The Asian Development Bank (ADB) has approved a $750 million multitranche program loan facility to upgrade power distribution networks in Azerbaijan, that will benefit over 1.4 million consumers and give the wider economy a lift by providing more reliable electricity supplies.
Azerbaijan currently generates enough electricity to meet domestic needs. But electricity supply outside Baku remains unreliable with distribution network equipment at the end of its life, resulting in frequent power outages in many secondary cities and rural areas. The distribution network also suffers from sizeable system losses outside the capital.
“This ADB program will help address the bottleneck in electricity supply and provide round-the-clock and reliable electricity to households and entities in secondary cities and rural areas in Azerbaijan,” said Sean M. O’Sullivan, Director General, in ADB’s Central and West Asia Department. “It will also help promote inclusive economic growth, foster new business opportunities for small- and medium-sized enterprises, and reduce urban-rural income disparities.”
The loan facility, which is earmarked to be rolled out in 3 tranches of $250 million each, will rehabilitate distribution network substations and lines, replace current low quality customer service lines and install modern, tamper-proof smart meters across the country. The loan will also finance training and other support to improve the financial management and operational performance of the state power distribution oversight company, Azerishiq Open Joint-Stock Company (OJSC).
The investment underpins the government’s commitment to achieve efficient use of energy resources and to provide sufficient and reliable electricity supply to all consumers. ADB supports the government efforts in sector reforms, including developing and implementing an energy sector financial recovery plan which aims to improve the sector’s financial performance and sustainability.
The introduction of loss reduction and collection improvement measures in Baku by Azerishiq, a distribution company for Baku, including the introduction of modern metering and billing systems, has seen power losses drop to levels in line with many European countries. This investment will help Azerishiq to be able to replicate this experience elsewhere in the country.
The multitranche facility will run for over 6 years with an expected completion date of end December 2022. The first tranche of $250 million will cover investment activities from mid-2016 to the end of 2018.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.