Mtkvari HPP

Mtkvari Cascade on Mtkvari River - A preliminary assessment

The proposed site has two alternatives; i) a 4-stage 253MW cascade, or a ii) 3-stage 198MW cascade which delays the construction of the largest dam until a later date. The site stretches up to 47km of the upper Mtkvari River, one of Georgia's largest rivers, near the Turkish border. The proposed HPPs will supply the surrounding districts and the national grid, with a good potential for exports to Turkey. A 4-year development and construction period is envisioned and the 3-stage site is viewed as the most economically viable in the short term. The sites are subject to considerable seasonal flow variation, with a total annual production at full operation of approximately 596GWh. The financial attractiveness of the site is evaluated based on a tariff just below that of the approximate marginal cost of thermal generation 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, with cash flows more than covering the cost of capital. In fact a tariff of USc 6.5 is likely sufficient to ensure investors a 20% RoE. 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. Subject to further geological tests, the site appears to be technically and economically feasible with no known major environmental/social risks.

Table A         Key results for the Mtkvari Cascade (Costs in USD)

* Includes 3 reservoirs of different sizes.

** This is the estimated average tariff for the first 12 years of operation, before planned liberalization in 2023. According to the analysis below, this average tariff ensures a RoE of approximately 20% on the project

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