Invest in Georgian Energy

Georgia - Greenfield hydropower investment opportunities

See Attached file(.pdf)

Update

• Georgia has one of the largest undeveloped hydropower potentials in the world. (50,000 MW)
• Following the rapid rise in the price of imported gas from Russia, hydropower has become least cost generation in Georgia as it is in most other electricity systems.
• The Georgian government has expressed a strong commitment to aggressively expanding greenfield hydropower generating capacity in the coming years. In particular, the Government has as a strategic priority, the replacement of expensively generated thermal electricity. In addition the government wants to facilitate the export of electricity to neighbouring countries, and meet anticipated rapidly growing domestic demand.
• A series of reforms which has improved commercial viability in the sector has sent a strong positive signal to potential investors.
• The electricity distribution companies in Georgia are under private management and the technical and commercial losses in the system have been dramatically reduced in recent years, to respectable levels. The distribution companies are now operating at a net profit.
• The end consumer tariffs have increases significantly in recent years and are now on par with those in Western Europe.
• Under current legislation, prospective investors are permitted to negotiate returns directly with the independent Georgian electricity regulator, before committing to an investment. Potential returns are up to 20% p.a.
• Turkey, the primary export market for Georgian electricity, has one of the highest wholesale tariffs for electricity to industry in Europe and rapidly growing demand.
• ESCO, the system operator in Georgia, guarantees purchase of all electricity from newly built hydros, thus minimizing the off-take risk.
• Turkey, as the primary future export market for surplus Georgian electricity has rapidly growing demand and offer competitive prices for imported electricity.
• In cooperation with the Georgian Ministry of Energy, the Nordic energy firm ECON, is undertaking a detailed due diligence of the investment opportunities in greenfield hydropower sites in Georgia. ECON is also developing pre-feasibility studies for the most prospective sites (1100 MW in total).
• The due diligence will have separate studies assessing political (local and regional) risks, the general investment climate in Georgia, the electricity sector in the country and the export markets for electricity. The documents will focus on the risks and return for international investors assessing the potential of Georgian hydropower.
• The pre feasibility studies will calculate capex, opex, expected IRR, cashflow profile etc for each of the prospective sites. The document will also contain least cost technical design of the sites, hydrological profile and an evaluation of the potential for industrial development, using the electricity.
• The due diligence and the pre feasibility studies will be made publicly available to prospective investors in October 2007.
• A road show is planned, where the Georgian hydro-power sector will be presented. The presentations will be held in October-November 2007 and the locations will include the Nordic capitals and London.
• An investment conference will be organised in Tbilisi in December 2007 for interested investors.

If you want further information about this opportunity, please contact Bjorn Brandtzaeg Project Manager ECON on bjb@econ.no +4798263966