The Asian Infrastructure Investment Bank’s board has approved $45 million in non-sovereign financing for Azerbaijan’s first large-scale seawater desalination plant, to be built in Sumgayit. The facility will produce around 300,000 cubic metres of drinking water a day.
Under the approved project, the Asian Infrastructure Investment Bank (AIIB) will finance the design, construction and operation of a desalination plant that will produce drinking water from the Caspian Sea using reverse osmosis technology. The plant will be built in the Sumgayit industrial zone on the Caspian coast. AIIB said it would be the country’s first facility of this scale and also the first public-private partnership project in Azerbaijan’s water sector.
A 25-year public-private partnership agreement has been signed between the project’s sponsor, ACWA Power, and the State Water Resources Agency of Azerbaijan, which will purchase the water. Azerbaijan’s Ministry of Finance is providing a guarantee mechanism covering payment obligations during the operational period. ACWA Power is currently the sole sponsor of the project, and a separate company that will act as borrower under the financing arrangement has already been established.
The project’s main goal is to boost Azerbaijan’s drinking water supply capacity and strengthen the resilience of its water system, according to the announcement.
Environmental risks assessed
AIIB has classified the project as Category “B” for environmental and social risk. The main risks relate to construction work on the coastline, the intake of seawater and discharge of brine, as well as contamination left over from previous activity on the industrial site.
During construction, around 2 kilometres of pipelines will be laid for water intake and discharge. Measures will be taken to limit the impact of these works on seawater quality and bottom-dwelling marine life.
According to the bank, the main environmental concern during operation will be the discharge of brine and other waste into the sea. The project includes a diffuser system designed to disperse brine rapidly a few hundred metres from the shore. Assessments found no significant or irreversible adverse impact expected on biodiversity, including the Caspian seal, though long-term monitoring of the marine ecosystem and water quality will be carried out.
Since the project will be built within an existing industrial zone, no land acquisition is required. However, the water transmission pipeline could have a limited impact on local residents’ sources of income, issues that will be addressed through compensation and other measures.
AIIB said environmental and social assessments, stakeholder consultations and public hearings were carried out for the project. Mechanisms have been established to manage risks that may arise during construction and operation, as well as to handle grievances from affected people.
