Harold Doan and Associates (press release), CA
July 29 2005
Armenian hydro plant gets EBRD backing
Press Release – European Bank for Reconstruction and Development
The European Bank for Reconstruction and Development is lending 1.1
million to an Armenian mini-hydroelectricity project that will bring
the country one step closer to achieving its goal of obtaining 70 per
cent of its energy from renewable sources, particularly hydropower.
Bazenc CJSC, an Armenian company set up in 2000 to run a small
hydropower plant on the Yeghegis River, will use the loan to install
a second turbine which, while only working for three summer months,
will increase the company’s total electricity production by 23 per
cent.
New energy laws since 2001 have tried to create an attractive climate
for entrepreneurs dealing in alternative energy sources. The
electricity will be sold to the Armenian government, under guarantees
lasting until 2016, at prices negotiated once a year. Energy supply
has been a critical issue for Armenia since independence in 1991. To
make up shortfalls, the government in 1995 reopened a nuclear power
plant at Hrazdan that had been closed since an earthquake in 1988.
This five-year loan is part of the Early Transition Countries (ETC)
initiative launched last year to stimulate market activity in
Armenia, Azerbaijan, Georgia, the Kyrgyz Republic, Moldova,
Tajikistan and Uzbekistan. It uses a streamlined approach to
financing more and smaller projects, mobilising more investment, and
encouraging economic reform. It is part of an international effort to
address poverty in the Bank’s seven lowest-income countries of
operations. The Bank accepts higher risk in projects it finances in
these countries, while still respecting the principles of sound
banking.
The EBRD is also supporting Bazenc in acquiring a Clean Development
Mechanism (CDM) status for its mini-hydro projects under the Kyoto
Protocol on reducing greenhouse gas emissions and limiting global
warming. CDM is the Kyoto mechanism enabling project sponsors in
developing countries, which do not have targets for greenhouse gas
reduction themselves, to sell their carbon credits to countries with
Kyoto targets. If Bazenc gets CDM status, it will be the first such
mini-hydro project in Armenia to be able to sell carbon credits. This
will help sustainability of the project, as carbon credits will be
paid for in hard currency. The Bank also expects to demonstrate that
Armenian small-scale renewable energy projects can benefit from the
international emissions trading market.
The Bank identified Bazenc while conducting a survey for potential
CDM projects in the Caucasus and central Asia in 2004. Initial CDM
activities are being financed from the Netherlands Environmental
Trust Fund at the EBRD. The Bank has also established a Clean
Development Mechanism Project Support Facility for the Early
Transition Countries supported by the ETC Multi-Donor Fund. The Bank
offers technical assistance for emission reduction projects, helping
companies to monetise emission reductions as carbon credits.