European Bank for Reconstruction and Development - EBRD

The European Bank for Reconstruction and Development (EBRD) was established in 1991 and its headquarters is in London. One of the reasons for the establishment of the bank was crumbling of the communist regime in Central and Eastern Europe at that time and the support to nurture a new private sector in a democratic environment in the countries of the former Soviet bloc. Today the EBRD uses the tools of investment to help build market economies and democracies in 39 countries from Central Europe to Central Asia.

The EBRD serves the interests of 69 countries from five continents plus the European Union and the European Investment Bank.

With the help of its investments, bank assists in the following areas:
−    Implementation of structural and sectoral reforms;
−    Development of copetition, privatization and development of entrepreneurship;
−    Strengthening the legal system and financial institutions;
−    Development of necessary infrasturcture to assist the private sector;
−    Application of a reliable business system for corporate governance.

The Republic of Azerbaijan has been cooperating with EBRD since 1992.  The EBRD office in Azerbaijan has been operating since 1993. Cooperation between the Bank and Azerbaijan is regulated by the Country Strategy Document covering the years 2019-2024.

According to the strategy, financing projects in the following areas is a priority for the EBRD: 
-    Promote economic diversification by supporting competitiveness and good governance;
-    Strengthen resilience by developing financial markets;
-    Support green economy transition and regional connectivity.

The EBRD supports the diversification of the economy and the development of small and medium-sized enterprises in Azerbaijan, and thus seeks to achieve positive changes in the country's economy. The EBRD operates not only in Baku, but also in the regions.

The EBRD has implemented 168 projects in Azerbaijan (11 public, 157 private). Investments in our country are worth 3.6 billion euros, payments are worth 2.4 billion euros, and portfolio projects are worth 1.4 billion euros. 50 percent of the projects cover the energy sector.

The amount of state guaranteed loans is as follows:
−    Completed: 9 projects (5 in transport, 3 in energy, 1 in water sector) - USD 480 mln.
−    Ongoing: 2 projects (1 in road construction, 1 in energy sector) - USD 1.2 bln.

The amount of credit allocated to the private sector is as follows:
−    8 projects in 2017 – 39 million Euro
−    4 projects in 2018 - 16.1 million Euro

The State Oil Fund of the Republic of Azerbaijan invested 100 million euro in the EBRD Equity Participation Fund (total funds - 350 million euro).

On November 22, 2019, the EBRD Eastern Partnership Investment Summit was held in London, UK. Ali Asadov, the Prime Minister of the Republic of Azerbaijan attended the summit. The Summit saw the signing of a cooperation agreement between the Government of the Republic of Azerbaijan and the EBRD, and a contribution agreement between the Government of the Republic of Azerbaijan and the EBRD in respect of participation of Azerbaijan in the Eastern Europe Energy Efficiency and Environment Partnership Regional Fund. An agreement was also signed on Azerbaijan's accession to the community of EBRD donor countries.

The E5P Foundation was established under an initiative of the Swedish Government during its presidency of the European Union in 2009 and the main goal is promoting energy efficiency and environmental projects in the Eastern Partnership countries and attracting investments in these areas. 

The main activities of the Fund include providing grant co-financing for projects in diverse areas such as district heating; water and wastewater, solid waste management, street lighting, insulation of public buildings or residential housing, and urban transport.

EBRD-funded projects in the energy sector:
Southern Gas Corridor Project - The Republic of Azerbaijan guarantees a loan of up to $ 500 million to Southern Gas Corridor CJSC (the “Borrower”). The loan is intended to finance part of the borrower's obligations under the Trans-Anatolian Natural Gas Pipeline project. (18.10.2017)
Total cost of the TANAP project: USD 8.6 billion
Share of Southern Gas Corridor CJSC: USD 5 billion
Lukoil overseas: Shah Deniz Gas Condensate Field Develop.II - The agreement on the project was signed on January 15, 2014. The proposed financing is a pre-planned increase to the existing exposure of the Bank to the Lukoil Overseas Shah Deniz Ltd (“LSD”) relating to the development of the off-shore Shah Deniz gas and condensate field (“SD”) in Azerbaijan. 
LSD has a 10% share in SD.
During the first phase of financing, it should be used to expand the operation of the field and to apply more advanced technologies, including the existing terminal and platform.
The total cost of the project is USD 2.1 billion.
EBRD Finance: Senior loan of US$ 200 million (not syndicated)
Total project costs: Total SD Stage 1 extension and modernisation project cost estimate is USD 2128 million. LSD stage 1 project cost estimate is USD 212.8 million.
The Lukoil Shah Deniz Stage II Extension project - will provide a loan to LUKOIL Shah Deniz Ltd (LOSD) to provide additional financing for the offshore gas exploration, production project in Azerbaijan and its share in the second stage of production at the Shah Deniz field.
LUKOIL has a 10% stake in the Shah Deniz field. The project is managed by BP plc. The EBRD loan project was canceled because LUKOIL could finance the project by itself and there was no need for foreign loans.
EBRD Finance: USD 100 million
Total project cost: USD 400,000,000.00 
Lukoil Shah Deniz Stage II project - LUKOIL has a 10% interest in the Shah Deniz field.  The Project is managed by BP plc. The EBRD and the ADB were appointed by LUKOIL as the Mandated Lead Arrangers (“MLAs”) for the proposed transaction.

Total project cost: USD 3 billion.
EBRD Finance: The total loan amount is expected to be up to USD 1 billion, with both MLAs arranging USD 500 million each. Approximately a half of the total loan amount is expected to be syndicated under the A/B Loan programmes of both the EBRD and the ADB.
AZDRES Power Plant Rehabilitation project – EBRD Finance: USD 115 million to Azerenergy. The project was completed in 2006.

Lukoil Overseas: Shah Deniz Gas  Condensate Field Development project – EBRD Finance: USD 110 million (partially syndicated). The project was completed in 2005.

SOCAR: Shah Deniz Gas Condensate Field Development project – EBRD Finance: USD 110 million. The project was completed in 2003.

With the technical assistance of the European Bank for Reconstruction and Development, the project “Support for auctions on renewable energy in Azerbaijan” is being implemented. Within the project, drafts of documents of “Auction Rules”, “Requirement for Qualification” (RFQ) and “Requirements for Proposals” (RFP) will be developed by the consultant company. Within the technical and organizational issues, the Ministry of Energy has selected 9 areas with the potential for renewable and is planned to conduct preliminary work in these areas for auctions.