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HYDRO POWER HUB
HYD RO POW ER HU B
Georgian National Investment Agency 2013
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OVERVIEW OF GEORGIA’S (HYDRO-) POWER SECTOR
• Domestic: Demand growth and increasing share of renewables requires an
extension of hydropower generation by around 65% until 2020
VEST
• Export: Georgia is surrounded by countries with a projected structural
power deficit (e.g. Turkey, Russia South) or expensive power generation,
opening up attractive export opportunities
Strong demand growth prospects
• Power generation accounts for 3% of GDP and ~ 1% of employment but is
of high strategic importance to Georgia
• ~ 10% of power production are exported, but Georgia still needs to import
power during winter
ORGIA
Importance of the sector low in
terms of GDP and employment
• Georgia boosts significant and economically viable HPP potential – already
today 75% of power generated via HPP (2,700 MW) – 25% via thermal
(mainly gas)
• All new HPPs operate in a liberalized market
• Cost of hydropower generation is very competitive in the region
Power sector with strong focus
on cost competitive HPP
• FDI inflows amounted to USD 200 million in 2011 and are growing
• 65% of economically viable potential not yet exploited
• Projects of up to USD 750 million have been concessioned to investors
from e.g. India, Turkey, Czech Republic and other counties.
Large projects have been • Pipeline well filled with several large scale projects (100-702 MW) as well
placed and pipeline is filled as 70+ smaller projects
3. ALL CONDITIONS FOR CAPTURING OPPORTUNITIES FROM
GROWING DOMESTIC DEMAND AND EXPORTS ARE IN PLACE
Opportunities Conditions for investment Situation in Georgia Evaluation
• Electricity demand growing in
IN
HPPs for Domestic demand line with high GDP growth
Mostly covered
domestic growth and • Share of hydropower to grow in by commissioned
supply offtake guarantee total generation capacity HPP developments
• Domestic offtake guarantees
Excess demand • Turkey and Russia projected to
have excess demand
in neighboring
• Armenia/Azerbaijan still with
countries generation overhang
IN GEO
• Incremental generation cost
Competitive among the lowest in the region,
generation cost ~50% lower than target market
Turkey Investment
HPPs for opportunity
export for new HPP
developments
• 160 MW currently available (to TK)
Transmission • Upgrade of infrastructure by 2014
capacity to increase capacity by 5-10
• Transmission guarantee granted
• Agreement with Turkey under
negotiation
Offtake guarantee
• Export buyer SPV being
discussed
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DOMESTIC DEMAND GROWTH REQUIRES AN EXTENSION
OF HYDROPOWER GENERATION BY AROUND 65%
DOMESTIC DEMAND AND SUPPLY PROJECTIONS
VEST
TWh, 2020 15.7 6.2
High
2.1 2.1 scenario1
+65%
Low
10.9 4.1 scenario1
1.4
ORGIA
RGIA
13.6
Current i
installed
ll d Decreasing
i Projected
j d Demand d
capacity share of demand overhang to
thermal 2020 be covered
• Georgia’s demand for electricity is increasing in line with expected GDP growth, requiring more HPP
generation capacity
• Commissioned HPP developments likely to saturate the demand growth
1
High scenario assumes 6% CAGR of demand (in line with GDP), low scenario assumes 6% till 2015, thereafter 3%
5. ATTRACTIVE EXPORT POTENTIAL IN THE REGION,
PARTICULARLY IN TURKEY
TURKISH GENERATION DEFICIT IS EVOLVING TURKISH CONSUMPTION PROFILE PERFECTLY
IN
OVER THE COMING YEARS MATCHES GEORGIA’S GENERATION
Energy deficit High scenario Generation Georgia
forecast
TWh Low scenario Consumption Turkey
Increased consumption
due to air conditioning
Surplus due to increased
river flows
GENERATION COST, USD CT
Generation cost
USD Ct
IN GEO
GEORGIA’S GENERATION COSTS ARE HIGHLY COMPETITIVE
Current generation tariff
New generation cost
TRANSMISSION CAPACITY IS CURRENTLY BEING UPGRADED
Transmission capacity
MW
850
880
160
1,480
850
2011
2016
1,560 250
160
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GEORGIA SURROUNDED BY COUNTRIES WITH A STRUCTURAL
POWER DEFICIT OR EXPENSIVE POWER GENERATION
2020
• Turkey expected
VEST
to have deficit
of up to 80-120
Ukraine TWh by 2020,
with seasonality
of its demand
South Russia matching
Romania
Georgia’s supply
Bulgaria Uzbekistan • Russia’s
Georgia Southern
districts will also
Azerbaijan
ORGIA
RGIA
experience a
Greece Turkey Turkmenistan
Armenia structural deficit
of up to 40 TWh
by 20201
Lebanon • In other markets,
Iraq
Georgia’s
Iran
Israel hydropower
is very cost-
competitive
compared to
local tariffs2
Structural deficit by 2020 No deficit, but current tariffs > Georgia’s generation cost
Ad hoc deficits projected No deficit, but subsidized tariffs
1
Assuming current consumption and supply pattern
2
This does not even include countries with heavily subsidized electricity generation (e.g. Azerbaijan, Kazakhstan)
7. SETTING UP A REGIONAL EXPORT CONSOLIDATION SPV HELPS
TO CONSOLIDATE EXPORT SUPPLY AND FACILITATE PPAs
ILLUSTRATIVE SETUP FOR EXPORT CONSOLIDATION EVALUATION
IN
SPV represents
single interface for
power producers
PPA
Utilities Increased
efficiency in
negotiations
PPA Electricity delivery
Export with utilities and
Power transmission
consolidation
IN GEO
producers Electricity SPV Transmission agreement
providers
delivery
PPAs to power
Funding and Proceeds
Transmission providers with
guarantee Trans-
provider competitive bid
mission
fees could generate
earnings potential
for SPV
Several counter-
Ultimate parties, depending
shareholder on offtake countries
Market risk lies
with SPV if foreign
COULD BE utilities do not
sign PPAs
• Government of Georgia (contract specific
guarantee/ stake)
• Private investor
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NUMEROUS INVESTMENT OPPORTUNITIES IN HPP IN GEORGIA
PROJECTS DESCRIPTION
VEST
• 7 large-scale HPP (100-450 MW) developments
Largescale – Clearly identified list of projects open for investment
– Packaged with attractive offtake and export opportunities
HPP
• Domestic offtake agreement (subject to negotiations)
developments
• Export with transmission guarantee
• Buildup of a regional trading company with dual mission
ORGIA
Regional – Consolidate export PPAs and transmission agreements
with key offtake countries (e.g. Turkey)
consolidation – Eventually develop modern trading/power pool
and trading SPV infrastructure and regulation
• Bundling of several of the ~ 70 existing small-/medium-
scale projects (< 100 MW) into an investment fund
Renewable
– Facilitates financial investments into smaller HPPs
energy project – Overcomes critical hurdles of small-scale HPP financing
finance fund to international investors
9. OUR COMMITMENTS ALONG 4 CRITICAL THRUSTS
Subject to negotiation
IN
Pre-packaged 1 Pipeline of 7 large HPP projects
HPP investment
projects 2 Full package of agreements provided by central government counterparty
3 Increasing domestic demand (+65% in 10 years)
Guaranteed
offtake in local
markets 4 Domestic offtake PPAs offered (part of the year or year-round)
Attractive export
potential (incl.
guaranteed
transmission)
Attractive
IN GEO
5
6
7
Regional shortfalls and competitive generation costs
Cross-border trading agreement negotiated with Turkey
Transmission infrastructure to in place/being upgraded, incl. take or pay
transmission guarantees
investment 8 Business friendly environment with favorable and simple tax system
environment
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THE GOVERNMENT OF GEORGIA FACILITATES YOUR INVESTMENT
AND NAVIGATES THE NETWORK OF LOCAL PARTNERS
Project entry/ Technical and Transmission Distribution
VEST
negotiations licensing and offtake
• Georgian National • Georgian National • Georgian State • Electricity System
Investment Agency Energy and Water Electrosystem Commercial Operator
O MEST I PART NE RS
D OMESTI C PARTNERS
ORGIA
Supply Regulatory
Commission
• Ministry of Energy and • Commercial distributors
Natural Resources (e.g., Telasi, EnergoPro)
• Electricity System • Eligible direct
Commercial Operator consumers (Using more
than 7 GW of energy)
• Export offtakers
CONTACT NAVIGATOR
• Industry-specific expertise through dedicated investment advisors
• Experience in dealing with foreign investors
• Links to all administrative and business partners
11. HYDROPOWER PIPELINE BOOSTS SEVERAL NEW MEGAPROJECTS ABOVE
100 MW CAPACITY THAT ARE CURRENTLY OPEN FOR INVESTMENT
IN
N
Project Capacity Forecast Invest. Ready to invest?
volume
USD millions
• Namakhvani Cascade 450 MW 926
• Khaishi HPP 400 MW 620
• Oni Cascade 270 MW 599
IN GEO
EO
• Nenskra HPP 210 MW 491
• Tobari HPP 200 MW 310
• Fari HPP 180 MW 297
• Lentekhi HPP 120 MW 189
• Hydropower pipeline also boosts ~70 small/medium projects (<100 MW capacity)
that are currently open for investment
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13. NAMAKHVANI CASCADE
SUMMARY OF COSTS
IN
Cost item Cost (USD)
Pre-design works 1,829,676
Design works 6,526,916
Pre-construction & environmental monitoring works 24,167,097
Preparation of construction site and facilities 197,852,902
Construction of HPPs 572,175,289
Indirect investment costs 2,651,347
Unexpected costs (contingencies) – 15% 120,780,484
IN GEO
TOTAL INVESTMENT COST 925,983,711
TVISHI HPP
NAMAKHVANI HPP
NAMAKHVANI
ZHONETI HPP
Note: All the calculations are based on preliminary assumptions. Therefore any clarifications will cause appropriate changes in the final results.
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NAMAKHVANI CASCADE
PROJECT DATA
VEST
Tvishi HPP Namakhvani HPP Joneti HPP
Dam Height 56.5 (m) 111 (m) 31 (m)
Dam Volume 13.1(mln.m3) 156(mln.m3) 12.5(mln.m3)
Res. area at max. level 0.97 km2 4.35 km2 1.25 km2
Reservoir volume 13.5% 156.0 mln m3 12.5 mio m3
Reservoir useful volume 121.2 Million USD 52.0 mio m3 6.0 mio m3
Maximal water head 12% 83.0 m 32.0 m
ORGIA
NAMAKHVANI HPP’s Cascade
15. KHAISHI HPP
BASIC PARAMETERS
Total Installed Capacity 400 MW
IN
Average Annual Generation 1470 GW/h
IN GEO
ASSUMPTIONS AND FINANCIAL INDICATORS
Construction Cost 620 Million USD
Construction Period 5 Years
Domestic Tariff 4.8 USc/KWh
Export Tariff 8 USc/KWh
Project IRR 11%
Project NPV 126.4 Million USD
Equity IRR 15%
Equity NPV 160.1 Million USD
Payback Period 15 years
Number of Observations 30 years
Note: All the calculations are based on preliminary assumptions. Therefore any clarifications will cause appropriate changes in the final results.
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KHAISHI HPP
PROJECT DATA
Dam Height 204(m)
VEST
Dam Volume 445(mln.m3)
Normal Headwater Level 910 (m)
Tailwater Downstream Pool 700(m)
Project Discharge 270 (m3/sec)
TOPOGRAPHIC MAP
ORGIA
17. ONI CASCADE
BASIC PARAMETERS
Total Installed Capacity 270 MW
Average Annual Generation 1255 GW/h
IN
ASSUMPTIONS AND FINANCIAL INDICATORS
Total Project Cost
Net Present Value (Million USD)
IN GEO
E
598.9 Million USD
Full Project
270.0
Project
Corp. Tax
201.8
Equity
135.5
Internal Rate of Return 13.31% 12.57% 13.17%
Benefit / Cost ratio 1.39 1.29 1.79
Balance year 13 15 18
Note: All the calculations are based on preliminary assumptions. Therefore any clarifications will cause appropriate changes in the final results.
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19. NENSKRA HPP
BASIC PARAMETERS
Total Installed Capacity 210 MW
IN
Average Annual Generation 1,205 GW/h
IN GEO
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NENSKRA HPP
INVESTMENT COSTS AND ASSUMPTIONS GEORGIAN GOVERNMENT OFFER
• 20 years Stability Period
VEST
Total Investment Cost 491 Million USD
Plant Factor 66% • Construction permit
Proportion of Firm Energy 85% • Energy Generation license
Construction Period 5 Years • Transfer of land right for 1 USD
Duration life of project 50 Years • Full year PPA
Domestic Tariff 6.9 USc/KWh
Export Tariff 8 USc/KWh
ORGIA
Note: All the calculations are based on preliminary assumptions. Therefore any clarifications will cause appropriate changes in the final results.
21. TOBARI HPP
BASIC PARAMETERS
IN
Total Installed Capacity 200 MW
Average Annual Generation 810 GW/h
PROJECT DATA
Dam Height
IN GEO
173(m)
Dam Volume 200(mln.m3)
Normal Headwater Level 1060 (m)
Tailwater Downstream Pool 910(m)
Project Discharge 235 (m3/sec)
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TOBARI HPP
ASSUMPTIONS AND FINANCIAL INDICATORS
Construction Cost 310 Million USD
VEST
Construction Period 5 Years
Domestic Tariff 4.8 USc/KWh
Export Tariff 8 USc/KWh
Project IRR 12%
Project NPV 94 Million USD
Equity IRR 17%
Equity NPV 110.08 Million USD
Payback Period 14 years
ORGIA
Number of Observations 30 years
TOPOGRAPHIC MAP
Note: All the calculations are based on preliminary assumptions. Therefore any clarifications will cause appropriate changes in the final results.
23. FARI HPP
BASIC PARAMETERS
Total Installed Capacity 180 MW
IN
N
Average Annual Generation 780 GW/h
PROJECT DATA
Dam Height
Dam Volume
Normal Headwater Level
IN GEO
173(m)
240(mln.m3)
1300 (m)
Tailwater Downstream Pool 1060(m)
Project Discharge 103 (m3/sec)
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FARI HPP
ASSUMPTIONS AND FINANCIAL INDICATORS
Construction Cost 297 Million USD
VEST
Construction Period 5 Years
Domestic Tariff 4.8 USc/KWh
Export Tariff 8 USc/KWh
Project IRR 12%
Project NPV 91.7 Million USD
Equity IRR 17%
Equity NPV 107.09 Million USD
Payback Period 14 years
ORGIA
Number of Observations 30 years
TOPOGRAPHIC MAP
Note: All the calculations are based on preliminary assumptions. Therefore any clarifications will cause appropriate changes in the final results.
25. LENTEKHI HPP
BASIC PARAMETERS
IN
Total Installed Capacity 120 MW
Average Annual Generation 560 GW/h
IN GEO
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LENTEKHI HPP
ASSUMPTIONS AND FINANCIAL INDICATORS
Construction Cost 189 Million USD
VEST
Construction Period 4 Years
Domestic Tariff 4.8 USc/KWh
Export Tariff 8 USc/KWh
Estimated Cost per kW capacity $1,575 /kWh
Simple Pay Back Period 7.6 years
Pre-tax Internal Rate of Return-Assets 10.9%
Pre-tax Internal Rate of Return-Equity 29.6%
ORGIA
Anticipated Life-span 50 years
GEOLOGY MAP
Lentekhi Project, 120 MW
Note: All the calculations are based on preliminary assumptions. Therefore any clarifications will cause appropriate changes in the final results.
27. INVEST
IN GEORGIA
A
GEORGIAN NATIONAL
INVESTMENT AGENCY
www.investingeorgia.org
E-mail: enquiry@investingeorgia.org
Portfolio Manager: Alexander Sajaia
E-mail: asajaia@investingeorgia.org