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Armenia: High Voltage Electrical Networks, CJSC

Sovereign (Public) Project | 52165-001 Status: Dropped / Terminated

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 Details

Project Officer
Gurgenidze, Nana Central and West Asia Department Request for information
Country
  • Armenia
Sector
  • Energy
 
Project Name High Voltage Electrical Networks, CJSC
Project Number 52165-001
Country Armenia
Project Status Dropped / Terminated
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA 9529-ARM: High Voltage Electrical Networks, CJSC
Technical Assistance Special Fund US$ 100,000.00
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Governance and capacity development
Knowledge solutions
Private sector development
Sector / Subsector

Energy / Energy sector development and institutional reform

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.

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.

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
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
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
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
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
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

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

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Procurement Plan

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