EBRD LoC helps Moldova secure winter gas supplies
The European Bank for Reconstruction and Development has agreed to issue an on-demand, standby letter of credit (LoC) of up to $50 million to guarantee payment obligations of the Moldovan state energy importer Energocom to help secure gas supplies for the coming winter in case of an emergency.
The financial arrangement will enable Energocom to purchase one month of natural gas supply from Naftogaz, the national oil and gas company of Ukraine, to avoid any gas supply risk.
Moldova, which relies on gas from Russia and has no storage for the fuel, faces the risk of disrupted supply should Russia and Ukraine fail to extend a gas transit agreement that expires on 31 December 2019.
Naftogaz will procure, through open tenders with European Union suppliers, up to 0.4 billion cubic metres of gas, which will be delivered to Energocom and distributed to customers in Moldova by the national gas distribution company Moldovagaz.
The EBRD letter of credit will facilitate a 180-day delay in Naftogaz payment, which will give Energocom time to collect receivables from customers and pay the invoices. In the event that Energocom is not paid in time and has insufficient funds to pay Naftogaz, the Ukrainian company can claim the EBRD’s letter of credit. Any funds used under the letter of credit will be repaid by the Moldovan state.
