KfW water supply project may raise price in Azerbaijan

Business Materials 16 January 2013 19:23 (UTC +04:00)

Azerbaijan, Baku, Jan. 16 / Trend, I. Khalilova /

Some $150 million more is required to implement the "Open municipal infrastructure program" project, funded by the Azerbaijani Government, the Swiss State Secretariat for Economic Affairs Seco and the German Development Bank KfW, the government told Trend on Monday.

"It is necessary to draw $150 million more than the given the cost of the project at $366 million. There are already two KfW loans for a total of 137 million Euros and a Seco grant worth 10 million Euros", a source in the government said.

The funds are intended to finance the modernization of water and sewage systems in Ganja and Sheki which constitute the 2nd and 3rd stages of the "Open municipal infrastructure program". Costs may be extended given the expansion of Ganja caused by growth in the neighboring areas of Dashkesan, Goranboy, Goygol and Samukh regions.

"KfW has announced its intention to allocate 120 more million Euros, which in principle could cover the cost of the project set forth during the Azerbaijani-German talks in early December", the government said. "The bank did not give a financial agreement on the loan, so a decision will be made depending on the offered terms."

KfW's first loan was delivered for a period of 40 years with a grace period of 10 years and an interest rate of 0.75% per annum in accordance with the agreement worth 37 million Euros signed in Bern in October 2006. The second loan worth 100 million euros (the agreement signed in December 2012) was signed for a period of 12 years with a grace period of three years and a rate of 1.96% annum (the bank preliminarily offered 2.35%).

"Credit conditions are being regulated depending on the market situation at the time of signing of the financial contract", the source said.

KfW's Baku office told Trend that there is the potential for project expansion in connection with the decision to increase the territory of Ganja and the industrial features of the town. The project was prepared with consideration for the both Ganja's population which exceeds 350,000 people, and Sheki's which is around 75,000 people.

The German Development Bank is ready to completely reconstruct the water-sewerage system of Ganja and Sheki within the second, third and fourth phases of the program. The second phase refers to the water networks and existing sewerage lines in the two towns, and the third phase will cover the construction of treatment plants and the construction of a new sewerage network.

Seco plans to cover consulting services and partially restore infrastructure in Sheki.

Ganja is located in the west of the country 345 kilometers from Baku, Sheki is 380 kilometers from Baku.