Armenia : Power Transmission Rehabilitation Project

Energy / Electricity transmission and distribution - Energy efficiency and conservation

Armenia has no proven oil or natural gas reserves and imports most of its fossil fuel resources from Russia (through Georgia) and has begun importing gas from Iran. Imports account for about 77% of total primary energy supply_and natural gas imports from Russia account for 81% of total energy imports. Strengthening energy security and improving energy efficiency are the country's top priorities. Development of indigenous energy resources and rehabilitation of old and inefficient generation, transmission, and distribution infrastructure are critical to the country's energy security.

The core problem in Armenia's energy sector focuses on the low efficiency of energy resources utilization. This has been evidenced by very limited utilization of substantial renewable energy resources, low efficiency of thermal and hydro power plants, relatively large electricity transmission and generation losses, and incomplete realization of the electricity export potential.

Much of the sector's infrastructure was built during the Soviet-era and has deteriorated significantly because of the lack of sufficient funding for rehabilitation and maintenance. Roughly 70% of the installed equipment at power generation plants has been in operation for more than 30 years, and 50% for more than 40 years. The average age of power transmission assets including substations is 45 years and, distribution assets 32 years. Much of the existing transmission infrastructure has reached the end of its useful life and requires major rehabilitation or replacement to continue reliable operation. Nearly 90% of 220-kV overhead lines require rehabilitation, and about 42% of low-voltage substations are in deficient technical condition._ADB's Interim Operational Strategy for Armenia, which was approved in 2006, identified the energy sector as one of the priority sectors for ADB's intervention._ The Country Partnership Strategy for Armenia is currently under preparation, and is expected to be finalized in 2014. ADB will continue assisting Armenia in improving the utilization of energy resources. The key areas of ADB's operations in the energy sector have been selected on the basis of the government's priorities in the sector, are aligned with ADB's Strategy 2020 and Energy Policy 2009, and include (i) rehabilitation of large hydropower generating assets, (ii) rehabilitation of aging transmission and distribution assets, (iii) improvement of cross-border interconnection of power systems, (iv) development of renewable energy, and (v) policy and institutional development. The project is included in ADB's country operations business plan for 2014 to 2016.

The expected impact will be improved reliability and efficient power supply in Armenia.

Improved reliability and efficient power supply in Armenia

Increased operating efficiency of domestic transmission network

After 6.7 years from approval, SDR equivalence in USD has depreciated from $37 million to $33.672 million. All contracts anticipated under the project have been awarded. The cumulative contract awards and disbursement_as of 18 October 2021 are $23.574 million (70.0% of total project amount) and $24.444 million (72.6% of total project amount), respectively. The overall project physical progress is 90% against the elapsed project period of 89%. Although the project is facing implementation challenges, it is rated 'On on track_ as of 18 October 2021 also in terms of compliance with APFS/AEFS and financial covenants and compliance with the Environment, Resettlement and Indigenous people safeguards following ADB's rating criteria.

The Government's intention to complete the transmission rehabilitation component using state budget financing is likely to go beyond the Project allocated timeline. ADB needs to monitor the Project implementation also after the completion date to assess the likelihood of achievement of the outcome.

Expansion of SCADA system and EMS fully implemented.

Rehabilitation of two 220 kV substations at Agarak 2 and Shinuhayr

Institutional development, capacity building, and project management successfully completed

EPC SCADA/EMS contract awarded in Oct 2017. The installation of a new Backup Dispatch Center was added in the contract and completed in September 2020. Following the Government's request in Oct 2019 and IEE update in Feb 2020, ADB approved additional installation of OPGW in other substations. Completion of works for the scope added is expected in March 2022.EPC contract for substation rehabilitation was awarded in May 2016. Design was finalized and Contractors have started activities on site, including environmental and social safeguards compliance. Rehabilitation in both substations - namely, Agarak and Shinuhayr, is experiencing delays. Presently, 84% of contracted equipment for Shinuhayr SS have been delivered on site and 41% of the required engineering and civil works have been accomplished. At the Agarak SS, 94% of contracted equipment have been delivered on site and 78% of engineering and civil works have been completed. HVEN issued a unilateral contract termination in Dec 2019 followed by the decision of the Management Board of completing the rehabilitation of the substations undergoing a selection process based on local procurement law and using state budget financing. EPSO and HVEN staff are actively involved on procurement- and safeguards-related activities. SCADA/EMS contractor held trainings for EPSO in January, April, May, August, Sept, November 2018 in Yerevan, Georgia, Vienna and Spain. PSMC for EPSO is engaged to assist in project implementation. PMC Contract for HVEN was terminated in 2018 with no construction works in place since early 2019.

HVEN is intended to advertise a procurement for the completion of substation rehabilitation component in November 2021.

Procurement of goods and works from ADB loan proceeds are undertaken following ADBs Procurement Guidelines (2013, as amended from time to time) and a procurement plan developed for the project. The procurement applied international competitive bidding procedures using standard bidding documents for plants (single-stage, single envelope).

Bidding process for substation rehabilitation has been concluded with contract awarded in May 2016 and for SCADA/EMS and Backup Dispatch Center was awarded in October 2017.