ADB Approves First Private Sector Infrastructure Investment in Azerbaijan
The Asian Development Bank (ADB) is providing EUR20 million to an integrated cement plant in Azerbaijan to expand output and improve fuel efficiency. The loan marks ADB's first ever private-sector infrastructure investment in the Central Asian nation.
The loan, approved by ADB's Board of Directors, will help "Garadagh Cement" Open Joint Stock Company raise its cement production capacity by around 30% to 1.7 million tons per year. At the same time, the replacement of the existing four wet kilns with a single, more efficient dry kiln will significantly reduce the plant's fuel consumption, cut water consumption and effluent discharge, and bring the plant in line with international environmental standards.
Azerbaijan's economy is one of the fastest growing in the world. Given sustained commercial construction and the government's wide-ranging infrastructure program, "Garadagh Cement" estimates medium- to long-term demand to grow 5%-8% per year. With limited domestic production, Azerbaijan is currently forced to import much of its clinker and cement. Clinker is an intermediate cement product.
"Additional supply of high-quality, locally made cement will help the government and others complete the infrastructure needed to boost regional trade and tourism and diversify the country's sources of economic growth beyond the oil and gas sector," said Philip Erquiaga, Director General of ADB's Private Sector Operations Department.
"Garadagh Cement" is majority owned by Switzerland-based Holcim Ltd. The plant, 35 kilometers from the Azerbaijan capital of Baku, is the only integrated clinker and cement producer in the country. In 2008, the European Bank for Reconstruction and Development (EBRD), a minority shareholder in "Garadagh Cement", was mandated to arrange the loans needed to help upgrade the plant. ADB's loan will be in parallel to EBRD's funding.
"This project represents a key opportunity for ADB to support Azerbaijan's infrastructure development in a way that increases efficiency and brings valuable energy savings," said Don Purka, Senior Investment Specialist of ADB's Private Sector Operations Department. "At the same time, it demonstrates the opportunities for foreign direct investment outside the oil and gas industry."
The EUR325 million project will be financed by EUR140 million in senior debt from the EBRD and ADB, subordinated debt from Holcim and from the cash flow of "Garadagh Cement".
A steering committee of "Garadagh Cement" and Holcim officials will oversee the project, with CBMI Construction Company, a subsidiary of Sinoma International, contracted to carry out the main part of the investment under a turnkey engineering, procurement, and construction contract.