2018 AIIB Annual Report and Financials

HOW WE DO OUR WORK

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Our Alignment With the SDGs

AIIB’s establishment is critically linked to the global effort toward sustainable development and improved living standards. Understanding the Sustainable Development Goals (SDGs) is important for AIIB to effectively serve its clients. AIIB members are committed to the SDGs and many countries have integrated the goals into their road maps. For example, Bangladesh, Cambodia, China, Malaysia, Mongolia and the Philippines have all integrated the SDGs into their national development plans.

Research on the SDGs show interlinkages among the targets and sometimes interdependence between goals and targets, and that these interlinkages are critical to achieving development benefits. Mapping interlinkages between the SDGs and institutional activities is often subjective and dependent on the perception of the institution conducting the study. We consciously factored this into our own mapping exercise on two levels: (1) AIIB’s activities at the institutional level in relation to the SDGs and (2) how these are aligned at the project level.
With a mandate to align the Bank’s operations with global priorities, we reviewed our investment portfolio and environmental and social standards to (1) determine our alignment with the SDGs and better assess the impact of our operations and (2) see how our operations align with international agreements. We discovered that the Bank’s operations are not only aligned with our investments but also with the environmental and social standards we adopt to ensure sustainable development. Moreover, the direct and indirect benefits emerging from our investments could also be aligned with specific SDGs. Broadly, our investments are focused on four major goals (SDG 6: Clean Water and Sanitation, SDG 7: Affordable and Clean Energy, SDG 9: Industry Innovation and Infrastructure and SDG 11: Sustainable Cities and Communities).

Our Alignment With the SDGs
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This endeavor is supplemented by the environmental and social measures aligned with SDG 8: Decent Work and Economic Growth; SDG 9: Industry, Innovation and Infrastructure; SDG 10: Reduced Inequalities; SDG 12: Responsible Consumption and Production; SDG 13: Climate Action; SDG 14: Life Below Water and SDG 15: Life on Land.

The direct and indirect benefits accrued from the investments are aligned with SDG 1: No Poverty, SDG 2: Zero Hunger, SDG 3: Good Health and Well-Being, SDG 4: Quality Education and SDG 5: Gender Equality.

As the infographic shows, the alignment of our activities is best demonstrated with case studies where specific investments, environmental and social measures and benefits can be aligned with specific SDGs.

Our activities with major global pledges for growth and development are limited to alignment mapping. Individual governments are in better positions to measure SDG impacts at the macro level, and they will have to generate relevant data for each target assigned with the SDGs.

For AIIB, it is important to decide how the Bank’s investment operations align with the SDGs and how these can be depicted in project documentation.

Value for AIIB and the Client

Our Project Prioritization and Quality Framework (PPQ) helps us ensure that projects we include in our investment program are strategically aligned with the mandates of and add value to both AIIB and the client.

The PPQ allows us to ensure alignment with AIIB in terms of thematic priorities, sector priorities, portfolio diversity and the Bank’s capacity. The PPQ gives us a better look at the possibility of alignment between the project and the client’s national strategies, providing substantial cofinancing and solid economic and sector analytical work.

For AIIB, the PPQ allows us to look closely at what the project would bring to the Bank (for example, if it would allow us to learn, build partnerships, build our brand, open new markets or develop our capacity).

For the client, the PPQ allows us to see if (1) the project would add value to clients in terms of adding financing currently not provided by the market, (2) risks involved could be shared or mitigated, (3) the project design could be improved and (4) the project offers better development outcomes and adheres to higher ESG standards.

Project Spotlight

EGYPT: Sustainable Rural Sanitation Services Program
EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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Abdel Naby Remembers Clean Waters

The scent of sewage is not a stranger to 70-year-old retiree Sayed Abdel Naby who lives near an open sewer in Sakakra village 100 kilometers northeast of Cairo, Egypt. Garbage on top of sewage increases the odor.

“We used to wash ourselves in El-Salam,” Abdel Naby reminisces a time when the waters were clean. Then the water quality deteriorated. A rudimentary sanitation system—built by the villagers in 1988—drains into the canal and today causes much of the pollution.

The Sakakra sewerage is one of the polluters of the El-Salam Canal in the Nile Delta, which Egypt aims to rehabilitate as part of its National Wastewater Project. Under this umbrella project, the Sustainable Rural Sanitation Services Program was launched to strengthen institutions and policies as well as improve and increase access to sanitation services in rural Egypt. AIIB invested USD300 million for the second phase of the program, which is jointly funded by the World Bank and the Government of Egypt.

More than 7,000 Sakakra residents in the Sharkiya Delta governorate await improvements to the village’s sanitation services. Residents fear the spread of disease since the polluted sewers attract mosquitoes, flies and bugs.

“The current sanitation system is outdated,” says community leader Ahmed Adel. “The pipelines are too small and located just beneath the surface, causing regular flooding.”

EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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EGYPT: Sustainable Rural Sanitation Services Program
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Sewage flooding into the streets creates health issues for pedestrians, says 62-year-old villager Sayed Mahmoud, adding that water from broken sewerage pipes mixes with tap water.

Hayam, a homemaker who lives less than 100 meters from an open sewer, is concerned about the health risks poor sanitation poses to her three young children.

“The sewers are in a bad state,” she says. “It’s not natural and has negative effects on children and the elderly. The smell causes breathing problems and I’m worried one of my children might fall into the sewers.”

College student Mohamed Helmy works in a pharmacy located next to the sewers. “Farmers use sewer water to irrigate their lands,” he says. “We need a new sanitation system and the open sewers need to be closed.”

Sakakra is not an exception. With an estimated 80 percent of households in rural Egypt not covered by public sewerage, improvements in the sanitation system are badly needed.

AIIB is financing both the physical infrastructure and improvement programs for institutions responsible for sanitation.

The projects will run till September 2023. In total, 178,000 households in 133 villages in the governorates of Dakahliya, Sharkiya, Damietta, Menoufya and Gharbiya will receive sanitation services.

Technical studies to determine the most suitable and highest priority locations for a new drainage system are underway. Sanitation projects in Egypt used to be conducted top-down by the government, but this one takes a more community-based approach.

Abdel Naby, Hayam, Mahmoud and their neighbors’ participation will help Sakakra get a new pump station, a new network of pipelines and a new wastewater treatment plant serving five villages. And hopefully along with that, newfound safety and peace of mind.
INDIA: Andhra Pradesh Rural Roads Project
INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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Navya and Sujatha’s Road to Education

Thirteen-year-old Navya Reddy can’t wait to go back school. A new road crosses her village in Ayyarapali in Andhra Pradesh’s Prakasam district, and she’s eager to share the news with her schoolmates. The road now enables the school van to pick Navya up from home instead of her having to walk a kilometer to the main district road.

Navya’s family lives in one of the 4,973 habitations expected to benefit from the Andhra Pradesh Rural Roads Project, a USD666-million initiative funded by AIIB and the Government of Andhra Pradesh.

Meanwhile, in a remote village in Komarole Mandal, 35-year-old Sujatha Sooram teaches at the government’s rural child care center. The upcoming road will connect Sujatha and her village to the child care center and the government primary school, making the otherwise uneven and stony pathway to school a comfortable walk for the young students.

“It’s very difficult for little children to walk on this muddy path,” says Sujatha. “Rains make it worse. This much-needed road would make school more accessible to village kids.”

The project aims to construct 4,824 kilometers of new all-weather roads (including seven main bridges) and upgrade 3,094 kilometers of existing roads across 13 districts, with more than 250 people per habitation (each habitation is composed of several households). Majority of the population of Andhra Pradesh (approximately 50 million), one of the largest coastal states in India, live in rural regions. Rural roads comprise 60 percent of the state’s total road network. This perhaps indicates an urgent need to improve roads and connect these vastly spread habitations to better health, education and trade facilities.

INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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INDIA: Andhra Pradesh Rural Roads Project
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The newly constructed roads have caused hope to ripple among the villagers and lessen cynicism. Women, senior citizens and those in need of health care are hoping the project would provide last-mile connectivity to social services. The project has also sparked volunteerism in some of the villagers. Braving the heat wave, farmers attend to their crops in the vast fields of the largely agrarian state of Andhra Pradesh. The rural roads project has given them a reason to hope, with some of them voluntarily contributing a small part of their lands for the road construction.

“We sow crops like groundnut, millets, chilies and even cotton, which need great care,” says Bala Venkat Reddy, a farmer in Moolapali village. “With the roads, getting to our fields every day with our bullock carts is much easier now. Transporting our harvested crops to the nearest market yard now costs us half the price, with tractors and three-wheeler auto rickshaws easily accessing our village.”

Roads are lifelines to socioeconomic development. They embolden women to travel farther distances for education, trade and health. They enable people like Bala Venkat to transport and trade his crops. They empower teachers like Sujatha to educate the young. And they help Navya get to school safely.
INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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Kendo and Suhada’s Thoughts on Rice and Water

Kendo is passionate when he talks about modernizing agricultural irrigation in his village of Karangwangi in Subang Regency, West Java, Indonesia. The 55-year-old farmer says water needs to be distributed equally to all rice farms, but canals are damaged and unable to proportionally irrigate arable land especially during the dry season.

Cultivating 4.5 hectares, Kendo is one of several hundred thousand farmers who rely on the canal to irrigate paddy fields. His home is one of 887,000 farmer households expected to benefit from the USD578-million Strategic Irrigation Modernization and Urgent Rehabilitation Project being cofinanced by AIIB, the World Bank and the Government of Indonesia.

“This is very important for rice farms in Subang,” says Kendo, explaining that rice grows in flooded fields and requires continuous irrigation. “I hope the project can be completed soon.”

The project focuses on infrastructure management, rehabilitation and modernization of 14 national irrigation systems spread across eight river basins with a service area of around 100,000 hectares. It involves strategic modernization of the 176,000-hectare Jatiluhur Irrigation Scheme in West Java, the largest contiguous irrigation system in Indonesia.

Meanwhile, Suhada, a 40-year-old farmer from Gempol Village, says agricultural modernization is needed since sometimes he doesn’t get adequate amounts of water due to irrigation scheduling. He adds that modernization would solve canal clogging due to sediment particles.

INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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INDONESIA: Strategic Irrigation Modernization and Urgent Rehabilitation
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“If water is not distributed in time, crops would be affected and I won’t be able to harvest on time,” says Suhada.

Irrigation is pivotal in Indonesia where 30 percent of the total land (about 55 million hectares) is agricultural. Agriculture is the main source of employment for more than 33 percent of the country’s labor force and contributes 14 percent to gross domestic product. Modernizing the irrigation system could distribute water equally to all farms.

“Irrigation scheduling is still manual but will later use an automated system of operating irrigation gates to ensure real-time water distribution for farmers who could then directly irrigate their farms when needed,” says Iman Ramdhani, head of program of project executor Balai Besar Wilayah Sungai (Citarum River basin organization).

Irrigation modernization is key to wet rice cultivation in a country that is one of the world’s largest rice consumers. It allows farmers to harvest high-quality crops, explore crop diversification, decrease the cost of pumping water and minimize crop failures—ultimately leading to more stable incomes for farmers like Kendo and Suhada.
TURKEY: Tuz Gölü Gas Storage Expansion Project
TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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Light and Heat for Bayram’s Family

Among the hills of Turkey’s central Anatolian province of Konya, 35-year-old Bayram Kaya lives a simple life, like most farmers. His family owns a modest farm where they grow wheat, barley and sugar beets. There he lives with his wife, parents, brother and five children.

At the center of their home is a rudimentary coal-fired stove that burns round-the-clock. Here they bake bread, cook meals and brew tea. Churning out thick black smoke, the stove also provides heating for the family of 10.

Bayram’s is among one in five Turkish homes which aren’t connected to the natural gas grid. When winter comes, staying warm can get difficult and expensive.

“There isn’t a single house here without a coal stove—we use it for everything,” says Bayram. “When the nights are long and freezing, the only other option is the electric heater. And when the electricity bill arrives, it may be two, three or four times higher than you expect.”

Like many countries, Turkey has to import natural gas throughout the year. Prices in the international market spike with winter demand when consumers are using more gas to heat their homes. But if Turkey were able to import gas in the summer (when prices are lower) and distribute it in winter, consumers would see a significant change in their bills.

The solution lies underground, a few kilometers from Bayram’s home where efforts to transform Turkey’s energy grid are underway. The Tuz Gölü Gas Storage Expansion Project is a USD2.73-billion project cofinanced by AIIB and the World Bank that aims to quadruple Turkey’s natural gas storage capacity using an underground facility.

TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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TURKEY: Tuz Golu Gas Storage Expansion Project
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The project uses a process called solution mining. Ultrasonic scanners reveal salt deposits beneath the earth, which engineers then drill into. The resulting cavern—large enough to fit the Eiffel Tower—is filled with water from the nearby Hirfanlı Dam. Dissolved in water, the salt deposits are extracted then returned to the lake. Once the underground cavern is sealed, it can be used to store natural gas year-round. The project could expand Turkey’s overall underground gas storage capacity from 3.4 billion to 10 billion cubic meters.

The project supports sustainable development and brings social benefits to the community. Fresh water for agricultural irrigation could be transported from the Hirfanlı Dam after the leaching process. This enhances the feeding and breeding conditions of the flamingo population and contributes to the revival of the Salt Lake ecosystem. Planting thousands of trees would balance the project’s carbon footprint. Renewable energy could be produced by a solar power plant for electricity consumption.

More importantly, the project ensures reliable and year-round gas supply and contributes to hedging winter consumption. More storage capacity means greater ability for BOTAŞ—Turkey’s largest natural gas import company—to absorb market fluctuations in demand and prices. With more supply storage, natural gas can be purchased when prices are low. It also leaves room for planning when demand is high. This ultimately passes savings to the consumer.

Among these potential consumers are the 10 members of Bayram’s family, where a coal-fired stove continues to burn round-the-clock at the center of their home.