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ADB, Azerbaijan Sign A $1 Billion MOU to Upgrade Power Distribution Network

News Release | 5 May 2015

BAKU, AZERBAIJAN – The Asian Development Bank (ADB) and Government of Azerbaijan have signed a Memorandum of Understanding for a $1 billion investment program to rehabilitate and expand the country’s power distribution network.

The agreement was signed on the sidelines of ADB’s Annual Meeting taking place in Baku from 2-5 May. The signatories were Baba Rzayev, chairman of state-owned Azerishig Open Joint Stock Company, which will carry out the program, Finance Minister Samir Sharifov for the Government of Azerbaijan, and ADB Vice President Wencai Zhang.

“Azerbaijan’s power sector plays a leading role in the country’s economy and the proposed program will further improve electricity delivery to customers,” said Mr. Zhang. “The program will deliver more reliable power supplies, reduced distribution losses, and higher quality customer service.”

ADB is supporting the program through a $750 million multitranche financing facility with a $250 million loan earmarked for the first phase. The funds will be used to upgrade and expand the power distribution lines, substations, and customer service lines, and to replace the existing electric meter devices with digital electric meters. Capacity building support will also be given to Azerishig Open Joint Stock Company to enhance its operational and financial performance.

The Government of Azerbaijan will provide counterpart funds of $250 million.

ADB has been supporting Azerbaijan since 1999, with total approved assistance of nearly $2.1 billion (public and private sector), much of which has been earmarked for infrastructure to help the country diversify and expand economic opportunities.

 In the energy sector, cumulative approved assistance, including cofinance, equal to about 9% of ADB’s total country operations. ADB’s support for power improvements includes a $160 million loan completed in 2014 to strengthen the country’s main power transmission network, a private sector energy efficiency project, and a biomass renewable energy project. Domestic electricity sales in Azerbaijan are projected to rise 3% annually between 2015 and 2020.

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, it is owned by 67 members – 48 from the region. In 2014, ADB assistance totaled $22.9 billion, including cofinancing of $9.2 billion.