The European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), IFC - a member of the World Bank Group -, the shareholders of Nabucco and NABUCCO Gas Pipeline International GmbH signed a "mandate letter" on September 6 2010,  marking the start of the appraisal process of the Nabucco project, a required step towards a potential financing package of up to four billion billion.

The Nabucco gas pipeline project is the flagship project for meeting future EU gas demand and will diversify Europe’s pool of supplier countries, according to a media statement by the three international financial institutions.

The potential financing package will consist of up to two billion euro from the EIB, up to 1.2 billion euro from the EBRD (up to 600 million euro for EBRD’s account and up to 600 million euro to be syndicated to commercial banks) and up to about 800 million euro from IFC (up to 400 million euro for IFC’s account and up to 400 million euro to be syndicated to commercial banks).

The mandate letter formalises the conditions under which the three IFIs 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 statement said. 

The involvement of the three international financial institutions is, according to the statement, "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," the statement said.

The Nabucco gas pipeline project addresses the EU’s priority goal of achieving energy security via the diversification of gas routes and gas supplies.  It will deliver additional volumes of gas from different sources through a new supply route to the EU member states and their neighbours.  Nabucco provides a strategic solution by enabling the transport of gas from both the Caspian Region and the Middle East, according to the statement.

Following the successful conclusion of the appraisal, the financing will need to be approved by the relevant governing bodies of each IFI. 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.