Gas pipeline Nord Stream’s project financing has taken its final step towards completion as the company announced that funding for the final phase of development has been secured.

Phase two of the project, which will bring up to 55 billion cubic metres of natural gas to Western Europe from Russia, has successfully reached the massively oversubscribed €2.5bn (US$3.5bn) funding milestone it required for completion.

The firm tapped the project finance market for 70% of the money, while the remaining 30% of the funds came directly from Nord Stream’s investors.

Commerzbank, RBS and Société Générale acted as financial advisors on the deal and UniCredit took up a limited advisory role in connection to the German government’s untied loan programme, UFK.

The positive response from lenders has meant that Nord Stream was approximately 60% oversubscribed for the phase two €2.5bn funding.”

In total, 24 banks are participating in the deal that was oversubscribed by 60%, or around €1bn.

Export credit agencies Sace, Hermes and UFK are providing cover worth about €1.75n.

A Nord Stream spokesperson confirms to GTR: “The positive response from lenders has meant that Nord Stream was approximately 60% oversubscribed for the phase two €2.5bn funding; this was also the case in phase one.”

Furthermore, the spokesperson tells GTR that “the project capex is €7.4bn and will remain at that.”

Natural gas will play a decisive role in the development towards a sustainable energy supply in Europe over the coming decades.”

“The completion of phase two financing marks a major milestone in the project’s evolution,” says Matthias Warnig, managing director of Nord Stream.

The project’s construction is well underway; with the pipeline from phase one due to be completed in April 2011.

Construction for phase two’s pipeline will begin immediately afterwards and completion is projected for April 2012.

“With construction of line one of Nord Stream nearly complete and with construction of line two due to start in May, it is clear that lenders see Nord Stream as a solid project with a sound economic background,” Warnig continues.

Nord Stream received €3.9bn in financing from investors and 26 banks for the first phase of the project.

Nord Stream is majority owned by Russian oil and gas firm Gazprom, which holds 51% of the company, while E.ON and BASF SE/Wintershall Holding own 15.5% of the company.

Energy firms Nederlandse Gasunie and GDF Suez each have a 9% stake.

Klaus Schäfer, chairman of the board at E.ON, says: “Natural gas will play a decisive role in the development towards a sustainable energy supply in Europe over the coming decades because it provides an efficient way of balancing economic viability, climate protection and security of supply. The latter will be significantly enhanced by Nord Stream and the successful completion of project financing marks a very important milestone.”

The banks participating in the deal are:

BBVA
BTMU
Barclays
Bayerische Landesbank
BNP Paribas
Caja Madrid
Citi
Crédit Agricole
Credit Suisse
Commerzbank
Intesa Sanpaolo
ING
KfW Ipex-Bank
Mediobanca
Mizuho Corporate Bank
Natixis
Nordea
SEB
Société Générale
SMBC
RBS
UniCredit
WestLB