Mediamax’s exclusive interview with Georgian Deputy Prime Minister, Minister of Energy Kakha Kaladze

- Mr. Minister, the issue of privatization of the North-South pipeline owned by the Georgian government has been raised time and again over the past few years. In particular, the State Oil Company of Azerbaijan Republic (SOCAR) has expressed its readiness to purchase the gas pipeline, and it spurs certain concern in Armenia taking into account the strained relations with Azerbaijan. What is the stance of the Georgian government today regarding the future of the North-South pipeline?

- As far as I know, there has not been any talk on the privatization of this asset.  A few years ago the Oil and Gas Corporation, which is the owner of this pipeline, was going to conduct Initial Public Offering (IPO) for a certain number of the company’s shares. In the long run, a decision was passed on the issue of Eurobonds and the company attracted EUR 250 million at the London Stock Exchange.

I would like to reaffirm that as of now, the Georgian government does not consider the privatization of this infrastructure. Presently a transit from Russia to Armenia is carried out, we perform the operation of gas pipelines and Georgia receives relevant payment for this service.

- KfW German development bank has agreed to finance the construction of the new electric main between Armenia and Georgia. Which is the current status of the project and what significance does it bear for Georgia?

- Our Armenian colleagues have informed us that an agreement has been reached with KfW German development bank and the necessary credit has been allocated. In addition, a feasibility study of the project was conducted by international experts and various technical options of its implementation were considered.

On the other hand, we have an agreement on the construction of Armenia-Georgia new electric-power transmission. It was signed by leading power suppliers in Armenia and Georgia. This agreement was formulated in its final form in conformity with Supplementary Agreement N2 of April 16, 2014. The agreement specifies all phases of construction of power transmission line 500 kW between substation “Marneuli” and substation “Ayrum” and allocates the construction obligations between all participating state companies. The first phase of the project should complete by late 2018, and the second – by 2022.

The participating states are currently jointly thrashing out the technical details of the new power line and the construction process.

Within the project, substation “Marneuli” will be expanded and enlarged in the territory of Georgia and will acquire a status of that of a 500 kW, thus becoming one of the major electric power nodes in Georgia. In the meantime, a state-of-the-art high-voltage direct current (HVDC) will be constructed in Ayrum, the second in the Caucasus region after the HVDC in Akhaltsikhe. Along with the new powerful transmission line from substation “Ksani” to Stepantsminda (Kazbegi) region, this project will broaden the possibilities of the Georgian power supply system on energy transit between the Northern and Southern sub-regions, which will in the end shape our power supply system as evenly developing and open for transits in all directions.

It will beyond doubt serve as an extra incentive for supporting power industry commerce and will help us seek after the establishment of a powerful, modern and attractive electric power market in Georgia.

- Every now and then it is stated that owing to the new line with Georgia and the three overhead transmission lines with Iran, Georgia and Iran will carry on power trade through Armenia. Representatives of Armenia and Iran have issued statements on it, however, the Georgian government has yet not commented. What do you think about the prospect of Iran-Georgia power trade through Armenia?

- At this point, we have no particular technical agreements with Iran on electric power interchange, even more so agreements on deliveries – export, import and transit.

Kakha Kaladze

Photo: Cbw.ge

On the whole, the southern route of the transit corridor is very interesting and prospective provided the establishment of relevant legal environment. The Iranian power supply system is one of the largest in the region with possibilities for further development and it is fairly interested in seeking external import sources.

Southern route of the transit corridor is very interesting and prospective provided the establishment of relevant legal environment

In case of positive development of relations in this sector, the Iranian power system, along with our other neighbors, might morph into an active participant of regional electric power market.

- Owing to hydropower projects, Georgia is transforming from electricity importer into an exporter. What role does the renewable energy have in the energy strategy of Georgia?

- You are totally right. Georgia is rich in water resources and it dictates us the main line of development – emphasis on hydro-power engineering. At the same time, unlike many countries using water resources, the degree of use of these resources for electric power purposes does not exceed 20% in Georgia. So there is still room for improvement and for attracting investments.

By the way, Armenia also has good practice in support for the development of small HPPs. Over the recent years, Armenia successfully implemented a number of small hydropower projects. We also have practical results; new HPPs were put into operation – Paravani, Larsi, Aragvi, Bakhvi and Kazbegi (total installed capacity up to 130 MW). Darial HPP and Acharistsqali HPP (total installed capacity up to 300 MW) are the next forthcoming projects.

The construction of the new 400 kW electric power transmission between Georgia and Turkey (Borcka-Akhaltsikhe) gave additional impetus to the increase of electric power export volumes. Owing to the implementation of modern projects, the intersystem deliveries are carried out not only during the spring-summer season but also continue during the fall-winter months previously not typical to the Georgian hydro-power engineering. It is noteworthy that along with the increase in generating capacities, sustainable growth of power consumption (on average 4-5% per annum) has been observed in Georgia over the past years. All these factors make the Georgian energy market more interesting and attractive and provide an incentive for its dynamic growth.

- Last summer, you expressed gratitude to the “sister nation of Armenia” for the support they rendered to Georgia after the power outage in most of the country. How efficiently do the ministries of the two countries cooperate? How often do the representatives of these two ministries meet, and what new projects do they discuss?

- Emergency mutual aid is one of the most important and indispensable segments of cooperation between the power systems of our neighboring countries. Despite the level of development, breakdowns occur in all power systems and a vivid example of it is what happened last year when our system managed to restore within possible tight deadlines owing to precisely the support of our Armenian colleagues. Our power supply systems have a longstanding history of relations and mutual assistance in various emergency situations. This foundation should be consolidated and developed under modern conditions, and a cutting-edge legal-contractual base on the earlier regulated regime of emergency deliveries (if necessary) should be formed.

We are happy that our Armenian colleagues pay proper attention to energy security. As far as I know, Armenia has already started the process of the elaboration and affirmation of the new regulation on the allocation of functional responsibilities between the market participants on providing intersystem emergency assistance.

Kakha Kaladze

Photo: REUTERS

As to cooperation and the formats of communication between the energy sectors of the two countries, we should firstly note the intergovernmental ties. In only late December 2014, the representatives of government establishments and experts of Armenia and Georgia held a working meeting in Yerevan in which representatives of the ministries of energy and leaders of power supplying companies also took part. Regular meetings of the leaders of state infrastructure companies operating in the power industry sector became the norm. These meetings are held 2-3 times a year, new agreements, contracts and protocols are formed, new tasks are set and joint prospects are discussed.

Just recently, Georgia passed Amendments to the Law on “Electricity and Natural Gas” regulating the standards and procedures of the elaboration and regular update of the 10-year plan aimed at the development of Georgia’s electricity transmission grid. The first such 10-year plan has already been worked out considering the modern European requirements and will be approved in the near future. If Armenia also works out such a long-term plan aimed at the development of the high-voltage electrical grid, we can then consider the elaboration of a joint, intersystem Armenian-Georgian 10-year plan covering issues related to the prospective construction of the interdependent parts of national power grids.

- Mr. Kaladze, in the past few years the Armenia national team has significantly improved its positions in FIFA rating and player for the Armenia national and Borussia Dortmund Henrikh Mkhitaryan has become one of the most famous persons in Armenia. What contacts do you maintain with Armenian players and what do you think about the Armenian football today? Do you think Armenia and Georgia can closely cooperate in the sphere of football and train the young players? 

- During my football career, we have not played against Armenian football clubs. We once had a friendly match with the Armenia national in which Georgia scored a victory.

Henrikh Mkhitaryan is indeed a strong, successful and talented football player

Unfortunately, my work schedule does not let me regularly keep up with Armenian football, however, Henrikh Mkhitaryan is indeed a strong, successful and talented football player. I would like to wish luck to him, the rest of Armenian footballers and the Armenia national.

Ara Tadevosyan talked to Kakha Kaladze