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ADB ready to participate in syndicated financing of Azerbaijani plant expansion project

Business Materials 1 March 2010 11:28 (UTC +04:00)

Azerbaijan, Baku, March 1 / Trend I.Khalilova / 

The Asian Development Bank's (ADB) Private Sector Department is considering joining the syndicated financing of a project to expand and improve the efficiency of Garadagh Cement. The project is organized by the European Bank for Reconstruction and Development (EBRD), the Azerbaijani government reported.

"The ADB is ready to allocate about 20-40 million euro for the project," the source reported. "The ADB board of directors is expected to approve the loan in the first half of 2010."

Based on social research conducted by ADB, the expansion of the plant will promote employment in the country. The factory has over 580 employees; 470 are directly involved in the cement production.

Support for the project is provided under ADB's strategy and program for Azerbaijan, which focuses on promoting economic growth and non-oil sector development.

In May 2009, the EBRD board of directors approved financing worth 170 million euro for the project, which will cost a total of 330 million euro.

Earlier, it was reported that the project will be financed through credit (credit A / B) worth 150 million euro, approximately 50 percent of which will be offered to commercial banks (lenders Class B). The rest would be financed by the EBRD. Another 20 million euro was to come from an Eurobank loan (Class C), and an additional 30 million euro from the founder Holcim.

The project is expected to achieve substantial energy savings by an over 50-percent reduction in energy consumption per unit of clinker production. The introduction of modern technology will provide the opportunity to transmit and increase skills.

The EBRD loan will support the company, leading in terms of corporate governance and business management in difficult conditions. The project, which is the largest foreign direct investment outside the oil and energy sector in Azerbaijan, should have a positive effect for other potential investors in the private sector.

EBRD's investments will increase the capacity of Garadagh cement to 1.7 million tons from the current 1.3 million per year, as well as reduce the energy used to produce one ton of cement. As part of the modernization and expansion of Garadagh, it is planned to increase production of clinker from 2,616 to 4,000 tons per day and annual cement production from 1.3 million tons to 1.7 million tons without imports. Funding will cover a construction period from mid 2009 to the first half of 2011, when a new furnace is planned to be launched. As a result of the project, the plant's overall emissions of carbonic dioxide must be reduced by 10 percent.

Garadagh Cement is the largest and the only producer of cement clinker in Azerbaijan.

Partners of JSC Garadagh Cement is a Swiss Holcim (69.4 percent), EBRD and Azerbaijan Investment Company (10 percent), private shareholders (10.6 percent).

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