EBRD stands ready to cooperate closely with Azerbaijan to ensure COP29's success - Alkis Drakinos (Exclusive interview)

Economy Materials 3 June 2024 08:03 (UTC +04:00)
EBRD stands ready to cooperate closely with Azerbaijan to ensure COP29's success - Alkis Drakinos (Exclusive interview)
Maryana Ahmadova
Maryana Ahmadova
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BAKU, Azerbaijan, June 3. The European Bank for Reconstruction and Development (EBRD) stands ready to collaborate closely with Azerbaijan to ensure COP29 is a successful and impactful event, advancing our shared goals of sustainability and climate action, Alkis Vryenios Drakinos, Director, Regional Head of the Caucasus for the EBRD, told Trend in an exclusive interview.

"Our team in Baku, but also those spread across our different countries will be supporting Azerbaijan in leveraging the opportunity presented by the conference to mobilize green finance on a national, regional, and global scale," he said.

Drakinos pointed out that Azerbaijan’s role in advancing climate action and sustainability goals is becoming increasingly significant.

"The country has taken a pole position in the Caucasus when it comes to deploying utility-scale solar and wind energy generation capacity, and the EBRD has been instrumental in facilitating this. As the largest institutional investor in Azerbaijan, and the climate finance leader in the region, we are a natural partner for Azerbaijan’s ambitious decarbonization agenda," the official noted.

The EBRD rep reminded that the bank recently financed the first utility-scale privately owned wind power plant in the Absheron and Khizi regions, following investment in the first utility-scale solar power plant in Garadagh last year.

"We’re also enhancing energy efficiency in Ganja under our flagship Green Cities program. On the policy front, our collaboration on renewable energy auctions has led to the planned development of a solar power plant project in Garadagh. We now want to help carry this momentum forward and we believe that COP29 is a great opportunity," Drakinos said.

EBRD's role in renewable energy auctions launch in Azerbaijan

He further noted that the EBRD has been supporting Azerbaijan's Ministry of Energy in developing a robust legal and regulatory framework to ensure the success of the renewable energy auctions launch.

"We support auctions because, through competition and transparent procedures, beneficiary countries get the best possible prices from international quality bidders. To ensure the success and effectiveness of these auctions, the EBRD has been supporting the Ministry of Energy in developing a robust legal and regulatory framework. This includes contributions to the new Renewable Energy Law, which provides the necessary foundation for competitive bidding processes. Our experience in supporting similar auctions in countries like Uzbekistan, Albania, and Serbia has shown that such frameworks are very successful in mobilizing private sector financing and high-quality project delivery," he said.

According to Drakinos, the launch of the first renewable energy auction for a solar power plant in Garadagh represents a significant milestone in the country's journey towards decarbonization and sustainable energy development, "a game-changer for Azerbaijan’s green energy agenda".

"The primary objective of these auctions is to attract private investment in utility-scale renewable energy projects, increasing the renewable energy share of Azerbaijan’s installed electricity generation capacity. By helping foster a competitive and transparent procurement process, we aim to help ensure that the best projects are selected, driving both innovation and efficiency in the sector," he elaborated.

The EBRD official also spoke about the outcomes of such auctions. "They are designed to diversify Azerbaijan’s energy mix, reducing reliance on fossil fuels, and helping the country meet its international climate commitments. This is particularly relevant now as the country prepares to host the COP29 climate conference in Baku later this year. Investments in renewables will also stimulate economic growth and diversification by creating jobs and encouraging technological advancements within the energy sector. We remain dedicated to supporting Azerbaijan’s renewable energy ambitions and look forward to continuing our collaboration in this transformative journey".

Promoting connectivity through the Middle Corridor

Further speaking, Alkis Drakinos highlighted the bank's support provided for the development of the Trans-Caspian International Transport Route (TITR), or the so-called Middle Corridor. As such, the bank may consider supporting additional projects along the route.

"Being a demand-driven institution, the EBRD will consider supporting additional projects along the Middle Corridor provided these projects are bankable and meet our required governance, transparency, environmental, and procurement standards. Eligible projects in support of this project addressing either transit, trade, and energy potential or infrastructure gaps in the same sectors may be forwarded to the EBRD for consideration by any among the three South Caucasus countries as well as from Central Asia," he said.

According to Drakinos, over the years, the EBRD has been supporting projects promoting connectivity among all its 38 countries of operations. "Connectivity is in fact a priority theme in most of our Country Strategies. I personally align myself with those that see connectivity as a key driver for economic growth and prosperity as well as a means of increasing the understanding and cooperation among countries and peoples," he said, adding that the South Caucasus plays particularly important role in this process.

"I am fully aware of the strategic importance of the South Caucasus region in increasing substantially international trade across sectors including renewable energy, playing a catalytic role as a bridge connecting Asia with Europe as well as within the South Caucasus region countries. More particularly, Azerbaijan’s geographical location, infrastructure networks, economic resilience, natural resources wealth, and renewables potential, position the country in the epicenter of the Middle Corridor," Drakinos pointed out.

The EBRD rep further added that, to date, the bank has supported Azerbaijan’s transit potential along the Middle Corridor by signing a financial package of 38.7 million euros for ASCO shipping company, to finance the acquisition of two vessels that will be navigating through the Black Sea trading food commodities from South America towards Central Asia through Georgia’s ports in the Back Sea, and then via trucks or trains to the port of Baku crossing the Caspian until their final destination.

Considering future Southern Gas Corridor financing

Discussing the potential financing for the future expansion of the Southern Gas Corridor (SGC), Drakinos mentioned that the bank might consider participating in the initiative.

"Azerbaijan has been a long-standing partner of the EBRD for three decades. In the past, the EBRD supported the SGC through financing its key components. We understand that the capacity of the SGC is expandable, and should a decision be made to pursue this expansion by the Azerbaijani authorities if approached, we could consider engaging with the project," he said.

The EBRD, as a transition bank, views climate mitigation and adaptation as essential transition processes, Drakinos noted. "Given this perspective, we acknowledge the challenges faced by hard-to-abate sectors in our countries. Therefore, we recognize a limited scope for fossil fuel investments, only if they can accelerate decarbonization".

He pointed out that to finance the project, it must align with the goals of the Paris Agreement and the bank’s stance on fossil fuels. "This includes strict adherence to criteria designed to mitigate the risk of carbon lock-in and promote low-carbon gas transportation. Potentially, any future cooperation on the SGC would perhaps need to demonstrate the capacity to transport low-carbon gases and ensure future-proofing of the infrastructure to accommodate these requirements," Drakinos explained.

"The EBRD is committed to ensuring that any investments we support contribute to a sustainable and low-carbon future. This means that projects like the expansion of the SGC must not only meet current energy needs but also be aligned with future demands for cleaner energy. By integrating these principles, we aim to support Azerbaijan in its efforts to achieve a swift and resilient energy transition," the official added.

EBRD's new Country Strategy for Azerbaijan

Supporting Azerbaijan's future economic diversification through strengthening sectors outside oil and gas and fossil fuels remains one of the foremost priorities for the EBRD, Drakinos pointed out.

"To date the EBRD has supported Azerbaijan’s economic development by investing in 190 projects of 3.8 billion euros in value. Most of this funding has been oriented towards Azerbaijan’s sustainable infrastructure including in the energy sector. Our yearly level of investments has been varying in tandem with demand for bankable projects from Azerbaijan’s private sector and the state sector," he said.

According to Drakinos, the bank is interested in boosting its share of private sector operations. "I can expect that in the coming years, investments in support of private sector development including through our growing network of partner banks, the Middle Corridor, and facing the global challenge of climate change mainly through power generation from renewable resources and subsequent improvements on the national grid, will be at large our areas of operational focus".

"In all our operations we will continue supporting green transition, inclusion, and digitalization in line with our own priorities and strategic direction as an institution. The above operational directions will be outlined in our forthcoming Country Strategy for Azerbaijan that will cover the period 2024 – 2029," he noted.

The EBRD rep also pointed out that the bank is in discussions with the Azerbaijani authorities and the private sector about the Country Strategy priority themes.

"We expect to complete the process and submit the Country Strategy to our shareholders for their approval later in 2024," he added.

In conclusion, Drakinos added that the 30 year-long partnership of EBRD with Azerbaijan is currently at a positive juncture steered by frequent high-level meetings fostering a forward-looking and further improving cooperation on agreed strategic directions.

"For the mid- to long-term, our partnership with Azerbaijan will be at large captured by our forthcoming Country Strategy for Azerbaijan 2024-2029. Priority themes in the Strategy will include fostering reform towards private sector development, improved governance, and commercialisation of SOE policies, supporting investment and reform to address regional challenges such as the success of the Middle Corridor as well as global challenges such as climate change. In this context, immediate future cooperation already includes support for the success of COP29 this coming November in Baku," Alkis Vryenios Drakinos concluded.