ADB's investment fuels Azerbaijan's green energy ambitions
Towards a greener future

ANALYTICS  07 April 2024 - 13:33

Azerbaijan remains an island of stability in the Eurasian space at a time of epochal changes and the collapse of globalist world structures.

This constancy, as well as its stable position as a key energy and transport centre of the Caspian region, attracts the attention of international donors to Azerbaijan. The country has been successfully cooperating with one of them - the Asian Development Bank (ADB) - for about a quarter of a century, and during this period, the bank has provided loans worth more than $5 billion.

Currently, ADB together with the Azerbaijani government is working on a country cooperation strategy for the next three years: the bank plans to focus on the areas of green energy and climate agenda, agribusiness, transport, education, securities market, etc.

The Asian Development Bank, the main donor structure of the vast Asian region, was founded in 1966, with 68 member countries and its headquarters in Manila, the capital of the Philippines. Since Azerbaijan gained full membership in the ADB structure in 1999, our country has received loans, grants and technical assistance worth almost $5.3 billion for the implementation of more than eighty and a half transportation, energy, financial, agrarian, health and other projects. The main donor structure of Asia ranks among the first along with the World Bank and the European Bank for Reconstruction and Development in terms of financing of socio-economic endeavors in Azerbaijan.

ADB's lending activity in our country peaked in 2014-2018, when the country received loans and grants totalling $3.04 billion, mainly for projects in the oil and gas and transport sectors, as well as for programs to improve the efficiency of the public sector and other initiatives. Due to the completion of financing of large-scale infrastructure and extractive industry projects in the new five-year country strategy for 2019-2023, ADB's lending program has shifted somewhat to support private sector development, including support for banking capital, renewable energy (RE), climate change, agriculture, and so on.

"Today ADB is finalizing its partnership strategy with Azerbaijan for the next three years," Director General of ADB's Regional Department for Central and West Asia Eugene Zhukov said on April 6 during a meeting with Azerbaijani Finance Minister Samir Sharifov.

During the meeting, consultations were held on the current status and future directions of cooperation between Azerbaijan and ADB, and promising credit directions aimed at strengthening the sustainability of the country's economic development were considered, taking into account the priorities of the government's strategic roadmaps covering the main sectors of our country's economy. Projects to stimulate private sector development, increase the efficiency of the public sector, improve infrastructure and strengthen human capital were identified as the basic directions of the country's strategy. Another important direction of Azerbaijan's development, in which the government is interested in expanding cooperation with ADB, is the Asian Bank's participation in the projects of Karabakh revival and Great Return to the liberated territories.

Moreover, in the course of the meeting, Sharifov noted that the expansion of the use of "green" energy sources in Azerbaijan is defined as a new priority direction of the national energy policy. Sharifov noted that the expansion of the use of "green" energy sources in Azerbaijan is defined as a new priority direction of the national energy policy: "We believe that the decision to hold COP29 in Baku also reflects the global support for Azerbaijan's green energy policy".

On April 6, Director General of the ADB Department Zhukov and Minister of Ecology and Natural Resources of Azerbaijan Mukhtar Babayev exchanged views on preparations for the 29th session of the Conference of the Parties to the UN Framework Convention on Climate Change (COP29).

"Azerbaijan and ADB discussed potential financing opportunities for projects aimed at addressing climate change, COP29 activities, as well as ADB's draft global climate policy plan," Azerbaijani Economy Minister Mikayil Jabbarov wrote on his social media page X.

It is relevant to note here that in 2022, ADB provided the first major loan in the private sector RES segment: a $21.4 million non-sovereign loan to Masdar Azerbaijan Energy (UAE founder) to finance the construction of a 230 MW solar power plant to provide annual electricity to over 30,000 households.

This year, together with ADB specialists, another "green" initiative was launched - "National Urban Assessment (NUA) for Azerbaijan" aimed at "green", climate-resilient and inclusive urban growth, which will help shape the modern landscape of the country's cities.

Transport and railway infrastructure development projects are among the government priorities along with financing of the RES sector. Thus, earlier this year, ADB agreed with the member states of the TITR Association to allocate a grant to develop a strategy for further development of the Trans-Caspian International Transport Route (TITR). In the area of financial support for transport infrastructure development, ADB is finalizing financing of a railway project - a $400 million Rail Sector Development Program aimed at improving the provision of railway services and financial operations of AJD, as well as financing the reconstruction of the Sumgayit-Yalama double-track railway line with a length of about 166 km. In the future, ADB is ready to provide further assistance in increasing the transit capacity of Azerbaijan's main transport corridors.

In general, ADB's new country strategy envisages increasing the share of the private sector in the investment and lending portfolio to one-third, not only through traditional lending, but also through the Asian Bank's participation in the equity of private companies. Another important direction is ADB's participation in projects to support the country's private sector, particularly those related to trade, finance, development of small and medium-sized enterprises, as well as financing of Azerbaijani enterprises in local currency by issuing bonds. The Asian Development Bank twice last year issued bonds denominated in the national currency - manat (8.4 million manats and 14.5 million manats). These endeavours continued this year: in January ADB made a new placement of bonds in the national currency of Azerbaijan and attracted 19.5 million manats. The issue is structured as a three-year bond, with coupons to be paid semi-annually at a rate of 6.5% per annum, and the loan itself is aimed at financing the development of women's entrepreneurship and agribusiness in Azerbaijan.

"International investor demand for local currency bonds plays a key role in mobilizing ADB's financial resources for operations in the bank's developing member countries as we seek to expand the currency composition of our borrowing program," said ADB Assistant Treasurer Maria Lomotan not long ago.

Caliber.Az