Gazprom worried others besides Saipem might sue over cancellation of South Stream
The lawsuit from Italian engineering company Saipem against Gazprom over the cancellation of the South Stream gas pipeline project might not be the only one, the Russian gas giant warned investors in the risk factors section of a memorandum for a new Eurobond offering.
"Our contractors demand and, one can expect, will demand compensation in connection with the suspension of their contracts on the South Stream pipeline project. We might also be required to create substantial provisions for impairment of our investments in the South Stream project," Gazprom warns.
The South Stream project was halted in 2014 and supplanted by the alternative project Turkish Stream. But in light of the current international political situation, the outlook for the Turkish Stream project remains uncertain, Gazprom said.
In December 2015, South Stream Transport B.V. received notification of an arbitration lawsuit filed by Saipem S.p.A. demanding compensation for expenses, a penalty for early termination of its contract and payment for work - a total of EUR 760 million plus interest.
On the date that this prospectus was written, the dispute with Saipem was the only claim by a contractor in connection with the termination of the South Stream project, Gazprom said. Nonetheless, there are no guarantees that other claims will not be initiated in future, the company added.
As a result of the arbitration with Saipem and potential claims from other contractors to get compensation in connection with the cancellation of South Stream, Gazprom might be obligated to pay out substantial amounts, the company said. In addition, Gazprom might be required to provision in its financial statement for ongoing court cases, suffer adverse publicity or face other negative consequences of such litigation, the company warns.
While warning of possible write-offs, Gazprom nonetheless said that it continues to invest in the expansion of its gas transport system to feed gas into a Black Sea pipeline, whether it will be South Stream or Turkish Stream. The initial version of the investment program for 2016 sets aside 10.5 billion rubles for this purpose.
