Azerbaijan launches first ADB multi-tranche financing for water economy

Business Materials 6 July 2011 14:26 (UTC +04:00)

Azerbaijan, Baku, July 6 / corr Trend I.Khalilova /

To continue water supply and sewage services improvements, Nakhchivan has already begun to implement the first cut of its multi-step MFF financing system, supplied by the Asiatic Development Bank (ADB) for water services in Azerbaijan, the Baku bank representative said on Tuesday.

"The ADB has allocated $75 million out of the MFF to fully cover two regions (Nakhchivan and Goychay), including $28 million allocated for the Nakhchivan Autonomous Republic," the source said.

The contractor carrying out construction works in Nakhchivan is "Gemi Qaya", selected as the regional executor of the project. The decision was made by the State Committee for Land Reclamation and Water Management of the Nakhchivan Autonomous Republic.

"Work in this field continues to be realized in relation to a plan based on the first credit of $30 million, granted in 2004 for the rehabilitation of water supply systems in Agdash, Gekchai, and Nakhchivan", the government said. "Nakhchivan was allocated $10 million from this fund."

A water purifying device is planned to be built in this area for the first time, with a tender issued specifically for this respect. Some $10 million is required to construct a water purifying plant.

The ADB dispatched an engineer to Azerbaijan to become familiar with the work done in Nakhchivan and Goychay.

Followingtheunsuccessfultender , anewestimatewasdevelopedtoimprovewaterandsanitationservicesinGoychay .

Under the proposed prices of the contracting companies, within the perimeters set by the tender announced by Azersu, the costs exceed 100 percent of the real price. In this regard, new cost estimates for price revisions must be prepared by a consultant from the Asian Development Bank

Azersu issued a repeated tender for Goychay to determine contractor and tender procedures. These are expected to stop by July 25.

To date, the ADB has financed two projects to improve water and sanitation services.

ADB and the Azerbaijani government signed a loan agreement on the first tranche of $75 million on Dec.17, 2009, as part of the MFF, for the implementation of the water supply and sewage services improvement in Goychay and Nakhchivan. The funds are designed to finance work in two regions, although plans previously anticipated three regions. The project's initial cost hit $39.9 million. Funding for the project expires on June 30, 2011.

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 Azerbaijani government is providing $25 million.

The first tranche will cover additional costs associated with the project's rising costs for improving water supply and sewage services in Agdash, Goychay and Nakhchivan. The project was approved five years ago and designed in 2004. Prices of construction materials, especially sewage materials, significantly increased over this period. The construction of modern sewage 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.

The total cost of the MFF was approved in the amount of $600 million by the ADB Board of Directors in Azerbaijan in September 2009.

The AICO Consulting Ltd / European Consultants Organization is the consultant of Azersu on water project.