Three International Financial Institutions (IFIs) have signed a mandate with NABUCCO Gas Pipeline International to begin the appraisal process as shareholders and provide a potential US$5.2 billion finance package for the Nabucco gas pipeline project.
The potential financing package will consist of up to US$2.5 billion from the European Investment Bank (EIB), up to $1.5 billion from the European Bank for Reconstruction and Development (EBRD) – up to $770 million for EBRD’s account and up to $770 million to be syndicated to commercial banks – and up to around $1 billion from the International Finance Corporation (IFC) – up to $500 million for IFC’s account and up to $500 million to be syndicated to commercial banks.
The 3,300km Nabucco pipeline will directly connect the Caspian region and the Middle East to the European consumer markets. The pipeline will link the eastern border of Turkey to Baumgarten in Austria – one of the most important gas turntables in central Europe – via Bulgaria, Romania and Hungary.
The mandate letter formalises the conditions under which the three IFIs will conduct their appraisal of the Nabucco project, and provides an indication of the potential level of financing. It sets out the work that will be required before a final financing decision can be taken according to the EBRD.
The appraisal of the project will include a thorough assessment of its commercial, social and environmental aspects.
Following the successful conclusion of the appraisal, the financing will need to be approved by the relevant governing bodies of each IFI. Export credit agencies and international banks are expected to commence their appraisal of the Nabucco project soon after the IFIs. Commitments from potential lenders are expected to be sought in 2011.
