South Stream seeking US$ 14 billion of loans for gas pipeline

South Stream Transport BV is seeking approximately US$ 14 billion of loans to fund the joint-venture’s natural gas pipeline under the Black Sea.

Advisers to the construction group met lenders last month to discuss the debt. In April 2012, South Stream hired ING Bank NV, Credit Agricole SA and RPFB Project Finance Ltd., as advisers to the US$ 16 billion project.

Commercial banks and export credit agencies are being asked to provide the financing. The agencies may provide insurance against political and commercial risk for a small portion of commercial bank debt, and are also considering making direct loans.

Support for the South Stream pipeline

In a meeting last month Bulgarian Economy and Energy Minister Dragomir Stoynev, met with Serbian Minister of Energy, Development and Environmental Protection Zorana Mihaylovic. Stoynev insisted that the pipeline project will give a boost to the Bulgarian economy. In addition, he assured that Bulgaria would not take steps until the financing scheme for the pipeline project was clear.

Stoynev said "To me and to the government this is a huge infrastructure and investment project worth € 3.3 billion, which will create many jobs, influence trade and services in Bulgaria, while the Bulgarian State Railways company will have concrete orders,"

South Stream pipeline

The South Stream pipeline is designed to diversify natural gas export routes.

The 900 km pipeline under the Black Sea links Russian gas fields to Europe, through the Bulgarian city of Varna. According to Alexey Miller, Gazprom’s Chief Executive, South Stream will cut costs and improve energy security by bypassing nations such as Ukraine.

Construction of the pipeline is divided into two phases, schedules to begin at the end of 2013. The first part will be backed by the majority of the debt at about US$ 8.6 billion. The final composition and pricing of the US$ 10 billion debt have not yet been decided. The two phases are set to be completed by 2019.

Edited from various sources by Hannah Priestley-Eaton

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