Project Description
Provision of long-term senior debt of up to USD 21 million for the development, construction and operation of a solar photovoltaic power plant with an installed capacity of 230 MW on a site located 9 km northwest of the Alat settlement in eastern Azerbaijan (the Project). The Project will be developed by a newly established special purpose vehicle in Azerbaijan, which will act as the borrower for the project financings. Abu Dhabi Future Energy Company PJSC (Masdar) will act as the sponsor for the project.
Project Objectives
The Project will add 230 MW of solar generation capacity to the Azerbaijani power system and power approximately 110,000 homes. This would help substitute natural gas-based power plants and help in meeting the renewable energy targets set by the Government of Azerbaijan in line with county's commitments under the Paris Agreement. The Project will also result in strong environmental benefits with estimated annual CO2 emissions savings of up to 200,000 tonnes. This will assist the country in its low-carbon transition, reducing its current high reliance on thermal power generation.
Transition Impact
ETI score: 76
The transition impact of the Project is expected to come mainly from its contribution to the currently state-dominated Azerbaijani power sector by adding a new private entrant. The Project is expected to be the first privately owned utility scale solar power project in the country. The Project will also introduce a new international power sector sponsor to the country - a key milestone for power sector development.
The transition impact of the Project will also stem from its alignment with the EBRD's Green Economy Transition approach (GET) as it will allow producing electricity using solar power, which will assist the country in its low-carbon transition, reducing its current high reliance on thermal power generation.
Client Information
MASDAR AZERBAIJAN ENERGY LLC
The Masdar Azerbaijan Energy Limited Liability Company (the Borrower) is a limited liability company incorporated in Azerbaijan for the sole purpose of the Project.
Based in the UAE, Masdar is a regional leader and a major international player in renewable energy and sustainable urban development.
EBRD Finance Summary
USD 61,000,000.00
Up to USD 21 million loan to the Borrower to finance the development of a 230 MW solar photovoltaic project. Along with the EBRD, a number of other international financial institutions are expected to support the Project.
Total Project Cost
USD 293,300,000.00
The project cost will consist of EPC, non-EPC and financing costs.
Additionality
Financing structure: The Bank is additional in providing long-term financing at terms and conditions not available in the local market for this major infrastructure project, particularly in view of the limited liquidity caused by the COVID-19 pandemic and as this is one of the first private project financings of a renewable energy project in Azerbaijan.
Innovative financing structures and/or instruments: EBRD will provide a set of tailored financing facilities under the project finance structure, innovative for the Azerbaijani power sector.
Policy, sector, institutional, or regulatory change: The Bank is actively involved in the development of policy dialogue in Azerbaijan. The Project is a key milestone for the country's renewables sector, and will further its green agenda, serving as a pilot for further renewables development.
Environmental and Social Summary
The Project has been Categorised B in accordance with EBRD's Environmental and Social Policy (ESP) 2019. An Environmental and Social Impact Assessment (ESIA) has been completed by the Owner's Environmental and Social Consultant (OESC) and Environmental and Social Due Diligence (ESDD) has been undertaken by a Lender's E&S Consultant (LESC). The ESIA and all associated documentation has been disclosed on the Project website and has been subject to public consultation.
Project website: Area 60 Solar Photovoltaic Power Plant (masdar.ae)
While the land take for this project is relatively large, the E&S sensitivities have been confirmed to be site specific, identifiable and addressed through the adoption of an Environmental and Social Action Plan (ESAP) and a commitment to Good International Practice by the Project Sponsor. The Project site was subject to a pre-screening exercise as part of the preparation of the renewable energy auction scheme in Azerbaijan, supported through technical cooperation by EBRD. As a result, sensitivities associated with protected areas or physical resettlement were avoided at the outset.
The ESIA confirms that the Project site is of low biodiversity value. The assessment identified several flora, fauna, and avifauna species within the Project site none of which are listed as threatened under the International Union for Conservation of Nature (IUCN) or the Red Book of Azerbaijan. The Project area has been subject to past human disturbance and is not considered to be a sensitive area for biodiversity.
The Project has been located away from individual houses and local settlements and therefore there is no requirement for a physical resettlement. However, the Project area is currently used by a number of farmers and herders for grazing and winter pastures and restriction to such areas will occur during project implementation. Overall, the Project will impact 25 Project Affected Households (PAHs) and 108 Project Affected People (PAPs) which includes 65 vulnerable PAPs. To address this, a Livelihood Restoration Plan (LRP) has been developed which details compensation measures for affected farmers and herders. The LRP has also been subject to consultation and has been confirmed during the ESDD to meet EBRD's PR5.
A Community Development Plan will also be produced that aims to provide a range of benefits to people in local communities in the vicinity of the Project, and to off-set residual impacts associated with land use change and land access restrictions.
An Environmental and Social Management & Monitoring Plan (ESMMP) which describes the monitoring and mitigation requirements for the duration of the project, including responsibilities and any legal requirements, has been also provided as part of the ESIA. The Company commits to the ESMMP and measures detailed will be carried into the relevant Construction and Operational Environmental Management Plans (EMP).
ESDD has confirmed that the Project Developer has sufficient capacity and capability in place to implement the Project in accordance with the EBRD's Performance Requirements.
A Stakeholder Engagement Plan (SEP) has been developed for the Project, which describes the planned stakeholder consultation activities and engagement process as well as a grievance mechanism to ensure that it is responsive to any concerns and complaints particularly from affected stakeholders and communities.
Enhanced supply chain due diligence has been conducted for the solar components in accordance with the Management Approach for Solar Supply Chain Risk Management. Masdar has provided evidence of a functioning supply chain management system including a number of policies and positon statements stating that Masdar has a zero tolerance to labour violations. The supply chain for this particular project, to Tier 3, has been mapped and will be verified by an independent consultant for point of origin. The Financing Agreement and ESAP requires Masdar to maintain due diligence and management procedures for the sourcing of solar modules in accordance with Good International Practice to Address the Risk of Forced Labour in Their Operations and Supply Chains (2021). To date, the supply chain for this specific project has been mapped to Tier 3 (to the wafer level) and the client and supplier have stated that this is as far as practical that the supply chain can be accurately traced and verified.
Technical Cooperation and Grant Financing
None
Company Contact Information
Murad Sadikhov
msadikhov@masdar.ae
+994 70 298 55 55
http://www.masdar.ae
PSD last updated
02 Aug 2022
Understanding Transition
Further information regarding the EBRD’s approach to measuring transition impact is available here.
Business opportunities
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Environmental and Social Policy (ESP)
The ESP and the associated Performance Requirements (PRs) set out the ways in which the EBRD implements its commitment to promoting “environmentally sound and sustainable development”. The ESP and the PRs include specific provisions for clients to comply with the applicable requirements of national laws on public information and consultation as well as to establish a grievance mechanism to receive and facilitate resolution of stakeholders’ concerns and grievances, in particular, about environmental and social performance of the client and the project. Proportionate to the nature and scale of a project’s environmental and social risks and impacts, the EBRD additionally requires its clients to disclose information, as appropriate, about the risks and impacts arising from projects or to undertake meaningful consultation with stakeholders and consider and respond to their feedback.
More information on the EBRD’s practices in this regard is set out in the ESP.
Integrity and Compliance
The EBRD's Office of the Chief Compliance Officer (OCCO) promotes good governance and ensures that the highest standards of integrity are applied to all activities of the Bank in accordance with international best practice. Integrity due diligence is conducted on all Bank clients to ensure that projects do not present unacceptable integrity or reputational risks to the Bank. The Bank believes that identifying and resolving issues at the project assessment approval stages is the most effective means of ensuring the integrity of Bank transactions. OCCO plays a key role in these protective efforts, and also helps to monitor integrity risks in projects post-investment.
OCCO is also responsible for investigating allegations of fraud, corruption and misconduct in EBRD-financed projects. Anyone, both within or outside the Bank, who suspects fraud or corruption should submit a written report to the Chief Compliance Officer by email to compliance@ebrd.com. All matters reported will be handled by OCCO for follow-up. All reports, including anonymous ones, will be reviewed. Reports can be made in any language of the Bank or of the Bank's countries of operation. The information provided must be made in good faith.
Access to Information Policy (AIP)
The AIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations following its entry into force on 1 January 2020. Please visit the Access to Information Policy page to find out what information is available from the EBRD website.
Specific requests for information can be made using the EBRD Enquiries form.
Independent Project Accountability Mechanism (IPAM)
If efforts to address environmental, social or public disclosure concerns with the Client or the Bank are unsuccessful (e.g. through the Client’s Project-level grievance mechanism or through direct engagement with Bank management), individuals and organisations may seek to address their concerns through the EBRD’s Independent Project Accountability Mechanism (IPAM).
IPAM independently reviews Project issues that are believed to have caused (or to be likely to cause) harm. The purpose of the Mechanism is: to support dialogue between Project stakeholders to resolve environmental, social and public disclosure issues; to determine whether the Bank has complied with its Environmental and Social Policy or Project-specific provisions of its Access to Information Policy; and where applicable, to address any existing non-compliance with these policies, while preventing future non-compliance by the Bank.
Please visit the Independent Project Accountability Mechanism webpage to find out more about IPAM and its mandate; how to submit a Request for review; or contact IPAM via email ipam@ebrd.com to get guidance and more information on IPAM and how to submit a request.
