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The Nabucco consortium is set to announce Monday that top international lenders will sign an agreement to take a senior financing role for its planned EUR7.9 billion natural gas pipeline, several people familiar with the matter said Thursday.
At a ceremony and press conference scheduled to take place Monday morning in Brussels, the Nabucco consortium will say the lenders will sign a mandate agreement that will kick off a due diligence process, expected to culminate in "significant" financing for the project at the end of 2011, the people told Dow Jones Newswires.
The lenders include the European Bank for Reconstruction and Development, the European Investment Bank and possibly the World Bank's International Finance Corporation, they said.
A spokesman for the Nabucco consortium, whose pipeline is slated to transport gas from the Caspian and Middle Eastern regions to central Europe through Turkey, declined to comment on the information but confirmed financing issues will be addressed at the press conference in Brussels Monday.
The consortium has wrestled for years with the problem of how to find reliable gas supplies for the project to ensure the project's long-term commercial viability.
The consortium consists of Austria's OMV AG (OMV.VI), Germany's RWE AG (RWE.XE), Turkey's Botas, Bulgaria's Bulgarian Energy Holding, Romania's Transgaz and Hungary's MOL Nyrt. (MOL.BU).
The most likely first gas supplier for Nabucco would be an off-shore Azerbaijani field in the Caspian basin, but competition for that gas is high and it would offer less than 10 billion cubic meters a year. Another potential gas source is Iraq, but procedural, political and technical hurdles suggest that gas will also not be available quickly.
The exact amount of financing the lenders will contribute remains unclear, but a person familiar with the matter said they would provide a "large part" of the required capital, while another said the lenders would take a "senior financing role."
The Nabucco consortium has said it intends to build the 3,300-kilometer pipeline with around 30% of equity capital and 70% debt.
The EBRD had indicated in June 2009 that it could lead a group of lenders to finance the project in the amount of EUR1 billion, but major development banks have subsequently been silent on potential financing contributions.
In October 2009, Nabucco said it had started discussion with EBRD and EIB over financing of the project and soon afterwards also launched negotiations with IFC. A month later, Transgaz officials said that EBRD and EIB could lend up to EUR1.5 billion of an overall debt capital requirement of EUR5.6 billion.
The Nabucco pipeline is expected to deliver around 31 billion cubic meters of gas annually from the Caspian region and Iraq to central Europe through Turkey, Bulgaria, Romania and Hungary, bypassing Russia.
The Nabucco pipeline has been backed by the European Union as it is considered crucial to diversify the block's heavy dependence on Russian gas. Russia accounts for around 25% of the EU's annual gas supplies.
Russia, the world's biggest energy supplier, wants to build its own routes to bypass ex-Soviet transit country Ukraine after rows in recent years over prices. Its South Stream project is scheduled to start by the end of 2015.
(Alessandro Torello in Brussels contributed to this article.)
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