EBRD announces a tender for loan supervisor on largest non-oil investment in Azerbaijan

EBRD announces a tender for loan supervisor on largest non-oil investment in Azerbaijan
Published: 17 June 2009


The European Bank for Reconstruction and Development (EBRD or the Bank) has announced the first tender within the support of the major cement producer in Azerbaijan, Garadagh Cement (GC) OJSC, on construction of Kiln No 6 for cement production by dry method.

The Bank has reported of announcement of the process of Expression of Interest since 17 June for consulting services on supervision over loan borrower GC by the lender.
“EOI receipt deadline is 27 June 2009,” the EBRD says.

The EBRD is considering providing a senior debt in the amount of €120m to OJSC Garadagh Cement (the Company) and wishes to engage a consultant to monitor the Project implementation so as to ensure that the Project construction and operation are carried out according to the implementation, investment and financing plans as well as envisaged standards and applicable laws and regulations and in accordance with the loan agreement and other related project documents.
In particular, the consultant’ss main tasks will include:
1. Prior to Project Implementation
- review the Business Plan at the stage of its preparation to ensure that it is in compliance with the Bank’s requirements;
- review the controls and procedures implemented by the Company to ensure that the Bank can effectively monitor implementation of the Project on time and within budget.
2. During Project Implementation
- undertake a quarterly review of design and construction work, programme status, sub-contracting, expenditures and forecast cost to completion and report to the Bank on the Project?s progress and provide the Bank with the regular detailed monitoring reports on those matters;
- review the disbursement applications of the Company against the actual progress and actual invoices from the contractors;
- communicate with the Bank on regular basis and inform of any problems that may negatively affect the implementation of the Project;
- participate in all relevant completion tests for the Project and certify to the Bank that the Physical Completion has been achieved as per the Loan Agreement terms.
The assignment is expected to start in July 2009 and last for approximately 18 months. Maximum Budget Available for the Assignment is EUR 100,000; exclusive of VAT.
The consultant must determine whether any VAT would be chargeable on the services and the basis for that determination, without taking into consideration the Bank’s special status as an IFI and state this to the Bank in their response to the Invitation for Expressions of Interest taking into account that a consultant incurs input VAT on goods and services purhcased in connection with the provision of services (eg VAT on airline ticket).

The consultant should be a firm or a consortium of firms with relevant experience and knowledge of the cement and construction materials industry. The consultant’s team should include senior multi-sector specialists (management, technical and financial) with an extensive working experience of implementation of large projects in the international market. The consultant should have an extensive experience in procurement of services, goods and works.
In order to determine the qualifications and competence of consulting firms seeking to be shortlisted, the information submitted should include the following:
- details of experience or similar assignments undertaken in the previous five years, including their locations
- CVs of staff who could be available to work on the assignment
The above information should not exceed 30 pages excluding CVs.
Expressions of Interest should be submitted, in English, electronically through eSelection, and not to the below e-mail address, not later than the closing date.

The EBRD’s Contact Person:
Elena Kolodiy
European Bank for Reconstruction and Development
One Exchange Square
London EC2A 2JN
Tel: + 44 20 7338 6765
Fax: +44 20 7338 7451
E-mail: kolodiyo@ebrd.com

The EBRD has not signed a credit agreement with GC yet.
The EBRD Board of Directors approved financing of €170mn for this project worth €330m.
The €170m structured corporate loan with a senior A/B loan of €150m, of which approximately 50 per cent will be offered to commercial banks (B lenders), and a EUR 20 million subordinated C loan for EBRD’s account. An additional €30m loan subordinated to all bank debt is to be provided by Holcim – the main shareholder of GC.

The Bank is considering a possibility of financing for GC modernisation and expansion. GC plans to increase clinker production capacity from 2616tpd to 4000tpd and annual cement production capacity from 1.1Mt to 1.7Mt, without clinker imports. The financing will be drawn down during the construction period from mid 2009 through the first half of 2011, when commissioning of the new kiln is expected.
The Bank indicates that the project will achieve significant energy savings through the use of dry technology (in excess of 50 per cnet reduction of energy use per unit of clinker produced). The introduction of state-of-the-art technology will provide the opportunity for a massive transfer and upgrading of skills. The EBRD loan will support a company that pioneers high corporate governance and business standards in a challenging environment. As the largest foreign direct investment outside the oil and energy sectors in Azerbaijan, the project should have a demonstration effect for other potential private sector investors. It is geared to attract co-financing from commercial banks in amounts and maturities not yet achieved outside the oil sector in Azerbaijan.

GC is the largest cement and sole clinker producer in Azerbaijan. Holcim, a leading global supplier of concrete and cement based in Switzerland, acquired a controlling stake in Garadagh privatisation in 1999. Today it owns 69.4 per cnet of the company’s share capital and provides managerial, technical and commercial resources.
Earlier in accord with its business plan Garadagh Cement planned beginning of clinker production in a new kiln in the 2nd quarter of 2011.

Construction of the Kiln No 6 for dry cement production method will allow to replace four existing stoves, save energy and reduce atmospheric emission.

GC is owned by Switzerland’s Holcim (69.4 per cent), Azerbaijani government in the person of the Azerbaijan Investment Company (10 per cnet) and European Bank of Reconstruction and Development (10.6 per cnet). GC started operating in 1999. For construction of a new production line Holcim allocated €300 million for project budget.

According to Holcim’s forecasts, country’s demand for cement till the end of 2009 will make approximately 3.7Mt and in 2011 more than 4Mt.