European Investment Bank supports GBP 250m gas network expansion and upgrade in Scotland and southern England

Published: 22 September 2010 y., Wednesday

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The European Investment Bank has agreed to lend GBP250 million for the replacement, reinforcement and expansion of the gas distribution networks operated by Scotland Gas Networks and Southern Gas Networks. The two companies, wholly owned by Scotia Gas Networks (SGN), will receive GBP150m and GBP100m respectively. The loan will be for up to 16 years and will enable replacement of nearly 1,000km of cast iron pipes, increase connections to final customers and provide new pipelines linked to the national distribution network. The three year infrastructure development programme will be undertaken from 2010 to 2013 and will ensure the maintenance of a safe and reliable service for existing customers, as well as catering for increased capacity/storage and peak requirements.

Increasing domestic, commercial and industrial gas use will replace less efficient use of more polluting energy sources, contributing to EU energy and environmental objectives, in particular concerning the supply security and diversification. The project will also involve expanding the gas network by 120km in Scotland and 175km in southern England, and provide gas services to remote parts of the Scottish Highlands and Islands, an EU convergence region. It is expected that around 40,000 new customer connections will be made during the year, with approximately 20,000 in each network area.

“The European Investment Bank recognises the investment challenges essential to ensuring the reliable provision of gas across the UK. We are committed to working closely with leading energy companies investing in improved delivery of gas when and where it is needed, alongside increasing storage and import capacity. This project complements EIB financing of LNG storage facilities at key UK facilities.” said Simon Brooks, European Investment Bank Vice President responsible for the United Kingdom.

SGN Chief Executive Officer John Morea said: “Borrowing long-term finance from the EIB for our company helps secure both the short and medium term future of both our gas distribution networks. Since our formation in 2005, we have spent many millions of pounds on the continued expansion and refurbishment of our gas networks, ensuring safe and reliable gas supplies for our customers far into the future. We are committed to ensuring gas has a major part to play in the UK's future energy mix and this financing will help us meet our current commitments and achieve our objectives.

The European Investment Bank is the long-term lending institution of the European Union, whose shareholders are the 27 member states. The promotion of sustainable, competitive and secure sources of energy is a key policy objective of the European Union and the European Investment Bank has made lending to support Europe’s energy objectives a top priority. Over the last five years the institution has provided over GBP 4.5bn for key energy infrastructure across the United Kingdom and UK energy projects totalling GBP 1.8bn are currently being examined by the European Investment Bank. Key funding has been provided to six of the eight UK gas distribution networks by the EIB.

SGN is the UK's second largest gas distribution company, operating two of the largest gas networks. Scotland Gas Networks covers the whole of Scotland and Southern Gas Networks covers central southern and south east England. The combined distribution networks deliver gas safely and efficiently to over 5.7 million homes and businesses.


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