Promoting Private Sector Investment in Georgia Hydropower
Generation from renewable resources contributes to Georgia’s energy independence and security. Small hydro power plant (SHP) potential is estimated to range between 300 and 500 megawatts, on par with many of Georgia’s largest power assets. For each kilowatt-hour domestically generated from renewable resources, the country avoids purchasing the equivalent amount of natural gas needed for thermal electricity production, thus reducing reliance on foreign suppliers. The short lead time to implement such projects can help rapidly reduce Georgia’s chronic dependence on energy imports.
Development of SHP in Georgia is hampered by limited access to capital, as local bankers view the energy sector as a whole, and the SHP sector in particular, as too risky an investment. Stringent local loan financing terms make projects unaffordable, such that many viable projects capable of generating hundreds of megawatts annually never move past the conceptual stage.
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| Grant, loan, equity and community investments totaling $5 million are developing nine small hydro facilities in rural Georgia |
To help Georgia achieve its hydropower development goals, USAID initiated the Rural Energy Program in 2005, which works to create linkages among SHP project developers and commercial lenders, private investors and donor organizations, with two principal objectives: to increase access to financing for SHP development; and to expand the technical capacity of facility owners. The program, the outgrowth of a pilot project initiated in 2003, started by educating bankers on mitigating risks related to SHP projects. It then moved to activity scoping, identifying and evaluating the viability of SHP projects, for each of which business plans, technical designs and environmental management plans were completed. Lastly, in collaboration with a local commercial bank and the European Bank for Reconstruction and Development, a credit facility is providing over $2 million in medium-term loans to a number of environmentally-friendly and commercially viable projects.
The Rural Energy Program leveraged over $4.2 million through January 2007 from private investors and other donor organizations for nine facilities which will generate 43.8 million new kilowatt-hours annually, enough to meet the demands of over 200,000 Georgian citizens. For every $1 provided by USAID, an additional $5 was leveraged from commercial banks, equity investors and donor organizations. As a result of the program’s successes, commercial banks, private investors and donor organizations are now viewing Georgian SHPs for the first time as realistic investment options.
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