Why Azerbaijani Government Needs Loans for Economic Electric Power Grids?

As already reported Turan, the Azerbaijani government has asked the international organizations such as the Asian Development Bank (ADB) and the World Bank for financial assistance to improve the country's energy supply.

The principal amount of $ 750 million was requested from the Asian Development Bank.

The total project cost will be $ 1 billion, of which $ 250 million will be allocated by the government of Azerbaijan.

Also, the Azerbaijani government has asked the World Bank for financial assistance in the amount of $ 250-300 million, but the final decision will be made within a few months.

The request was made, while the ADB allocated to Azerbaijan $250 million for the Development Project Distribution in 2010-2016.

The request from the government in terms of profitability of power efficiency that compared with 10 years ago has grown at all stages - production, transportation and distribution, looks strange.

All cycles of providing electricity to consumers at different times received multimillion-dollar loans, which led to a marked increase in the efficiency of electricity production (double reduced consumption of fuel to 270 grams per kW) and distribution (thanks to the widespread installation of meters, mostly prepaid). The level of payment for electricity rose from 46% in 2003 to 93% in 2015. Significantly reduced energy losses in the network from 17% in 2003 to 10% in 2014, which is not bad when you consider that the rate of loss should not exceed 9%. The loss last year amounted to 2.3 billion KW of total production of 23.1 billion KW.

But even with high loss of ten years ago in all three segments profitability of the electricity production was provided at a price of 0,041 manat (4.1 gepiks) for 1 kW. That is the conclusion of PA Consulting Group, which within the USAID technical assistance to Energy of Azerbaijan made "Estimates of subsidies in the power sector of Azerbaijan" for 2003.

But in 2007 the Tariff Council increased the retail price of electricity for all consumer groups to 0.06 manats (6 kopecks), which made cost-effective production of electricity. Then there is the question of how, with such profitability still remains the problem of quality of electricity supply and the need for a billion loan. The problem is lack of transparency and corruption. The international organization Extractive Industries Transparency Initiative (EITI) in Azerbaijan lowered the status in this structure from a "permanent member" to a "candidate country". EITI is based on 12 principles that require mining companies to disclose paid funds, and the governments of these countries - the funds received. In December 2014 Transparency International presented the annual Corruption Perceptions Index, where Azerbaijan ranked 126 out of the 175 participants.

In such circumstances, experts say, the effectiveness of projects and loans allocated for them will be considerably lower than planned. -0-