ADB to issue $1.2 million to Azerbaijan

By Azernews

By Nigar Abbasova

The Asian Development Bank (ADB) has approved rendering of a technical assistance worth 1.2 million for the preparation of a plan of financial recovery of Azerbaijan’s energy sector.

The Bank reported that the Azerbaijani side will allocate another $300,000, and total budget of technical assistance (TA) is going to reach $1.5 million.

 The Finance Ministry of Azerbaijan will be an executive agency of the technical project. The assistance is expected to be launched on November 1, 2016.  

The ADB orients assistance to foster energy sector development and institutional reform, expecting governance and capacity development, and knowledge solutions. Among the main objectives of the TA is to establish an appropriate electricity tariff mechanism along with supportive policies, rules, and regulations to help the power sector achieve full cost recovery by 2022.

The TA is comprised of four directions including calculating the real cost of electricity supply (power generation, transmission, and distribution), designing a new tariff structure for power generation, transmission, and distribution, with differentiating tariffs for different customers and different generation sources (hydro, solar, water, gas) in existence and in development, to replace the current single tariff for all customers, developing a financial recovery road map for gradual increase in tariff, to achieve a full cost recovery level by 2022 as well as undertaking a public information campaign on tariff reform, case studies of good practices in other countries, and institutional strengthening.

The ADB also does not excludes the possibility of allocation of additional TA funds to support the government in the implementation of the financial recovery plan, particularly achieving the road map milestones during 2017-2018.

Azerbaijan currently generates enough electricity to meet domestic needs, but electricity supply outside Baku remains unreliable, according to the Bank.

Earlier, ADB and Azerbaijan’s Azerishig OJSC signed an agreement on allocation of the Bank loan’s first tranche to improve the power distribution system in Azerbaijan.  The funds are expected to be directed to the purchase of necessary equipment in substations as well as purchase of meters for the population of the country. 

Azerbaijan became a member of ADB in 1999 while the country’s share in the bank’s capital amounts to 0.5 percent.