South Stream Transport BV is seeking about 10 billion euros ($14 billion) of loans to help fund the joint-venture’s gas pipeline under the Black Sea, according to two people with knowledge of the financing.
Advisers to the construction group, led by Russia’s gas export monopoly OAO Gazprom, met lenders last month to gauge appetite for the debt, said the people, who asked not to be identified because the talks are private. South Stream hired Credit Agricole SA, ING Bank NV and RPFB Project Finance Ltd. as advisers to the 16 billion-euro project in April 2012, according to the venture’s website.
The 900-kilometer pipeline under the Black Sea links Russian gas fields to Europe through the Bulgarian city of Varna, according to the company’s website. Gazprom supplies a quarter of Europe’s gas and says South Stream will cut costs and improve energy security by bypassing nations such as Ukraine, according to Alexey Miller, Gazprom’s chief executive officer.
A Gazprom spokeswoman, who asked not to be identified citing company policy, said the joint-venture hasn’t started raising the project financing yet. She declined to comment on any details of the proposed debt.
Commercial banks and export credit agencies are being asked to provide the financing, the people said. The agencies may provide insurance against political and commercial risk for a portion of commercial bank debt and are also considering making direct loans themselves, the people said.
Construction of the offshore pipeline is divided into two phases, the first part will be backed by the majority of the debt at about 8.6 billion euros. The final composition and pricing of the 10 billion-euros of debt haven’t been decided, the people said.
The South Stream undersea link, which has a planned capacity of 63 billion cubic meters a year, will run through Anapa in Russia along the Black Sea bed to Bulgaria, then continue to Serbia, Hungary, Slovenia and Italy, according to the project’s website. Gazprom says it should start delivering fuel in December 2015.
Gazprom joined with Eni SpA (ENI), EDF SA and BASF SE (BAS)’s energy unit Wintershall Holding to build the pipeline, the company said in the Oct. 2 statement on its website. Gazprom holds a 50 percent stake in the project, Italy’s Eni has a 20 percent stake, and Germany’s Wintershall and France’s EDF own 15 percent each.
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