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ADB Urban Water Supply and Sanitation Loans Signed

Baku, Azerbaijan (29 November 2005) – The Asian Development Bank (ADB) and the Government of Azerbaijan today signed two loans totalling US $30 million to help improve water supply and sanitation services in the regional towns of Agdash, Goychay and Nakhchivan.

The loans will also finance institutional reform and capacity building activities, including the establishment of new utilities in the form of joint stock companies with modern managerial skills, providing efficient and financially viable long-term operations.

In addition to the loans, ADB will be providing a technical assistance grant of $500,000 from its Japan Special Fund, funded by the Government of Japan, to help support sector-wide reforms, and address legal, regulatory, administrative and institutional frameworks.

"For Azerbaijan, ADB assistance is not simply financing, but serves as a source of knowledge for policy and structural reforms, strategy implementation, innovative project design, and sound implementation," says Matthew Westfall, Country Director of the ADB Azerbaijan Resident Mission. “This important project will help place the water supply and sanitation sector on a sustainable footing, reduce poverty, and bring clean water and better health to the people in the regions.”

The project will establish a joint stock company in each project town, which will own the assets constructed and rehabilitated under the project, enjoy appropriate autonomy in decision-making, and be accountable to AzerSu in Agdash and Goychay, and to the State Committee for Construction and Architecture in the Nakhchivan Autonomous Republic. To promote efficient service provision for consumers, the project will facilitate introduction of management contracts with private sector operators that will be remunerated on the basis of their performance.

In addition to improving network infrastructure and establishing new water companies with access to strong operational and management capacity, the loan project will support investments to rehabilitate pumping stations, strengthen pipe networks, introduce supply zoning, and install meters. This will lead to improved water quality, greater continuity of service, higher water pressure, and the introduction of volumetric metering, a required first step towards achieving economic viability of the new water companies.

ADB will cover 75% of the project's total cost of $39.9 million through two loans. A $20 million loan comes from ADB's concessional Asian Development Fund, carrying a 32-year term including a grace period of eight years. Interest charges are 1.0% per annum during the grace period and 1.5% per annum after. A $10 million loan comes from ADB's ordinary capital resources. It carries a 25-year term including a grace period of six years. Interest will be determined in accordance with ADB's LIBOR-based lending facility.

The Government will contribute $9.9 million toward the project cost. AzerSu is the executing agency for Agdash and Goychay subprojects, and the State Committee for Construction and Architecture of Nakhchivan Autonomous Republic for the Nakhchivan subproject.

The project is due for completion in December 2010.

ADB, based in Manila, is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 64 members – 46 from the region. In 2004, it approved loans and technical assistance totaling $5.3 billion and $196.6 million, respectively.