AKKORD Corp. making substantial contribution to development of non-oil economic sector of Azerbaijan

Khagani Guluzade
Chairman of the Board of Directors and General Director
Akkord Industry Construction Investment Corporation OJSC

Has been heading Akkord Corporation since August 2010. From 1996 to 2010 he held various management positions (Head of the Committee for Assets and Liability Management, First Deputy Chairman of Board and Chairman of the Board of Directors) at leading Azerbaijani banks. He was also in charge of the working group that carried out the successful placement of “euro-bonds” and gained broad experience in cooperation with international financial institutions, investment funds and leading global banks.

He is a graduate of the Azerbaijan State Economic University with a Masters degree in “Finance” and the Faculty of Law at the Baku State University, both with honors. He holds Ph.D. in Economics, defended a dissertation: “Priorities of the state investment policy in the process of development of national economy.”
He was given a “top-manager of the year” award by the Europe Business Assembly in Oxford, UK in June 2011.
Married. Has three children.


Caspian Energy (CE): Mr. Guluzade, how would you evaluate Azerbaijan’s economic development and competitiveness level in the international market?
 

Khagani Guluzade, Chairman of the Board of Directors and General Director, Akkord Industry Construction Investment Corporation OJSC: Azerbaijan’s economic successes are considerable. It is noteworthy that in the Global Competitiveness Index 2012-2013 by the World Economic Forum Azerbaijan rose by nine positions and ranked 46 among 144 countries. This means that Azerbaijan is among 50 most competitive economies of the world. Apparently, it was attained due to the economic strategy set by the country’s President Ilham Aliyev, which allowed to avoid negative impacts of global financial crisis and ensured steady economic growth. The country economy’s high growth rates demonstrated many years in consecutive, clear and consistent government investment programs, diversification of economy, continuous support to the development of non-oil sector and other strategic measures taken under the leadership of President Aliyev will ensure long-lasting economic and social benefits to Azerbaijan and its people.

CE: The economic policy that has been implemented under the guidance of President of Azerbaijan envisages consistent and scaled development of the non oil economic sector of the country. How do you evaluate the contribution Akkord makes in to the development of the local construction business as a part of the non oil economic sector?

Khagani Guluzade: In view of the tasks assigned by President Ilham Aliyev for development of the non oil sector and generally private sector, the Corporation has been strongly committed to contributing to the development of the local construction market. Within a short period of time, Akkord has managed to become a national leader in the construction field, particularly in development of large-scale road infrastructure projects. Nowadays, Akkord implements five large scale road infrastructure projects in Azerbaijan with the total contract value of approximately AZN 314 million. Up to now, both in Azerbaijan and abroad, the corporation has completed infrastructure projects with the total contract value exceeding $1.7 billion. In addition, Akkord has continuously developed the other two lines of its core business: the construction of real estate and public facilities, as well as production and processing of construction materials. The combination of construction and industrial lines of businesses, along with ensuring the corporation’s diversification and multi-functional capacity, also positions Akkord as an important supplier of construction materials such as concrete and precast concrete, asphalt, gravel, sand, bricks, fabricated metal products and others. Notably, Akkord is finalizing the installation of the first production line of its brand-new cement plant in the Gazakh region of Azerbaijan. Together with a prospective second production line the plant is to ensure manufacturing capacity of 3 million tons of cement annually. In total, the corporation possesses and operates 39 various plants within the territory of Azerbaijan. Regarding real estate development, the corporation has also constructed and commissioned 10 residential complexes in Baku with a total area of over 775,000 sqm., and has also developed 56,000 sqm. of commercial area. One of the recent business directions within the overall infrastructure development line is the construction of water supply and sewerage infrastructure systems in Azerbaijan. Currently, in six regions of the country, Akkord is implementing 11 such projects with a total contract value of almost AZN 300 million.

Moreover, Akkord began expanding the range of its infrastructure business by participating in construction projects assigned by the Baku Metro Authority and envisaging building of new lines and stations for the underground network. Since this business area is new for Akkord, the corporation teamed up with Bouygues Travaux Publics, one of the global construction leaders and a part of Bouygues Group of France.

Importantly, Akkord, as a public interest entity, by employing and contracting many thousands of individuals and entities, and delivering services to millions of people, fully realizes its social and public undertakings and does its best to comprehensively address these in a timely manner.
The country’s development strategy, defined by President Ilham Aliyev, clearly underlines the significance of development of the non-oil sector of the national economy. In particular, the “State Program for Social and Economic Development of the Regions of the Republic of Azerbaijan for 2009-2013”, endorsed by the country’s President, successfully enhanced the business environment for the sustainable development of the non-oil sector. At the conference dedicated to the results of the fourth year of implementation of the state program held on February12, 2013 under the chairmanship of President Ilham Aliyev, the head of state restated the priority of development of the non-oil sector of the economy and strengthening of the export potential of the country.

Thus, by demonstrating fast improvement dynamics through heavy investment into industry and manufacturing, introducing new technologies and know-how, as well as creating new workplaces, Akkord has made a substantial contribution to the development of the non-oil sector of Azerbaijan’s economy.

CE: To what extent has the Corporation managed to expand its business beyond Azerbaijan?

Khagani Guluzade: At present, Akkord is active in several foreign markets, including Georgia, Turkey, Kazakhstan, Uzbekistan and Ukraine. In all these countries the corporation has opened full-scale operational subsidiaries and branches, which are involved in infrastructure projects. In addition, in 2012 Akkord has established its representative office in Frankfurt, Germany. The current portfolio of ongoing road infrastructure projects abroad consists of six projects with a total contract value of more than $390 million.

I would like to specifically mention Georgia, where we have been building roads, bridges and tunnels for many years and thus, making our contribution to the development of Georgia.
Such international exposure strengthens our experience, establishes a solid professional background, and intensifies our business contacts with foreign partners among which we can name companies like Salini, Todini, and the subsidiaries of Vinci Group – Freyssinet and Freysas. Importantly, in international markets we give priority to projects funded by international financial institutions like the World Bank (WB), the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ABD), and the Islamic Development Bank (IDB). In the future, we are planning to enter the Russian construction market to join significant infrastructure projects related to preparation for the upcoming 2018 FIFA World Cup.

CE: Akkord Corporation has been engaged in implementation of many large infrastructure and construction projects both in Azerbaijan and world markets. Which of those projects do you find more challenging and grandiose?

Khagani Guluzade: There is no project without a challenge. The challenge drives and leads us to research and improve. We are committed to this philosophy. Nonetheless, there are some ongoing projects I would like to mention specifically due to their public significance. A long-term Conceptual Development Scheme of Baku Metro system prepared as per the President’s decree of November 10, 2008 and the “State program for development of Baku Metro system in 2011-2015”, approved by the President’s decree of March 18, 2011 lay the ground for Baku metro network expansion plans.

Akkord, together with Bouygues, has recently established the Akkord-Bouygues Joint Venture for the Baku Metro network expansion project. On November 7, 2012, the Joint Venture signed a Memorandum of Understanding (MoU) with the Baku Metro Authority for the initial two projects, including the reconstruction of the 28th of May station and the construction of the new Khatai-Azi Aslanov-2 section of the green line of the Baku Metro. Indeed, these projects are a challenge for Akkord, but I am absolutely confident that with our partner Bouygues we will successfully complete and commission them in a timely and effective manner. In general, more than 50 metro stations and tunnels to the length of 165 km are planned to be constructed in Baku in coming 20 years.

Gazakh Cement Plant is another project that is underway in Western Azerbaijan. Deloitte and Touche worked out the feasibility study of the plant. The plant, having prospective production capacity of 3 mln tons of cement per year, will considerably meet the demand of the local market and ensure export to the neighboring markets, including Georgia.

The plant construction covers two stages. The first stage envisaging annual production of 1 mln tons of cement will be commissioned in mid of 2013. The second stage will enable to produce additional 2 million tons of cement per year. The development of the Gazakh Cement Plant for Akkord is carried out by CBMI, a subsidiary of the world-renowned SINOMA of China. Dry cement production method will be applied at the plant. Besides, advanced environmentally friendly technologies will also be used during the production process. Great part of the work has already been done at the plant. The majority of the plant personnel numbering 1,000 people will be recruited locally. Gazakh Cement Plant will enable to increase meeting of domestic cement demand up to 75%. It is noteworthy that President Ilham Aliyev who visited the Gazakh Cement Plant for getting familiarized with the construction work on April 12, 2012, gave high evaluation to the project. He expressed his views on continuous strengthening of national non-oil production capacity drawing on the example of Gazakh Cement Plant.

Another essential project is a road-tunnel complex at Galaba Square, Baku. The project was designed by Surbana International Consultants of Singapore and architectural design was developed by Venezia Design of Italy. This road-tunnel complex consists of six tunnels, eight pedestrian crossings, and two new exits at the Ganjlik metro station. Also there will be constructed an adjacent underground parking. By the way, one tunnel has been completed and its opening ceremony was led by the country’s President on 28th of December 2012. Nowadays, this is the largest ongoing road-tunnel infrastructure project in Baku.

Of course, many other projects by Akkord Corporation such as reconstruction of Ganja By-Pass Road in Azerbaijan, reconstruction of M39 Road Tashkent-Termez Road in Uzbekistan, construction of Western Europe-Western China International Transit Corridor in Kyzylorda, Kazakhstan, reconstruction of Kiev-Chop Road in Ukraine, construction of Akchagoze-Bashpinar Road in Turkey as well as construction of New Kutaisi By-Pass Road in Georgia could also be briefly mentioned.

CE: Akkord has made a big appreciable step forward not only in the construction but also in corporate organizational and management issues for the past years. What could you tell about this issue?

Khagani Guluzade: First of all, it must be noted that we have managed to establish and strengthen a good team of professionals dedicated to their work. Akkord has a multinational team composed of professionals from Azerbaijan and countries such as Italy, Germany, the UK, the UAE, China, Turkey, and Georgia. We have been holding various training and educational programs for our employees, increasing staff professionalism, and heavily investing in human capital.

A well-integrated corporate governance system was developed to add value to our business. Good governance, strengthened internal control, and internal audits as well as risk management systems have been successfully implemented at Akkord. Moreover, we have managed to diversify financing sources and improve financial stability. Additionally, in 2012 the corporation’s charter capital increased to AZN 84 million (approx. $108 mln.), which allowed us to ensure the required cash flow for investments through internal sources. Akkord improved its financial reporting standards based on IFRS and contracted Deloitee and Touche as external corporate auditors. PricewaterhouseCoopers has been contracted as a rating advisor for the first time rating of Akkord by Fitch Ratings. We are planning to renew our rating by Fitch and strongly believe to achieve higher results in 2013. Besides, in 2013, we are planning to re-launch our “euro-bond” project to gain access to low-cost international financial markets to raise funds and maintain the diversification of our sources of financing. Notably, Akkord intends to continue its commitment to corporate social responsibility and comply with stakeholders’ interests and demands.