Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

EBRD Mulls Loaning $250M to Gazprom

The European Bank for Reconstruction and Development is considering lending $250 million to natural gas monopoly Gazprom, the bank announced in a statement Tuesday.

The statement, posted on the bank’s web site (www.ebrd.org), states that the EBRD board will review the loan Sept. 5.

The bank is to provide $150 million of the total, with the remainder being a syndicated loan.

If approved, the loan will be the EBRD’s second large investment in the Russian energy sector this year after $150 million was granted to LUKoil in May.

"As one of the first large-scale syndications of long-term loans in Russia since 1998, this project will have a significant ‘demonstration effect’ and will assist in establishing market standards for similar financings," the statement said.

The medium-term corporate loan is to be used to finance the reconstruction of parts of the nation’s unified gas supply system and to refurbish and upgrade its transport and production facilities with the aim of improving environmental protection and energy efficiency.

The credit will also go toward establishment of a comprehensive management information system for Gazprom’s accounting department. The statement says it hopes this will improve the transparency of the company.

The transparency of Gazprom, which is 38 percent state-owned, has been under scrutiny. The Audit Chamber, the State Duma’s financial watchdog, began a probe into Gazprom last week.

With the final decision on the loan yet to come, Gazprom is cautious to comment on the credit.

"Gazprom is a good, stable and serious company that people trust and if it turns to somebody for a credit, the request is usually satisfied," said Anatoly Babayev, spokesman for Gazprom. "All the credits we have been given were paid off on time."

Babayev said the bank’s credit will be useful to Gazprom, especially at a time when many of the company’s gas bills are unpaid.

Gazprom is owed "hundreds of billions" of rubles, Babayev said, but he was unable to be more specific.

Alexander Agibalov, oil analyst at Aton, said there’s no surprise in loan promises for a company like Gazprom, which has a proven credit record.

The EBRD’s planned credit, along with other credits such as $35 million loaned to No. 1 steelmaker Severstal this year, said Agibalov, also shows the bank is serious about increasing credits for Russian projects.

The bank’s president, Jean Lemierre, said Russia would receive more funding from the EBRD as the country recovers from the 1998 financial meltdown.

Lemierre promised to increase investment in Russia to 30 percent of the EBRD’s portfolio, which is between 700 million euros ($631 million) to 750 million euros per year.

This is up from 10 percent in 1999, when Russia received $220 million from the EBRD.

"The attitude and trust in Gazprom has changed since 1998. The company turned a $4 billion loss in 1998 into a $2 billion net profit in 1999," said Gennady Krasovsky, an analyst with Nikoil.

"Although the credit itself is not that big, it’s a positive signal for the banking community," he said.