Azerbaijan

Gateway to Eastern Promise

 

Azerbaijan, friend and energy supplier to the West, is seeking more investment and business partners.

Azerbaijan’s status as a secure, pro-Western supplier of oil and natural gas—and as a commercial link to Central and Eastern Asia—will be further enhanced by a new international marine-trading and logistical center in Alat, to be developed over the next few months.

The government will build the port’s infrastructure while the private sector will finance the $270.3 million logistical center. Both will be situated 40 miles south of Baku, the capital, on the western coast of the Caspian Sea.

Azerbaijan has enormous potential as a regional hub due to its oil and gas resources and extensive network of international pipelines, railroads and highway routes. Four new international airports also have been built.

Sixteen years after signing a production-sharing contract with a consortium of Western companies—which led to a $7.4 billion investment in three offshore oil fields—the country is producing 1million barrels of oil and 500 billion cubic feet of natural gas daily. Most of this is exported to European markets, lessening their dependence on Middle Eastern and Russian suppliers.

“Azerbaijan has done a lot to ensure energy security for Europe and the West, and has done so because it is a stable country both politically and economically,” says Novruz Mammadov, director of the Department of Foreign Relations.

The production-sharing agreement has acted as a bridge between the U.S. and Azerbaijan, says Deputy Minister of Foreign Affairs Araz Azimov. “We now have so many areas of cooperation with the U.S.”

In spite of its high level of collaboration, government ministers in Baku are concerned that many U.S. companies mistakenly regard Azerbaijan as “a risky zone” for investment and do not realize its full business potential.

“The main problem is lack of correct information,” says Minister of Transport Ziya Mammadov. “Nearly 70% of financing for various projects comes from foreign investment. Our partners include the World Bank, the Asian Reconstruction and Development Bank, BNP Paribas, the European Reconstruction and Development Bank and many others.”

Determined efforts have been made to diversify the economy, extending it beyond the basic extraction industries and encouraging private-sector involvement.

The success of Azerbaijan Methanol Company (AzMeCo) is a striking example of this diversification. Created by engineering entrepreneurs Nizami Piriyev and his son Nasib, AzMeCo has become the country’s largest private-enterprise project.

AzMeCo also has created an arts foundation with the aim of promoting Azerbaijani arts and culture internationally.

From his days as a small boy during the Soviet era, Nasib Piriyev remembers Baku as a place rich in culture. “Baku was once a very literate town, and people were obsessed with education and culture,” he says.

This heritage has been revived in contemporary Azerbaijan. Designated as an Islamic Capital of Culture this year, Baku has hosted a series of art exhibitions, including an international modern art biennial event. In September, a new Museum of
Modern Art opened with more than 800 exhibits.

The country’s cultural accreditation has boosted the number of foreign tourists, but Minister of Culture and Tourism Abulfaz Garayev would like to welcome many more Americans.

“Our main aim is to attract people by showing the intercultural exchanges that have been created here through the ages.”

Garayev is keen to attract investment that will create more tourism infrastructure in the mountain and seashore areas. A ski resort is currently under construction in Shahdag, only 30 minutes from the shore.

“The city will be able to host 5,000 visitors, leaving a lot of opportunity for investment in hotels, facilities and services,”says Garayev.

The European Azerbaijan Society (TEAS) is another organization devoted to raising awareness of the unique culture of the nation. The society operates as a networking center, focusing on business development, diplomatic relations, culture and education.

“We must increase international awareness of how easy it is to capitalize on the Azerbaijani economy,” says Tale Heydarov, TEAS chairman. The country is moving away from state control, he says, and the concept of public–private partnerships is reaping dividends for investors.

Other sources of investment with export potential include food and beverage production and industrial activities.

Goychay Cognac, founded in 1826, currently lacks brand recognition but is exporting cognac alcohol as a raw material to Arizona. “The products we produce do not differ from their French counterparts,” says Vagif Mamedov, the president of the parent company, Shark Holding.

Bakfem, a leading producer of hazelnuts, has reduced production costs by investing in modern technology and now meets the highest standards required in international markets. The company is currently exporting nuts to Canada, establishing sales in North America, and hopes to enter the U.S. market soon.

In the industrial sector, Khazar JSC is planning a $154.5 million glass production project using one of the most modern technologies in the field. “At the moment we are negotiating with several foreign companies because we are looking for a partner that will not only invest but also manage the business with us,” says its chairman, Gudrat Kerimov.

Healthcare is a sector poised to grow significantly in Azerbaijan, says Javanshir Feyziyev, general manager of Avromed, the leading importer of pharmaceutical products. Established in 2001, the company now has over 200 suppliers from more than 48 countries.

Grand Enterprise – New Opportunities In a Diversifying Economy

Grand Motors Ltd. is the leading construction machinery distributor and leasing company in Azerbaijan. As the pioneer of the sector, the company currently represents 18 globally recognized brands.

Established in 2005, Grand Motors is an example of dynamic entrepreneurship in Azerbaijan’s diversifying economy. Beginning with only three people, the company has swiftly expanded to 114 staff, with offices in Baku and Ganja.

Grand Motors CEO Rufat Majidov founded the company to take advantage of Azerbaijan’s booming construction sector, following the influx of oil revenues into the country.

With just under $3 billion of construction projects in 2009 despite the downturn, healthy demand in this sector will continue to grow.

The high interest rates of domestic banks led Mr. Majidov to seek out foreign credit lines, giving customers previously unattainable access to competitive rates and high-quality international suppliers.

Today, Grand Motors is stepping into new business areas such as the oil industry, and marine and sailing equipment.

With extensive local knowledge, plus a highly skilled and experienced workforce, Grand Motors is increasing its presence in the region, with an office in Turkmenistan planned for 2011.

As Grand Motors progresses into the future, it is constantly seeking new suppliers as well as partners to expand the company and create joint ventures in new business areas.

Technology: On the Move

The concept of a compact and portable oil refinery seems a world away from the gigantic structures of traditional refining plants. However, this seemingly futuristic venture is a reality in Baku, changing the face of the oil industry as we know it. Ecologic Petroleum Group, a daughter enterprise of AzMeCo, has created mobile oil refineries the size of just four railway cars. The “miniplant” refineries can complement traditional large-scale refineries, reducing their construction and operation costs. Taking just six months to assemble and 30 employees to operate, the future is bright for mobile, efficient and environmentally friendly refineries.

Running on self-produced light oil, the configuration is versatile and capable of producing the full spectrum of end products from diesel to jet fuel.

The investment returns are striking at $18 net profit per barrel of diesel at 1 MMbbl/year capacity, or $8 million annual turnover from an initial $16.6 million investment.

The Uzbekistan desert was the site of Ecologic Petroleum’s first success in 2004, and the investment has already paid for itself twice over. A further Uzbek plant followed, then another in Kyrgyzstan and Afghanistan. The company is now looking to opportunities in the Russian market, as the mobile refineries can grant independence to regional producers in pricing and product range.

The company is poised for an IPO and presents an excellent opportunity for international investors, with 22 patents to date and technological exclusivity for over half of Eurasia.

www.ecologicpetroleum.com

Budding Creativity

ButaLab is a creative agency that is redefining expectations in corporate style and design. It was founded on the firm principle that business must be fine art – an idea put into practice in the form of cutting-edge Web design, advertising and exhibitions.

It is initiating a radically new approach for ex-Soviet republics by weaving together Azerbaijan’s unique historical legacy with modern business ideas.

As the brainchild of the Piriyev family, ButaLab successfully launched the groundbreaking AzMeCo project, impressing the likes of Tony Blair and others.

Every client and concept is formulated by drawing inspiration from Baku’s history as an international center of innovation.

www.butalab.com

Established in Azerbaijan in 2004, A-USA Holdings has been taking advantage of the country’s opportunities, from construction and hospitality to medical services. Its transparent business model and dedication to high-quality services has enabled growth and expansion. Existing projects, including the exquisitely designed Hotel Hale Kai and LabMed Clinic, exemplify the company’s skills in combining local knowledge with innovative techniques. International partners include RESA Group-Spain for building access systems and EDMParis, a stone specialist for massive and SPP Stone Performance Panels.

Adventure travel into the Caucasus Region is a future initiative for the expansion of Hotel Hale Kai tourism services. A-USA’s President George C. (Sandy) Wiswell III, has built the company with the eventual strategy of offering A-USA Holdings to investors and buyers to take the company into the future.

www.a-usa.org

United Enterprises International

When it comes to nurturing companies in the realization of their profitability, United Enterprises International (UEI) Ltd. has the experience, expertise and, perhaps most importantly, the passion and drive. Established in 2008, UEI is a holding company that focuses on promoting Azerbaijani products on an international level. It manages a diverse company portfolio, investing across a wide range of industries, including agriculture, construction, durable food products, FMCG, energy, financial services, property, manufacturing, tourism and textiles.

UEI is similar in concept and structure to a private-equity house, yet purposely differs from traditional private-equity and investment firms, as it is dedicated to establishing businesses – not making short-term investments in existing companies.

UEI’s management team comprises specialist industry experts, thereby facilitating the application of bespoke financing strategies. UEI is committed to long-term development, managing all of its portfolio companies with the dedication of an owner, not just an investor.

Headquartered in London, Düsseldorf and Baku, the company is strategically positioned to optimize its global operations. UEI serves Azerbaijan by bringing the country’s diverse product offerings to the global marketplace. The country has an abundance of goods and products for trade on the international market, yet it continues to exhibit untapped potential.

A World of Fine Tea

The UEI company, Çay GmbH, was established to showcase the delights of Azerbaijani teas, in addition to a handpicked selection of speciality world teas. UEI understands that, to many, tea is more than just a drink – it is a way of life. The Çay brand is unique in that it offers consumers a vast selection of teas from around the globe in one place. All the teas it carries are natural, many of which provide health benefits only now being substantiated by Western medicine.

In 2010, the first Çay House teahouse opened in Berlin. Located at 41 Friedrichstrasse, next to the worldfamous Checkpoint Charlie site, it offers customers the chance to enjoy good company in friendly surroundings. The Çay House stocks some of the world’s finest speciality teas and has an extensive food menu. It also boasts an exclusive range of soft beverages, including the ‘Super Juice’ range of pomegranate juice drinks.

Land of the Pomegranate

Another UEI company showcasing some of Azerbaijan’s superlative produce is the innovative drinks company Azerbaijan Juices Ltd. The enterprise was founded with a simple philosophy: to produce healthy fruit juice from only the finest fruit. The company launched its European range in Germany in 2009, bringing its new ‘Super Juice’ product line to customers. The ‘Super Juice’ range is available in refreshing pomegranate, peach, black currant and cherry variants, all of which are sold either as pure juice or concentrate. Products are marketed directly to consumers and the wholesale market; the latter is offered a selection of pomegranate premiums, comprising 100% pure pomegranate juice, pomegranate concentrate and apple concentrate – all available for global export. The company is busy working on new-concept juice drinks, which will be unveiled to the U.K. market during 2010.

Alternative Azerbaijan

UEI is supporting the Azerbaijani renewable-energy sector via its work with ALTEN GROUP (Alternative Energy Group). The company specializesin realizing renewable-energy projects and products through a local partner network established in collaboration with regional executives,farmers, private-property owners and the public sector. It also cooperates with international bodies as part of its knowledge outsourcing and production upgrade program.

ALTEN is dedicated to implementing biogas, wind, hydro and solar technologies across Azerbaijan, together with pioneering and establishing a mass solar streetlight concept and biogas reactor facilities. The company is currently designing a hybrid powerhouse, combining biogas production facilities, wind turbines and solar PV systems, which is unique to the Middle East, Caucasus and Europe.

For more information about UEI, visit: www.ueiholding.com.