Delek Group and the Dalia contract: a large contract, distant cash
The Dalia gas agreement strengthens the long-term demand case for Leviathan after the 21 BCM expansion, but it is still far from accessible cash for Delek. Supply starts in 2030, and the financing conditions and quantity-reduction mechanisms make it a high-quality contract, not a near-term cash proof.
The broader first-quarter discussion around Delek Group was about cash moving up to the parent. The Dalia agreement isolates a different question: has Leviathan already secured the demand needed for the expansion, or is this still another layer of future potential. The current read leans positive, but not fast. The agreement signed by NewMed Energy and Ratio with Dalia Energy provides a large domestic anchor for capacity that comes after the expansion, with annual quantities of about 1.3 BCM, rising later to about 1.7 BCM. But supply is scheduled to begin only on January 1, 2030, and the path there runs through approvals, the buyer's project financing and quantity-reduction rights if milestones are not met. That makes this a contract that improves the quality of Leviathan's backlog, not a contract that brings cash closer to Delek in the near term. The next proof point is not the signing itself, but financial close at the Ashkol Avshal facility, progress on the 21 BCM expansion, and continued distributions from the partnership while the investment program advances.
The Contract Confirms Demand, Not Cash Arrival
The buyer contract matters because it sits exactly on the gap the quarter left open. After completion of the third pipeline, Leviathan has already proven maximum production capability of about 1,530 MMSCF per day, or about 15.8 BCM per year, above the roughly 14 BCM framework discussed for the near-term expansion. At the same time, in January 2026 the Leviathan partners reached final investment decision for the first stage of the 21 BCM expansion, with first gas expected in the second half of 2029 and a total budget of about $2.36 billion on a 100% basis, of which the partnership's share is about $1.07 billion.
Inside that framework, the buyer is a meaningful domestic demand signal. The agreement is intended to supply two new combined-cycle power generation facilities, one at the Ashkol site in Ashdod and one at the Tzafit site, each with capacity of about 850 MW. The initial annual quantity, about 1.3 BCM, and the later rise to about 1.7 BCM help explain why the 21 BCM expansion is not simply capacity being built ahead of contracts.
Still, for Delek as a holding company, the large number is only the starting point. Total expected revenue from the agreement is estimated at about $6.7 billion on a 100% agreement basis, and the partnership's share is estimated at about $5 billion. That is a strong figure, but it is not Delek cash. It first has to pass through actual gas delivery, the electricity-tariff path over many years, Leviathan expansion investment, taxes and royalties, the partnership's financing needs, and only then distribution decisions.
| Contract Item | What Is Already Clear | What Can Still Change the Contribution |
|---|---|---|
| Annual quantity | About 1.3 BCM in the first stage, later about 1.7 BCM | Quantity-reduction rights can shrink the contract if Ashkol Avshal financing is delayed |
| Supply start | January 1, 2030 | The buyer's facility timetable and the Leviathan expansion timetable need to meet |
| Estimated revenue | About $6.7 billion on a 100% basis, about $5 billion partnership share | The estimate assumes full quantity consumption and depends on electricity tariffs and factors outside the sellers' control |
| Price | Linked to the uniform electricity tariff | From October 1, 2041, either side can request a price review within a 10% range |
The Quantity Mechanisms Are Not Fine Print
The sharper part of the agreement is not the $6.7 billion headline, but the way the quantities can change. The agreement includes a purchase-or-pay obligation for a minimum annual quantity calculated as a percentage of adjusted annual contract quantity, but even that is subject to force majeure and customary additional conditions. There is a contractual floor, but it is not a simple promise to buy the full amount under all circumstances.
The dependency on Ashkol Avshal makes the contract less clean than the headline suggests. If financial close for the Ashkol Avshal facility is not completed by June 30, 2027, the sellers will be entitled to reduce the contract quantity tied to that facility, up to 50% of the contractual quantities. If that financial close is still not completed by December 31, 2027, each party will have the right to reduce the quantity for that same portion. That makes 2027 a more important checkpoint than a quick read of the announcement suggests: before Delek can talk about 2030 cash, the buyer's project has to reach financing.
The price mechanism adds another quality test. The gas price is linked to the uniform electricity tariff, but from October 1, 2041 either side can request a price review during a 90-day period. Any update is capped at 10% up or down and is not retroactive, but if the parties fail to agree, the party that requested the review may reduce daily contractual quantity by up to 30%. The agreement is long, but it is not economically frozen for its whole life. It includes an adjustment mechanism, and in a disagreement scenario, also a quantity-reduction tool.
There is also a smaller clause that sharpens the contract-quality read. The buyer received a one-time option to update the price mechanism for gas supplied to the steam units at the Ashkol site under an existing May 2024 gas agreement, moving from a mechanism generally linked to Brent to one generally linked to the electricity tariff. The partnership estimates the possible effect on its revenue from that existing agreement is not material, but the clause is still a reminder that the new contract is not only an additional quantity. It also touches the pricing margin of an existing relationship with the same buyer.
Delek Still Needs Distributions While Investment Advances
The implication for Delek is not that the Dalia agreement is weak. It is the opposite: it improves long-term domestic demand visibility for Leviathan exactly when the reservoir is moving toward higher capacity. The contract also arrives after a quarter in which Leviathan production stopped for security reasons and resumed only on April 2, so it helps shift the conversation from a temporary shutdown to long-term demand.
But the contract does not solve the parent-company cash test. In and around the first quarter, the partnership paid or declared distributions that represent about NIS 215 million for Delek, and that is the near-term cash. The Dalia agreement belongs to the next investment cycle: it supports a project expected to deliver first gas only in the second half of 2029, and commercial supply to the buyer from 2030. The question for Delek is therefore whether the partnership can fund its share of the expansion, preserve flexibility around debt and Leviathan bond buybacks, and still move cash up to the parent.
The current conclusion is that the Dalia agreement improves the quality of the Leviathan story, but not the pace of Delek cash in the next few years. If Ashkol Avshal reaches financial close by the 2027 milestones and the Leviathan expansion advances on budget and schedule, the agreement becomes an anchor that connects new capacity to binding domestic demand. If either path is delayed, the market will be looking at a large contract that remains far from the line that matters most for Delek: cash reaching the parent after investment and financing. The checkpoint is no longer another announcement about the agreement itself, but the move from conditional commitment to actual gas sales.
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