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MINISTRY OF ENERGY OF
GEORGIA
Energy Sector Overview
Area – 69,700 sq.km
Population - 4.49 million persons
Capital - Tbilisi (population 1.2 million persons)
Official Language: Georgian
2014 INDEX OF ECONOMIC FREEDOM
heritage.org
2014 INDEX OF ECONOMIC FREEDOM
№1 Reformer in the World over
the past 5 years – World Bank
World Rank: 22
Mostly Free (+0.4)
Regional Rank: 12
43 European Countries
GROSS DOMESTIC PRODUCT
www.geostat.ge
FOREIGN DIRECT INVESTMENT
www.geostat.ge
EXTERNAL RELATIONS
• Diplomatic relations with 167 countries.
• Member of 48 international organizations
Power Sector – Major
Stakeholders
Ministry of Energy
- Sets policies and is responsible for
facilitating investment projects
Independent regulator – GNWERC*
- Establishes tariffs, licensing rules and
standards
-Resolves relations between customers and companies
ESCO
GSE/ET/SAKR
USENERGO
GNEWRC
MENR
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
-balances market, emergency import/export
-Reserves capacity trader
GENERATION
DISTRIBUTIO
N CO.S
Generation
-62 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
TECHNICAL OPERATOR AND
TRANSMISSION SERVICES
JSC Georgian State Electrosystem (GSE)-100% state-owned joint stock company providing
transmission and exclusive dispatch services
Transmission lines - 220/110/35 KV
91 Substations with capacity of 8,400 MW - 500 KV, 220KV, 110 KV, 35 KV
The National Control (Dispatch) Centre-NCC- controls Georgian power system and
ensures overall system reliability and proper operation of transmission facilities under the
normal operational mode, as well as in emergencies.
JSC Sakrusenergo- 50% owned by Inter RAO and 50% by the Georgian State, which owns
the 500 kV line running across the country from West to East.
Electricity System Commercial
Operator - ESCO
ESCO is 100% state owned joint stock company arranging discipline of relationships
among the energy sector units and creating guarantees for non-stop delivery of
electric power to the nation
The Electricity System Commercial Operator functions
Sale and Purchase of balancing electricity (capacity) (inter alia through forming medium and
long-term contracts on import and export)
 Trade with Guaranteed Capacity in accordance to the Law of Georgia on “Electric Energy
and Natural Gas” and the Electricity (Capacity) Market Rules
 Set up and operate unified database on the wholesale trade including unified metering
register
 Submission of relevant information to the Dispatch licensee in order to plan electricity and
capacity supply-demand for the whole electric energy system of Georgia
Inspection of meters used in the wholesale metering
Support construction of the new hydro power plants
Execution of other functions defined by the Law.
Georgian Energy and Water
Supply Regulatory Commission
GNERC
Georgian Energy and Water Supply Regulatory Commission is an entity not
established on the basis of the State property but on the basis of Georgian law on
“Independent National Regulatory Authorities"
The role and functions of the regulatory commission
 Establishes the licensing rules and standards of production, transmission, dispatch,
distribution, import and export
 Establishes and regulates wholesale and retail tariffs of production, transmission,
dispatch, distribution – pass through, import and consumption
 Discusses and resolves disputes between the entities of regulated sectors
 Controls and monitors the activities of entities of regulated sectors and the quality
of service and security of supply in the electricity sector .
Legal and regulatory
framework
•
Law on Electricity and Natural Gas (1997)
•
The Order of Ministry of Energy on “The Electricity (Capacity) Market Rules” (2006)
•
“Basic Directions of the State Policy in Energy Sector of Georgia” approved by the
Government of Georgia (2006)
•
Georgian National Energy and Water Regulatory Commission (GNERC) Decree on the
Electricity Tariffs (2008, # 33)
•
Government of Georgia, Decree on “Determining the Guaranteed Capacity and
Guaranteed Capacity Resources at the Electric Energy System of Georgia”
(2010, #193)
•
Government of Georgia, Resolution on “Approval of the rule of Expression of Interest
for technical and economic feasibility study, construction, ownership and operation
of the power plants in Georgia” (2013, #214)
•
The Order of Minister of Energy on “construction, ownership and operation of the
power plants that are not in the list approved by the Minister of Energy” (2014, #40)
•
Other Legislation Acts
EFFECT OF RESOLUTION #214
Expression of Interest
Expressions of Interest (Completed and On-going) - 12
Hydro Power Plants - 13
Installed Capacity – 710 MW
Estimated Investment - 1,396,090,000 USD
Memorandums of Understanding
MoU – 14
Power Plants – 47 HPPs and several WPPs
Installed Capacity – 673 MW and 1450 MW
14
TAXATION IS SIMPLE, LOW,
EFFICIENT AND FAIR
Number of Taxes
Before
2006
Current
21
6
• No capital gains tax
VAT
20%
18%
Personal Income
Tax
12-20%
20%
Social Tax
33%
-
Corporate Profit
Tax
• No payroll tax or social insurance tax
• No wealth tax and inheritance tax
• Foreign-source income of individuals
fully exempted
• Accelerated depreciation on capital
assets
• No restrictions on currency
20%
15%
Customs/ Import
Tax
0%, 5% or 12%
Property Tax
Up to 1%
convertibility or repatriation of capital
& profit
• Double taxation avoidance treaties
with 44 countries
TAXATION SYSTEM IN NEIGHBORING
COUNTRIES
ELECTRICITY CONSUMPTION OF
GEORGIA
POTENTIAL PROJECTS On the
PRE--FEASIBILITY STUDY LEVEL
PRE
Financials/Ratios
Income Statement
Cash Flow
Balance Sheet
NPV
IRR
Technical Projection
HPPs Technical Data
Hydrological Data
Topographic
Maps
Other Necessary Data
18
MEMORANDUM OF UNDERSTANDING
Pre Construction Stage
Full Feasibility Study
Environmental Impact
Assessment Report
Public Hearing
Construction Stage
Permits
Construction
Commencement
Operation Stage
Guaranteed 10 year PPA for 20% of annually generated electricity
19
SIMPLIFIED PROCEDURES
EIP
Construction
Permit
Generation
License
• Ministry of Environment and Natural Resources Protection
• More than 2 MW HPPs and 10 MW TPPs*
• Issued within 20 working days
• Ministry of Economy and Sustainable Development of Georgia
• Issued within 60 working days
• GNERC **
• More than 13 MW***
• Issued within 30 working days
* EIP is not needed for the HPPs with installed capacity less than 2 MW and TPPs with less than 10 MW
** Georgian National Energy and Water Supply Regulatory Commission
*** HPP with less than 13 MW installed capacity do not need Generation License
NEW POWER PLANTS
(CONSTRUCTION STARTED AFTER 2008)
• Khadori 2 HPP – LLC “Peri” (5.4 MW)
• Akhmeta HPP – LLC “Geoenergy” (9.1 MW)
• Aragvi HPP – LLC “Energo Aragvi” (8.5 MW)
• Larsi HPP – LLC “Energia” (19 MW)
• Shilda HPP – LLC “Energia” (5 MW)
• Bakhvi 3 HPP – LLC “Bakhvi Hydro Power” (10MW)
ANNUAL DEVELOPMENT AND OF PEAK
LOAD AND ELECTRICITY DEMAND IN
TURKEY
Source: TEIAS
Description of Development of Electricity Demand,
Production and Shortage During the Period of 2012-2021
in Turkey
Source: TEIAS
EXPORT OPPOERTUNITIES
TRANSMISSION TARIFF
Tetri/KWh
US$ ¢ /KWh
Dispatch Service fee - GSE
0.15
0.09
Transmission Fees GSE
0.50
0.29
SakRusEnergo
0.18
0.10
EnergoTrans - Internal
0.27
0.15
EnergoTrans - Export
0.35
0.20
System Capacity Charge
(GC fee)
0.60
0.34
0.019
0.01
0.02
0.01
ESCO fee
GNERC fee
Total
2.09
1.19
INVESTMENT ADVANTAGES
 Renewable projects based on Build-Own-Operate (BOO)
 All new HP 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
 Free third-party access to the grid
 No license required to export and no tariff set
 Government approved new rule of expression of interest for construction technical and
economic feasibility study, construction, ownership and operation of hydropower plants in
Georgia
 Government offers 10 year PPA for 20% of total generation for domestic supplies
 Developer benefits from carbon credits (CER) trading
 New HPPs have priority access to the capacity on the new interconnection to Turkey
(Long term contract with TSO)
 Generation and Export activities exempted from VAT
Thank You!