The activities of the newly established Azerbaijan Investment Company are very interesting for the most. At first glance one can come to conclusion that AIC is in perplexity and takes up for many at the same time not leading them till the end. It is understandable the company is new, while a responsibility for selection of the most priority one is very difficult.
The selection of enterprises foe investing will be carried out on all possible criteria, particularly, significance of the fields for the Azerbaijani economy. Several projects implemented can be financed simultaneously. In this respect two directions have been defined - projects that are of the Government's interest, and projects, proposed to the investment company by investors. The principles of commerce will be taken as basis, while investing in this sphere of trade would be undesirable, because is dealt with relatively long-term projects.
Let's look through the projects that AIC decided to direct the oil revenues, with hopes not to experience the fate of many oil producing countries
Milk Pro
The European Bank for Reconstruction and Development (EBRD) voiced its wish to acquire 10-20% share of dairy factory of Milk-Pro in Azerbaijan . The Azerbaijan Investment Company JSC will also participate in the capital of Milk-Pro.
The Azerbaijan Investment Company and EBRD agreed to make a decision by the end of the first quarter of 2007 on construction of a new dairy processing plant in Baku and the reconstruction of the existing dairy factory of "Milk-Pro" in Goychay . The project is estimated at $10.5 mln . According to the agreement, AIC share in the authorized capital of Milk-Pro will reach 20%. The concluding decision on putting investments to Milk-Pro is expected to be taken during the Observatory Council of AIC and Board of Directors of EBRD. According to the preliminary data, it will take place in the first quarter of 2007.
Lafarge
The Government of Azerbaijan, AIC and Lafarge signed a trilateral Memorandum of Intention on investing in cement production in Azerbaijan . A second memorandum between the Company and the Azerbaijan Ministry of Economic Development was concluded this week to confirm the Governments intentions.
The Ministry of Economic Development will act as security to the project on construction of the cement plant. The project budget for the cement plant is $110-120mln with a capacity of 1-1.25mln tons. The location of the plant will depend on the feasibility study.
The Ministry of Economic Development will act as security to the project on construction of the cement plant. The project budget for the cement plant is $110-120mln with a capacity of 1-1.25mln tons. The location of the plant will depend on the feasibility study.
Lafrge is studying the limestone fields, which will be selected depending on the location of the cement plant in Azerbaijan .
The first examination was carried out in Garadagh field and the next will be studied during a forthcoming visit to the country either in middle or end of 2007.
Lafarge will select the optimal field containing enough volume of raw material for cement production. The examination will be completed by March 2007.
AIC Observation Board is planning to make a resolution on the participation of this project. AIC's stake will comprise 20% and the rest will be held by Lafarge.
The necessity for the construction of the second cement plant is linked with an increased demand in cement both in Azerbaijan and in the region. Moreover, the country has necessary mines.
Nordisk
The Azerbaijan Investment Company" (AIC) JCS is also studying the prospects for investing in the construction of a plan on production of insulin. The AIC is negotiating with Denmark 's Nordisk with a view to invest in the construction of a factory on production of insulin.
The requirement to solve the problem of the shortage of insulin at a state level arose due to the rapidly increasing demand of this medicine in the country. The implementation of the project will fulfill the need of the drug at the expense of domestically-produced high-quality insulin, as well as creating the possibility to export this medicine. The project is estimated at $12 mln .
The Dutch company proposed to the Azerbaijani party to take part in the above-mentioned project via its regional office based in Moscow . However, AIC is eager to work with the head-Office of Nordisk , therefore the proposal put forward by our partners has not been considered yet.
Islamic Investment Company
The Azerbaijan Investment Company (AIC), a joint-stock corporation, has announced its plans to participate in the Islamic Investment Company, which was initiated by the Islamic Bank for Development within the framework of an international investment conference with the participation of Arab institutions.
The participation share of AIC in the investment company to be established upon Shariat principles will be a minimum of 10-15%. Several other banks will be included as shareholders of the investment company with a capital of $100 mln .
Furthermore, AIC is considering possible opportunities for establishment of the Fund. In its initial phase, talks are taking place with the international banks on the formation of the fund with a capital of $50-60mln. AIC plans to confirm details of it plans after the talks in February or March,
The initiative for establishment of such financial institute came out from the President of the Islamic Bank for Development, Ahmed Muhammad within the framework of an investment conference with the participation of Arab institutes and investors in Baku on 8-9 November 2006.
Ship Owner Company Ship Owner Company
The Azerbaijan Investment Company JSC designated a local operator for the creation of a Ship-Owner Company in Azerbaijan , which will be involved in the transportation of oil goods.
According to preliminary estimates, approximately $100mln is required for the creation of the Ship-Owner Company. Financing may be attracted as credit or participation in the joint capital. The minimum participation share of the operator in the newly created company will be at the level of 60-70%. The participation share of the Azerbaijan Investment Company in the project is expected to be 20-25%.
AIC has defined a local operator for a currently-established ship-owning company, which will be involved deliveries of oil cargo. After finalizing the memorandum with the local operator, the Investment Company will attract external finances. Participation will be offered to the Black Sea Bank for Trade and Development (BSBTD), which voiced its wish to participate in joint projects with the Azerbaijan Investment Company, it is not ruled out that the European Bank for Reconstruction and Development will be an investor for the project. Talks are being held with Greek companies, the leaders in this field, for the participation in the project on establishment of Ship Owner company in Azerbaijan .
The idea of creating the company emerged due to the increase of the volume of oil production and there are plans to increase revenue of the State from the transportation of oil through providing additional services. First of all, the company will deliver Azerbaijani oil from the ports of Batumi , Supsa and Ceyhan to the Black Sea and Mediterranean Sea littoral countries, as well as West Europe countries.
Garadagh Cement
AIC set up consultations on participation in the capital of Garadagh Cement. The process came into force after t he European Bank for Reconstruction and Development (EBRD) entered into the team of stockholders of Garadagh Cement JV on the base of the agreement signed between the sides. The EBRD will invest $10 mln to receive 10% shares of the enterprise out of Swiss Holcim's 89.5% share. Holcim privatized Garadag Cement in 1999.
The AIC, EBRD and Garadag Cement ae gong to sign a memorandum. Garadag Cement JSC is to expand the volume of the cement production by 15% and reach 1 ,5 mln tons annually, against present 1,3 mln tons. According to the co- ordinator of Holcim for CIS region Gareth Babbs , it needs to acquire new limestone field to increase the production. "Existence of the field would mean acquisition of the raw material reserves for minimum 50 years, which would guarantee the receiving of additional 50 mln tons of limestone and recurrence of the investments allocated to the plant," Babbs said. The only problem for Garadag Cement is the acquisition of new field. "According to him, it is intended to invest $120 mln for the reconstruction of the plant and part of the finances will be attracted from the European Bank for Reconstruction and Development.
According to the recent investigation, cement production in Russia with annual capacity of 2 mln tons require investment of €300 mln and take 5 years for construction.
Garbage Reproducing Plant Garbage Reproducing Plant
AIC is studying opportunities for prospects of investing in reproduction of garbage. J apanese EBARA has submitted preliminary proposal on the construction of a garbage processing plant to the Azerbaijani Government. The proposal by EBARA includes disseminating the existing polygons, as well as collecting and utilizing gas liberated in a result of it, and using it for burning out the torch or generating energy. New polygons and a garbage-processing plant with three lines are expected to be constructed at the first stage. The company proposes to build 3 garbage reproducing plants with small, medium and big production capacity. 28 months are allocated for the construction of each.
EBRD consultants' preliminary estimated the total cost of project at the level of $400mln. The complex is intended to reproduce no less than 600,000 tons of garbage a year.
The investment interest of the construction of a garbage reprocessing plant in the country is currently being appraised. "There is a commercial integral part in it. If it is economically interesting, then we will take part in it," noted Mr. Akhundov .
Oil Terminal and Petrochemical Complex
The Azerbaijan Investment Company (AIC) is viewing a business-plan on the construction of a new oil terminal in Garadagh District of Azerbaijan. The Investment Company is interested in the construction of the new terminal in Garadagh . AIC is negotiating with an Azerbaijani company in this respect.
The Company has submitted the business-plan to us. It is just the subject of our negotiations now.
"As soon as a decision on cooperation between AIC and the local company is taken, all other components and integrals of the project, including sending oil flows to be passed through the terminal will be determined.
Allied Investment Company, a Company-Consultant of the European Bank for Reconstruction and Development (EBRD) is expected to hold the second stage of the presentation of the project on the installation of the petrochemical complex in the country. Anar Akhundov , the Executive Director of "Azerbaijan Investment Company" JSC (AIC), said that the project will be also presented to the Supervisory Board of the Investment Company, Trend reports.
During the first stage, the Company was engaged in appraising the efficiency of this production in Azerbaijan , since this field is rather capital-intensive. "The second stage envisages the specialization of nomenclature of production, technological processes to be used for the future production, as well as determination of investors and sales agents," said Mr. Akhundov . .
The circle of investors is expected to be made more concrete and restricted. Negotiations on this issue are expected to be launched soon. The area where the new complex to be installed will be determined after the strategic investors are determined. The preliminary cost of the project on the installation of the petrochemical complex in Azerbaijan has been estimated at $500 mln .
Agriculture projects Agriculture projects
The Company is expected to view some investment projects to be implemented in the agriculture and reprocessing industry in 2007. "We show interest both to the most state-of-the-art technologies to plant vegetables, fruits, and flowers and reprocessing industry in agriculture. First of all, this is diary production and production of juices," said Mr. Anar Akhundov , the AIC Executive Director said. Cattle farming and broiler economy are viewed from the point of view of investment interest as well.
As to other spheres, we show great interest to projects in the field of production of construction materials. This is not only cement, but also facing materials. The company has commenced putting investments to the glass industry.
The Company is also very interested in such spheres like communications and logistics. We are carrying out a great work with foreign investors with them. Segments, which might be invested is currently being determined.