OREANDA-NEWS. June 16, 2008. Azerbaijan still has problems with starting alternative power projects.

Riad Gasimov, Azerbaijan Investment Company’s (AIC) deputy chief executive, said that today STX Energy Co is working on the project not so active as we would like.

“At the moment STX is strongly focused on Caspian Shipbuilding Factory Project but in parallel continues consultations with Ministry of Industry and Energy on alternative power project. We expect STX Energy Co as a strategic investor to agree all matters with the government. The project is very interesting. If there is a profit, we are ready to invest,” R.Gasimov said.

AIC and STX have protocol of intentions on participation in the project, but AIC also has experience of canceling such agreements.

“We refused from participating in Temirmasin and Nordwind Energieanlagen GmbH project, because have not seen sufficient return from other parties,” R.Gasimov said.

Approximately at the same time Ministry of Industry and Energy refused from ADB \\$30 million credit project on development of small hydroelectric stations.

“Nevertheless, we will develop alternative energy, although it’s not a simple question at all. In long-term perspective even in global scale it is planned to secure not more than 10% of power production due to alternative sources,” Minister of Industry and Energy Natig Aliyev.

Protocol with Temirmasin and German Nordwind Energieanlagen GmbH supposed construction of 6 wind power stations with 13,200 MWt-hour capacity. The Project must be started till the end of 2007 and construction of 6 stations for 2,200 MWt-hour capacity is foreseen with further leading to project capacity.

Earlier Minister of Economic Development of Azerbaijan Heydar Babayev said that delivery of main equipment through Volga-Don channel is being discussed. In parallel financing of the project is being solved. During our negotiations with Varel Freeman, EBRD Vice President, the bank was offered to participate in. Azerbaijan Investment Company (AIC) is also ready to purchase 20% of the stake. At the same time Sumgait Electricity Network has expressed interest to purchase energy from the station.

Terms of feasibility report making by South Korea’s STX Energy Co on the project of wind power station construction in Gobustan region of Azerbaijan have been disrupted.

Feasibility report readiness was scheduled for late 2007.

Besides, there is a range of basic issues, including first of all the order of supply and sale of electric power to be generated at the wind station. For this reason some projects on use of alternate power potential have come to a standstill or have been stopped.

Earlier it was informed that 15 ministries have given their appreciation on the feasibility report. The final draft of the report will be submitted for approval of the Cabinet Ministers and the President’s Office. The Azeri party has obtained from the report maker, South Korea’s STX Energy Co, to reduce construction terms of the future wind station in Gobustan region to 14 months.

At the moment the project is estimated at around \\$40 million, but in the future the figure can change.

The project completion was scheduled for late 2008 or early 2009.

At primary stage a 20 MWt wind power station is to be constructed with 10 plants by 2 MWt. Within Stage 2 station’s capacity will be increased up to 60 MWt. Preliminary cost of the project is \\$40.714 million. Construction term is 18 months. STX is ready to cover 20% of the project cost itself and raise loans from commercial banks to cover the rest 80%. Investments from Azerbaijan Investment Company at the level of 20-25% of the project cost are not ruled out. Prime cost of 1 kWt/h is estimated at \\$0.08 (it is higher than valid retail tariff of \\$0.07 or AZN 0.06) and recoupment during 20 years \\$122 million.