KfW stands ready to support Armenian government  in implementation of  new projects

ArmInfo. RA Prime Minister Nikol Pashinyan received the members of the delegation of the German  Reconstruction Credit Institute (KfW), the Premier's press service reports.

Projects implemented in the energy sector of Armenia with the  participation of the bank and the possibility of implementing new  projects were discussed.

The Prime Minister emphasized the continuous development of  cooperation between Armenia and Germany and noted that the  cooperation between the Government of Armenia and KfW plays an  important role in these relations.

Thomas Eisenbach, head of the energy and resource management  department of the German Reconstruction Credit Institute (KfW) in  Asia, emphasized that KfW is ready to support the Armenian government  in the implementation of new projects. Referring to the current  projects implemented with Armenia in various fields, the  representative of KfW particularly emphasized the implementation of  joint projects. According to him, the joint programs will contribute  to the continuous development of the sector.

Then the interlocutors touched on a number of issues related to the  progress of the projects and the implementation of new programs.

KfW Development Bank has been operating in Armenia since 1998 and  today is the largest lender to the Armenian economy. The cumulative  (accumulated) amount of KfW investments in the Armenian economy over  the past years has amounted to about 1.1 billion euros. On behalf of  the Federal Government of Germany, it supports projects in the areas  of: sustainable economic development, training and employment;  climate and energy, just transition; sustainable urban development;  protection of natural resources.

As stated on the KfW website, the Bank currently mainly finances  investments that help ensure a sustainable energy supply for the  country. This includes creating an integrated electricity grid  between Armenia, Georgia and Iran, as well as promoting renewable  energy and energy efficiency.

One of the bank's most important projects in Armenia is the  completion of the Kaps reservoir.  The reservoir, unfinished due to  the 1988 earthquake, with a design capacity of 110 million cubic  meters of water, is located in the Shirak region, 22 km north-west of  the city of Gyumri, in the valley of the Akhuryan River. The program,  with a total budget of 70 million euros, is financed by the KfW  German Development Bank. The loan agreement came into force on June  29, 2019, the deadline for using the funds was set until December 30,  2019, but was then extended until June 30, 2024. At the first stage  of the program, it is planned to complete the construction of a  reservoir with a capacity of 25 million cubic meters of water. At the  second phase, it is planned to increase the infrastructure capacity  to 60 mln. cubic meters. The project provides for the construction of  auxiliary structures for the Kaps reservoir dam, equipping  hydrological observation points of the Akhuryan River (from Lake Arpi  to the Akhuryan Reservoir), construction of additional stations, and  creation of a centralized database (SCADA system).

Another major project is the Caucasus Power Transmission Network  program, which provides for the construction of an Armenia-Georgia  power transmission line and substation to organize parallel  synchronous operation of the power systems of the two countries.  According to independent experts, the project will start working  after 2025 at best. Difficulties with organizing parallel operation  are associated with the delay in the construction of infrastructure,  including the converter station. Within the framework of the program,  work is planned on the construction of the 400/220/10 kV Ddmashen  substation, 400/500 kV overhead power line, and the Ayrum converter  station.

This project is an integral part of the North-South energy corridor,  designed to unite the electric power systems of Iran, Armenia,  Georgia and Russia. And if the construction of the Iran-Armenia power  line has so far been completed by 40-50%, then the parties have not  started the construction of a similar power line with Georgia. The  terms of reference for the program were developed by the German KfW  bank, which finances the program, and the FICHTNER company, which won  the tender to identify a project consultant. According to the terms  of reference, the project was divided into several stages. At the  first stage, it was planned to modernize an electrical substation  with a voltage of 220 kV, build a new substation with a voltage of  400 kV, and also build a new overhead power line to the Georgian  border. The cost of this program is estimated at 188 million euros.

According to FICHTNER the preliminary cost of the entire program for  synchronizing the power systems of Armenia and Georgia is 326.9  million euros, 10% of which should be part of the Georgian  contribution. To finance the "Armenian section" of the program, three  loan agreements were signed in 2014-2015. In particular, 165 million  euros were allocated in the form of a loan by the KfW German bank,  another 10 million euros were allocated by the European Investment  Bank and the same amount were provided by grant funds from the  European Commission. The Armenian side took upon itself the tax  burden.

Back in 2017, the Armenian government, based on the expediency of  managing the public debt, froze the project based on the decision of  the technical commission. However, in 2019, the government decided to  implement the program in full. Due to the delay in the implementation  of the project, which was initially scheduled for 2019, it was  decided to extend the loan repayment period until 2025.