The European Bank for Reconstruction and Development (EBRD) plans to support the reforms in the energy sector of Azerbaijan. A $115 million loan by the EBRD to Azerenergy JSC for the rehabilitation of the Azerbaijan Thermal Power Plant (TPP) in Mingechaur city will finance investments to improve the plant's reliability, its efficiency, health and safety conditions on site and to reduce carbon dioxide emissions, Trend reports quoting the statement of the EBRD Baku Office. The credit was approved by the EBRD Board of Directors on June 27, 2006, and presently a credit agreement is expected to be signed.
With a capacity of 2,400 MW, Azerbaijan TPP is the country's largest power plant in Azerbaijan. The sovereign-guaranteed loan addresses the reform of the energy sector to which Azerbaijan has committed itself in close cooperation with international financial institutions. The EBRD loan pursues a number of challenging objectives in term of tariff regulation, financial reporting and qualification under the Kyoto Protocol for Clean Development Mechanism. It is estimated that carbon dioxide emissions can be reduced by 8.2 million tonnes between 2006 and 2012 thus allowing the company to qualify for carbon credits which would provide an additional source of income.
The Azerbaijan TPP consists of eight dual fuel, gas and heavy fuel oil units of 300 MW each. The plant is currently operating below its potential capacity and efficiency levels. This has strong repercussions as Azerbaijan TPP is providing half the country's electricity generation and demand is increasing strongly thanks to a fast growing economy.
Mike Davey, EBRD Director for Caucasus, Moldova and Belarus, said the loan will ensure the implementation of energy sector reform which will lead to greater transparency and efficiency. Together with the increased output of Azerbaijan TPP after the implementation of the rehabilitation programme this will help Azerbaijan to significantly improve its energy security and reduce carbon dioxide emissions.
The EBRD has been involved in the power sector of Azerbaijan since 1994 through financing the hydropower plant Yenikend, completed in 2000, and Mingechaur, completed in 2003. The loan to Azerernergy is supported by technical cooperation grants from the US Trade Development Agency and the EBRD's donor-sponsored ETC Fund.
