Norwegian Pipe Owner Tries to Improve Cashflow

Njord Gas Infrastructure (NGI), which has an 8.036% stake in Norway’s subsea pipelines owner Gassled, said June 17 its bonds have been put on a positive credit watch by Standard & Poors for a potential upgrade of up to two notches from the current BB-, following its announcement the day before. It is one of a group of four owners continuing to attempt to reverse a government-ordered reduction of tariffs made in 2013. 

On June 16, NGI announced a plan to reprofile its bonds and extend their maturity by a year to 2028, in order to cope with a shortfall in cash flows arising from the tariff reduction announced in June 2013 by Norway’s Petroleum Ministry, following the earlier downgrading of its bond ratings. The bonds, originally rated as A- when issued, were downgraded to BB- following the tariff reduction. NGI estimated the loss of tariff to Gassled as a whole at Nkr 34bn ($4bn) during 2016-2028, which would put NGI's own net loss at about Nkr 2.73bn.

Gassled owns some 8,300 km of subsea pipelines offshore Norway, plus several processing plants and beach terminals in Norway and Europe. The system is independently managed by state-owned operator Gassco.

NGI financed its original investment in Gassled by four long-term loans: a $265mn 5.1% loan, a £165mn 5.241% loan, a Nkr 550mn 6.1525% loan and a Nkr 300mn 4.3% CPI (consumer price index) linked loan. The three loans not CPI-linked are now to be swapped to achieve a 100% Nkr index-linked debt exposure to match cash flows from the operation.

NGI also updated bondholders on its and others’ attempts to get the tariff reduction cancelled, noting that itself, Solveig Gas Norway, Silex Gas Norge and Infragas Norge in January 2014 filed writs of summons to initiate legal proceedings against the Petroleum Ministry. A joint hearing took place in Oslo City Court in 2Q 2015, and the court ruled in September 2015 favour of the Ministry. Two months later, the four companies jointly appealed the decision from Oslo City Court. The appeal court’s proceedings are due to commence in January 2017, said NGI in a presentation June 16.

Gassled pipeline and terminals system (Source: Njord Gas Infrastructure)

NGI is owned by Swiss bank UBS’s International Infrastructure Fund (82%) and Quebec pension fund-managed CDC Infrastructure (18%); it acquired its 8.036% stake in Gassled from ExxonMobil in 2011.

Solveig, Silex and Infragas have similar equity and/or pension fund ownership structures. Thus Solveig, which owns a 24.756% stake in Gassled, is owned 30% by German insurer Allianz, 30% by Abu Dhabi Investment Authority, and 40% by Canada Pension Plan Investment Board.

Majority control over Gassled is exercised through the combined 50.793% stake held by state-owned Petoro and state-controlled Statoil.

Gassled's owners  

Source: Norwegian state-owned Gassco (which runs the Gassled-owned subsea gas pipelines system)

Mark Smedley                    

www.naturalgaseurope.com