The World Bank has provided Azerbaijan with a $1.5 million grant to prepare a major project aimed at improving the efficiency and climate resilience of Baku’s water supply system. The funding will support feasibility studies, investment planning, digital water-management solutions, energy-efficiency measures and efforts to reduce water losses.
The grant agreement was signed on August 31, 2026, by Zaur Mikayilov, Chairman of the Azerbaijan State Water Resources Agency (ADSEA), and Rolande Pryce, World Bank Regional Director for the South Caucasus.
The grant is expected to lay the groundwork for a larger investment program to modernize Baku’s water infrastructure, with implementation activities scheduled through December 31, 2027.
Key Overview
- Grant amount: $1.5 million
- Provider: World Bank
- Recipient: Azerbaijan State Water Resources Agency
- Main location: Baku, Azerbaijan
- Project: Climate-Resilient and Efficient Water Supply
- Focus areas: Water efficiency, climate resilience, digitalization and energy efficiency
- Additional focus: Reducing non-revenue water and water-supply interruptions
- Grant period: Through December 31, 2027
World Bank Supports Azerbaijan’s Climate-Resilient Water Infrastructure
The World Bank’s $1.5 million grant will finance preparations for the proposed Climate-Resilient and Efficient Water Supply project in Baku.
The planned project is designed to strengthen the city’s water infrastructure while improving the efficiency and reliability of water services. Funding will initially be directed toward the studies and planning needed to identify priority investments and prepare the larger infrastructure program.
The grant agreement was signed on August 31, 2026, between ADSEA Chairman Zaur Mikayilov and World Bank Regional Director for the South Caucasus Rolande Pryce.
The financing reflects an investment approach that links climate resilience with infrastructure efficiency. By improving water-resource management, reducing losses and increasing energy efficiency, the project is expected to address both environmental and operational challenges within Baku’s water system.
Funding to Prepare Larger Water Investment
The grant will primarily cover consulting costs associated with preparing the larger water infrastructure project.
The preparation work includes a feasibility study to assess Baku’s water system and determine the investments required to improve its performance. It will also identify priority areas where modernization and efficiency improvements can deliver the greatest benefits.
Investment planning will include digital technologies and energy-efficient solutions. These measures are intended to improve how water resources are monitored and managed while reducing the energy requirements associated with water services.
The preparation phase will also include the development of tender documents that can support future contracts under the larger investment program.
Digitalization and Energy Efficiency
A major component of the preparation program is the integration of digital water management solutions.
Digital systems can support better monitoring and management of water resources, helping authorities identify inefficiencies and improve operational decision-making. The project will assess how such solutions can be incorporated into Baku’s water infrastructure.
Energy efficiency is another priority. Water supply systems can require significant energy for pumping, treatment and distribution. The planned project will therefore examine opportunities to improve energy performance alongside broader infrastructure upgrades.
The combination of digitalization and energy efficiency is intended to create a water system that is more efficient and better equipped to respond to future climate pressures.
Reducing Non-Revenue Water
The project will also address non-revenue water (NRW), referring to water that enters the distribution system but is not ultimately billed to customers.
Reducing NRW can improve the financial and operational performance of water utilities while making better use of available water resources.
The planned project will identify investments and measures aimed at reducing water losses and addressing interruptions in supply. Improving these areas could help strengthen the reliability of water services in Baku.
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Environmental and Social Safeguards
The World Bank grant will also support environmental and social preparation for the larger project.
The funding will cover the development of framework documents aligned with the World Bank’s 10 Environmental and Social Standards. It will also support preparation of an Environmental and Social Commitment Plan.
Environmental and social documentation will be developed as part of the project preparation process to ensure that future investments are assessed and implemented in accordance with the World Bank’s requirements.
This component is designed to establish the safeguards necessary before larger infrastructure investments move forward.
ADSEA to Lead Implementation
The Azerbaijan State Water Resources Agency will oversee implementation of activities financed under the grant.
ADSEA is establishing a specialized team of eight experts to support the preparation process. The team will cover key areas including environmental and social issues, procurement, technical engineering, financial management, climate change, communications and monitoring.
The multidisciplinary structure is intended to ensure that technical, financial, environmental and climate considerations are incorporated into project preparation.
The grant will remain available through December 31, 2027, providing time for the feasibility work, investment planning and environmental and social preparations to be completed.
Climate Investment Implications
The grant represents an early-stage climate investment in Azerbaijan’s water infrastructure, with the larger objective of preparing a substantial modernization program.
Water systems are increasingly exposed to climate-related pressures, making resilience and efficient resource management important components of infrastructure planning. By combining climate considerations with digitalization, energy efficiency and water-loss reduction, the proposed project takes a broader approach to infrastructure resilience.
The World Bank financing also helps reduce the initial costs and technical barriers associated with preparing large-scale infrastructure investments. A completed feasibility study and investment plan can provide a clearer pipeline of projects for future financing.
For Azerbaijan, the preparation work could therefore help create a foundation for attracting additional capital toward climate-resilient water infrastructure in Baku.
Outlook
The immediate focus will be on completing the feasibility study, identifying priority investments and preparing the technical, procurement, environmental and social documentation required for the larger project.
With the grant running through December 2027, ADSEA will have time to establish the necessary project structures and develop a pipeline of investments focused on water efficiency, digital management, energy savings and climate resilience.
The success of the preparation phase will determine how effectively Azerbaijan can move from planning to larger-scale investment in Baku’s water system.
FAQs
1. How much has the World Bank granted Azerbaijan for the water project?
The World Bank has provided $1.5 million to support preparation of the Climate-Resilient and Efficient Water Supply project.
2. What will the World Bank grant finance?
The grant will fund a feasibility study, priority investment planning, digital water-management solutions, energy-efficiency measures, tender documents, and environmental and social assessments.
3. What are the main goals of the planned water project?
The project aims to improve water-supply reliability, reduce non-revenue water, increase energy efficiency, strengthen climate resilience and modernize water-resource management in Baku.
4. When will the World Bank grant be implemented?
Activities financed by the grant are scheduled to continue through December 31, 2027, laying the groundwork for the larger water infrastructure investment project.
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