Banks have been given until early October to submit their proposals to participate in the EUR3.9 billion financing for the Nord Stream gas pipeline project out of Russia, said people familiar with the situation Friday.
Bank meetings took place last week to discuss the debt details for the EUR7.4 billion project to build a natural gas pipeline linking Russia and Germany under the Baltic Sea, the people said.
The financing for this project is divided between a 16-year EUR3.1 billion export credit agency-guaranteed portion, or ECA loans, and an EUR800 million 10-year unguaranteed loan tranche, the people said.
The indicative pricing on the ECA loans has been offered to banks in the 1.75% to 2% range, while the pricing on the unguaranteed portion is 4%, one of the people said.
"This is really a pricing template and it's now up to the banks to come up with the pricing they are willing to approve," this person said.
The export credit agency-guaranteed financing is backed by guarantees from export credit agencies Euler Hermes Group, a unit of Allianz AG, and Italian export credit agency Sace.
It is also backed by a guarantee from the German government's Untied Loan Guarantee program. This program supports projects which encourage development in emerging economies of importance to Germany, particularly in relation to projects that secure German imports of raw materials, such as oil and gas.
The maturity on the unguaranteed portion of the financing has already been altered after earlier discussions with the banks.
"They (the Nord Stream debt advisers) initially came out with a maturity of 14 years in February (for the unguaranteed loan tranche) which has subsequently been reduced to 10 years when the banks showed reluctance to lend for that long," a second person said.
Joint debt advisers to Nord Stream are Commerzbank, Royal Bank of Scotland and Societe Generale, with Unicredit as an additional adviser, the first person said.
Nord Stream is a joint venture between Russian gas monopoly OAO Gazprom (GAZP.RS), the Ruhrgas subsidiary of E.ON AG (EOAN.XE), and BASF AG (BAS.XE) subsidiary Wintershall AG. The 1,220 kilometer pipeline is expected to begin operation in 2011 with annual capacity of 27.5 billion cubic meters of gas, doubling to 55 billion cubic meters a year by 2012.