Paz Extends PA Fuel Contract With Larger Credit Line
The revised terms are expected to improve profitability, but Paz did not disclose the credit-line increase and received no additional collateral. PA sales were about NIS 1.4 billion in 2025, while Paz assessed that the available tax funds covered only part of the outstanding credit.
Paz has extended its petroleum-products and LPG supply agreement with the Palestinian Authority from the end of 2027 through 2029, with volumes expected to remain similar to those under the existing contract. The revised commercial terms include a better marketing margin that management expects to improve profitability, but the company is also increasing the customer's credit line without disclosing the amount or obtaining additional collateral. This customer generated about NIS 1.4 billion of sales in 2025, nearly 20% of the transport-energy segment's revenue. The renewed tax-funds annex provides a collection route through the Israeli government, but Paz assessed at the end of 2025 that those funds covered only part of the outstanding PA credit and could not estimate how long collection would take. The counterpoint is a payment history of more than 15 years in which collection was generally continuous and no failure to pay was recorded. The contract can therefore lift segment profit, but it has not yet shown that the additional margin will compensate for more cash remaining with the customer and for collection risk during a disruption. The next reports need to separate the margin improvement from changes in receivables, expected credit losses and cash conversion.
Two More Years Also Mean More Customer Financing
The extension was signed on July 22, 2026 and takes effect shortly after signing. Volumes are expected to stay similar, so the anticipated improvement does not depend on a volume surge. It comes from revised commercial terms, including the marketing margin and the conditions governing termination on notice.
The company did not disclose the new margin, the size of the larger credit line, or the payment and interest terms. It also did not say whether it retained the unilateral right under the previous agreement to terminate the contract at any time. Those three inputs jointly determine deal quality: profit per liter, the cash Paz must finance until collection, and its ability to stop supplying if the risk increases.
The payment record supports the positive case. Paz has supplied the PA since 2006 and stated at the end of 2025 that collection had generally remained continuous, with no case of nonpayment. Deviations from credit limits or payment dates had been approved in advance. The filings therefore do not point to a credit failure that has already occurred. They point to greater exposure to a large customer when the timing of the alternative collection mechanism remains uncertain.
One Customer Represents About 20% of Transport Revenue
Sales to the principal customer totaled about NIS 1.4 billion in 2025, down from NIS 1.6 billion in 2024 and NIS 2 billion in 2023. Even after that decline, the exposure is material:
| 2025 figure | NIS million | PA sales as a share |
|---|---|---|
| Sales to the Palestinian Authority | About 1,400 | 100% |
| Transport-energy segment revenue | 7,045 | About 19.9% |
| Group revenue | 11,130 | About 12.6% |
| Transport-energy segment EBITDA | 466 | Not attributable by customer |
The annual filing uses inconsistent labels. The business description calls the PA a material customer on which the company is dependent, while the credit-risk note says the company does not consider itself dependent on the customer. Both disclosures agree that cancellation would hurt profitability, and the business description also expects a significant impact on sales. The economic conclusion matters more than the label: a small margin change on this volume can be material, but so can a longer credit period or a larger uncovered balance.
Tax Funds Provide a Collection Route, Not a Payment Date
The PA renewed an annex allowing Paz to demand from the Israeli government fuel-related tax funds held for the PA. This is not full collateral. At the end of 2025, Paz assessed that the tax funds covered only part of the PA's outstanding credit. In the new filing, it again said it could not estimate either the ability to complete collection through this route or the time required. No additional collateral accompanied the larger credit line.
The statements do not separate the PA balance from other customer receivables. At the end of 2025, net customer receivables were NIS 1.593 billion. Gross receivables were NIS 1.623 billion and the expected-credit-loss allowance was NIS 30 million, including NIS 26 million against all business customers. The filings do not identify an allowance specific to the PA.
Net customer receivables rose to NIS 1.719 billion by the end of March 2026, an increase of NIS 126 million in one quarter. The increase in customers and other receivables absorbed NIS 170 million of cash, while operating cash flow fell to NIS 147 million from NIS 306 million a year earlier. There is no basis for attributing that movement to the PA. It does show why a larger credit line can lift accounting profit while simultaneously absorbing cash.
Conclusion
The transport-energy segment entered the new agreement from a stronger operating position. In the first quarter of 2026, segment revenue declined to NIS 1.612 billion from NIS 1.769 billion, but operating profit rose to NIS 71 million from NIS 41 million and EBITDA increased to NIS 128 million from NIS 97 million. The EBITDA margin improved to about 7.9% from 5.5%. Those figures predate the July terms, so they do not prove the new contract's contribution, but they show that transport margins had already strengthened.
The current read is positive for profit and cautious on cash. The agreement secures a major customer for two additional years and raises the expected margin, but it also extends more credit without new collateral or disclosure of the line's size. Proof will come when Paz reports the PA receivable, credit-line utilization, aging and specific loss allowance alongside transport margins after July. Any actual use of the tax-funds route would provide the clearest evidence of how well the collection mechanism works.
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