First ODA Loan to Azerbaidjan

February 26, 1998

1. The Government of Japan has decided to extend an ODA loan of up to 20,699 million yen for the Severnaya Gas Combined-Cycle Power Plant Project of the Government of the Azerbaidjan Republic. Notes to this effect were exchanged between the two governments on February 26 (Thu.) in Tokyo. This is the first ODA loan to Azerbaidjan.
   
   
2. Azerbaidjan's power sector has become ineffective because of worn-out facilities and lack of maintenance. Since the demand for electricity is expected to increase by more than 3 percent each year, the country is planning to change the old facilities into a highly effective combined-cycle power plants to meet the future electricity demand.
   
   
3. The present ODA loan will be used to convert the existing Severnaya Thermal Power Plant (150 MW) into a gas combined-cycle power plant to increase the electricity supply. Since the power plant will be constructed near Baku, the capital, where electricity demand is expected to increase, this project is given a high priority.
   
   
4. The power plant to be constructed by the present ODA loan will mainly use natural gas and benefit measures against air pollution and global warming. Therefore, the most favorable terms and conditions (interest 0.75% per annum, repayment period forty years including a ten-year grace period), based on the "Kyoto Initiative" announced by the Government of Japan last December, will be applied. The procurement method is general untied. This ODA loan was pledged at the Consultative Group Meeting for Azerbaidjan held on January 27 in Tokyo.