Black Sea Energy Transmission System

repaying

The proposed project consists of the extension of the Georgian main 500kV system with addition of 2 new 500kV links from Gardabani and Zestaponi to a new 500kV substation near the Turkish border at Akhaltsikhe. Akhaltsikhe will be connected to the Turkish EHV grid at Borchka asynchronously using a Back-to-Back HVDC link at Akhaltsikhe. The project will be co-financed with the European Investment Bank and KfW. Implementation of the project will: (i) Increase energy security and improve electricity balance between supply (generation located in the west part of the country) and demand (consumption areas mostly located in the east side of Georgia); (ii) Stabilize the Georgian Electricity System; (iii) Increase electricity trade in the Caucasus through the creation of an electricity hub for energy exchanges with neighbouring countries; (iv) Increase electricity exports to Turkey. Transition impact of the Project comes from four main sources: Frameworks for markets The Project will provide vital support for the on-going reform of the Georgian power sector. Promoting Competitive Markets Development Current lack of the transmission capacity is a hindering factor for the private capital inflow into the generation sector. Encouraging Sound Regulatory Environment The Bank will work through a Technical Cooperation assignment with the Regulator on further improving the transmission tariff methodology in order to ascertain appropriate level of tariffs and fair and transparent rules of access to the transmission grid. Transfer of skills The Project is important for the energy security and stabilization of the electricity system. The Project will promote better use and maintenance of transmission system assets in the country. The borrower is the 100 per cent State-owned Georgian State Electrosystem (GSE) with guarantee by the State of Georgia. The project will be co-financed by EBRD, EIB and KfW, with EBRD and EIB providing respectively EUR 80 million each and KfW – EURO 100 million. EIB and KfW will be lending to the State of Georgia with on-lending to the GSE. The remaining of the project costs will be financed by the Government of Georgia. The estimated project costs are EUR 260 million. The project has been screened A/0 under the banks Environmental Policy (2003). The project will require an Environmental and Social Impact Assessment (ESIA) to the satisfaction of the Bank and in compliance with the public disclosure and consultation procedures of the Bank and National ESIA legislation for A-level projects. The due diligence and ESIA will be undertaken by an independent international consultant and will verify that the corridor selected has the lowest negative impact on occupied land areas and impact on local inhabitants as well as flora and fauna. The Project Summary Document (PSD) will be updated once due diligence is completed and the Environmental and Social Action Plan has been agreed. There is an Environmental and Social Impact Assessment available for this project. Two technical cooperation assignments funded from Special Shareholder Fund are underway: Technical cooperation funds of EUR 300,000 to carry out the Environmental and Social Impact Assessment in compliance with EBRD/EIB Environmental and Social Policies, EU EIA Directive, Aarhus Convention and Georgian EIA Law. Technical cooperation funds of EUR 180,000 to assist the Regulator in improving transmission tariff methodology in order to ascertain appropriate level of tariffs and fair and transparent rules of access to the transmission grid.