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ADB extends period of use of loan within highway project for 3.5 years

Business Materials 10 August 2010 13:48 (UTC +04:00)

Azerbaijan, Baku, Aug.10 / Trend, I.Khalilova/

The Asian Development Bank (ADB) extended the period of use of ADB's loan by Azerbaijan on the project of reconstruction of the Masalli-Astara highway till Dec.31 2013, the Bank's Baku office said today. Since the entry into force of the loan agreement in January 2008, the loan resources have remained practically unused, and the duration of their use expired June 30, 2010.

"In this regard the Government of Azerbaijan has requested the Asian Development Bank (ADB) to extend by three years the period of use of ADB's loan on the project of reconstruction of the Masalli-Astara highway. This proposal was adopted by ADB, because a normal practice in other projects is a period of 4-5 years," Bank's Baku office said.

The road will be constructed with a $200-million loan provided by the ADB. The government's participant share will total $49 million.

One of the main issues for the beginning of the project is to implement the plan on purchase of lands along with the Masalli-Astara highway. Under the terms of the loan agreement, the issue with the purchase of the lands was to be resolved by June 2010. As the government told this process is almost completed on the first section (with length of 21 km) of Masalli-Astara highway, which was a main demand of the bank.

One of the main issues for the beginning of the project is to implement the plan on purchase of lands along with the Masalli-Astara highway. Under the terms of the loan agreement, the issue with the purchase of the lands was to be resolved by June 2010. As the government told this process is almost completed on the first section (with length of 21 km) of Masalli-Astara highway, which was a main demand of the bank.However, in connection with Azeryolservis JSC's cancellation of a tender to determine the contractor, the construction work on this section will not be able to be started in October 2010 as previously planned.

The Transport Ministry said although during the third quarter all the issues with the selection of contractor should be addressed, respectively, starting date of construction is not moved. "According to the conditions of the ADB, the contractor may be declared only after the completion of the purchase of land, respectively, the tender for its definition will be announced this quarter," said the ministry..

The Masalli-Astara Highway is divided into three sections. A contractor is now being found to construct the first 21 kilometers of the road.

The ADB Board of Directors approved the project Sept. 28, 2007. Under the agreement, the Asian bank issued loans worth $190 million partially from its common resources for 24 years with a four-year grace period and libor +0.6 interest rate. Loans were also issued at $10 million under preferable conditions for 32 years with an eight-year grace period and one-percent interest rate.

Credit for the Masalli-Astara Highway was allocated within the Multitranche Financing Facility mechanism with a sum total of $500 million to finance three road projects. Two projects worth $255.4 million have been coordinated. The bank has provided up to 2014 to use the remaining funds.

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