March 2014. Sandro Samadbegishvili, lawyer at Mgaloblishvili Kipiani Dzidziguri
- Generally, why is Georgia a Good Place for Hydropower Investment?
Hydropower sector is considered as one of the most attractive sectors for investing in Georgia.
The country is favored with water resources that are well-suited for hydropower generation and it is the cheapest electricity supplier in region.
Georgia has 300 rivers in terms of energy production while only 18% f total hydro potential is utilized.
- What can be the Market for the Power Produced in Georgia?
Georgia’s domestic demand which corresponds to its growth of GDP and strong export capacity makes hydropower projects most attractive to foreign investors.
Georgia is surrounded by countries with projected structural power deficit or expensive power generation, opening up attractive export opportunities in neighboring countries, including Russia and Turkey while Azerbaijan, Armenia, Iran and Europe are also considered as potential exporting states. Meanwhile, Georgia exporting 10% of power production, the country still needs to import power during winter.
Noteworthy that according to the forecasts by 2020 Turkey shall have deficit of up to 80-120 TWH with seasonality of its demand matching Georgia’s supply. It should be mentioned that generation costs in Georgia are 50% lower than in target market of Turkey. Russia’s southern districts will also experience structural deficit of up to 40 TWH by that time.
- Does Georgia have Necessary Infrastructure for Power Transmission?
Yes, it does!
An important factor in attracting strategic investors to Georgian hydropower is the construction of the new Black Sea Transmission Line which is due to run from the Azeri border in the east to Turkey in the west. It will be a second major line for Georgia potentially connecting Georgian power system to Europe. One of the organizations financing the project is EBRD. Georgia is also connected with electricity system of Armenia, Azerbaijan and Russian Federation.
- Is Georgia Friendly to Foreign Investments in Hydropower Sector?
The investors should know that all new hydro power plants operate in a liberalized market and the cost of hydropower generation is very competitive in the region. For that reason FDI flows in hydropower sector of Georgia amounted to USD 180 million in 2012 and are growing as 65% of economically viable potential is still not exploited.
For 7 large-scale HPP developments Georgia has identified list of projects open for investment. It also offers package of attractive off-take and export opportunities.
Process of project entry/negotiations as well as technical and licensing issues is well-structured and suited for the foreign investors. Construction permits are issued within 60 business days while power generation licenses within 30 business days.
All these opportunities should be seen in light of investment-friendly environment and simple tax system.
- Please, Sum up the Major Advantages of Investing in Georgia’s Hydropower Sector and Assess the Potential of Attracting Investments?
To sum up, Georgian hydropower sector offers:
» Tremendous potential for renewable energy generation
» Region’s cheapest electricity
» Growing domestic demand and strong export capacity
» Deregulated tariffs and license-free export opportunities
» Modern transmission and cross-border infrastructure
» Pre-packaged Investment projects;
Georgia is hoping to bring in USD 10-15bn into the hydropower sector in the next 10-15 years. Georgia’s ability to convince investors that hydropower is a safe bet could prove key to hitting that target and regaining the levels of economic growth it so successfully achieved in the last decade.