WEEKLY ECONOMIC REVIEW

Last week Etibar Piriverdiyev, the President of Azerenerji Joint-Stock Company, held a news conference dedicated to the state of energy systems and arrangements for the winter season. Pirverdiyev began his report with unpleasant news. It turned out energy situation in Azerbaijan is going through tough period. Russia notified that the considerable cut in the electricity supply this year. If earlier in winter period the capacity of electricity supply was approximately 300 MW, next year the figure will not exceed 60MW. Russia, which earlier used to supply 100 KW/h of electricity a month, will reduce the electricity deliveries 30 KW/h a month next year.

Russia made a statement on increase of tariffs for electricity delivery to 4.1 cents per 1 KW/h, whereas last year Russian exported 1,033mln KW/h electricity to Azerbaijan at the price of 2.8 cents per 1 KW/h.

Until 30 November 2006 Azerbaijan will sell to Russia electricity at the price of 1.6 cents per 1 KW/h in the volume of 350mln KW/h in the night shift. In it turn Russia will supply 1bln kW/h electricity to Azerbaijan at the price of 3,636 cents per 1 KW/h in day hours.

Moreover, the cost of the gas delivered by Russia is increased up to $230 a 1,000 cu.m, which is sure to increase the prime cost of the production of the electric power. The Russian gas is mainly delivered to the electric power stations for the production of the electric power.

Presently, the electric power is delivered to the distribution companies for 1.4 kopecks (Azeri currency 100 kopecks = 1 AZN) per 1 kVt/hour, and the population receives it for 2 kopecks per kVt/hour.

It is even impossible to refuse from import and rely on own capacity. Azerenerji has officially appealed the Government of Azerbaijan with a proposal on cessation of the activities of Ali-Bayramly HPS. At present it is an only power grid with technical parameters complicating the situation in general. Some 440-450 grams of conditional fuels are spent to generate 1 KWatt/hour of electric energy and that is a very high indicator. Azerenerji has determined a priority capacity for new plants to be installed in the Ali-Bayramli HPP within its reconstruction.

Azerenerji is negotiating with the Islamic development Bank (IDB) on the issue of financing the reconstruction of the Mingachavir Hydroelectric Power Station (HPS). Work on the reconstruction of the Station, removal of the Electric Power Station control centre and one of its energy blocks that has been stopped, are expected to be implemented at the expense of the credit of IDB.

Despite work carried out in the electricity transmission lines, the bad state of distribution of networks, and equipment results on problems. Over the past 4-5 years no investment has been raised for electricity distribution networks of Absheron peninsular.

In this situation Azerbaijan is obliged to rely on alternative energy sources. Thus, Azerbaijan and Iran signed a contract on work of the energy systems of the two countries in a parallel regime from 1 December 2006. It entails Azerbaijan receiving 600-700 kVt electric power monthly from Iran in the winter period when a deficit is observed, and returning it in the summer period when Iran sustains a deficit,

The electric power will be delivered via the 230KV-electricty transmission lines Imishli (Azerbaijan), Parsabad (Iran) and Astara (Azerbaijan) and Astara (Iran).

Azerbaijan has proposed Georgia to carry out the electric power interchange. The Georgian party may supply Azerbaijan with electric power at night when Georgia experiences the excess of this energy, and be supplied back with the same volume in the day time. Georgia is ready to supply electricity on these conditions in rush hours. We have agreed, but should wait until winter, he stressed.

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