Azerbaijan Prolongs Deal with KEPCO to Construct Private Thermoelectric Power Station

Azerbaijan, Baku, 8 October / Trend corr. I.Khalilova /Azerbaijani Economic Development Ministry (EDM) has prolonged the term of the first deal to construct the private thermoelectric power station with 818 MWt capacities in Azerbaijan. The deal was signed with the Korean KEPCO company on 24 September 2007, until June 2009, Askar Alakparov, chief of the EDM Foreign Investments and Technical Aid Coordination Department, said.

Despite of the deal, no agreement has been reached to launch construction on the first private thermoelectric power station in the country. Although the proposals (deal package) have already been submitted to the Cabinet of Ministers for consideration. The package includes nine deal projects, which are necessary to implement the deals including the agreement to construct, manage, finance, participation of the Azerbaijani Investment Company (AIC), as well as land allocation.

The main document is to define the scheme of energy production in station: the Azerbaijani side supplies natural gas to the station and receives produced power energy. At the same time, investor and operator are paid for developing electric energy from gas. Under the project, the Azerigas CJSC will deliver gas to the station, and Baku Electricity Network OJSC will receive the energy.

The Azerbaijani Government resumes the responsibility to create an infrastructure to supply the station with water, gas, as well as to lay under ground ways and export of electric energy.

If Kepko's proposals will be favorable for Azerbaijan, the station will be constructed within 3-3.5 years. Currently Kepko's proposals envisage construction of the station in the Alat settlement near Baku and 25 years teram to manage the project.

The cost of the project on construction of a private electric station in Azerbaijani Alat settlement capable of 818 MW is estimated at AZN 640mln (€523mln. According to the feasibility study by South Korean KEPCO company, the station will be comprised of two gas turbines and one steam turbine.

As a result of installing modern gas turbines in the station, the station will use 0.185cu.m of gas to produce 1 KW electricity, i.e. some 5.4KWt/h electric energy will be produced from 1 cu m of gas. Construction cost of the station totals AZN 783 (€640).

Taking into consideration the similar project has already been implemented in Azerbaijan and in all post Soviet countries for the first time, EDM invited international experts. French BNP Paribas was involved as financial consultant, British Allen & Overy as legal consultant, MottMacDonald as technical consultant, Azerbaijani MGB as local legal consultant.

No funds are planned attract from the state budget to implement the project. Investor intends to implement the project at its own expenses. Under the memorandum with KEPCO, the Azerbaijani Investment Company (AIC) is ready to acquire 25% shares in the project. AIC's participation share totals $80mln. Totally KEPCO is about to finance 30% of the project at the expense of attracted loans. All the documents on the project are being developed and will be signed after the Government's decision.

The correspondent can be contacted at: [email protected]

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