AZERBAIJAN - The Power Sector.

Azerbaijan's total installed capacity for power generation is about 5,100 MW. About 84% of this is thermal based mostly on heavy fuel oil, and natural gas is only used as a secondary source for some plants. But the actual generating capacity now is only 4,200 MW, because of obsolete facilties and lack of proper maintenance. If the maintenance system is not improved, the usable capacity would drop further, while domestic demand for power has been rising rapidly since 1996.

There is also an exchange of power supplies between Azerbaijan and each of Russia, Georgia, Iran and Turkey. Since 1994, imports from these countries have overtaken exports by far. Azerbaijan still depends heavily on the import of power plant equipment and spare parts from Russia and Ukraine, as a result of full integration with them during the Soviet era.

The efficiency and profitability of the state's power utility, Azerenerji, are to be improved. The concern is to be partly privatised after its improvement, along with Azerigaz. This is under a plan adopted earlier in 2000, after a series of major power cuts, which called for three basic changes: (1) new incentives and a special campaign to attract foreign investment into this sector, (2) creation of an independent power regulator, and (3) privatising the regional power networks.

The power sector has received priority in the country's development plan. Among projects now being implemented in the sector is a gas-based Combined Cycle Power Plant-II to be built at Severnaya on the outskirts of Baku. With a capacity of 400 MW, this will be the country's first gas-fired CC plant. It will replace Severnaya's 150 MW oil-fired station and is aimed to ensure stable power supply in the metropolitan area, cut air pollution and curb emission of toxic gases. The project is being financed partly by a loan of Y18,332m ($172m) from Japan Bank for International Cooperation  (JBIC), granted at the "most concessionary" interest rate of 0.75% for a 40-year repayment period including a 10-year grace period. The oil-fired plant is being upgraded and mostly rebuilt by a Japanese partnership of Mitsui amd Mitsubishi Heavy Industries (MHI), under a contract with Azerenerji.

The Baku Thermal Power Plant-I is being revamped and expanded by ABB under a $50m turnkey contract signed in early 1999. This would have a new gas turbine cogeneration unit with a capacity of 55 MW and 200 tons per hour steam. To be completed by early 2001, it will supply heat and power to the Baku reginery, a local textile factory, other industrial customers and households in capital. The project has been financed by Bayerische Landesbank of Germany, with cover provided by the export credit agencies of Germany (Erg), Switzerland (ERG) and Poland (Kuke) as these three countries are supplying equipment and services.

Hydro-power generating capacity available in Azerbaijan now is limited to about 200,000 tons/year of oil equivalent, compared to 100,000 t/yoe before 1992. Azerenerji has received two sovereign loans from the European Bank for Reconstruction and Development (EBRD) worth about $60m for two projects: (1) to help complete the Yenikend hydro-power plant on the Kura River, which will enable Baku to raise fuel oil exports and reduce the amount of gas needed for this sector; and (2) to develop the legal and regulatory framework for the sector, raise hydro-power generating capacity and improve Azerenerji's management and monitoring systems.

The EBRD loans and aid from other multilateral agencies, including the Islamic Development Bank, were to help Azerenerji acquire computers, modern communications equipment, electric metres and spare parts. They were also to help replace three generators at the Mingechaur hydro-power plant on the Rura River to reduce pollution in that area. Sumitomo Corp. is to install a wind-power plant for Azerenergy on the Apsheron Peninsula where supply of wind is abundant.

In addition, EBRD is helping in a programme to privatise Bages, the major power distributor, and the distribution network of the Baku Power Co.

Coal consumption in Azerbaijan between 1987 and 1991 amounted to about 100,000 t/yoe, but stopped completely after the collapse of the Soviet Union in 1991. Unlike several other former Soviet states, including Armenia, Azerbaijan has no nuclear power generating capacity.