Asian Development Bank Offers Three Options to Assist in Improving Railway in Azerbaijan

Business Materials 1 September 2008 11:24 (UTC +04:00)

Azerbaijan, Baku, 1 September/ Trend , I. Khalilova/ By the end of September, the Asian Development Bank plans to coordinate with the Azerbaijani government the way it will take part in the state program on improving railway infrastructure, Baku office of the Bank said.

"We are ready to render technical assistance in development of projects which will be financed through separate loans or within multi-tranche package," a source in the office said. "We hope to agree upon on this issue soon".

ADB has already held preliminary discussions with the Azerbaijani government on prospects of granting $550mln within Multitranche Financing Facility (MFF) which calls for the concentration of several projects in one package. Technical assistance will cost $1mln.

Asian Bank first introduced this mechanism in financing of highway projects and $500mln has been allocated for this purpose. At present, two projects with a total cost of $255mln have been approved from this package. However, the Baku office is not sure that ADB will be offered railway projects to be financed totally through MMF as there is a big demand for it, but the state program is evaluated at AZN 1.252bln.

In its proposal, ADB for the first time expressed its preparedness to ease terms of financing on non-concession loans with interests rate of libor+0.6% to libor+0.2%. The credit resources on new terms are offered on railway projects. They can be granted for 25 year term with a grace period of 8 years. Besides interests on loans, Asian Bank offers to reduce commission for service (from 0.35% to 0.25%).

At present, the government is selecting investors to reconstruct railways in the direction of Russia-Baku-Iranian border (North-South transport corridor). Besides ADB, European Bank for Reconstruction and Development (EBRD) is also ready to join financing of these projects. In this case, EBRD will act together with the European Investment Bank and it is prepared to grant $500mln. The German development bank KfW is ready to finance updating of rolling-stock of State Railway of Azerbaijan and Japanese Bank for International Cooperation - electrification of railway.

The railway segment of West-East corridor is financed by the World Bank which has already granted $450mln.

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