Estimation of demand for cement

Gross building area of these units is estimated at 3.5 mn m

Khazar Islands: or Caspian Islands is a project under construction that encompasses creation of artificial islands in Caspian see with area of 3000 ha. Islands will have necessary city infrastructure and an airport. Estimated investment outlay is USD100bn

Azerbaijan Tower: will be the tallest building in the world planned to be constructed within project of Khazar Islands. The USD 3bn will be allocated to the tallest building in the world with 189 storey and height of 1,050mn

Properties in Haydar Aliyev Avenue:

■ SOCAR Tower, Headquarter of State Oil Company of Azerbaijan Republic. Estimated value is USD300mn

7,000

6,000

5,000

4,000

3,000

2,000

1,000

-

(5.6%)

13.2%

27.1%

8.7%

16.6%

2.4%

10.8%

2.1%

5.0%

30.0%

25.0%

20.0%

15.0%

10.0%

5.0%

- (5.0%)

(10.0%)

■ Azersu Tower, Headquarter of Azersu, state utility services provider. Estimated value is USD120mn

■ Baku Tower is a business centre. Investment value is unknown

■ CBAR Tower is a project under construction to build headquarter for Central Bank with GBA of 89,700 m2

Substantial projects in western regions of Azerbaijan:

■ Gazakh Industry Plant

■ Ganja Industry Plant

■ Solar Energy Plant

2010 2011 2012 2013 2014 2015 2016 2017 2018

Cement demand Growth rate, %

Source: KPMG analysis, based on EIU information and publicly available data

Note: Graph is provided for information purposes. It is used to cross check demand estimation that derived from EIU forecasts

All of these projects along with other unlisted projects allow market participants to be optimistic about the demand for cement in Azerbaijan

Cement industry overview in Azerbaijan

Prices

Prices

Retail prices for cement packs of 50kg have been increasing over 2001-2008, reflecting the increased demand which is driven by increased construction activities in the economy. The drop of prices in 2009 is explained by the global crisis which hurt oil prices, the major funding source for almost economic sectors of Azerbaijan. Given this decrease in oil prices, the cutting Government Spending and weakened private sector activities, decreased the demand for the cement

Despite the recovery of the sector (and economy) from the crisis, average retail price is still dropping. The drop rate is decelerating

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