Price Rise in ADB’s Project in Azerbaijan to be Covered due to Government

Business Materials 30 August 2008 14:28 (UTC +04:00)

Azerbaijan, Baku, 30 August /corr. Trend I.Khalilova / Asian Development Bank (ADB) plans to hold re-assessment of the project on improvement of water-supply system and sanitary services in Agdash, Goychay and Nakhchivan after the beginning of spending funds, a source at the Baku Representation of Bank said. "Project rose in price by minimum $5-6mln, but the total cost of works will have to be defined concretely after the beginning of the use of the funds," the same source said.

Additional financing will be provided due to an increase of Azerbaijan Government's participation share. The current design of the project was prepared in 2004, and prices for the construction materials considerably have increased since then.The first tender on the selection of contractor for the construction of water pipeline will be summed up supposedly in October - November 2008.

The consultant of Azersu JSC for the water project is AICO Consulting Ltd/European Consultans Organization. Consultant prepared report on detailing of the works, envisaged for three years. As a result, the final cost of project will be defined concretely. According to the preliminary estimations, over three years the project raised in price approximately by $5mln. The representation considers that any rise in price of project will be covered due to an increase of Azerbaijan Government's participation share.

The initial cost of project totaled $39.9mln. To finance the project, the Asian bank allocated $30mln credit, with $9.9mln falling on share of the Government. For the period of realization of the project - until 2010, it is planned to hold structural reformations for the development of the water-supply system, infrastructure in Agdash, Goychay and Nakhchivan.

ADB's credit consists of two parts: $20mln was provided on the privilege basis from the Asian Development Fund for a period of 32 with the eight years payment by installments. In the privilege period the annual interest rate will be 1.0%, and after its completion - 1.5% per year. The remaining part of the credit totaling $10mln is provided on the conditions of usual basic resources of the ADB for a period of 25 years with the six year installment and the interest rate in accordance with libor.

It is supposed that the tariffs in these regions will be doubled after the realization of the project. Today in Agdash the tariffs for water total AZN 1 for the family and AZN 1 for the canalization services, in Goychay the family departs AZN 4 per month for the use of water-supply systems and canalization.

Rate on 30 August is 0.8134 AZN/USD.

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