MINISTRY OF ENERGY OF GEORGIA
Investment and trading
Opportunities in
Energy Sector of Georgia
Power Sector - Major Stakeholders
MENR
ESCO
GNEWRC
Distribution Co.s
Generation
GSE/ET/SakrusEnerg
o
Ministry of Energy -Sets policies and is responsible for facilitating investment projects
Independent regulator – GNWERC*- Establish tariffs, licensing rules and
standards- Resolve relations between customers and
companies
Technical operator/Transmission Services - HV lines, HV substations and dispatching
- GSE and ET (100% state owned)- SakRusEnergo (50% state owned and 50%
owned by Inter RAO)
Electricity System Commercial operator – ESCO - balancies market, emergency import/export- Reserve capacity trader
Generation - 59 Hydropower plants- 3 Thermal plants
Distribution Companies - All 3 Distribution Co.s under the private
ownership Telasi, Energo-pro Georgia, Kakheti Distribution
• Georgian National Energy and Water Supply Regulatory Commission
Hydropower Potential
• Immense untapped hydro resources
• One of the top country in water resources percapita
• 300 out of 26,000 rivers are significant in terms ofenergy production
• Only 18% of total hydro potential is utilized
• HPP Greenfield potential of 40 TWh
4
Financials/Ratios
Income Statement
Cash Flow
Balance Sheet
NPV
IRR
Technical Projection
HPPs Technical Data
Hydrological Data
Topographic
Maps
Other Necessary Data
Pre-Feasibility Studies FOR HPPS
74 HPP projects on pre feasibility level with financial and technical projections with installed capacity of up to 670 MW
MINIMUM BUREAUCRACY
5
*HPPs with less than 13 MW do not require Generation License•GNEWRC- Georgian National Electricity and Water Regulatory Commission
Construction
Permit
Ministry of Economy & Sustainable Development
Issued within 60 working days
Generation
License
GNEWRC
Above 13MW*
Issued within 30 working days
No payroll tax or social insurance tax
No capital gains tax
No wealth tax, inheritance tax
Foreign-source income of individuals fully exempted
Very strong political commitment to low and simple taxation and improve services
Taxation is simple, low, efficient and fair
‘04 ‘05 ‘06 ‘07 ’08 ‘09 ’10 ‘11 ‘12
Number of Taxes
21 7 7 7 6 6 6 6 6
VAT 20% 20% 18% 18% 18% 18% 18% 18% 18%
Income Tax 12-20% 12% flat 12% flat 12% flat
Social Tax + Income Tax
32% 25%
Social Tax + Income Tax
20%
20% 20% 20%
Social Tax 33% 20% 20% 20% - - - - -
Corporate Income Tax
20% 20% 20% 20% 15% 15% 15% 15% 15%
Dividend & Interest
Income Tax
10% 10% 10% 10% 10% 5% 5% 5% 5%
Existing Transmission lines• Russia 1155 MW
Existing & Planned Transmission Lines• Turkey 2000 MW• Armenia 835 MW• Azerbaijan 1150 MW
7
Construction of new high voltage 500/400 KV line connecting to Turkey finished
MOU for additional 154 KV line connecting to Turkey was signed
Georgian power grid is connected to the grids of all of neighboring countries
INFRASTRUCTURE AND TRADING OPPORTUNITIES WITH NEIGHBORING
COUNTRIES
Government Regulations –Prioritizing renewable Investments
Renewable projects based on Build-Own-Operate (BOO)
All new HPP plants are totally deregulated - No tariff set for the newly built HPPs - investor is free to choose the market and negotiate the price
There is no fee for the connection to the transmission grid
No license required to export and no tariff set
Developer benefits from carbon credits trading
New HPPs have priority access to the capacity on the new interconnection to Turkey (Long term contract with TSO)
Generation and Export activities are exempted from VAT
PPA for 20% of annually generated electricity for 10 year period for domestic supplies
100%
Thermal & ImportHydro
ProjectedSeasonal Asymmetry of Generation and
Consumption
Winter Summer
Generation
Consumption
HIG
H
LO
W
LO
W
HIG
H
80%
20%
Current
Thermal Power Plants Hydropower Plants
2013
Percentage structure in generation of electricity
RENEWABLE Energy projects
• 21 Under Construction
Installed capacity of 686 MW Annual generation up to 2,784 GWH
• 11 In the Process of Obtaining Construction permit
Installed capacity of 1,086 MW Annual generation up to 3,027 GWH
• 32 Projects Under Feasibility
Installed capacity of 570 MW Annual generation up to 915 GW
64 On-Going Energy Projects
Percentage Structure of the Indicator in Total FDI Inflow by
Q2 2013
www.geostat.ge
Electricity Import/ExportDATA
2006(Sep-Dec)
2007 2008 2009 2010 2011 20122013
(Jan-Oct)
Import from Turkey 31.762 149 54.3 - 0.00014 0.002823 0.000548 -
Export to Turkey -31.53 -215.6 -216 -182.3 -303.366 -218.625 -79.008 -
Import fromAzerbaijan
15.523 107.4 34.6 31.5 10.138 23.42 97.794 -
Export to Azerbaijan -29.986 -109.6 -30.9 -21.5 -14.344 -5.924 -11.79 -6.612
Import from Armenia - - - 0.04 - - 0.000408 0.001014
Export to Armenia - - - -19.8 -89.447 -117.474 -67.917 -73.16
Import from Russia 12.802 176.8 560.1 223.3 211.937 447.542 516.797 366.287
Export to Russia -0.568 -300.2 -432.7 -525.8 -1117.123 -588.575 -369.432 -370.602
Import total: 60.087 433.3 649 254.8 222.08 470.96 614.59 366.29
Export total: -61.807 -625.5 -679.6 -749.4 -1524.28 -930.6 -528.15 -450.37
Net Export -1.72 -192.20 -30.60 -494.60 -1302.20 -459.64 86.44 -84.08
www.esco.ge
Electricity Import/Export Chart
GWh
-6000
-5000
-4000
-3000
-2000
-1000
0
1000
2000
3000
4000
2006(Sep-Dec) 2007 2008 2009
2010 2011 2012 2013(Jan-Oct)
DATA FROM Doing Business 2014WB/IFC
Indicator(Rank)
Geo
rgia
D
B20
14
Geo
rgia
D
B20
13
Arm
en
ia
DB
201
4
Az
erb
aij
an
DB
201
4
Bel
aru
s D
B2
014
Bu
lga
ria
D
B2
014
Ro
ma
nia
D
B2
014
Tu
rkey
D
B2
014
Bes
t p
erf
orm
er
glo
ba
lly
Starting a Business 8 7 6 10 15 65 60 93New
Zealand
Dealing with Construction Permits
2 2 79 180 30 118 136 148Hong Kong SAR, China
Getting Electricity 54 54 109 181 168 135 174 49 Iceland
Registering Property 1 1 5 13 3 62 70 50 Georgia
Getting Credit 3 3 42 55 109 28 13 86 Malaysia
Protecting Investors 16 16 22 22 98 52 52 34New
Zealand
Paying Taxes 29 32 103 77 133 81 134 71 UAE
Trading Across Borders 43 45 117 168 149 79 76 86 Singapore
Enforcing Contracts 33 33 112 28 13 79 53 38 Luxembourg
Resolving Insolvency 88 92 76 86 74 92 99 130 Japanwww.doingbusiness.org
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
15
Thank you