The $7 billion Turkmenistan-Afghanistan-Pakistan-India (TAPI) 1,635km gas pipeline – sponsored by Turkmengaz, Afghan Gas Enterprise, Inter State Gas Systems (Pakistan) and GAIL (India) – is expected to reach financial close on an ECA/DFI-backed facility in Q1 2019 following the mandating of a commercial bank lead arranger group.
The project, which has an all-in cost of $8.1 billion, will transport up to 33 billion cubic metres of natural gas annually from Turkmenistan – which has the fourth largest gas reserves in the world – to Afghanistan, Pakistan and India, with the former offtaking 5% and the latter 47.5% each over a 30-year life.
Construction of the first 214km Turkmenistan section of the pipeline is almost complete, funded by a $700 million provided by the Islamic Development Bank. The remaining Afghanistan-Pakistan-India (API) pipeline section is split into two phases –construction of the pipeline (phase one) followed by the installation of six compressor stations to triple the capacity of the 11bcm pipeline to 33bcm (phase two).
The phase one financing is expected to comprise a 15-year $500 million loan from the ADB (rumoured to be priced below 200bp) to the governments of the four countries that will be on-lent to the project company; 12-year commercially banked Hermes- and Sace-covered tranches; and a Turk Eximbank direct loan backed by a sovereign repayment guarantee from Turkmenistan. Discussions with Turk Eximbank took place prior to the recent lira crash, but according to a source close to the deal, “it would be foolish to shut doors unnecessarily, though the pricing they can now achieve will be very different”. The Islamic multilateral ICIEC and Greece’s export credit agency ECIO are also rumoured to be potentially part of the funding mix.
Portland Advisors is financial advisor to TAPI Pipeline Company Limited (TPCL), which will build, own and operate the Afghanistan and Pakistan sections of the pipeline. TPCL is also being counselled by law firm Allen & Overy.