ADB approves $302 million Baku Metro signalling loan with AIIB co-financing

The Asian Development Bank has approved a $302.38 million loan to replace Baku Metro's signalling system and digitalise its operations, the bank said on 13 October. The Asian Infrastructure Investment Bank will provide $79.98 million of co-financing.

The government of Azerbaijan will provide $132.71 million, taking the project's estimated cost to $515.07 million. The ADB project page records board approval on 12 October. The financing plan in the bank's Report and Recommendation of the President gives ADB 58.7 per cent of the total, AIIB 15.5 per cent and the government 25.8 per cent.

The terms

The ADB loan is a regular loan from ordinary capital resources with a 25-year term, including a five-year grace period, an interest rate set under ADB's Flexible Loan Product and a commitment charge of 0.15 per cent a year (report). Average maturity is 15.25 years and the maturity premium payable to ADB is 0.20 per cent. The AIIB loan's terms will be set in a separate agreement between AIIB and the government, and ADB will partially administer it, covering procurement, financial management, safeguards and disbursement.

The two lenders will jointly finance only the signalling work, at a ratio of 71 to 29. The government's share consists mainly of cash to pay taxes and duties, put at $68.82 million, and financial charges on both loans, and it will cover any shortfall, the report says. The base cost is $403.79 million, with $47.40 million of contingencies and $63.89 million of financial charges during implementation.

Who carries the debt

The structure matters for the operator's balance sheet. The ADB and AIIB loans are made to the government and on-granted in full to Baku Metropolitan Closed Joint-Stock Company, the state-owned operator, so Baku Metro bears no debt service, according to the report. The repayment obligation rests with the government as borrower of record.

ADB's financial analysis puts the project's financial internal rate of return at 8.61 per cent, above a real weighted average cost of capital of 3.59 per cent, with a financial net present value of AZN340.7 million. The same analysis says the company remains dependent on government subsidy because of its regulated tariffs and public service obligations, and that the project "should be regarded not as a stand-alone commercial investment". Because the operator carries no project debt, annual financial covenants will focus only on entity-level operational sustainability, the report says. It names a supervisory board as the project's oversight body.

The report also records the October 2025 fare rise from AZN0.50 to AZN0.60, and estimates that a month of two trips a day at AZN36 is about 13 per cent of the poverty line threshold.

What gets built

The project will replace the existing signalling with communications-based train control, upgrade the operations control centre, and add systems for asset management, cybersecurity, passenger information and crowd management, the ADB release says. The metro operates 27 stations and carried about 220.4 million passenger boardings in 2025, the bank said.

The government requested the loan as a phase 1 loan within its $2.6 billion metro expansion programme, focused on signalling and digitalisation and separate from civil works and rolling stock procurement (report). The release describes that programme as about 20 kilometres of new tunnels with nine stations, two depots and 300 metro cars; the report puts the number of new stations at ten.

The implementation period runs from December 2026 to June 2032, with an estimated loan closing date of 31 December 2032. Procurement follows ADB rules, and because AIIB's money is partly administered by ADB, universal procurement applies to all contracts. The project page lists no contracts awarded so far.

"Advanced signaling technology and integrated digital operations systems will make existing services safer and more reliable, while laying the foundation for the efficient operation of Baku's rapidly expanding metro network," Sunniya Durrani-Jamal, ADB's country director for Azerbaijan, said in the release.