billion, as well as most of the assets outside of Egypt, excluding UFG’s commercial activities in Spain.
The new agreement, approved by the Egyptian Council of ministers, is aligned with the former agreement reached in February 2020. The February agreement values UFG at a total od consideration of up to $1.5 billion, depending on the energy scenario. Out of the $1.5 billion, $1.2 billion relate to the Egyptian assets, including the outstanding legal proceedings, and the remaining $0.3 billion for the assets outside of Egypt.
Naturgy noted that the February agreement was terminated in April due to certain conditions not being met.
The agreement has been following the ratification of their Council of Ministers last November 25th.
The president of Naturgy, Francisco Reynés , stated “this agreement is very positive. It represents clear progress in simplifying and reducing the company’s exposure to gas, releasing Naturgy from its 3.5 bcm annual gas procurement contract to supply its CCGT’s in Spain which was due to end in 2029, and it resolves a complex situation lingering since 2012 and which couldn’t be resolved in the Spring because of the pandemic”.
The completion of the transaction, planned during the first months of 2021 once customary conditions precedent are met, including the restart of operations in Damietta planned in the first quarter of 2021, will result in Naturgy’s departure from Egypt and the end of its joint-venture with Eni.
The plant has a capacity of 7.56 billion cubic meters per year, but has been idle since November 2012.
Eni will also take over the contract for the purchase of natural gas for the plant and will receive corresponding liquefaction rights, thus increasing the volumes of LNG in its portfolio by 3.78 billion cubic meters per year, which will be available on an FOB basis, with no destination restrictions.
In its separate statement, Eni said the agreement comes at an important moment, when also thanks to the fast time to market of Eni’s natural gas discoveries, especially the ones in the Zohr and Nooros fields, Egypt has regained its full capacity to meet domestic gas demand and can allocate surplus production for export through its LNG plants.