Since the beginning of the year, Azerbaijan Investment Company (AIC) has increased the portfolio of the potential projects and reached their number up to 70. Particularly the projects are forwarded towards the spheres such as agriculture, commercial real estate, infrastructure, mineral resources. According to the AIC, Anar Akhundov, the key selection criteria is the belonging to the private sector and high commercial efficiency. The projects which are not attractive commercially will not be accepted. For instance, AIC refused to participate in establishing a new garbage processing plant near Baku. The Company assessed and found the project as commercially ineffective.
Yet the AIC approved participation in three projects like construction of a new dairy plant Milk Pro (20% for $5.375mln or AZN 4.684mln), operating company 'Sangachal-Garadagh Oil and Gas Terminal' (25% for $9mln) and Production Unit 'Azerbaijan Salt' (25% for $2.9mln). Yet only the first project has been financed.
Milk Pro
Participating in the management of the Milk Pro is the first investment decision of the AIC, which has allocated finances for its participation. In December 2006 AIC and Milk Pro signed a Memorandum of Understanding for financing construction of a new plant on collection and processing of diary in Baku city and reconstruction of Goychay diary plant. In May 2007 AIC signed an investment agreement with the European Bank for Reconstruction and Development (EBRD). According to the agreement, AIC participation share in the capital of Milk Pro makes up 20%. The first AIC investments into Milk Pro LLC amounted to AZN 4.684mln.
The key moment in making such a decision was the agreement on $5.7mln presented as participation in share and credit, which was signed between EBRD and Milk Pro in November 2004. EBRD's 10% participation in the management of Milk Pro makes this project perspective.
The key goals of the enterprise is to construct a new dairy plant on collection and processing of the natural milk, increase production capacity of the dairy plant, which functions in Goychay district, establish relevant production in Georgia and expand the nomenclature of the products. The new dairy plant is planned to be constructed in Hovsan.
AIC's participation in Milk Pro will be realized at the expense of issuing new shares. The cost of the project is $11.75mln.
Oil Terminal
Another project approved by the Azerbaijan Investment Company (AIC) is the construction of a new oil terminal in Azerbaijan's district of Garadagh. Currently a business plan is being considered and a Protocol on Intentions has been signed with Azerbaijani Company 'Kavkaztransservis'. The US Company Nexant involved in the assessment of the project will devise a concluding report on the amount of the investments for the project on establishment of Sangachal-Garadagh Oil and Gas Terminal.
Approximately the construction of the terminal is assessed as $90mln. The terminal will be constructed in three stages. In the first stage, the transshipment capacity of the terminal will make up 15mln tons of oil, in the second stage - 25mln tons and third stage - 35-40mln tons. The first stage of the terminal is planned to be completed in one and a half year.
AIC's participation in establishing the terminal and other projects equals 25%. Thus, according to the 29 June decision of the AIC Supervisory Board, the Company will allocate $9mln for the terminal. In addition, the AIC will, in co-operation with 'Kavkaztransservis', attract funds. Thus, AIC's policy includes not only to invest, but also attract foreign investors and international financial institutions. Talks are already held with the Islamic Development Bank, European Bank for Reconstruction and Development and other financial institutions.
The stated capacity of the terminal in 20mln tons per year should be clarified depending on the conjucture of the market. The terminal is intended to received raw oil from Kazakhstan and Turkmenistan for further transportation to the terminals on the shore of the Black Sea and Port of Ceyhan.
Azerbaijani Salt
Further, the AIC will begin financing the project on establishment of Production Unit 'Azerbaijani Salt' JSC, which has been approved by the AIC Supervisory Board on 29 June. The Company intends to allocate $2.9mln for the project.
The goal of the investments into 'Azerbaijani Salt' is to build an edible salt plant in Masazir settlement. The plant is planned to produce 100 tons of salt per day and the annual production capacity of the plant will total 30.000 tons. The salt will be provided from Masazir field and from Turkmenistan. The construction work will be implemented by the Turkish Company of Inova and the equipment and technologies will be brought from Germany. The key goal is to organize salt production in Azerbaijan in accordance with the international organizations.
AIC and Azersun Holding concluded a memorandum on joint investments into the construction of the salt plant. Thus, the main shareholder to the project is Azersun Holding, and the AIC is considering the possibility to acquire nearly 25% participation share. The international financial institutions will also be attracted into the project.
The construction of a new salt plant will begin by the end of the year. The plant is planned to be put into operation by the end of 2008. Constructing the plant will take €6mln.
It is not excluded that the products will be exported to Georgia and Dagestan. However, the goal of the Company in establishing the enterprise is not to export the product, but cover the salt demand in Azerbaijan.