YEREVAN, TBILISI—The construction of a power line linking Armenia and Georgia is getting a boost, thanks to a 95.2 million euro (approx. $100 million) loan announced Monday.
The European Investment Bank (EIB) said it is providing 10 million euros (approx. $11 million) while German bank KfW is lending 85.2 million euros (approx. $90 million) for the project.
The cash will be used to build the new electricity transmission line and a high-voltage direct current station between the two nations, designed to meet the growing power demand.
EIB Vice-President Wilhelm Molterer, responsible for EIB lending in Armenia said: “The project will also foster regional trade, increase the potential for the use of hydro energy generation and facilitate FDI [foreign direct investment] by ensuring the reliable electricity deliveries needed by foreign investors.”
Earlier this month UK energy regulator Ofgem launched a consultation on its proposals to approve three new electricity interconnectors.
The total cost of the program “Caucasus Power Lines” is 320 million euros, Armenian energy and natural resources minister Yervand Zakaryan said Monday.
He said the program will be implemented in three phases -the first was launched in 2014 and will end in 2018, the second phase will end in 2021 and the third in 2026.
In the first phase Armenian and Georgian energy systems will be united through a high-voltage direct current (HVDC) line to be built in Armenian Ayrum on the border with Georgia. The new substation and the transmission line will enable Armenian and Georgian power grids to work in the same mode and make electricity swaps.
The total cost of the first phase of the project 105.2 million euros. This phase is co-financed by the European Investment Bank and the EU Neighborhood Investment. Another 85.2 million euro loan will be provided by German KfW bank. The agreement with KfW was signed in 2014 December and the agreement with European Investment Bank was signed Monday in Yerevan.
“This project will enable Armenia and Georgia to integrate their power grids and contribute to their economic development. We are also negotiating a possible integration of the power grids with neighboring Russia and Iran,” said Zakaryan.
The head of KfW’s Energy Department Ian Blum said Armenia’s high level energy security depends largely on energy cooperation with neighboring countries, and a stable and strong system of transmission lines will bring the energy security of Armenia and Georgia to a new level.
He said the involvement of the EU and the European Investment Bank in this program is evidence that the EU as a major donor is willing to continue to assist Armenia both in the framework of investment projects and development programs.
The KfW loan will be provided in two tranches — 75 million and 10.2 million euros. The first is repayable in 15 years with a five-year grace period and the second is provided for a period of 40 years at 0.75% interest rate