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Ex-Ante Evaluation(for Private Sector Investment Finance)
Private Sector Investment Finance Division,
Private Sector Partnership and Finance Department, JICA
１．Name of the Project（１）Country: Republic of Azerbaijan（２）Project: Alat (Garadagh) Solar Power Project（３）Project Site / Target Area: Garadagh district, Baku
（４）Signing Date:: August 2nd, 2022
２．Background and Necessity of the Project（１）Current State and Issues of the Power Sector and the Priority of the Projectin Azerbaijan
Azerbaijan (population: approx. 10.2 million: UN Population Fund, 2021) is anoil and natural gas exporting country, and after gaining independence in 1991,
its per capita GDP increased from USD 1,237 in 1990 to USD 5,398 in 2021
(International Monetary Fund, "IMF") due to oil and natural gas development andexport of these resources through promotion of foreign capital investment. The
per capita GDP is projected to increase from USD 1,237 in 1990 to USD 5,398 in
2021 (International Monetary Fund ("IMF") estimate). The electricity generationthat supports this economic development is composed of 92.5% gas-fired, 6%hydropower, and 1.5% other types of power, resulting in a high degree ofdependence on fossil fuels and a high environmental burden (International
Energy Agency (IEA) estimates, 2019). The amount of electricity generated in2020 is 25,840 GWh, which is higher than the amount consumed (22,700 GWh),
but many of the power generation facilities have aged significantly, as more than
30 years have passed since their construction, and there is an urgent need toimprove and renew power generation facilities. On the other hand, the newcoronavirus infection ("COVID-19") and the temporary decline in crude oil prices
have caused the demand for power generation facilities to increase. On theother hand, the economy and public finances are highly volatile due todependence on commodities, such as the GDP growth rate of -4.3% in 2020
(which will rebound to 5.6% in 2021, IMF) due to the impact of the newcoronavirus infection ("COVID-19") and a temporary drop in oil prices. Under
these circumstances, the challenge is to urgently develop and upgrade new
power generation facilities that are not derived from fossil fuels, while curbing thefiscal burden.

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The Azerbaijani government intends to reduce greenhouse gas emissions by
35% by 2030 compared to 1990 levels in accordance with the Paris Agreement,
while aiming to diversifythe economy from its dependence on fossil fuels. TheNational Sustainable Energy Action Plan, which the Azerbaijani government
formulated in 2019, calls for the construction and renewal of not only new
gas-fired power plants, which have been the main source of electricity, but also
renewable energy generation, such as solar and wind power, by taking
advantage of the characteristics of the country's land, to meet electricity demandthat is expected to increase at a rate of 3.4% per year. The plan also calls for thedevelopment of renewable energy sources, such as solar power and wind power,
to meet the expected increase in electricity demand, and aims to increase theratio of renewable energy sources to 35%-40% by 2030. The plan also mentions
the importance of private sector investment in the power sector.
Under these circumstances, this project is the first solar power generation facility
to be constructed and operated by a private company in Azerbaijan, which willcontribute to the diversification of the country's power sources, climate change
mitigation, and private investment, and is in line with the government's policy.
（２）Japan’s and JICA’s Cooperation Policy and Operations in the Power
Sector
The "Country Assistance Policy for the Republic of Azerbaijan" (January 2021)
defines "economic infrastructure development" as a priority area, with particularemphasis on support for the energy sector. Therefore, this project is in line withthis policy. JICA has more than 20 years of experience in providing assistance tothe power sector in Azerbaijan, including the completion of the Simar Thermal
Power Plant Unit 2 in September 2019, which was supported by a yen loan, andthe completion of the Simar Thermal Power Plant Unit 1 in October 2003, also
supported by a yen loan. As of 2019, JICA's assistance will have contributed toapproximately 10% of the country's power generation capacity.
（３）Other Donors’ Activities
ADB and EBRD are providing assistance in this country, including financial
support and technical assistance for renewable energy and various powertransmission facilities.
３．Project Description（１）Project Description① Project Objective
This project is located in the Karadag district of Baku, Azerbaijan, in theVer 202208

southeast of Azerbaijan (hereinafter referred to as "Azerbaijan"). By
constructing and operating a solar power plant (230 MW) and related
facilities in Arat, Garadagh district, Baku, located in the southeast of thecountry, the project will promote the spread of renewable energy, thereby
contributing to the mitigation of climate change through the reduction ofgreenhouse gas emissions and the revitalization of private investment.
② Project Components
The project involves the construction and operation of a 230 MW solar
power plant and related facilities in Arat, Garadagh district of Baku,
located in southeastern Azerbaijan.
③ Project Beneficiaries（Target Group）
Azerbaijani citizens（２）Estimated Project Cost
261.9 million USD (JICA loan: 21.4 million USD)
（３）Schedule
August 2022: Commencement of the construction,January 2024: Completion of the construction（４）Project Implementation Structure１）Borrower: ”Masdar Azerbaijan Energy” Limited Liability Company
２）Guarantor: NA３）Executing Agency: ”Masdar Azerbaijan Energy” Limited Liability Company
４ ） Operation and Maintenance System ：Masdar Specialized TechnicalServices Company（５）Collaboration and Sharing of Roles with Other Donors: NA（６）Environmental and Social Consideration① Category: B② Reason for Categorization: The project does not fall under thesensitive sectors/characteristics and sensitive areas listed in the "JICA
Guidelines for Environmental and Social Considerations" (promulgated inApril 2010), and the undesirable effects on the environment are notconsidered to be significant.
③ Environmental Permit: The Environmental and Social Impact
Assessment (ESIA) report for the project was approved by theAzerbaijani authorities (Ministry of Ecology and Natural Resources) inFebruary 2022.
④ Anti-Pollution Measures: The impacts on air quality, water quality,

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noise, and waste generated during construction and operation have been
confirmed to be mitigated by measures that meet domestic andinternational environmental standards.
⑤ Natural Environment: The impacts on air quality, water quality, noise,
and waste generated during construction and operation have been
confirmed to be mitigated by measures that meet domestic andinternational environmental standards.
⑥ Social Environment: No involuntary resettlement will occur as a resultof this project. The site is confirmed to be land owned by the Azerbaijani
government and leased to the borrower. The land is being used without apermit by farmers and herders employed by farmers, both of which havebeen confirmed to be eligible for livelihood restoration assistance.
⑦ Other/Monitoring: Based on the environmental monitoring plan, theEPC contractor will monitor impacts on air quality, water quality, noise andvibration, waste, ecosystems, and livelihood restoration support beforeand during construction, and the O&M contractor will monitor impacts
during service.
（７）Cross-Sectoral Issues: NA（８）Gender Category: [Gender Project] GI(S) Gender Activity Integration
Project<Reason for classification>: The project has gender-sensitive indicators set by
the co-financing partner（８）Other Important Issues: NA
４. Targeted Outcomes
As quantitative outcomes, maximum power (MW), power generation at sendingend (MWh/year) and CO2 Reduction (tCO2/year) will be monitored.
As qualitative outcomes, diversify power sources, mitigate climate change, andpromote private investment in renewable energy markets will be monitored asresults of the project.
５. External Factors and Risk Control
NA
６. Lessons Learned from Past Projects
The lessons learned from similar projects in the renewable energy sector in thepast were that the capacity of existing facilities after linking to the central powersystem was insufficient due to the aging of power system facilities and theVer 202208

inability to increase capacity to keep up with rapidly growing demand, which
temporarily affected the amount of electricity transmitted. The lesson learned isthat it is useful to analyze the situation in advance and incorporate it into thedecision on business feasibility. The technical advisors have confirmed that thetransmission grid to be connected to the project is adjacent to the 850 ha AlatFree Economic Zone and was originally designed to handle large power
generation capacity, and that the grid can sufficiently absorb the power
generation capacity of the project, taking into account the existing power
generation facilities. The technical advisor has confirmed that the grid is capableof absorbing the capacity of the project, taking into account the existing
generation facilities.
７. Evaluation Results
This project is highly significant because it is consistent with the country's
challenges, development policies, and cooperation policies of Japan and JICA,and because it is expected to contribute to SDG Goals 7 (Affordable and Clean
Energy), 13 (Climate Action), and 17 (Partnerships for the Goal).
８. Plan for Future Evaluation（１）Indicators to be Used
As indicated in Section 4.
（２）Future Evaluation Schedule
Ex-post evaluation:3 years after the project completion
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