WORLD BANK GIVES ARMENIA GRANT AND CREDIT TO SUPPORT RENEWABLE ENERGY PROJECT

Armenpress
Mar 30 2006

YEREVAN, MARCH 30, ARMENPRESS: The World Bank approved on March
29 a Renewable Energy Project for Armenia. The total amount of the
project is US$25.050 million, including a US$5 million International
Development Association (IDA) credit, and a US$3 million grant from
the Global Environment Facility (GEF). The project will also be
supported by co-financing of US$7 million from EBRD, US$3 million
from the Cafesjian Family Foundation, and US$7.050 million from the
government and local financial institutions.

This project will assist the government to increase privately owned
and operated power generation utilizing renewable energy and to reduce
greenhouse gas (carbon dioxide) emissions by overcoming barriers
to the development of renewable energy. Following the energy crisis
Armenia has achieved remarkable results in reforming the power sector
and improving its financial performance. The key remaining challenge
for the sector is to ensure sustainable and reliable power supply by:
(a) shifting reliance from costly and polluting sources of energy to
lower cost and environmentally friendly alternatives; (b) increasing
the energy diversification and achieving a higher degree of energy
security through the utilization of the indigenous renewable energy
resources.

While the overall legal and regulatory framework in Armenia is
supportive to the development of renewable resources, private
investments in renewable projects are impeded by a number of legal,
regulatory, informational, financial, and institutional barriers.

The Renewable Energy Project will provide assistance to remove the
existing barriers and debt financing, as well as technical, legal,
managerial and business support to a selected number of renewable
projects.

“The project will increase the role of renewable resources in
Armenia’s electricity generation mix in the future thereby increasing
the diversification of electricity supply and energy security,”-
said Gevorg Sargsyan, Head of the World Bank team designing the
project. “It will also generate environmental benefits by reducing
emissions and pollution.”

The overarching goal of the project is to build a sustainable
market-based capacity to develop and finance renewable energy projects
on commercial terms.

The Renewable Energy Project has two components: (i) assistance
to remove barriers and support project implementation; and (ii)
financing of investment. IDA and grant funds will be channeled through
the Renewable Energy and Energy Efficiency Fund, which will provide
finance to private investors through a financial intermediary.

By the time of completion, the project is expected to contribute to
the development of about 80MW of additional renewable energy generation
capacity, adding 200GWh annual renewable generation to the electricity
generation mix. In addition, carbon dioxide emissions are expected to
be lowered by around 130,000 tons annually. The Credit will be made
to Armenia on standard IDA terms, including 40 years maturity and a
10-year grace period.

Since joining the World Bank in 1992 and IDA in 1993, the commitments
to Armenia total approximately US $921 million for 42 operations.