Georgian electricity system Russianized
21 April, 2011
Georgian electricity system Russianized

Political tension cannot affect fruitful business relationships between Georgian and Russian energy systems. Two Georgian hydro power plants - Khrami 1 and Khrami 2 with 232 megawatt installed capacity are handed over to the Kremlin-controlled Inter Rao UES for USD 104 million. Georgian analysts say the deal is on a par with the restarted American-Russian relationships.
Electricity is the only language, which Georgian and Russian governments still speak to each other irrespective of political tension and trade embargo. While Georgian

president prohibits Russian songs at public venues, Georgian energy minister welcomes more and more Russian investment in energy sector from its trustful business partner of Inter Rao that owns Telasi, Tbilisi electricity distribution network.  Two Hydro Power Plants (HPP) Khrami 1 and Khrami 2, been under 25-year management right of Inter-Rao UES starting 2000, were handed over to Inter Rao ultimately for USD 104 million on April 1st, 2011.  Generation of both HPPs makes 650 million kw/h that equals to one-third of annual electricity consumed by Tbilisi and Inter Rao has been purchasing this electricity completely based on the direct agreement.
Meantime the state has been implementing rehabilitation works on Khrami 2 HPP since 1996 and spent GEL 50 million of Japanese credit plus about GEL 11 million of the state budgets on it. Inter-Rao allocated GEL 5 million investments for the rehabilitation and plans to invest another GEL 5 million on the second phase of rehabilitation that starts this year.
However government found more profitable to divest HPPs and well-trimmed Khrami 2 along with the Khrami 1 was sold out.
Aleko Khetaguri, Minister of Energy and Environment of Georgia, finds the deal profitable from both technical and economic points of view and reasons the deal by argument that HPPs actually were under management of Inter Rao and it just became factual owner of energy assets after this deal.
“After 13 years these HPPs might worn out into scrap,” Khetaguri said, “While today Inter Rao will be personally interested to invest in these HPPs and take care after them.”
Why on earth government spent millions on rehabilitation of a unit that might become a scrap in 13 years Khetaguri did not elaborate just reported that Inter Rao takes over responsibilities for covering credits spent by Georgian state on rehabilitation works of divested units, and also it has an obligation to detain 85% of working capacity of Khrami 2 till 2031.
Energy experts approve the deal from economic point of view and believe that private ownership is much better  than the state one but appear suspicious from political point of view.
“It is good from economic point of view that HPPs have “patron” now, when an unit is under management right manager tries to get as much profit as possible and leaves the unit as a squeezed lemon, privatization is better, but what comes to Russian investor and political side of the issue, I would rather refrain from comments,” Revaz Arveladze, President of Georgian Energy Academy, told Georgian Journal. “Taking energy generating units under private ownership is good and a well-probated practice globe over. I have been consulting ex-president Shevardnadze to privatize HPPs for the state could not take care for them, but government did not then, besides international organizations including International Monetary Fund (IMF) and World Bank (WB) opposed this idea.”
To political end Khetaguri says that irrespective political tension between Russia and Georgia there is a healthy economic partnership between Georgian and Russian companies, and exemplifies this partnership that during the August war in 2008 Inter Rao did not hamper electricity supply of the capital in any way. Moreover, there was no halt of electricity export-import between Georgia and Russia in that period that bespeaks of smooth partnership of Georgian and Russian electricity systems.
However the aftermath of this smooth partnership was that Georgian government actually was forced to hand Enguri HPP, the biggest electricity generating assets of Georgia making 40% of the total electricity generation of the country, to Russia by end-of -2008 under management right and the contract is still under seal of secret.   Russia is the single energy investor of Georgia by today. All new contracts on upcoming HPP constructions are signed with investors of different nations, but all the operating investors running the electricity generating, distribution and transmission line assets in Georgia   are Russian. The Kremlin owned Inter Rao runs Tbilisi electricity distribution company, the high voltage electricity transmission lines connecting Russian and Georgian energy systems are owned by Georgiana and Russian state on 50-50% basis, the Kremlin is supposed to be behind the allegedly Czech-based Energo-Pro that owns the electricity distribution network covering about 75% of Georgian regions plus HPPs. It means Russia is successfully implementing its plan to control the region through monopolization energy sector. No European country would allow  any company to own the entire chain of electricity sector including generation, distribution and transmission, but Georgian government does not care for anti-trust idea and appears happy that Inter Rao owning the electricity distribution network of the capital of Georgia also took two HPPs off hands of Georgian government.
As to Georgian government policy of divesture energy assets to its strategic opponent Liana Jervalidze, energy analyst, finds it on par with the underway geopolitical situation.
“International organizations like IMF and WB were against privatization HPPs before [rose revolution] because no reforms were made and everything was bundled, besides Americans were against all Russians then, now reforms are made and the geopolitical situation is different with the tightening of ties between the US and Russia. Nobody can oppose Georgian government to let Russian investors in while the US-based ExxonMobil and Rosneft have entered into an agreement regarding joint development of oil and gas resources in the Black Sea,” she told GJ.

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