Published: June 24, 2009
Nord Stream, a 1,200km gas pipeline project running from Russia through the Baltic Sea to Germany, is looking to raise the first phase of financing in Q3, raising US$3.5bn.
Paul Corcoran, Nord Stream’s financial director, tells emeafinance: “We are targeting financial close in Q3 for phase one of the financing of €3.5bn and will be approaching the financial markets for phase two funding of a further US$2.5bn in 2010.”
The project has received letters of interest from Hermes (German export credit agency) and from SACE (Italian export credit agency) each for €1bn for phase one financing. Nord Stream also has the full support of the German government, according to Corcoran.
Because of the economic crisis, it is expected that several more banks will be needed to join the syndicate than originally planned. No banks have yet been mandated.
The budget is designed on the basis of a ratio of 30% in equity to 70% in debt. “Nord Stream's shareholders have already provided €1.5bn of equity which has enabled the project to make the excellent progress it has so far achieved,” says Corcoran.
Nord Stream is 51% owned by Gazprom, with Germany's BASF and E.ON owning 20% each and Dutch Gasunia, 9%.
The pipeline would be 1,220km long and will consist of two parallel lines. The first one, with a transmission capacity of around 27.5bn cubic metres of gas a year, is due for completion in 2011. The second line is due to be completed in 2012, doubling annual capacity to around 55bn cubic metres. This is enough to supply more than 25mn households in Europe.
The project has run into problems with the five European countries through whose territorial waters the pipeline will pass. Each of the five countries through whose territory the pipeline passes have to approve the project for it to happen.
Poland, in particular, has raised environmental concerns about the pipeline’s route. It released a report on June 8, and sent to the environment ministries of Russia, Germany, Latvia, Lithuania, Estonia and Finland, which heavily criticised the report.
It said: “A land alternative for the offshore pipeline has not been analysed by Nord Stream in an adequate way and it does not specify exactly who might pay for the damages if they occurred as a result of the environmental catastrophe.”