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21/04/2009 11:37 (213 Day 19:59 minutes ago) | |||||
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The FINANCIAL -- The FINANCIAL interviewed Mariam Valishvili, First Deputy of the Minister of Energy of Georgia. She explains why hydro power development in Georgia is the priority for the Government among other sources of renewable energy.
Turkish company Urban-Energy plans to start building a 78 megawatt hydro electric power station in the Samtskhe-Javakheti region this summer. The USD 100 million project will be implemented together with the fastest growing Turkish conglomerate Anadolu Group already involved in Georgia’s beer production business. The FINANCIAL interviewed Mariam Valishvili, First Deputy of the Minister of Energy of Georgia. She explains why hydro power development in Georgia is the priority for the Government among other sources of renewable energy.
“The company Urban-Energy in cooperation with Anadolu Group will develop medium-size hydro power plant in Georgia, Aspindza. MOU signed last week considers construction of new hydro power plant with the capacity of 78 megawatts. The total project cost is about USD 100 million. Anadolu Group is in the process of negotiating around 70% debt financing with EBRD and European Investment Bank (EIB). During the summer season, Georgia will not need total volume of electricity produced by this plant. The remaining is the potential volumes ready for exports to other countries. According to MOU energy generated by the new power plant will be used during winter period to meet local demand. The produced electricity will replace imports from neighbouring countries (Russia, Turkey, Azerbaijan and Armenia) and local thermal generation. The hydro power plant with the capacity of 78 megawatts will generate 250-300 million kWh of electricity.
Q. For the construction process of the hydro energy station in Aspindza, the Turkish company plans to invest USD 100 million in this project. Will Urban Energy become the 100% owner of the station?
A. The Georgian Government does no go for any partnership with the investors. The BOO principle which is built-own-operate is applied in cased of Hydro Power Plant development. Entire scheme of cooperation between the Government and the Investor is outlined in the MOU. Our obligation towards Urban-Georgia is to purchase produced electricity during three winter months at agreed price of around 4.6 US cents. The Georgian Government does not give any guarantees when investors borrow money from EBRD and other financial institutions. Electricity produced by the hydroelectric stations is cheaper than energy received from thermal units and at some point will contribute to the reduction of power generation cost in Georgia. Urban-Energy plans to export produced electricity to Turkey and supply direct customers (factories or different commercial consumers) or sell to the wholesale market.
Q. Current political events have influenced lots of economical industries and also the investing environment. What’s the situation like in the energy industry, have the negotiations been postponed or abandoned?
A. In energy we don’t have projects which last for couple of months. An agreement is made to last over a period of years and then divided into phases. That means that the investor has to fulfil his obligation within agreed time frame. Investors are still interested in hydro projects Georgia, but to choose proper site and make all project related negotiates takes time. Currently we don’t have any postponed projects. Many projects are initiated and we hope that along existing projects new ones also will find owners. We have not changed investors and have not confiscated any objects. At the Ministry of Energy we are still receiving applications under the Government Program Renewable Energy 2008 covering small and medium size hydro stations.
Q. In September 2009 the building processes of a 500/400 kilovolt power transmission line will start. The project is planned to be finished in three years. A sizeable sum of Euros 200-220 million will be launched by EBRD, KFW and IEB as a credit line. What are the loan conditions?
A. The loan which we’ll receive from different financial institutions for the construction of the Black Sea Transmission Project will be provided under the state guarantee. The loan terms and conditions are relatively soft with interest rate of around 4-5 %. The duration of the loan is about 15 years. This loan will be covered from the revenues received from the operation of the new line. The line project also includes construction of High Voltage DC/AC Link between Turkey and Georgia. The station will be the interface of the systems and allow synchronization of parameters of power systems of different countries.
Q. From which countries is Georgia supplied with electricity?
A. Georgia is supplied from Russia, Turkey, Azerbaijan and Armenia. But this is exchange of energy rather than commercial imports. For the stability of the electric system such regimes with neighbour countries are considered very important. To keep balance in the system we do barter exchanges between our neighbour countries. In winter we import power from our neighbouring countries and we export it in the summer. From a total 8 billion of electricity 0.5-0.7 billion is imported and in the summer we return it. If we describe it in percents it will consist of 6-9% of total demand. If there is a market for our thermal generation (it depends on the price) we will start exports of power produced by thermal power units. Q. The united energy project of Azerbaijan-Georgia-Turkey will help our country to start exporting electricity to the member countries of the EU. Are there any advantages of Georgian electric energy for Europeans?
A. This concrete project which is called energy bridge between Azerbaijan-Georgia-Turkey is a part of our cooperation in technical-commercial areas. Because of the fact that we are small countries we are experiencing lack of full system stability. In terms of the three countries our power systems will become more stable and systematic planning and analysis will improve regional network operations. Another point is the planning of our working process. Our country is the only country in the region with such attractive hydro resources. European countries also have a deficit of electric energy. In European countries the main priority is to increase share of renewable energy in the total energy balance. They are focusing on building of nuclear power stations. But the speed of building nuclear stations can’t follow the demand of the European countries. Turkey signed MOU with Russia about building nuclear power station. Price for the unit of electricity produced by this plant is agreed to be 15 Euro cents. Meanwhile prime cost of hydro power generated by new hydro power plants is about 4-5 US cents. The market will welcome competitive prices and having into consideration competitive electricity price in our country, Georgia is presumed to be in a good position.
Q. When the energy distributing company Energy-Pro-Georgia started building power transmission lineof 110 kilovolt, the Minister of Energy Mr. Khetaguri stated that construction of this transmission line would make Georgia the main transiting region. What is the potential of Georgia in this direction?
A. Besides export Georgia has a big potential of working on transit. Azerbaijan is intensively building thermal power plants because they have a large amount of gas resources. If Azerbaijan will decide to export its energy to Turkey they’ll use transit route through Georgia. Income received from exports and transits is the main source for the loan. There is one more transmission line connecting with Armenia. After 2-3 years with the donor support Armenia has to finish construction of the line and we’ll join them from Ksani. Using this line to export power to Iran is also the option.
A. Currently our country already has excess capacity of around 500 megawatts during summer. We’ll be able to export this additional energy. The Georgian Government is not involved in commercial deals and doesn’t trade with energy. Our goal is to create a healthy and attractive environment, basing commercial relations between companies. The Ministry of Energy is focused on ensuring uninterrupted power supply. After the end of construction processes of a 110 kV HV line Energo-Pro plans to start export of electricity. This company owns several generating assets and during summer can freely have exports to Turkey. They plan to build new hydro power plants with total installed capacity of 100 MW.
Q. Currently large attention is being paid to Green Energy. Do you plan to start either wind or solar energy power soon?
A. Our hydro stations are part of Green Energy. In comparison with solar and wind energy, hydro resources are more acceptable for us because of their cheaper expenses. From our reality of different sources of green energy, hydro products are more flexible in Georgia. Now we think that hydro resource development is more competitive then wind farm or solar stations. At least we had no investment proposal competitive to hydro development. Naturally conditions in Georgia support construction of hydro power plants, but we believe that in the nearest future competitive wind and solar projects will be also identified and developed.
Q. How many power generating units does Georgia has at this moment?
A. Today we have around hundred hydro power plants. Most of them are completely rehabilitated and working at maximum capacity. Rehabilitation works are still needed at Enguri HPP. Most Georgian energy stations were rehabilitated in the years 2004-2005. About 80% of these stations are currently in operation. This year we may rehabilitate some small sized stations which supply small villages and settlements. Most of the small and medium size hydro power plants are under the private ownership.
Q. After the August war between Russia and Georgia many rumours were spread about Engury Hydro Electric Power Station. What percentage is under the ownership of Georgia?
A. The 100% owner of Engury Hydro Electric Power Station is the State of Georgia. The owners won’t be changed after signing the memorandum with Inter Rao. This is the MOU for common management excluding asset transfer or ownership sharing. Currently Abkhazia is supplied with energy received from the hydro electric station Engury. According to our agreement with Russia a part of the income of the electric energy from Abkhazia will be for Georgia too.
Q. Out of the energy distributing companies what share of the total Georgian market is occupied by Telasi, Energo-Pro-Georgia and Kakhety Energy (Achema group)?
A. Telasi is covering only Tbilisi , Energo-Pro-Georgia the rest of our country except for Abkhazia, Ossetia and Kakhetia. The owner of Kakheti Distribution Company is the Lithuanian company Achema Group. The entrance of third energy distributing company Achema Group confirms that distribution business in Georgia is attractive and with the new company new investments and experience is coming to Georgia. Ossetia is supplied with energy through Java line from North Ossetia (Russia).
Q. When in 2003 US Company AES was selling its shares to Russian company Rao-UES, the executive director of AES Telasi Paul Hanrahan said that his company was leaving Georgia for a short time and they would look for ways to return to this market. Have you noticed any interest from the company after their leaving?
A. When AES Telasi entered the Georgian market they were new company in the distribution business and particularly in the region. AES is famous with its huge generating capacity (thermal and coal fired power plants) I am sure that AES made reasonable decision leaving business in Georgia. They made huge investments of about 250 million USD. The company also brought western management to the distribution sector. It was hard times for AES and probably it was right decision at that time. Today AES still runs generating assets worldwide and I do not exclude that some time they will show interest toward generating business particularly in Georgia.
Written By Madona Gasanova
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