Nord Stream Gas Pipeline Phases I and II

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Nord Stream is a 1,224 kilometer-long offshore natural gas pipeline, which was to be laid across the Baltic Sea, from Vyborg, Russia to Greifswald, Germany. Nord Stream AG was the project company set up to build and operate Nord Stream AG. Initially, one pipeline (phase 1) was to be built with a transport capacity of roughly 27.5 billion cubic meters of natural gas per annum. In the second phase, a parallel pipeline would be laid to double the annual transport capacity to roughly 55 billion cubic meters. The second pipeline was planned to come on stream in the last quarter of 2012. Nord Stream was scheduled to be completed and to deliver the first gas in the last quarter of 2011. In addition to the offshore pipeline, a 917 kilometer-long onshore connection in the Russian territory was to be built and operated by Gazprom, to connect Nord Stream to the Russian gas transmission system. Two onshore connections from Greifswald to the south and west of Germany, with a total length of 850 kilometres, were to be built by WINGAS and E.ON Ruhrgas. Neither of these two onshore pipelines formed part of the Nord Stream pipeline. Nord Stream consortium was composed by Russian Gazprom (51%), German BASF (15.5%), German E.ON Ruhrgas AG (15.5%), Dutch N.V. Nederlandse Gasunie (9%), and GDF Suez S.A. (9%) by June 2010. The project had a long development phase. The feasibility studies were conducted between 1997 and 1999. In December 2005, Gazprom, E.ON and BASF established the JV, North European Gas Pipline Co (NEGPC). The process of obtaining all the permits started in 2006 and concluded in February 2010. Construction of the first line started in April of 2010. By October 2010, both lines had been completed at Russian and German landfalls, and by year-end 70 percent of line 1 had been laid. The total investment for both phases of the offshore pipeline was estimated at Euro 7.4 billion (US$9,842 million). In March 2010, financing for phase I amounting to Euro 3.9 billion (US$5,187 million) reached closing. Financing came from Nord Stream’s shareholders that provided 30% of cost of phase I on pro rata to their holdings, and from bank financing that provided the remaining 70%. Twenty-six banks participated in the deal underlining the attractiveness of the project during difficult market conditions. The ECAs that provided cover for the deal were HERMES and SACE with support also coming from Germany’s untied loan guarantee scheme: the amount covered by such agencies totals approximately 3.1 billion Euros. Additionally, there was a syndicated loan facility on an uncovered basis in an amount of up to 800 million Euros. In March 2011, financing for phase II amounting to Euro 3.5 billion (US$4,795 million). Similar to phase I, financing came from sponsors (roughly 30%) and bank loans (roughly 70%). The debt financing for Phase II amounted to Euro 2.5 billion, 1.75 billion of which were covered by the export credit agencies SACE and Euler Hermes as well as through Germany’s untied loan guarantee scheme (UFK). Twenty-four banks are participating in the deal.