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Energy Department of Azerbaijan Prepared to Finance Construction of Second Combined-Cycle Plant without Foreign Loans

Oil&Gas Materials 4 June 2008 13:07 (UTC +04:00)

Azerbaijan, Baku, 4 June / corr. Trend I. Khalilova/ Azerenerji joint stock company is prepared to construct second combined-cycle plant in Shimal hydro-power electric station in order to decrease expenses for construction works which cost much with the granted loans, Bahruz Sadigov, the deputy head of the technical and production department of the company said. According to Sadigov, two tenders have been announced so far to select general contractor, it they did not yield results, now Azerenerji is going to issue third tender.

The Azerbaijani government is prepare to suspend the loan of the Japanese Bank for International Corporation (JBIC) worth 22.28bln Japanese yens (over $275mln) because of the delay in the selection of a contractor for the construction of the combined-cycle plant.

Each of two tender took half year, however, they did not yield results because of the non-conformance of the financial and technical proposals with the company's requirements, Sadigov said. Therefore, Azerenerji appealed the government with a request to suspend the loan and it is ready to repay the loan by out of its own proceeds.

There were two participants in the second tender. The proposals of one of participants, the Chinese CNEEC were not accepted because of the absence of the bank guarantee. The second one, the Japanese Mitsui/Huidai refused to lower the cost of its proposal which exceed the JBIC loan by twice. The Chinese company proposed to construct the combined-cycle plant at $403mln and Japanese - $448mln.

According to Sadigov, Azerbaijan can finance (out of proceeds of the public budget and Azerenerji) the construction of the combined-cycle plant with the help of the high technologies. The Azerbaijani government did not rule out that it can attract loans from foreign business banks or international finance organizations in order to realize the project.

"Today there is a great interest to the energy projects in Azerbaijan and unlike JBIC, talks can be held to attract loans in a year," a source in a government said.

Otherwise, the government will finance the project out of its own proceeds. Some $160mln is required to purchase equipment and the remaining work can be realized by opening credit line. Azerbaijani company AZENCO can be involved in the construction work.

JBIC granted loan to Azerbaijan for 40 year period with grace period of 10 years and 0.75% interest.

The feasibility study of the project was developed in 2004 by the alliance of the consulting companies TEPSCO ( Japan)-Enprima ( Finland). The tender was issued for the designing four 220-kilowatts of electricity lines and 220/110 kilowatts of sub-station, building and assembly jobs, testing and putting exploitation.

The second combined-cycle plant was planned to be launched in 2009 earlier.

The correspondent can be contacted at: [email protected]

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