Power company operations diagnostics project - financial and economical analysis

Power company operations diagnostics project - financial and economical analysisAzerenerji is the state owned utility company responsible for power generation and transmission in Azerbaijan. The assignment of the PRIMA was to perform diagnostics in respect to financial management performance and conditions of Azerenerji, including its power plants (both thermal and hydro) and power grid to identify the potential for improvements. Moreover, it was requested by the client, to conduct economic analysis of the power generation, transmission, dispatching and export activities, and provide its recommendations a) on the current tariff levels in order to recover government capital expenditures in the long term and b) practices used by Azerenerji in conducting project appraisal and preparing feasibility studies.

Key project information

  • Country:

    Azerbaijan

  • Financing/Donor:

    Ministry of Finance

  • Client/Project Beneficiary:

    Ministry of Finance

  • Project Size:

    Small (<$50k)

  • Contractor type:

    Sub-contractor

  • Contract period:

    June 2016 - October 2016

Assignments delivered by Prima

  • Data collection. The Consultant team visited eight major power plants and five regional grid departments in order to assess their financial management practices and condition. A number of interview were conducted with key financial personnel. In addition, a detailed financial questionnaire was prepared and submitted for comprehensive data collection.
  • Financial Management Assessment. Financial Management performance and condition was assessed by PRIMA, key gaps and risky weakness were identified. Based on the assessment, set of recommendations with prioritized activities to improve the financial management system was provided to the client.
  • Economic analysis. The electricity and heat production costs were one of the major indicators for assessment of plant economics. For each power plant and regional grid network specific costs and costs breakdown were calculated and assessed. The Consultant prepared a tool to calculate electricity production and transmission costs based on various fuel scenarios (fuel type, pricing, weighting factors, etc.) that can be used by the Client for their assessments of various economic scenarios. Several risks and uncertainties were identified that could limit potential economic gains from electricity export to Turkey.

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