www.investingeorgia.org 1HYDRO POWER HUBHYD RO POW ER HU B Georgian National Investment Agency 2013
www.investingeorgia.org 3 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 winterORGIA 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
ALL CONDITIONS FOR CAPTURING OPPORTUNITIES FROM GROWING DOMESTIC DEMAND AND EXPORTS ARE IN PLACEOpportunities 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 www.investingeorgia.org 4
www.investingeorgia.org 5 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 1.4ORGIA 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%
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 160www.investingeorgia.org 6
www.investingeorgia.org 7 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 AzerbaijanORGIA 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)
SETTING UP A REGIONAL EXPORT CONSOLIDATION SPV HELPSTO 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 investorwww.investingeorgia.org 8
www.investingeorgia.org 9 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 missionORGIA 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
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 environmentwww.investingeorgia.org 10
www.investingeorgia.org 11 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 PARTNERSORGIA 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
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 www.investingeorgia.org 12
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 HPPNote: All the calculations are based on preliminary assumptions. Therefore any clariﬁcations will cause appropriate changes in the ﬁnal results. www.investingeorgia.org 14
www.investingeorgia.org 15 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 mORGIA NAMAKHVANI HPP’s Cascade
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 yearsNote: All the calculations are based on preliminary assumptions. Therefore any clariﬁcations will cause appropriate changes in the ﬁnal results. www.investingeorgia.org 16
www.investingeorgia.org 17 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 MAPORGIA
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 18Note: All the calculations are based on preliminary assumptions. Therefore any clariﬁcations will cause appropriate changes in the ﬁnal results. www.investingeorgia.org 18
www.investingeorgia.org 19 ONI CASCADE VESTORGIA
NENSKRA HPP BASIC PARAMETERS Total Installed Capacity 210 MW IN Average Annual Generation 1,205 GW/h IN GEOwww.investingeorgia.org 20
www.investingeorgia.org 21 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/KWhORGIA Note: All the calculations are based on preliminary assumptions. Therefore any clariﬁcations will cause appropriate changes in the ﬁnal results.
TOBARI HPP BASIC PARAMETERS IN Total Installed Capacity 200 MW Average Annual Generation 810 GW/h PROJECT DATADam 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) www.investingeorgia.org 22
www.investingeorgia.org 23 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 yearsORGIA 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.
FARI HPP BASIC PARAMETERS Total Installed Capacity 180 MW IN N Average Annual Generation 780 GW/h PROJECT DATADam HeightDam VolumeNormal Headwater Level IN GEO 173(m) 240(mln.m3) 1300 (m)Tailwater Downstream Pool 1060(m)Project Discharge 103 (m3/sec)www.investingeorgia.org 24
www.investingeorgia.org 25 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 yearsORGIA 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.
LENTEKHI HPP BASIC PARAMETERS IN Total Installed Capacity 120 MW Average Annual Generation 560 GW/h IN GEOwww.investingeorgia.org 26
www.investingeorgia.org 27 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.
INVESTIN GEORGIA A GEORGIAN NATIONAL INVESTMENT AGENCY www.investingeorgia.org E-mail: firstname.lastname@example.org Portfolio Manager: Alexander Sajaia E-mail: email@example.com