By using project financing methods, Gazprom diversifies its loan sources and improves the efficiency and transparency of its key investment projects further. We plan to expand our project financing activities.
It should be pointed out that our project financing transactions are very advanced: for instance, the project financing deal for the construction of the Amur Gas Processing Plant (GPP) has received recognition from the international financial community, which underscores its strong structure and significance. The deal received the Russian ECA-backed Deal of the Year Award in the annual TXF Perfect 10 Export Finance Deals of the Year competition, as well as the Proximo EMEA (Europe, Middle East and Africa) Deals of the Year 2019 Award in the Eurasian Oil & Gas category.
As a reminder, the deal on securing project financing for the construction of the Amur GPP, the largest deal for Gazprom and one of the largest in Europe over the last few years, was successfully completed in December 2019 with the signing of project finance documentation for the total amount of debt financing of EUR 11.4 billion. The funds are provided by 22 European, Asian and Russian banks. Such a wide array of participants reflects the interest of the international financial community in collaborating with the Group, which has excellent credit solvency. Gazprom Pererabotka Blagoveshchensk acts as the borrower. The deal involves 14 banks from Europe and Japan providing up to EUR 3.66 billion under the insurance coverage offered by Western export credit agencies for a tenor of 17 years. Gazprom Pererabotka Blagoveshchensk became the first Russian company to raise project financing under ECAs’ cover for such a long tenor, thereby ensuring Gazprom’s leadership in the Russian financial market. An additional EUR 1 billion for 15 years will be provided on an uncovered basis.
The construction of the Amur GPP, which is going to be one of the largest gas processing plants in the world, is in full swing. By now, the project is 70.5 per cent complete, and the first production trains will be put onstream next year.
We are also implementing another major gas processing project. Together with RusGazDobycha, RusKhimAlyans as a project company, as well as financial advisers (Gazprombank and VEB.RF), Gazprom is currently making efforts to leverage project financing to build the complex for processing ethane-containing gas near Ust-Luga, Leningrad Region. Funds will be procured both from Russian and foreign credit institutions, including loans covered by export credit agencies. We are looking forward to the successful completion of the transaction that will expand our project financing portfolio.
As for hydrocarbon production projects, negotiations are currently underway with potential creditors to attract project financing for RusGazAlyans. It is expected that leading Russian banks will act as the original creditors for the project; the signing of the loan agreement is scheduled for late 2020. The project is run in partnership with RusGazDobycha; the maximum output within Phase 1 of the development of the Semakovskoye field will be up to 7.5 billion cubic meters per year, and it is expected to start producing gas in the fourth quarter of 2022.
The work on attracting project financing for Achim Development, a joint venture with Wintershall Dea that develops blocks 4A and 5A of the Achimov formations of the Urengoyskoye field, is well on track. At the moment, a strategy to attract long-term project financing for the company is being developed and negotiated with the German partner along with the deadlines and volumes of financing.
Besides, great efforts are being made to relieve the pressure on Gazprom’s investment program for 2021–2025. As a result of these efforts, project and structured financing will replace significant volumes of investments and will also be used to refinance the previously incurred costs. When structuring projects, great attention will be paid to the deconsolidation of the accumulated debt burden from the balance sheet of the Gazprom Group.
These measures will have a positive impact on the Company’s free cash flow and will increase its financial flexibility. We have compiled a list of top-priority projects that are expected to start paying off as early as 2021 and we will report on it after the review of the adjusted investment program of Gazprom in the middle of next year.
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