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Vedomosti: Gazprom completes the purchase of Sakhalin 2 energy project stake

Russia’s state-controlled gas giant Gazprom has acquired a controlling stake in Sakhalin Energy, which operates the Sakhalin 2 energy project in the Russian Far East that is being developed under a product sharing agreement. The company closed the deal yesterday. Government officials simultaneously endorsed the project’s budget sheet till 2014. Investors’ spending has almost doubled compared to the previous proposals, from $10 billion to $19.4 billion.

The signing of the final agreement with Sakhalin Energy’s shareholders – Anglo-Dutch Shell and Japanese Mitsui and Mitsubishi – was postponed several times. Earlier this month, Bogdan Budzulyak, member of Gazprom’s board of directors, said that the parties could not agree whether Gazprom should shoulder responsibility for Sakhalin Energy’s environmental violations and ensuing economic sanctions.

The parties managed to sign most of the documents by 10 pm Moscow time yesterday, said a source close to the transaction. They endorsed the project’s budget at $19.4 billion till 2014, out of which $3.6 billion was classified as non-refundable spending carried by previous shareholders, the source said.

Russian Deputy Industry and Energy Minister Andrei Dementyev said earlier that the government believed changes in technical decisions on the project, which boosted its cost, to be non-market factors. “We decided that the foreign shareholders should carry the engineering risks, and they agreed to that,” he said.

Gazprom will pay the foreign companies $7.45 billion immediately after signing the agreement, said another source familiar with the transaction. The gas giant will borrow money, he added, declining to elaborate on the source of financing.

News agencies yesterday quoted a source in the banking community as saying that Gazprom would take a $2 billion syndicated loan this week to finance the deal. The loan will be divided in two equal tranches, one for three years and the other for five. A source familiar with Gazprom’s borrowing plans earlier said that the company would also take a short-term $5-$8 billion loan to pay for the stake in Sakhalin 2.

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