The shareholders and project company of Nabucco have singed a mandate letter with three international financial institutions for the appraisal of the future natural gas transit pipeline, which has been hailed as a key step towards its successful construction

The signing of the mandate letter of the shareholders and Nabucco Gas Pipeline International with the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and IFC - a member of the World Bank Group, marks the start of the appraisal process of the Nabucco project, a required step towards a potential financing package of up to EUR 4 B, the project company says in a statement Monday.

The potential financing package will consist of up to EUR 2 B from the EIB, up to EUR 1.2 B from the EBRD (up to EUR 600 M for EBRD's account and up to EUR 600 M to be syndicated to commercial banks) and up to around EUR 800 M from IFC (up to EUR 400 M for IFC's account and up to EUR 400 M to be syndicated to commercial banks).

The mandate letter formalizes the conditions under which the three financial institutions will conduct their appraisal of the Nabucco project, and provides an indication of the potential level of financing. It sets out the work that will be required before a final financing decision can be taken.

"The involvement of the EBRD, EIB, and IFC is a demonstration of global and European support for the project and represents an important milestone in ensuring the overall financing of Nabucco. The early involvement of the IFIs will support Nabucco in meeting the highest standards in environmental and social risk evaluation and procurement. The appraisal of the project will include a thorough assessment of commercial, social and environmental aspects," states Nabucco Gas Pipeline International GmbH.

The company also points out that the Nabucco gas pipeline project addresses the EU's priority goal of achieving energy security via the diversification of gas routes and gas supplies, and will deliver additional volumes of gas from different sources through a new supply route to the EU member states and their neighbors from both the Caspian Region and the Middle East.

Following the successful conclusion of the appraisal, the financing will need to be approved by the relevant governing bodies of each of the three international financial institutions. Export credit agencies and international banks are expected to commence their appraisal of the Nabucco project soon after the IFIs. Commitments from potential lenders are expected to be sought in 2011.

Nabucco is expected to connect directly the world's richest gas regions - the Caspian region and the Middle East - to the European consumer markets. The pipeline will link the Eastern border of Turkey to Baumgarten in Austria - one of the most important gas turntables in Central Europe - via Bulgaria, Romania and Hungary.

Nabucco Gas Pipeline International GmbH (NIC) was set up on 24 June 2004 to develop, construct and operate the Nabucco pipeline, and is headquartered in Vienna. NIC is owned by the Nabucco shareholders and is responsible for the development, construction, operation and capacity trading and allocation for the Nabucco pipeline.

The Nabucco shareholders are: Bulgarian Energy Holding (Bulgaria), Botas (Turkey), MOL (Hungary), OMV (Austria), RWE (Germany) and Transgaz (Romania), Each shareholder holds an equal share of 16.67% of Nabucco Gas Pipeline International GmbH. The shareholders are responsible for negotiating the gas supply contracts.

Bulgarian Energy Holding EAD is a joint-stock company with a 100% Bulgarian state ownership The structure of the Bulgarian Energy Holding EAD includes seven subsidiaries: Mini Maritsa Iztok EAD, Maritsa East 2 TPP EAD, Kozloduy NPP EAD, NEK EAD, Bulgargaz EAD, Bulgartransgaz EAD and Bulgartel EAD, the capital of which is 100% owned by the Holding. Two of the BEH subsidiaries are working in the field of gas transmission and gas supply. These companies are Bulgartansgaz EAD and Bulgargaz EAD.