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Nord Stream 2 project to raise Gazprom’s commercial, funding risks — Fitch

September 21, 2015, 17:19 UTC+3 MOSCOW

Over the last couple of years Nord Stream 1 has been operating at only around 55% capacity because European authorities have restricted Gazprom's usage of the OPAL pipeline

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MOSCOW, September 21. /TASS/. Gazprom may face commercial and funding challenges following the decision to push ahead with the Nord Stream gas pipeline expansion, Fitch Ratings reported on Monday.

"These could hamper the project's implementation and significantly increase Gazprom's leverage if it had to raise funding for the project directly," the report said. However, the impact from additional debt is unlikely to affect Gazprom's "BBB-" rating, because the rating is capped at the same level as Russia, Fitch said.

The expansion known as Nord Stream 2, will double the existing pipeline capacity to 110 billion cubic meters. It is intended to help Gazprom reduce reliance on Ukraine, which still accounts for nearly half of Russian gas transit to the key European market.

Over the last couple of years Nord Stream 1 has been operating at only around 55% capacity because European authorities have restricted Gazprom's usage of the OPAL pipeline, which carries Nord Stream's gas on into Germany. According to Fitch, a solution to this limitation, imposed to ease third-party access to the pipeline, would be necessary if the capacity of the Nord Stream-2 (55 billion cubic meters) were to be fully used.

"The original Nord Stream was funded by project finance. But despite a generally favorable funding environment for project finance and a strong shareholder base including several of Europe's top gas producers and off-takers, we believe raising multi-billion dollar project financing for Nord Stream 2 in the capital markets would probably be much harder now. This is because Western sanctions have significantly hindered international funding to Russian corporates, even those not directly sanctioned," Fitch reported.

Gazprom signed a shareholder agreement on the Nord Stream expansion with Royal Dutch Shell, E.ON, OMV and Wintershall earlier this month. Gazprom, Wintershall and E.ON are shareholders in the existing 55 bcm capacity Nord Stream Lines 1 and 2 commissioned in November 2011 and October 2012.

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