OREANDA-NEWS. November 29, 2007. European Bank of Reconstruction & Development does not hold out hopes for approval of a loan for Azerbaijan State Railway Company (ADDY).

The Baku-based EBRD office informed that the EBRD Board of Directors has re-postponed another time consideration of the loan issue for February 19, 2008.

EBRD is going to extend $500 million for transport projects in Azerbaijan, but consideration of the ADDY loan matter has been postponed repeatedly. Earlier EBRD planned its approval on April 25, June 27, July 25, October 17, October 25, November 7, December 5, 2006  and then on February 6, March 20, May 15 and June 12, and September 4, November 24, 2007.

EBRD is ready to disburse a $50 million loan for the $70 million locomotive reconstruction project. Awarding of a $1.5 million EBRD grant is possible within the credit for preparing a detailed project and project group activity. The loan will be given by two tranches: the first of $27 million is intended for purchase of locomotives and the second for creation of locomotive service bases in Balajari and Beyukshor, and purchase of spare parts for locomotives. Capital repairs of 60 electric and diesel locomotives is also planned.

The project financing conditions require issue of ADDY shares, adoption of its restructuring plan, and a plan of its transfer to international accounting standards. The project in accordance with these requirements was prepared due to the UK Trust Fund’s grant of EUR 49 500, and making of a work plan due to German government’s grant of EUR 500 000. Azerbaijan is ready to borrow no more than $30 million.

In connection with Azerbaijan’s request to reduce EBRD financing the Bank has announced selection of the contractor to renew the project prepared in November, 2005.

ADDY intends to use the EBRD loan to modernize its locomotive fleet to have a possibility to satisfy growing demand for oil transportation through Caucasus. The offered project will demand purchase of equipment and services for reconstruction of 14 diesel-electric locomotives, 10 locomotives, and railway equipment.

The bids from the tender participants have been received since the 3rd quarter of 2007. The tender procedure will close on March 31, 2008.

Earlier it was expected to finish the tender on March 29, 2007 but because of discussion of State Railway Development Programme 2007-10 all the project consultations were halted. The Programme stipulates AZN 1.2 bn of investments. 40-50% of these finances will be covered by State Budget and the rest due to foreign investors and banks.