Azerbaijan: Water Supply and Sanitation Investment Program (Tranche 1)

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During the first decade after the country regained independence in 1991, the quality and efficiency of water supply and sanitation services (WSS) in Azerbaijan declined because of poor management and inadequate investment. The situation was particularly challenging in secondary towns such as the project areas of Goychay and Nakhchivan, where at project appraisal, the WSS sector was in visibly poor condition due to weak institutions, inefficient operations, outdated and dilapidated physical infrastructure, and severe financial constraints.

Recognizing that improving WSS in secondary towns required sequenced interventions, the government requested the Asian Development Bank (ADB) to finance part of the process.  In response, ADB approved a multitranche financing facility (MFF) for the Water Supply and Sanitation Investment Program for an aggregate amount of $600 million in September 2009 and subsequently approved the MFF $75 million tranche 1 loan for project 1 in October 2009.   Project 1’s objective was to improve public health and the environment by improving the quality, reliability, and sustainability of WSS services in Goychay and Nakhchivan.   Its envisaged impact was improved public health and environment; and expected outcome was improved coverage, continuity, and quality of water supply and wastewater disposal in both towns. The project outputs were (i) WSS in Goychay and Nakhchivan improved, (ii) WSS management and planning strengthened, and (iii) program management facilities established.

Most of the physical outputs at completion significantly fell short of the targets set at appraisal.  In Goychay, the reduction in the scope of the civil works was prompted by the huge difference in the cost estimate and the actual bids.  In Nakhchivan, this was caused by the upgrade from the standard chlorination-based water treatment plant (WTP) to a more technologically advanced membrane-type WTP to reduce high mineral content and water hardness. Shortfalls in the originally targets physical outputs under project 1 ─ including in water distribution, sewerage systems, and water meters in Goyay and water and sewer lines in Nakchivan ─ were planned to be covered under project 2. 

Institutional strengthening measures enabled the executing agency (EA) for Goyay, the Azersu Open Joint-Stock Company (Azersu) to establish a central database of residential and industrial customers, and provide residential consumers 100% coverage through smart or prepaid metering services. A twinning arrangement for a 5-year operational training and knowledge transfer contract with Suez Environnement, a France-based utility company, also boosted Azersu’s capacity to manage the project WSS systems.  Capacity development for the project EA for the Nakchivan town, the State Amelioration and Water Management Committee (SAWMC), included a twinning program with the Aquas de Portugal, a water and sanitation operator from Lisbon, and the provision of a specialized maintenance equipment.

During project implementation, the water supply and wastewater disposal tariffs increased in 2011 and in 2016, based on the methodology and calculation made by Azersu.  Except for the detailed design of WSS for Balaken town and due diligence for peri-urban areas in Baku, which were removed from the program scope, the target outputs for the project management component were mostly achieved.  

Overall, the project delivered water supply and wastewater disposal improvements to 7,000 households in the two project towns, but the Azersu-administered part of the intervention had significant cost and time overruns. Because of the decreased scope of works in both cities, it was not possible to meet the project outcome of 100% water supply coverage and 80% sewerage services in both towns by 2012.  Neither was the target in nonrevenue water attainable under project 1.  Moreover, even as most target outcomes could only be achieved after the completion of related works under project 2, some outcome indicators for project 1 were also too ambitious for its investment size.

Azersu was the EA for Goychay and SAWMC, the EA for Nakchivan. The project management offices established by Azersu and SAWMC took charge of implementing all the MFF projects.

Project Information
Project Name: 
Water Supply and Sanitation Investment Program (Tranche 1)
Report Date: 
November, 2019
Project Number: 
Report Type: 
Goal 6: Clean Water and Sanitation
Goal 3: Good Health and Well-Being
Loan Number: 
Source of Funding: 
Date Approved: 
14 October 2009
Report Rating: