Minister: Agreement on cross border transit of electricity is important topic in Azerbaijani-Georgian relations

Minister: Agreement on cross border transit of electricity is important topic in Azerbaijani-Georgian relations

Georgia, Tbilisi, Feb. 12 / Trend, N. Kirtzkhalia /

Working out and formalizing an agreement on bilateral electricity transit plays an important role in the relations between Azerbaijan and Georgia, Georgian Minister of Energy and Natural Resources Kakha Kaladze said in an interview with Trend.

"Although, at this stage, basic issues of the commercial importance of the project have not been agreed upon yet," he said.

These relations create opportunities for Georgia to hold leading positions in the region and play a significant role in energy development of the region, he said.

Energy Development Strategy

"At the first stage, it was important for us to get acquainted with the structure of the ministry, to staff the governing group and to effectively manage the current processes," he said.

Afterwards, a structural reorganization was conducted, Kaladze said. These were not significant changes, although they have increased working efficiency, he said.

Kaladze added that besides deputy ministers, no official was dismissed at the ministry.

"Our task was to preserve the main group of employees who were already working at the ministry before us," he said. "As the minister, people's professionalism and loyalty to the cause, rather than political credo is important for me."

The ministry first began working on the long-term development strategy of the country's energy sector, he said.

This work included a wide range of community - NGOs, scholars, power engineering specialists and professionals from other fields, he said.

The U.S. Agency for International Development (USAID) is also involved on this project. "We have already signed an agreement with the organization to develop an agreement to create a new model for the Georgian energy market," he said.

"There were long negotiations on this issue with USAID," he said. "The operations over a new model will be completed in 2014, and its implementation will occur in 2015."

He said that a new model of the Georgian electricity market will be prepared within the initiation of the agreement. Its goal is to develop the private sector of hydro-power engineering, to create and to improve trade instruments and to reduce investment risks. This promotes selling electricity generated by hydropower stations to Turkey and other developing regional and competitive markets.


Georgia had to carryout complex work to be able to make a decision to reduce electricity tariffs in a manner which would not hurt the future of energy development in the country, Kaladze said.

"The reduction in electricity tariffs was achieved in terms of distribution, that is, by reducing the profits of companies that currently play in the Georgian energy market. By reducing the tariff by 3.9 Tetri ($ 1 = 1.66 Lari), we achieved annual saving of between 30 to 40 million Lari by the population, "he said.

He said talks were conducted directly with companies that have expressed understanding in regard to the position of the Ministry on tariffs, and were conducted by the regulatory commission.

"We have achieved tariff reductions in a very short period of time - two months. A more detailed study is being conducted regarding further electricity tariff decreases or maintaining their current level," he said.

As for gas prices, work is underway which will be completed in February, according to Kaladze.

"I think it will also be possible to reduce the tariffs in distribution," he said.

Hydropower plants

Water resources are the only means through which Georgia becomes independent in terms of energy, as it has no oil and gas resources, Kaladze said.

"We have already launched active work with existing and future investors in this field. We started the study of government's existing memoranda and a number of problems accumulated over the past years," he said.

As Kaladze said, there are financial, technical and legal issues, which are currently being addressed.

Individual study of these memoranda is carried out step by step, they are discussed and deficiencies are corrected, he said.

The minister said that Georgia will not completely abandon the construction of large hydropower plants; the country has only three or four such projects.

"Our goal is to achieve maximum transparency. Investor shall provide environmental and feasibility conclusion on each project, which will be discussed in the Ministry of Energy and the Ministry of Environmental Protection," he said.

According to Kaladze, revision of the draft does not create barriers to any investors.

"On the contrary, our task is to remove those drawbacks for individual projects that may be present there and cause more harm both to the state and the company in future," he said.

Energy Investments

According to Kaladze, Georgia is currently actively working with new potential investors, providing them with maximum information concerning new possible projects and trying to create the most competitive and fair environment.

"We are waiting for new major investments and projects," he said.

Alongside, he mentioned that the active work with donor organizations is underway. New interesting projects in terms of infrastructure development are being planned, Kaladze said.

"I also want to note the significance of legislative changes, we are working on with our partners," he said.

According to Kalazde, cooperation between Georgia and the EU on free trade agreement, where sectoral energy holds a significant position and plays a significant role, is in progress.

Factors contributing to the development of the energy sector that may create an attractive investment climate are friendly business environment, liberal tax system, administration, flexible labor code, regulated energy sector, diversified and growing export markets, including the markets of the EU, he said.

"Our goal is to have developed and diversified energy sector, the growing export potential, more jobs and improved social background in the region. We intend to create a modern and reliable infrastructure with 100 percent energy independence," Kaladze said.

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