Financing Heating Sector Improvement Project ADB’s Experience International Conference October 2005, Baku October 2005, Baku Ashok Bhargava East and Central Asia Energy Division Asian Development Bank

Heating sector projects - an environmental improvement priority of ADB The 2004 Review of the Asian Development Bank’s Poverty Reduction Strategy listsThe 2004 Review of the Asian Development Bank’s Poverty Reduction Strategy lists Three Pillars: pro-poor sustainable development, social development, and good governance; andThree Pillars: pro-poor sustainable development, social development, and good governance; and Five Thematic Priorities: private sector development, gender, environment, regional cooperation, and capacity developmentFive Thematic Priorities: private sector development, gender, environment, regional cooperation, and capacity development

Dysfunctional and inadequate district heating and gas distribution is a priority Impact on poor : is disproportionately high – exposure to more pollutants and risk of accidents; particularly affecting women and childrenImpact on poor : is disproportionately high – exposure to more pollutants and risk of accidents; particularly affecting women and children Environmental impacts : emissions from coal based system causes air pollution and gas based system leads to greenhouse effects.Environmental impacts : emissions from coal based system causes air pollution and gas based system leads to greenhouse effects. Rationale for Heating Sector Projects

Financing Heating Sector Projects - An integrated approach by ADB Efficiency Improvement : promote more efficient technology - circulating fluidized bed boilers, Combined Heat and Power plants, consolidation of small in-efficient boilers.Efficiency Improvement : promote more efficient technology - circulating fluidized bed boilers, Combined Heat and Power plants, consolidation of small in-efficient boilers. Energy Conservation: Introduce heating control equipment, 100% metering and consumption based billingEnergy Conservation: Introduce heating control equipment, 100% metering and consumption based billing

An integrated approach by ADB ….(ii) 3.Institutional Development: gradual transition from a “welfare” measure to commercial operation based on market principles; improve financial performance of heating companies 4.Reforms: promote pricing and tariff reforms- encourage full cost recovery principles and transparency in tariff formulation, concurrently provide social safety net for vulnerable groups

5.Promote Private Sector Participation: Remove key barriers - lack of transparency and low tariffs, institutional uncertainties, public and utility perception of welfare, and transfer operations to private sector through IPO An integrated approach by ADB ….(iii)

ADB Heating Sector Assistance Heating is a necessity only in a small number of DMCs - central asian republics; PRC; Mongolia and, Republic of Korea (KOR)Heating is a necessity only in a small number of DMCs - central asian republics; PRC; Mongolia and, Republic of Korea (KOR) ADB lending amounts to about $700 millionADB lending amounts to about $700 million Most of the project have been rated as “successful”, and led to (i) significant efficiency gains; (ii) air quality improvement and, (iii) supported sector reforms. Most of the project have been rated as “successful”, and led to (i) significant efficiency gains; (ii) air quality improvement and, (iii) supported sector reforms.

ADB Energy Sector Strategy in Azerbaijan and Heating Energy will be a strategic priority in the program (2006 – 08) and the assistance will aim for balanced regional development through restoration, rehabilitation and modernization of energy infrastructure – power, gas and heating.

Heating Sector in Azerbaijan and ADB Assistance Restoration in regional area is a daunting task. ADB with more than 35 years of unique experience and strengths in the Asia Pacific region, and in-depth understanding of the sector can be a partner. ADB’s integrated approach successfully implemented in the region can be tailored to the specific conditions in Azerbaijan.

Overview of ADB Assistance … (i) Funds : ADB provides loan and equity investment to its DMCs for their economic and social development. It has provided public sector loans amounting to more than $110 billion across 39 DMCs of the region Technical Assistance Grants : Provides grant for the planning and implementation of development projects and programs, and for advisory services. TA grants of over $2 billion have been provided.

Private Sector Development and Finance :Private Sector Development and Finance : creates enabling conditions for private sector participation, promotes public-private partnerships, and provides loans, equity, cofinancing, and guarantees. Private sector operation of more than $4 billion Overview of ADB Assistance … (ii)

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International Conference International Conference October 2005, Baku October 2005, Baku Ashok Bhargava East and Central Asia Energy Division Asian Development Bank Financing Heating Sector Improvement Project ADB’s Experience