The government announced plans for a public offering of the Qartli Wind Farm on the Georgian Stock Exchange. The 20.7MW WPP in Gori has generated 38.6 GWh in 2017 and annual generation is forecasted at 88.0 GWh. There is a 10-year PPA in place with ESCO for a guaranteed USc 6.89/kWh. Georgian Energy Development Fund (GEDF) and Georgian Oil and Gas Corporation (GOGC) are the current shareholders of Qartli Wind Farm Ltd. EBRD provided a 10-year US$ 22.0mn loan for the project. The EBRD transaction was named the best renewable energy transaction of 2016 by EMEA Finance. Details of the public offering will be announced in the coming months.
Adjaristsqali Georgia LLC has completed the construction of the 187MW Shuakhevi HPP. The expected annual generation of 450.0 GWh will contribute positively to Georgia’s electricity trade balance and increase energy independence and security of supply. This is the largest HPP constructed in Georgia in the last 50 years, boasting the world’s second longest hydropower tunnel (37.5km). Total investment amounted to US$ 420.0mn, with 40.5% in equity financing by Norway’s Clean Energy Invest AS, India’s Tata Power, and IFC Infraventures. The remaining 59.5% (US$ 250.0mn) was financed by loans from EBRD, ADB, and IFC. Company’s social responsibility program encompasses more than 70 social projects, including education in energy and construction sectors and infrastructure and local business development.
Inter Rao has filed a dispute against GoG in the international court of arbitration. Inter Rao owns 75% of JSC Telasi and 100% of Khrami 1 and Khrami 2 HPPs through two separate subsidiary companies based in the Netherlands. There is a Bilateral Investment Treaty in place between Georgia and the Netherlands, which protects the interests of foreign investors. Inter Rao claims that exchange rate fluctuation, which negatively affected its revenues, was not taken into account by GNERC in its 2016 tariff calculation. Generally, the tariff methodology in Georgia does not factor in losses due to exchange rate movements. Before filing the dispute, Inter Rao submitted a list of claims to the Georgian government, but the parties were unable to reach an agreement. According to preliminary information, the investor is suing for US$ 125.0mn in damages.
Domestic consumption increased 1.3% y/y in May 2017. Consumption of distribution companies increased 6.0% y/y in May: consumption was up 6.8% y/y by Telasi, 5.5% y/y by Energo-Pro, and 6.2% y/y by Kakheti Energy Distribution. The Abkhazian region’s electricity usage was up 7.7% y/y and accounted for 12.5% of domestic consumption. The low overall growth in domestic consumption (1.3% y/y) was largely the result of a 26.6% y/y decrease in direct consumption (-4.1ppts. in total domestic consumption growth), with Georgian Manganese usage down 30.1% y/y. Georgian Manganese’s production dropped in May 2017 after the government’s appointment of a special administrator at the company.
Electricity exports increased 5.4% y/y in May 2017. The top export destination was Turkey (42.1% of total), posting a 38.1% y/y increase, albeit from the low base in 2016 (-29.7% y/y). The top exporters to Turkey were Georgian Urban Energy (69.8% of total), owner of the 89MW Paravani HPP, and Adjar Energy 2007 (22.5% of total), owner of the newly commissioned 47.5MW Khelvachauri HPP. Electricity exports to Russia decreased 22.6% y/y and accounted for 31.6% of exports, while exports to Armenia posted a 14.1% y/y increase and accounted for 25.8% of total. Azerbaijan accounted for the rest (0.5%). ESCO was the sole exporter to Russia and Azerbaijan, while export to Armenia was split between GIEC (51.0%) and ESCO (49.0%), which exported electricity in exchange for the electricity imported during Feb-Apr from Armenia.
Electricity demand was satisfied largely by hydro generation, with 99.1% in the supply mix. The new wind power plant accounted for 0.7% of total electricity supply, while imports and TPPs together comprised only 0.2%. 19.0% of domestic generation was exported. Total hydro generation was up only 1.3% y/y. Deregulated HPPs posted a 38.7% y/y increase in generation, with 29.5ppts due to the addition of new large HPPs – Dariali HPP (108.0MW) and Khelvachauri HPP (47.5 MW) – and the remaining 9.2ppts attributed to good hydrological conditions in May 2017. However, generation was down 1.7% y/y by Enguri/Vardnili and 10.0% y/y by other regulated HPPs due to the low water levels in reservoirs resulting from bad hydrological conditions in the winter (Oct-16 to Apr-17). The guaranteed capacity fee was up 12.9% y/y to USc 0.64/kWh, with guaranteed capacity provided by most of the sources for the entire month. Block 3, which was under maintenance for the month, was the exception.
Wholesale market prices in Georgia decreased 16.8% y/y to USc 3.9/kWh. Only 7.2% of total electricity supplied to the grid in May 2017 was traded through the market operator, with the rest traded through bilateral contracts. The average price of electricity exported from Georgia was USc 3.4/kWh (+2.0% y/y), 22.7% below the Turkish market clearing price. The average monthly market clearing price in Turkey was USc 4.4/kWh (+4.4% y/y), 12.5% above the Georgian wholesale market price in May 2017.
