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EBRD loan to restore hydro power capacity in Azerbaijan
To increase hydro-generated electricity and further the commercialisation of the power sector in Azerbaijan, the European Bank for Reconstruction and Development is providing a sovereign-guaranteed loan of US$ 21.65 million (ECU 19.16 million) to Azerenerji, the state-owned, joint-stock power utility. The loan, which has a four-year grace period, is the second the EBRD has provided to the power sector in Azerbaijan.
"The sector's restructuring is occurring in two phases. The first phase, the corporatisation and initial financial strengthening of Azerenerji, agreed under the EBRD's first loan in 1994, has been completed," said Ananda Covindassamy, Director of the EBRD's Power and Energy Utilities Team. "The second phase focuses on establishing a legal and regulatory framework for commercial management in the power sector. This will encourage the privatisation process of selected power stations, currently under discussion with several potential investors."
The EBRD's loan will be used to finance a variety of equipment, including the replacement of three generators at the Mingechaur Hydropower Plant (HPP), located on the Kura river. In addition, reconstruction of a back-up high-voltage power transmission line (330kV) from the generation facilities in the Mingechaur region to the high-demand Baku area will be undertaken. Equipment to implement environmental mitigation measures will also be purchased and installed. The project is co-financed with Islamic Development Bank and is supported by grant financing from the European Union's TACIS programme.
Fundamental to the project is the improvement of Azerenerji's commercial management system and energy metering, for which computers, communication equipment, electric meters and spare parts will be bought. The EBRD's project will help develop a key economic infrastructure in Azerbaijan as well as creating an estimated 350 jobs.
This investment in the modernisation of existing generating capacity and power transmission will help reduce the country's energy intensity by replacing current electricity generated by highly inefficient and polluting fuel-oil-fired thermal plants with renewable hydro power from an upgraded existing site. It will also significantly reduce power losses in the transmission system through low-cost reinforcement of the transmission grid.
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