Khudoni HPP

Khudoni HPP on Enguri River - A preliminary assessment

The proposed Khudoni HPP is a large 638MW site located upstream of the even larger Enguri HPP. The site was originally designed as part of an integrated plan so as to maximize the energy potential of the Enguri River. Accordingly, in addition to the estimated 1445 GWh of annual production, Khudoni will increase the available winter capacity for the Enguri HPP. A 4.5 year development and construction period is assumed, and the financial attractiveness of the site is evaluated based on a tariff just below estimated marginal thermal in Georgia ~ USc 6.8/kWh for the initial 7 years of full production. In this case, the project is viable and appears financially attractive. In fact, the project covers all costs including costs of capital at a tariff of USc 6.5 for an initial 20 year period. Expected revenues from sales of carbon credits play an important role in bridging the requirements of international investors and those of the regulator. Overall, the sector outlook is positive with the planned future liberalization presenting a potential significant future benefit to equity providers. However, it is worth noting that the site involves a very large dam of 170m and would require some resettlement. These, and other issues, are to be addressed in the full feasibility study (including environmental impact study) of the site, which has been commissioned by the World Bank.

Table A         Key results for the Khudoni HPP (Costs in USD)

* Reservoir volume is based on revised 1992 design.

** This tariff over 20 years ensures cash flows to cover costs of capital, including a 20% RoE.

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