BUSINESS
More investment to Georgian energy sector
16 December, 2010

Approximately USD 3-4 billion is supposed to flow in Georgian energy sector. Increasing demand on electricity in the region is supposed to boost investments in Georgian hydro power sector.
The global financial crisis and war with Russia in 2008 that badly affected Foreign Direct Investments (FDI) inflow in Georgia did not refer to energy sector. According to Aleko Khetaguri, Minister of Energy of Georgia, irrespective of war and financial crisis of 2008-2009 interest to Georgian energy sector rather increased than

decreased due to increasing demand of Turkey for electricity and all investment projects planned to be put under construction in 2009-2010 have already started construction works and some even went into active phase.
Georgia’s electricity potential standing at 800 Megawatt [making 15% of Georgia’s local consumption] at the moment is supposed to double in 10 years thanks to new Hydro Power Plant (HPP) construction projects. More than USD 3 billion is supposed to be attracted via 24 upcoming HPP projects in seven years.  The list of upcoming HPP projects been under construction at the moment includes Mtkvari HPP [of 43 megawatt (MW) capacity], Paravani HPP [78MW], Lukhuni HPP cascade [total 30MW], and Bakhvi HPP [6MW].
By 2011 Georgian government expects commencement of several big projects like Namakhvani HPP cascade [including three HPPs of 450 MW of total installed capacity] and two HPPs [of 100 MW installed capacity each] one of which will be constructed by Russian-Based Inter RAO energy company [owning Tbilisi Electricity Distribution Network] and another one by Czech-based Energo-Pro, owning bigger part of regional electricity distribution network of Georgia and number of HPPs.
Moreover, Ministry of Energy of Georgia (MoE) targets a big ambition of attraction portfolio investments  via allocation IPO [Initial Public Offering] of new HPP draft-projects at international stock exchanges. Thanks to attracted portfolio investments Government hopes to finance construction works of offered HPPs. After completion of construction the state either divests its share in the questioned HPPs or detains stocks so as to enjoy profits out of electricity sale. MoE plans to start construction of at least 100 MW of installed capacity HPP in frames of this IPO project next year.
“So, financial crisis gave a breath of relief  to energy sector on the one hand [as consumption reduced], but on the other hand interest of investors in energy and specifically in Georgian energy did not slow down, it even increased, because it is already possible to meet the  increasing demand of Turkey on electricity,” Khetaguri said. 
The essence of attraction of portfolio investments is to develop Georgian energy sector without state credits in future, Khetaguri elaborated. Governmental understanding is that the increasing demand of Turkish market may insure foreign investors to see granted profit of investing in Georgian energy sector.
“Turkey can consume as much electricity as possible,” Khetaguri told Georgian Journal. “But the existeing transmission line with Turkey is of 120MW capacity and we cannot export more than that at the moment, but after completion of the Black Sea Transmission Line [been under construction at the moment and scheduled to be through by May of 2012] connecting Georgina with Turkey in synchronized regime, it will be possible to export 1000 MW starting 2012 as much as Turkish market can consume any volumes irrespective the price of the electricity.”
As soon as Georgia joins Turkish electricity transmission infrastructure in synchronized regime it becomes a part of EU system that creates opportunity to export electricity to EU, Iraq and Syria as well. Turkey has already passed the test regimes with EU in synchronization [at the moment Turkey works in synchronized regime with two EU countries: Turkey receives electricity from Bulgaria and dispatch it to Greece], staritng first half of 2011 Turkey will officially join the unified EU networks and as soon as the Black Sea Transmission line is completed in 2012 Georgia will also become a part of this unified EU network that enhances Georgian export markets. 
Georgian government has already sent an agreement on electricity trade rules to Turkey [in frames of this new transmission line] and hopes to sign it in 2011 so as to meet 2012 with established market rules.
“Our approach is to admit the third party to the transmission line infrastructure i.e to allow any company to use the transmission network, to establish very transparent trade rules put in line with the EU standards and after the new line is constructed we can export our electricity in any direction including Iraq, Syria, and EU,” Khetaguri explains.
On the other hand Georgia enhances its export potential toward Armenia. A new 400 kilowatt transmission line is to be constructed to connect Georgian and Armenian transmission line systems. A memorandum of understanding was signed by two countries by end-November of this year. The paper also opens ways for wider regional cooperation.  Georgia has already constructed 14 kilometers of a new line within its territory and another 14 kilometer will be constricted after Armenian side starts construction of 110 kilometer long transmission line at its territory.
“We need just 3 months to get through with construction of the reminder 14 km on our part, while Armenia needs a year and a half to construct 110 km long line. Armenia has not started construction works as of yet and we are waiting for them, and if they start construction next year we will start construction in the first half of 2012,” Khetaguri said.

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