Doing Business in Azerbaijan 2009 - Azerbaijan Export ...

90 DOING BUSINESS IN AZERBAIJAN
in order to support energy efficiency and to increase the confidence
of investors. Since independence, the implementation of power
sector legislation has been complicated by, among other things, the
absence of a state agency performing functions such as the
issuance of relevant licenses, tariff regulation, and the conclusion
of contracts with investors. The creation of such a regulatory
agency became an urgent issue in 2001 in the light of the above
mentioned developments in the power sector.
A Presidential Decree “On Establishment of the Ministry of Industry
and Energy of the Republic of Azerbaijan” was issued on 6
December 2004. Under this decree, the new Ministry of Industry
and Energy is to assume the functions of the previous Ministry of
Fuel and Energy and some of the authorities of each of SOCAR,
Azerenerji and Azerigaz. Matters within the Ministry’s competence
include the preparation and implementation of state policy in the
fuel and energy complex, including the production, transportation
and processing of oil and gas.
Specifically, the Ministry prepares, negotiates, executes and
oversees implementation of production sharing or other agreements
on behalf of the state with respect to the development of
hydrocarbon reserves in the Republic of Azerbaijan. Under the
Energy Law, a foreign investor wishing to enter the power market
must obtain a permit to do so and, thereafter, conclude a contract
with authorized state agencies to conduct certain activities.
Contractors are also required to have their business plans approved
by central and local state executive authorities.
As a general rule, special permissions to carry out activity in the
power sector are granted and the contractors determined on a
tender basis. The Electricity Law requires that individuals and legal
entities must obtain special permission for conducting activities in