Azerbaijan Refuses Foreign Loan for Energy Project

Azerbaijan, Baku, 30 June / corr. Trend I. Khalilova/ The Azerbaijani government suspended the loan of the Japanese Bank for International Corporation (JBIC) worth 22.28bln Japanese yens (over $275mln) for the construction of second combined-cycle plant in Shimal hydro-power electric station, a source in the government said on 30 June. JBIC granted loan to Azerbaijan for 40 year period with grace period of 10 years and 0.75% interest. [Recently, many international organizations refuse to grant soft credits to Azerbaijan because of high economic growth].

The loan was suspended because of the delay in the selection of a contractor for the construction of the combined-cycle plant. Each of two tender took half year; however, they did not yield results because of the non-conformance of the financial and technical proposals with the company's requirements. Therefore, Azerenerji appealed the government with a request to suspend the loan and it is ready to repay the loan by out of its own proceeds.

There were two participants in the second tender. The proposals of one of participants, the Chinese CNEEC were not accepted because of the absence of the bank guarantee. The second one, the Japanese Mitsui/Huidai refused to lower the cost of its proposal which exceed the JBIC loan by twice. The Chinese company proposed to construct the combined-cycle plant at $403mln and Japanese - $448mln.

Azerbaijan can finance (out of proceeds of the public budget and Azerenerji) the construction of the combined-cycle plant as talks on attracting foreign loans from the other commercial banks or international finance organizations were not held.

Some $160mln is required to purchase equipment and the remaining work can be realized by opening credit line. Azerbaijani company AZENCO can be involved in the construction work.

The feasibility study of the project was developed in 2004 by the alliance of the consulting companies TEPSCO ( Japan)-Enprima ( Finland). The tender was issued for the designing four 220-kilowatts of electricity lines and 220/110 kilowatts of sub-station, building and assembly jobs, testing and putting exploitation.

The construction will take 27 months. The second combined-cycle plant was planned to be launched in 2009 earlier.

The official exchange rate for 30 June is 0,8116 AZN/USD.

The correspondent can be contacted at: [email protected]

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