The Asian Infrastructure Investment Bank (AIIB) has approved $45 million for Azerbaijan’s first major seawater desalination plant. AIIB approved non-sovereign financing on 26 September 2026. The facility will stand near Sumgayit on the Caspian Sea coast, northwest of Baku. The Azerbaijan seawater desalination PPP aims to produce 300,000 cubic metres of drinking water daily using reverse osmosis technology. At full capacity, that amounts to roughly 109.5 million cubic metres a year. However, actual production will depend on operations and demand. The project will serve Baku and the Absheron Peninsula, where communities need reliable water. Meanwhile, Saudi developer ACWA Power puts the project’s total investment at $418 million. AIIB’s commitment represents about 11% of that figure, rather than the entire financing package. The approval advances efforts to diversify supplies as urban growth and climate pressures challenge existing networks. It also brings international financing into Azerbaijan’s emerging water PPP market.
ACWA Power will develop the plant through Caspian Sea Azerbaijan Project Company, AIIB’s designated borrower. The developer signed a public-private partnership agreement with the Azerbaijan State Water Resources Agency, the project’s water offtaker. The contract runs for 25 years from the scheduled commercial operation date. Moreover, Azerbaijan’s Ministry of Finance provides a backstop for the agency’s operational payment obligations. Such protection matters to lenders because dependable revenue helps projects repay long-term loans. ACWA describes the contract as a build-own-operate-transfer arrangement. It names Power China Huadong Engineering Corporation as the construction contractor and ACWA Operations as the operator. Therefore, the Azerbaijan seawater desalination PPP combines private construction and operating responsibilities with public-sector water purchasing commitments. The structure places delivery risks on the developer while supporting future payments. However, AIIB’s approval does not confirm that all project financing has closed. Nor does it mean the lender has disbursed the entire $45 million.
Water security has become a major infrastructure priority in Azerbaijan. In January 2026, the government outlined a 2026–2035 programme covering water supply, wastewater and stormwater systems. It focuses on Baku and Absheron. Officials expect desalination to supply roughly 25% of local water consumption. They also projected completion by the end of 2028, although the date remains a target. Beyond adding production capacity, the plan seeks lower network losses, better metering and upgraded treatment facilities. The government is also studying another potential PPP to modernise the Hovsan wastewater treatment facility. According to its presidential meeting record, feasibility studies had advanced with Asian Development Bank involvement. Separately, the International Finance Corporation has supported the desalination tender through transaction advisory work. These activities show how Azerbaijan is exploring private investment in different parts of its water system. As a result, the new plant could become a starting point for broader sector reforms.
The desalination facility will form part of Azerbaijan’s efforts to expand drinking water supplies to Baku and the Absheron Peninsula. The plant, planned near Sumgayit, will draw water from the Caspian Sea and treat it using reverse osmosis technology. Under the project arrangements, ACWA Power will develop the facility through its project company. Meanwhile, Power China Huadong Engineering Corporation Limited has been identified as the engineering, procurement and construction contractor. ACWA Operations will undertake the plant’s operations and maintenance. The Azerbaijan seawater desalination PPP is expected to produce up to 300,000 cubic metres of drinking water daily. Furthermore, the Azerbaijani government has included the facility in its wider programme to improve regional water supplies. The government has indicated a targeted completion date in 2028. AIIB’s $45 million financing approval represents another step towards implementing the project. The development will proceed through construction, equipment installation, testing and commissioning before commercial water production begins.
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