TAP Concludes Project Finance
The TransAdriatic Pipeline (TAP) project completed financial close in December 2018, securing €3.9bn ($4.5bn) from a range of lenders that made it the largest project finance agreed for a European infrastructure project in 2018.
The final link of the European Union-supported Southern Gas Corridor, TAP's total project cost is €4.5bn. It will connect in Turkey to the Trans Anatolian Pipeline (Tanap) for which the European Bank for Reconstruction and Development (EBRD) approved a €500mn loan in October 2018, as did the EIB in March 2018 for a €932mn loan. It finishes in southern Italy, where there has been stiff local opposition to the project. Its first phase will carry 10bn m³/yr to Italy and flows will be bi-directional. Like Tanap, it may also be doubled.
TAP CEO Luca Schieppati said in a January 11 statement: "TAP has voluntarily committed to comply with environmental and social standards required by the international financial institutions.... With project financing now concluded, TAP can progress to the final completion of the project and delivery of Shah Deniz II gas in 2020."
The European Investment Bank's energy head Andrew McDowell said it recognised "the important contribution to improving security of energy supply in Europe that the Trans Adriatic Pipeline will bring and has provided €700mn for this, the largest energy project in Europe currently being built." He said the bank was pleased to be the anchor lender alongside the EBRD and other leading financial institutions.
The EBRD's director for sustainable infrastructure Nandita Parshad said: "The Trans-Adriatic Pipeline will set the foundation for an integrated gas market across south-eastern Europe and enhance the region's strategic status as an energy hub. We believe that gas remains an important transition fuel in this region that can help displace coal and facilitate penetration of renewables."
The financing is provided by a group of 17 commercial banks, alongside the EBRD and the EIB. Part of the financing is covered by three export credit agencies (ECA): bpifrance (€450mn), Euler Hermes (€280mn) and Sace (€750mn). The project raised €3.765bn in third-party senior debt with a door-to-door tenor of 16.5 years, combining commercial debt along with development financial institutions and ECA financing:
EIB Direct Facility, benefiting from a guarantee from the European Union under the European Fund for Strategic Investments EFSI: €700mn
EBRD A-Loan: €500mn
EBRD B-Loan: €500mn funded by commercial banks
Commercial term loan facility: €635mn directly provided by commercial banks without any ECA or multilateral involvement.
Costs have previously been funded in full by TAP's shareholders: UK major BP (20%), Azerbaijan producer Socar (20%), three European pipeline operators (Italian Snam, Belgian Fluxys and Spanish Enagas, with 20%, 19% and 16%) and Swiss utility Axpo (5%).