Azerbaijan, Baku, Dec. 6 / Trend I.Khalilova /
The Asian Development Bank (ADB) has prepared a new estimate for works to improve water and sanitation services in Goychay, according to which there was held a reassessment of costs, the ADB Baku office reported on Monday. The project will be funded through the first tranche of the ADB as a part of the multitranche financing (MFF) in the amount of $ 600 million.
"Under the prices proposed by the contracting companies in the JSC Azersu's ongoing tender, the costs exceeded real prices by 100 percent," the office said. "In this regard, there is a need to prepare new cost estimates for the price revision that was made by a consultant attracted by the ADB."
The Bank estimates that the reconstruction of water supply and sanitation in Goychay requires funds just above $ 60 million.
Given these estimates, the JSC Azersu should announce a new tender, which will depend on the decisions of the Azerbaijani government.
Delays in this process are linked with the lack of a consultant, which has to follow the further progress of the project. The office reported that the tender for definition of a consultant of the project has been completed and the government is expected to announce the outcome of the tender.
The project's initial cost hit $39.9 million. The ADB first allocated a loan amounting to $30 million to finance the project, but $9.9 million fell to the government's share. ADB and Azerbaijani government signed a loan agreement on the first tranche of $75 million as part of MFF to implement a project to improve water supply and sewage services in Goychay and Nakhchivan Dec.17, 2009. The funds are designed to finance work in two regions, although plans previously anticipated three regions. These funds, including the government's share of $25 million, are sufficient to fully finance the work in these two regions.
Under the loan agreement, the ADB's first tranche loan of $75 million is allocated for a 24-year term with a four-year grace period and interest set according to its LIBOR-based lending facility.
The first tranche will cover additional costs in connection with the rising costs of the project to improve water supply and sewage services in Agdash, Goychay and Nakhchivan. The project was approved five years ago and designed in 2004. Prices on construction materials, especially sewage materials, significantly increased over this period. The construction of modern sewerage system facilities covered by the project also affects its value. The ADB project also provides for the complete restoration of water supply and sewage services in the selected regions.
Contractor is already defined to carry out construction works in Nakhchivan.
ADB approved second tranche worth $350 million to cover the expansion of the coverage zone to four other cities - Agdash, Agjabadi, Beylagan and Balaken.
The third tranche is expected in the amount of $175 million and will create centralized water supply and sewerage systems around Baku.
The MFF is also establishing a foundation for an eight-year partnership between the ADB and the state, allowing for phased investments, and is backed by a clear reform strategy and program in the sphere of water supply and sewage system.
The total cost of the MFF was approved in the amount of $ 600 million by the ADB Board of Directors in Azerbaijan in September.
AICO Consulting / European Consultants Organization is Azersu's consultant in this project.