Changes in Georgian Energy Sector

Hydropower Potential and Investment Opportunities in

Georgia

Ministry of Energy and Natural Resources of

Georgia

2

INTRODUCTION

Economy• Open and dynamically

growing economy• Minimum bureaucracy and

liberal regulations• Diversified economic growth

International Recognition• World’s Top Reformer country

according to Ease of Doing Business (WB/IFC)

• Government’s strong commitment for further reforming

Regional Energy Hub• Reliable transit country• Net electricity exporter to all

four neighboring countries• Rapidly expandable energy

markets• Construction of additional

electricity export infrastructure

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ELECTRICITY BALANCE

3

100%

Thermal & ImportHydro

Projected

Seasonal Asymmetry of Generation and Consumption

Winter Summer

Generation

Consumption

HIG

H

LO

W

LO

W

HIG

H

85%

15%

Current

TW/h 2004 2005 2006 2007 2008 2009 2010 2011 Generation 6.9 7.1 7.6 8.3 8.6 8.9 10.1 10.1 Hydro 6.0 6.0 5.4 6.9 7.3 7.7 9.3 7.9 Thermal 0.9 1.0 2.2 1.5 1.3 1.2 0.8 2.2 Net Export -1.2 -1.3 -0.7 0.2 0.3 0.5 1.3 0.5 Consumption 8.1 8.3 8.3 8.1 8.3 7.9 8.8 9.6 Distribution 5.7 5.9 5.9 5.9 6.0 5.9 6.4 7.4 Direct Customers 1.7 1.9 2.0 2.0 2.1 1.7 2.1 1.8 Transmission Losses 0.7 0.5 0.4 0.2 0.2 0.3 0.3 0.4

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4

EXISTING HYDRO POTENTIAL

Vast untapped hydro resources

Top country in water resources per

capita

In total 26,000 rivers

300 rivers in terms of energy

production

Only 18% of total hydro potential is

utilized

HPP Greenfield potential of 20 TWhwww.menr.gov.ge

5

EASY REGULATORY FRAMEWORK

Greenfield projects based on Build-Own-Operate (B-O-O)

principle

Totally deregulated newly built HPPs - investor is free to

choose the market and the price

No special fee for the grid connection

Free third-party access to the grid

No license required for export and no tariff set

Guaranteed purchase offered by GoG for three months

Priority access for transmission to Turkey (Long term

contract with TSO) with new HPPswww.menr.gov.ge

PERMITS AND LICENSES

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* HPPs with less than 13 MW do not require Generation License

ConstructionPermit

Ministry of Economy & Sustainable

Development

Issued within 60 working days

Generation License

GNEWRC

Above 13MW*

Issued within 30 working days

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7

EXPORT OPPORTUNITIES

Georgia’s hydro potential can be used to offset part of the growing demand of neighboring as well as of European countries

Over the last three decades Turkish demand for electricity has grown at an average rate of 7.6% per annum

By 2013 Turkey is expected to be a net importer of electricity

The peak demand season (summer) in many of neighboring countries occurs in Georgia’s peak supply season – when river flows are at their highest

Increased profits from carbon credits sales

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EXPORT ORIENTED PROJECTS

40 HPP on-going Projects

• Total installed capacity of 2506 MW and annual generation up to 10.2 TWH

• Projected investment USD 4.1 bln.

• Construction works to be finished in 2014-2017

10 new HPP constructions ongoing

15 new HPP constructions will be launched in 2012 8

Major companies operating in

Georgia• Anadolu (Turkey)• Peri (Georgia)• Ağaoğlu (Turkey)• Trans Electrica Ltd.(India)• Energo Pro (Czech) • Clean Energy Group (Norway)• KGM (Georgia)• Rusmetal (Georgia); and etc

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INFRASTRUCTURE WITH NEIGHBORING COUNTRIES

Existing Transmission lines• Russia 1155 MW

Existing & Planned Transmission Lines

• Turkey 2000 MW• Armenia 835 MW• Azerbaijan 1150 MW

Georgian power grid is connected to the grids of all of neighboring countries

Construction of new high voltage 500/400 KV line to Turkey will be finished by 2012

Construction of additional interconnection with Turkey is under negotiation

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INVESTMENT OPPORTUNITIES

Currently, 41 HPP projects (each up to 100 MW) are offered to potential investors

Investor is free to choose and apply for construction of up to 7 potential HPPs from the list

Investor is not limited with the list

Terms and conditions of EOI for HPPs more than 100 MW capacity is subject of Government’s resolutionwww.menr.gov.g

e

HPPs PRE FEASIBILITY STUDY INCLUDES

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Financials/Ratios

Income Statement

Cash Flow

Balance Sheet

NPV

IRR

Technical Projection

HPPs Technical DataHydrological Data

TopographicMaps

Other Necessary Data

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LARGE-SIZE HYDRO PROJECT

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Tvishi Namakhv

ani Joneti

Installed capacity

100 MW 250 MW 100 MW

Annual average generation

386 GWh 941 GWh354 GWh

Height of dam 56.5 m 111.0 m 31.0 m

Type of damCVC

gravityConcrete

archRock fill

Type of diversion Tunnel Tunnel Channel

Type of spillwayGated over

damTunnel, gated

In river, gated

Maximal water head

36.3 m 83.0 m 32.0 m

Number of turbines

2 units 3 units 2 units

Type of turbines Kaplan Francis KaplanPower of units

[MW]2 x 50

2 x 110, 1 x 30

2 x 50 MW

Namakhvani HPP (Cascade Type) Installed capacity – 450 MW; Av. Annual Generation – 1,6 TWh; Estimated investment cost – USD 800

mln.

Namakhvani Cascade

Expression of interests on:

A. Consultancy services and,

B. EPC contractor

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INVESTMENT SUPPORTING FACTORS

Liberal Tax Legislation• Only 6 taxes effective in Georgia• Low and flat tax rates• Internationally accepted methods and practices• Minimum bureaucracy• Light administrative burden to taxpayers

Georgia has in force 36 OECD model Double Taxation Avoidance Treaties

List of treaties is expanding rapidly, additional 9 Treaties are in line for official signature or ratification

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INVETSMENT ADVANTEGES

Deregulated power sector with very impressive turnaround since 2004

Distribution companies privatized and operating at high profit

Significant existing private investment in generation assets

GoG's strong support and commitment aimed at developing hydropower resources

Simplified Procedures

Diversified & Expanding export markets including EU

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15

Thank You!

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