AZERBAIJAN Law and Practice Contributed by: Ismail Askerov and Amil Jafarguliyev, MGB Law Offices
at expanding renewable generation capacity and deepening private sector participation in the energy transition. It outlines state support mechanisms, rules for producer selection, tariff determination and proce - dures for allocating land for renewable projects. The law signals a long-term strategic commitment to cre - ating an investment-friendly renewable energy eco - system, an area where foreign investors have shown substantial interest. 2. Recent Developments and Market Trends 2.1 Current Economic, Political and Business Climate Azerbaijan’s near-term outlook is characterised by moderating but positive growth, continued fiscal and external buffers from hydrocarbons, and a strong policy focus on diversifying into non-oil sectors. The International Monetary Fund (IMF) projects real GDP growth of around 3% in 2025, with inflation expected to remain within the Central Bank’s target band. The World Bank expects medium-term growth to converge towards approximately 2.5% as declining crude out - put is increasingly offset by expanding non-energy activities. The government’s Socio-Economic Devel - opment Strategy 2022–26 explicitly targets higher FDI inflows – particularly into non-oil sectors – through structural reforms, improved investment facilitation and the development of priority industries such as energy transition, logistics, water infrastructure and agriculture. The year 2025 has seen a continuation of large-scale strategic foreign investment, particularly in energy, renewables and infrastructure. The most significant project is the USD2.9 billion expansion of the Shah Deniz gas and condensate field, led by BP and its international consortium partners. This programme, aimed at developing low-pressure gas reserves, will extend plateau production and underpin Azerbai - jan’s long-term export commitments to regional and European markets. Its scale and technical complexity make it one of the region’s largest upstream undertak - ings and a central pillar of Azerbaijan’s external sector resilience.
A second major development is BP’s move into utility- scale solar generation in the Karabakh region, through the construction of a 240 MW solar power plant val - ued at approximately USD200 million. Scheduled for completion by mid-2027, the project is strategically positioned as both a post-conflict reconstruction ini - tiative and a flagship of the government’s green ener - gy corridor vision. It demonstrates a growing appetite among international energy companies to participate in the redevelopment of newly reintegrated territories. Renewables more broadly continue to attract sig - nificant Gulf-based investment. The 240 MW Khizi– Absheron wind project being implemented by ACWA Power (Saudi Arabia) marks one of the largest wind- energy installations in the South Caucasus. In parallel, Azerbaijan is progressing a broader 1,000 MW renew - able-energy programme with Masdar (UAE), including wind, solar and integrated green-hydrogen develop - ment. These projects collectively reinforce Azerbai - jan’s positioning as an emerging regional clean energy hub and illustrate sustained, high-value interest from long-term institutional investors. The year 2025 has also seen important movement in water infrastructure investment, an area designated as a national strategic priority. The government has advanced a large desalination plant project on the Absheron Peninsula, awarded under a PPP structure to a foreign-led consortium. Designed to address long-term water security challenges, the facility will combine seawater desalination with modern transmis - sion infrastructure and represents one of the largest non-energy infrastructure investments in the country. Its scale, financing model and international participa - tion signal a broadening of Azerbaijan’s FDI profile beyond hydrocarbons. Overall, Azerbaijan’s political environment remains stable, with policymaking strongly centralised and government priorities clearly aligned around diversi - fication, infrastructure renewal and regional integra - tion. For foreign investors, the combination of macro - economic stability, targeted state support measures, robust demand for large-scale infrastructure and an expanding renewables pipeline creates a favourable near-term outlook. While structural reforms in compe - tition, state-owned enterprise (SOE) governance and
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