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Public-Private Partnership Law – New Opportunity for Energy Sector Projects

Energy sector (excluding oil & gas) is one of the strategically important sectors under newly adopted PPP legislation – which, among others, envisages the possibility of granting longterm guaranteed purchase agreement to the investor.

The law on Public-Private partnership was approved by the Parliament of Georgia in May 2018. Later in August 2018, the government of Georgia adopted the rule for PPP projects screening and implementation.

These documents define the general framework for PPP projects initiation, partner finding
and monitoring.

The project qualifies under PPP legislation if: 1) the value of the project exceeds GEL 5mn and duration is more than 5 years; 2) the risks and investments are fairly shared between the private and public investors; 3) the project is of public interest.

Furthermore, for some sectors additional criteria might be added to qualify the project under PPP framework.
The project initiation and private partner finding process is generally led by special entities, based on transparent and competitive principles.

The energy sector has some exemptions from general rules, e.g: for the projects larger than 100MW, the initiation process must include feasibility study conducted by independent company; all energy sector PPP projects
should be agreed with the government despite the size of the project; private companies are allowed to initiate the project; the Government has right to allow closed and direct negotiations with only one partner, skipping the public tendering and evaluation procedure.

The export season of 2018 ended with total export of 588.3GWh (-9.9% y/y). The decrease in 7M exports is explained by: 1) last year’s high base due to unexpected surplus in hydro generation, 2) disruption of export caused by Enguri’s emergency closure in May 2018, 3) low prices on Turkish market, incentivizing companies with TDAs (e.g. GeorgianUrban Energy) to sign additional agreements with the GoG and limit export to only May-July
period in favor of increased local supply, Galt & Taggart reports.