Baku Comments on Southern Gas Corridor Financing, Construction, After EITI Withdrawal

State-owned Southern Gas Corridor Co (SGC) remains committed to transparency and, through its wholly owned subsidiary, has been submitting Extractive Industries Transparency Initiative (EITI) reports to State Oil Fund of Azerbaijan since its establishment, it told NGW in a statement March 17.

EITI defines itself as a global standard to promote the open and accountable management of oil gas and mineral resources. Last October, the EITI board concluded that Azerbaijan had made meaningful progress in implementing the 2016 EITI Standard, but that it had not made satisfactory progress on civil society engagement. Accordingly, it set some corrective actions but on March 10, EITI said the government of Azerbaijan had decided to withdraw from it. 

SGC, which holds the government's stake in the major gas export corridor now being built across Azerbaijan, Georgia, Turkey, Greece and Albania to Italy, told NGW it has been "externally audited on a consolidated basis since its inception by reputable international firm Ernst & Young and discloses its financial statements in the public domain."

Its statement continues: "SGC has made available its annual financial statements for the years ended 2014 and 2015 as well as its reviewed financial statements for the 6 months ended 30 June 2016 and 11 months ended 30 November 2015 and 30 November 2016, respectively, in the relevant prospectuses of its Eurobond issuances. SGC shall continue to make available its annual audited financial statements to its investors via Irish Stock Exchange, where SGC’s Eurobonds are listed. Moreover, as part of its Eurobond issuances, SGC has compiled extensive prospectuses in March 2016 and 2017 (available in the public domain), describing, amongst other things, its business, its corporate structure, its constitutional documents, its financials, its revenue flow, the projects it is involved in, the risks affecting the projects. 

"SGC has already attracted several loans from the international financial institutions (IFIs) and continues discussions with certain other IFIs who are scrutinising SGC thoroughly and are conducting an in depth due diligence of its projects. SGC remains compliant with applicable regulations, rules and policies that it has agreed to adhere to. 

"Post EITI exit announced on 10 March 2017 by the government, SGC has already closed a successful deal on 15 March 2017 through an additional $1bn 144A/RegS tap of its existing $1bn 6.875% notes due 2026. The notes, as in the inaugural deal, are guaranteed by the Republic of Azerbaijan. The transaction was priced with a final yield of 5.80%, well inside the original reoffer yield of 7.00%, underlining the improved market sentiment for SGC and the Republic of Azerbaijan. The tap increased the total size of the 2026 notes to $2bn, making it the largest Eurobond from the country.

"The transaction generated significant investor demand with the US taking the largest share at 45%, followed by the UK at 40%, the rest of Europe accounting for 13% and Asia & Middle East accounting for 2% of the orderbook. The issue was well-oversubscribed and enabled a diversified distribution among high-quality institutional investors, with fund managers constituting about 90% of the offering. 

"At the same time, as of today, the negotiations with IFIs are progressing as before. Together with the successful tap of the 2026 notes, this reinforces investors’ confidence in Azerbaijan’s strong economic fundamentals and its commitment to develop transportation infrastructure for one of the world’s largest gas fields. 

The southern gas corridor

(Credit: Tanap)

"The Southern Gas Corridor project constitutes a multi-stakeholder value chain that is not dependent on Azerbaijan/SGC alone. SGC is a majority shareholder only in Trans Anatolian Natural Gas Pipeline (Tanap) project, while in the other three projects of the Southern Gas Corridor, SGC, through its subsidiaries, holds non-controlling interest. SGC’s partners are globally renowned, reputable companies and leaders in oil, gas, and energy generation and distribution industry. SGC is an investment-holding company and does not exercise operatorship in any of the projects. The day-to-day operations of the projects are conducted by respective project operators or specially designated project companies. Since there are a number of countries involved in the whole value chain from owners to end-users, the projects carry significant global strategic importance, hence full transparency is maintained not only before all partners, but also before the society as a whole, represented by multistakeholder groups. 

"SGC is confident that Azerbaijan’s exit from EITI will not impact the progress or the construction of any of the project along the Southern Gas Corridor value chain, as all of the partners have committed to finance the project, at a currently estimated investment cost of $43bn. SGC is also of the opinion that given the progress made with many of the IFIs and the recent support expressed by the investors in the debt capital markets, the EITI exit should not inhibit its ability to raise financing from the external sources for the value chain. Notwithstanding that, as per the decree of the President of the Republic of Azerbaijan #287 dated 25 February 2014, Sofaz stands ready to provide all necessary long-term financing to SGC for the successful completion of the Southern Gas Corridor project."


Azerbaijan desk


Natural Gas World welcomes all viewpoints. Should you wish to provide an alternative perspective on the above article, please contact

Kindly note that for external submissions we only lightly edit content for grammar and do not edit externally contributed content. 



We use cookies to ensure that we give you the best experience on our site. If you continue we assume that you understand and accept to receive cookies from this website. Dismiss