OREANDA-NEWS. September 07, 2009. Curator of energy projects of the Asian Development Bank (ADB) Tianxua Luo completed the mission to Azerbaijan.

Azerbaijani sources say that the mission of T.Luo was connected with realization of the first energy project of the bank in the country. “The specialist of the bank merely conducted the survey of realization of project Power Transmission Enhancement Project, nothing more,” a source indicated.

Currently the Bank is realizing Power Transmission Enhancement Project in energy sector of Azerbaijan and has announced a tender procedure for general contractor. The Project will enable within several years to reconstruct electric transmission lines which have been under operation for more than 60 years.

ADB extended USD 160 million for 20 years with 5-year grace term and annual rate of Libor-0.08%.The Bank announced officially project commencement since 26 January.

Presently, Power Transmission Enhancement Project is the most quickly implemented ADB project in the region. Its development, approval and coming into effect took only 3-4 months that is a good indicator.

The Azerbaijani government stated of the project commencement earlier this January.

The Azerbaijani government stated of the project commencement earlier this January.

The 25-year USD 160 million loan was extended for replacement of existing power lines that have been in use for about 60 years. Over 20% of the country’s energy equipment and more than half of its network facilities are well beyond their useful life, resulting in frequent power failures, system losses, and the threat of a collapse of the energy grid.

The bank estimated the project at USD 240 million, USD 160 of which it is ready to disburse and remaining USD 80 million will be covered by Azerenerji OJSC.

The aim of the project is to strengthen potential of power transmission, liquidate regional disbalance in development, and improve power-supply quality. Within the project it is planned to construct a 220 KV transmission line (2 branches) from Mingechevir hydroelectric power station up Absheron to substation, to construct 220/110 KV substation combined with 110 KV transmission line. ADB also determined terms of approval of Power Distribution Development Investment Program to become part of ADB Multi-Tranche Financing Facility (MFF) for electric power sector of Azerbaijan.

According to the Bank, approval of the project is scheduled for 2010. The ADB expects to disburse USD 50 million of its Ordinary Credit Resources (OCR) for project implementation. It has already allocated a USD 1 million for project preparing and Vision RI carried out the work.

The Bank indicates that the 2005 ADB sector review mission identified renewable energy and gas supply in regional towns as investment niches.

The Country Strategy and Program Update 2006 identified the deteriorating physical infrastructure and their demand for rehabilitation.

The Government in its “State Program for Development of Fuel and Energy Sector in Azerbaijan (2005-2015)” sets out a challenging investment programs. The annual growth of power demand is expected to be 4.7% through 2015. The power sector will require an estimated investment of USD 3.8 billion during 2005-2015 for construction of new thermal and hydropower plants (1,500 megawatt), modernization of existing generation facilities, and strengthening power transmission grid. The proposed program will improve electricity supply, both quantity and quality, to all consumers, contributing to achieve the country’s socioeconomic development targets. Under ADB estimate, country’s power sector faces three major development challenges: (i) deteriorating infrastructure with poor quality electricity supplied and high losses; (ii) emerging shortages of peak generation capacity in some regions; and (iii) inadequate investment and maintenance. Over 20% of energy equipment and over half of the network facilities are well beyond their useful life. The availability of power generation capacity is insufficient to meet peak system demand and bottlenecks in the power transmission network are expected to result in a distinct deterioration in quality power supply. The State Program on the Development of the Fuel and Energy Sector of the Republic of Azerbaijan (2005-2015) sets out an investment program. The annual growth of power demand is expected to be 4.7% through 2015. The power sector will require an estimated investment of USD 3.8 billion during 2005-2015 for construction of new thermal and hydropower plants (1,500 megawatt), modernization of existing generation facilities, and strengthening of the power transmission grid.

The proposed ADB multi-tranche financing facility for power sector development investment program will contribute to economic development in Azerbaijan through improved power sector operation. The investment program will focus on: (i) promoting pilot small hydropower development in the remote and underdeveloped rural region to supplement energy balance; (ii) strengthening transmission and distribution network to improve power supply reliability, reduce transmission and distribution losses, and enhance energy efficiency; and (iii) policy support, institutional restructuring and capacity building.

The outcome of the PPTA is to develop a financing framework agreement and an investment program that is economically, financially, and technically feasible, and socially and environmentally acceptable.

An expected result will be: (I) specification of investment programs in energy sector; (II) making of restructuring and business plans for Azerenerji (national energy operator; (III) a development and financing program coordinated with the government and ADB; (IV) completion of feasibility report making process and thorough check.

In the course of preparing and realization of the investment program there will be conducted surveys and consultations with interested central and local authorities, NGOs, private sector, consumers, including vulnerable groups of the population and large partners in the area of energy sector.

MFF is estimated at up to USD 500 million and is oriented currently for assistance to power distribution system, including upgrade of low-voltage networks in the country’s regions and installation of electric meters for consumers.