Has IFC had any effect on the transparency of BTC?
As part of bringing additionality to this Project and to further transparency, IFC asked the Sponsors to release the PSA (Production Sharing Agreement), 3 HGAs, IGA and Turkish LSTK Agreement. The Sponsors agreed and posted these documents on their website. Environmental and social information has been disclosed as part of the national approval process and the full suite of ESIA documents have been vetted by IFC for our own public disclosure requirements.
Will IFC disclose its financial and economic due diligence on the project? If not, why was the Bujagali project’s economic due diligence disclosed by IFC, but not BTC’s?
Since IFC, along with other potential lenders are lending on a commercial basis, we do not understand the argument that the projects might not be financially viable, as it would be very odd for commercial lenders or the private sponsors to invest large sums in a project that is not. The pipeline sponsors require a reasonable return on their investment and transit countries require reasonable compensation. We carry out our own lending due diligence based on proprietary commercial information (supplied by sponsors under confidentiality agreements), as well as publicly available information.
The summary of economic due diligence for Bujagali was made public because the project cost had a direct impact on electricity tariffs to the local consumers. In that type of project there was an element of regulation and the investor rate of return/economic analysis is therefore, of critical public importance. In the BTC project, where the crude oil is fully intended for export, the key area of public interest is the use of the revenues generated from the oil development. The detailed economic analysis of the pipeline is a matter for the private sector to assess and the rate of return and cost analysis are proprietary information - vital in a competitive environment. In the case of BTC, the overall share of the project revenues that will accrue to the sponsors and the host governments has already been fully disclosed by BTC Co., and these analyses are based on precisely the same information that is provided to IFC as part of our due diligence. More specifically, IFC released an extended
Summary of Project Information (SPI) which describes in detail the development impact and principal economic benefits of both projects including expected revenues to the three host countries.
What is the Caspian Development Advisory Panel (CDAP)and will there be an IAG for BTC?
An important “lesson learned” in the Chad-Cameroon Export Project undertaken by IFC and the World Bank, was the need for an independent panel of experts to oversee the development impact of a project on a regional basis. At the urging of the IFC and the World Bank, BP has established just such an independent external panel as part of its plan to ensure that the BTC pipeline is a world class model development project. CDAP is similar to the International Advisory Group (IAG) established for the Chad-Cameroon Export Project, but CDAP will report to BP’s Chief Executive rather than to the World Bank’s.
The Panel, which has a three-year remit, commenced its work in early 2003, and will provide objective advice to the company on the economic, social and environmental impacts of the pipeline project in
Azerbaijan,
Georgia and
Turkey, generally, and in areas closest to the 1,760-kilometer pipeline in particular. While the primary focus will be on the BTC pipeline, the Panel will have an opportunity to look at other related BP activities and plans in the region, ACG, Shah Deniz etc. Principal tasks will include, but not be confined to, the following:
·Assess BP's plans to manage the environmental, social and economic impacts of the projects in Azerbaijan, Georgia and Turkey, both at the route level and, more generally, at the regional level. Make recommendations for improvement
·Examine the application of BP's policies regarding the projects and critically appraise the impact of the projects, and
·Advise on the appropriate focus of social and community activities to enable BP and its partners to make a positive difference to the economies and societies of Azerbaijan, Georgia and Turkey.
While the Panel's role will be an advisory one with no executive authority or responsibility in relation to the Project, its findings are made public shortly after their presentation to BP (CDAP’s first interim report focusing on Azerbaijan and Georgia was released in early August 2003). This will contribute to the overall transparency of the project and help CDAP establish itself as a truly independent body.
