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Citigroup Inc. (NYSE: C)
November 23, 2004
Israel: Citigroup $250 Million Loan for Offshore Natural Gas Pipeline Construction Approved
Pipeline to Serve as Centerpiece of Israel’s Natural Gas System
The board of directors of the Overseas Private Investment Corporation (OPIC) approved $250 million in political risk insurance for the construction of a 65-mile pipeline that will serve as the centerpiece of Israel’s natural gas system, reducing that country’s dependence on imported fossil fuels and generating $200 million in annual savings for electricity generation.
OPIC’s insurance will cover a proposed loan arranged by Citigroup, for the construction of a pipeline that will be used to transport natural gas produced offshore, from Ashdod in southern Israel to Dor in the north, for downstream power projects in the country. Once completed, the pipeline will be owned by the Israeli government and operated by Israel Natural Gas Lines.
According to Citigroup’s country manager for Israel, Gus Felix, “The use of OPIC insurance in support of this loan results in attractive all in pricing and, more importantly, taps an entirely new source of funding for Israeli infrastructure projects.”
The Israel Electric Corporation estimates that annual savings from the use of natural gas electricity generation will amount to about $200 million a year, the majority of which will be passed on to end users through tariff reductions.
“This natural gas pipeline is critical to Israel for economic and environmental reasons,” said OPIC President and CEO Dr. Peter Watson. “Until recently, Israel had relied almost exclusively on imports to meet its energy needs. This project will exploit recently-discovered offshore natural gas reserves to significantly reduce Israel’s dependence, in the process using an energy source – natural gas – that is cheaper and less polluting than oil or coal.”
According to Dr. Yaron Zelekha, Accountant General of the State of Israel, “OPIC’s insurance coverage and the proposed financing by Citigroup provides an additional attractive alternative for the financing of such projects in Israel.”
Ran Vilker, Citigroup Israel’s Corporate Finance Head, who spent the past two years coordinating Citigroup’s negotiations with IEC, the MOF and OPIC in Washington is enthusiastic: “This transaction is not only innovative, but it also demonstrates the power of global banking. This would never succeed without the active leadership of Citigroup’s seniors and product experts in London, New York, Washington and Tel Aviv, all working hand in glove.”
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