PFI is the leading publisher of global energy and infrastructure finance news, data and analysis. Among the winners of prestigious award was the Trans Adriatic Pipeline (TAP) project which received Europe Oil & Gas Deal of the Year award for the EUR 3.9 billion project financing that it closed in late 2018. The event was attended by hundreds of senior professionals from the commercial banks, international financial institutions (IFIs), project companies and sponsors, including those of Southern Gas Corridor CJSC (SGC CJSC).

EUR 3.9 billion project financing of TAP was the largest project finance agreed for a European infrastructure project in 2018. The financing is provided by a large group of commercial banks and IFIs. Part of the financing is covered by the export credit agencies. SGC CJSC acts as one of the guarantors of the loan in the transaction (counter-guaranteed by a guarantee from the Republic of Azerbaijan) for the 20% share that it holds in Trans Adriatic Pipeline AG (TAP AG) and continues to provide required equity financing to TAP AG pro-rata to its equity share.

TAP will connect directly to TANAP on the Turkish-Greek border and transport natural gas via Greece and Albania, across the Adriatic Sea to southern Italy. TAP is expected to play a key role in the EU’s strategic goal of energy security and diversification of energy sources as it will be the shortest and most direct method of exporting gas from Azerbaijan to European markets. TAP is also expected to have ‘‘physical reverse flow’’ features, which will allow gas from Italy to be diverted to Southeast Europe, if required. The “Intergovernmental Agreement” on TAP project was signed among Albania, Italy and Greece in February 2013. TAP groundbreaking ceremony was held on 17 May 2016. The pipeline will be 878 km long and is expected to become operational in 2020. Initial transportation capacity will be 10 bcma (expandable to 20 bcma). Overall progress in the construction of TAP was circa 84.1% as of the end 2018.

TAP AG’s shareholders are: SGC CJSC (20%), BP (20%), Snam (20%), Fluxys (19%), Enagás (16%) and Axpo (5%).

The purpose of Southern Gas Corridor value chain is the implementation of the 2^nd Stage of the development of Shah Deniz gas-condensate field (SD2 project) and subsequent delivery of the gas to be produced under the project via expanded South Caucasus Pipeline (SCPX), Trans-Anatolian Pipeline (TANAP) and TAP to Turkey and Southern Europe. The Projects have an estimated investment cost of approximately US$40 billion. Upon completion, the SD2 project will add a further 16 bcm of natural gas per annum to 10.9 bcma (maximum production capacity) already produced under the 1^st Stage of the development of Shah Deniz gas-condensate field (SD1 project). Total length of the newly constructed SCPX, TANAP and TAP pipelines will be more than 3,200 kilometres.

On 29 June of the current year, the loan and guarantee agreements were signed in relation to the syndicated loan facility to “Southern Gas Corridor” CJSC (“SGC CJSC”) in the total amount of US$750 mln (US$500 million and EUR 215 million) backed with the guarantees of the Republic of Azerbaijan (sovereign guarantee) and Multilateral Investment Guarantee Agency (“MIGA”) for the purpose of financing Trans-Anatolian Pipeline (“TANAP”) project, which is part of the Southern Gas Corridor (“SGC”) project.

The sovereign guarantee agreement in relation to the mentioned loan agreement was signed by the Finance Minister Samir Sharifov on behalf of the Republic of Azerbaijan, and the loan agreement was signed by the General Director of SGC CJSC Afgan Isayev.

MIGA is an international financial-credit institution established in 1988, as a part of the World Bank Group, to encourage direct investments in member countries. The organization provides the insurance for the investments against non-commercial risks. The Republic of Azerbaijan became a member of the World Bank, including MIGA, in 1992.

Afgan Isayev, the General Director of SGC CJSC, briefed on the works carried out within the framework of Southern Gas Corridor projects:

"The SGC project has been financially supported by the leading international financial institutions, and Phase-0 under TANAP project, which relates to the works required for the first commercial gas deliveries to Turkey, has already been completed. The works planned for the delivery of natural gas to Europe through Turkey in the near future are being carried out according to the schedule.

Overall progress in works in relation to the 2^nd Stage of the development of Shah Deniz gas-condensate field (“SD2”) and South Caucasus Pipeline Expansion project (“SCPX”) is 100.0% (for the 1^st commercial gas deliveries), TANAP project – 94.8% and Trans Adriatic Pipeline (“TAP”) project – 74.6%.

The construction works are successfully progressing. The total cost of SD2 project is currently estimated to be US$22.7 billion (US$17.8 billion spent as of the end of May 2018), SCPX project - US$4.5 billion (US$4.2 billion spent as of the end of May 2018), TANAP project - US$8.0 billion (US$5.5 billion spent as of the end of May 2018), and TAP project - EUR 4.5 billion (EUR 3.0 billion spent as of the end of May 2018). SGC CJSC’s share of total project cost till 2020 inclusive is estimated at US$11.4 billion, of which US$9.1 billion (approximately 80%) had already been invested as of the end of May 2018.”

The purpose of SGC value chain is the implementation of SD2 project and subsequent delivery of the gas to be produced under the project via SCPX, TANAP and TAP to Turkey and Southern Europe.

SGC CJSC was incorporated pursuant to Presidential Decree No. 287 “On relevant measures related to the second stage of the operation of Shah Deniz gas-condensate field and establishment of the Southern Gas Corridor with regard to other projects” dated 25 February 2014. 51% of SGC CJSC’s share capital is held by the Ministry of Economy of the Republic of Azerbaijan and 49% by SOCAR.

The solemn ceremony relating to the Trans-Anatolian Pipeline (TANAP) Project, which is designed to transport Azerbaijani gas to Turkey and further to Europe, has been held in the city of Eskişehir, Turkey. President of Azerbaijan Ilham Aliyev, President of Turkey Recep Tayyip Erdogan, President of Ukraine Petro Poroshenko, President of Serbia Aleksandar Vucic, the leader of Northern Cyprus Mustafa Akinci and high-ranking officials and representatives of various companies attended the ceremony.

The formal speeches were followed by a symbolic reception of gas carried out by the heads of state participating in the ceremony, and TANAP was put into operation for the shipment of gas.

TANAP connects directly to SCP on the Georgia-Turkey border and will connect to TAP on the Turkey-Greece border. The Memorandum of Understanding between Azerbaijan and Turkey in relation to TANAP project was signed on 24 December 2011. The “Host Government Agreement” between the Republic of Turkey and TANAP company and the “Intergovernmental Agreement between the Government of the Republic of Turkey and the Government of the Republic of Azerbaijan concerning the Trans-Anatolian Natural Gas Pipeline System” were signed on 26 June 2012 and ratified by the appropriate legislative bodies of two countries.

TANAP groundbreaking ceremony was held on 17 March 2015. Currently, TANAP shareholders’ stakes in the project are as follows: “Southern Gas Corridor” CJSC – 51%, STEAS – 7%, BOTAS - 30% and BP – 12%.

The overall progress of TANAP project is 94.8%, total capital expenditures are currently estimated at US$8.0 billion. By the end of April 2018 US$5.4 billion had already been spent on the project.

TANAP carries on significant economic value due to its potential to transport not only the natural gas from Shah Deniz field to European end markets, but also from other fields of Azerbaijan..

Overall, the length of the pipeline from Georgia-Turkey border to Eskişehir is 1,336 km (with 56 inch diameter) and from Eskişehir to Turkey-Greece border - 459 km (with 48 inch diameter). Besides that, TANAP system includes two subsea pipelines in Dardanelles, each 18 km (with 36 inch diameter) long. Initial transportation capacity will be 16.2 bcma, expandable to 30.7 bcma.