Azerbaijan Probable to Cover Energy Demand out of Country: Interview with Deputy Minister for Economic Development (video)

Oil&Gas Materials 12 October 2007 15:39

Azerbaijan, Baku / corr Trend I.Khalilova / The Azerbaijani Ministry of Economic Development has intensified work over implementation of strategically important project for ensuring energy security and improvement of ecologic situation. These are the construction of private power stations and enterprises for refinery of garbage. Mikayil Jabbarov, the Azerbaijani Deputy Minister for Economic Development, spoke about these plans of the Government in his exclusive interview for Trend .

Question: Korean company KEPKO will construct the first private electricity power station in Baku. What is the capacity of the second private power station in Baku and which fuel will operate it?

Answer: The capacity of the first and second private power stations in Baku will comprise 700 MW. The type of field that the station is to operate will be defined after the estimation of investors' proposals. Gas is considered to be the most economical type of fuel for electricity production. However, every project has its specifics and it would not be right to out any frames until the commencement of the project. As to the necessary capacity of the stations, we consider that the country's domestic demand in electricity will increase taking in to consideration the rate of economic growth. We do not exclude that using own natural resources Azerbaijan will cover the electricity demands even out of the country.

Question: What is the probability of participation of international organizations in financing the construction of private power station in Azerbaijan?

Answer: The international financial institutions will finance the considerable part of projects. Definite part of the capital will provided by shareholders in the project and the rest by banks.

Question: Did the Government determine the place of the second private power station?

Answer: The place will be defined later, Alat village, where the first station will be placed in south of Baku and the second station will be placed in northern direction.

Question: What is the probability of the participation of the Azerbaijan Investment Company in these projects?

Answer: There is a probability. Such project might interest AIC, but this company will itself take a decision on this issue. The projects should be commercially profitable.

Question: Taking into consideration the absence of experience on establishment of private power stations, what privileges could be offered to investors?

Answer: The vitality of the project will not depend on privileges. We do not implement projects through any privileges. Instead of privileges it is necessary to speak about guarantees of predictability and definite parameters, which can be applied during the vitality of the project, as well as stabilizing factors - investment climate, macroeconomic stability, and expenses concerning fuel. These are on focus our discussions. To avoid any discrimination between local and foreign electricity producers, no privileges should be applied on purchase of fuel for electricity production.

Question: What tasks are put for consultants for the construction of the second private power station?

Answer: The consultant is in charge of organizing a tender to dispatch proposals to present the projects to energy companies. Many companies, including Sumitomo, International Power, AES, Hanower, take interest in this sector of Azerbaijan. These and other companies will receive proposals calling to send their own projects. Some 3-5 months will be allocated for reply proposals and a couple of months will be spent on their consideration. Afterwards, more efficient proposal meeting Azerbaijan's interest will be selected. Talks will be held with consultants on the legal agreement, which will be taken as basis for implementation of the project. The process to last by the commencement of physical work will take approximately 15-18 months.

Question: How will the guarantees for investment and macroeconomic stability be offered investors?

Answer: Companies, which take interests in the construction of stations, are mainly involve in the energy sector. To be more exact, they carry out projects to sell them further. The urgent priority for them is the maximal guarantee on long-term assets. They will produce electricity for 15-20 year or longer. As to the fate of the power station, the nature of relations between the Government and private investors after 10-20 years, it will be defined through talks and agreements. We have not reached this stage.