Armenia is a small landlocked country facing geopolitical constraints. Its economy grew fast from the mid-1990s until 2008. The economic crisis of 2008 2009 exposed the vulnerabilities of Armenia's economy. Construction fell by about 40% in 2009, accounting for most of the 14.1% loss in GDP that year. The government's response mitigated the social impacts of the crisis, but also resulted in a sharp rise in external public debt, from about 16% of GDP in 2008 to about 48% in 2017.
Armenia has no proven oil or natural gas reserves. With limited energy resources, Armenia can meet only 35% of the total demand for energy from domestic resources. It imports most of its fossil fuel resources from the Russian Federation (through Georgia) and has begun importing gas from Iran. Imports account for about 77% of the total primary energy supply, and natural gas imports from the Russian Federation account for 81% of total energy imports.
Project Name | High Voltage Electrical Networks, CJSC | ||||
Project Number | 52165-001 | ||||
Country | Armenia |
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Project Status | Dropped / Terminated | ||||
Project Type / Modality of Assistance | Technical Assistance |
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Source of Funding / Amount |
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Strategic Agendas | Environmentally sustainable growth Inclusive economic growth |
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Drivers of Change | Governance and capacity development Knowledge solutions Private sector development |
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Sector / Subsector | Energy / Energy sector development and institutional reform |
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Gender Equity and Mainstreaming | No gender elements | ||||
Description | Armenia is a small landlocked country facing geopolitical constraints. Its economy grew fast from the mid-1990s until 2008. The economic crisis of 2008 2009 exposed the vulnerabilities of Armenia's economy. Construction fell by about 40% in 2009, accounting for most of the 14.1% loss in GDP that year. The government's response mitigated the social impacts of the crisis, but also resulted in a sharp rise in external public debt, from about 16% of GDP in 2008 to about 48% in 2017. Armenia has no proven oil or natural gas reserves. With limited energy resources, Armenia can meet only 35% of the total demand for energy from domestic resources. It imports most of its fossil fuel resources from the Russian Federation (through Georgia) and has begun importing gas from Iran. Imports account for about 77% of the total primary energy supply, and natural gas imports from the Russian Federation account for 81% of total energy imports. Armenia's energy sector has moved from a severe crisis in the early 1990s to relative stability. Its power system has a total installed generation capacity of 4,100 megawatts (MW), 74% (3,047 MW) of which is operating. Power generation comprises 31% nuclear, 28% hydropower, and 41% thermal power (using imported natural gas). The country produces enough electricity to meet the annual domestic demand of about 6.0 billion kilowatt-hours (kWh). With a population of 3.3 million, it has an electrification ratio of 100%. A combination of policy, legal, regulatory, and institutional reforms have had good results. Improvements in operating efficiency such as a decrease in technical and nontechnical line losses, and a nearly 100 percent collection rate, have helped create commercially viable service providers; however, issues related to energy supply, subsidies and administration remain. 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 and more importantly to sustainable economic growth. |
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Project Rationale and Linkage to Country/Regional Strategy | ADB''s Country Partnership Strategy, 2014-2018 (CPS) aims to help Armenia integrate its economy regionally, and to rebalance it toward more resilient, inclusive, and environmentally sustainable growth. The CPS therefore supports strengthening energy security. In addition to legal limits on the size of debt, Armenia may face harder lending terms for public sector borrowing. To ensure that ADB-financed investments do not lead to debt stress and minimize the impact on the country's debt sustainability, CWEN works with SOEs to identify gaps and recommendations to improve their credit worthiness toward non-sovereign lending. The government discussed with ADB the possibility to help HVEN improve its position toward non-sovereign lending. In this regard, CWEN conducted a consultant mission to Armenia in March 2018 to explore the opportunity to work with HVEN. When TA is approved, CWEN will discuss further with the government. HVEN was established in 1998 as a closed joint stock company. The Company is operating on transmission of electricity in Armenia and 100% of the company shares belong to the Government represented by the Ministry of Energy Infrastructure and Natural Resources (MENR). In August 2017, MENR to enter a 25 years management contract with Tashir Capital, CJSC who will run HVEN's daily operations. HVEN's new management has already been appointed in December 2017 by Tashir Capital. Tashir Capital has a comprehensive human resource plan in place and expecting to complete the implementation by December 2018. While HVEN's outlook is considered positive, a financial assessment of HVEN's financial performance and credit risks assessment are needed to identify gaps and recommendations to improve HVEN's financial situation and credit worthiness toward non-sovereign lending in the future. The proposed KSTA is in line with ADB''s Strategy 2030 in Strengthening Governance and Institutions Capacity. ADB will work closely with SOEs to improve their financial management capacities and internal governance, enabling them to access financing on commercial terms and conditions. To this end, the proposed KSTA helps to create an enabling environment for sustainable growth by strengthening the quality and capacity of HVEN leading to non-sovereign lending. |
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Impact | Power supply reliability and efficiency improved in Armenia (Armenia Development Strategy)a Operating efficiency of domestic and regional transmission network increased (Armenia Development Strategy) |
Project Outcome | |
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Description of Outcome | HVEN's business environment improved |
Progress Toward Outcome | |
Implementation Progress | |
Description of Project Outputs | Financial assessment report of HVEN's prepared HVEN's credit risk assessment report prepared |
Status of Implementation Progress (Outputs, Activities, and Issues) | |
Geographical Location | Nation-wide |
Summary of Environmental and Social Aspects | |
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Environmental Aspects | |
Involuntary Resettlement | |
Indigenous Peoples | |
Stakeholder Communication, Participation, and Consultation | |
During Project Design | |
During Project Implementation |
Responsible ADB Officer | Gurgenidze, Nana |
Responsible ADB Department | Central and West Asia Department |
Responsible ADB Division | Energy Division, CWRD |
Executing Agencies |
ADB POHQ Regional |
Timetable | |
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Concept Clearance | - |
Fact Finding | 15 May 2018 to 15 May 2018 |
MRM | - |
Approval | - |
Last Review Mission | - |
Last PDS Update | 24 Sep 2018 |
TA 9529-ARM
Milestones | |||||
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Approval | Signing Date | Effectivity Date | Closing | ||
Original | Revised | Actual | |||
28 May 2018 | - | 28 May 2018 | 31 Dec 2018 | 31 Dec 2019 | - |
Financing Plan/TA Utilization | Cumulative Disbursements | |||||||
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ADB | Cofinancing | Counterpart | Total | Date | Amount | |||
Gov | Beneficiaries | Project Sponsor | Others | |||||
100,000.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 100,000.00 | 28 May 2018 | 0.00 |
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