Hydropower Investment Promotion Project (HIPP)

HIPP MONITORING AND EVALUATION REPORT

Six Month Assessment DRAFT

Monday, February 13, 2012 This publication was produced for review by the United States Agency for International Development. It was prepared by Deloitte Consulting in collaboration with Black & Veatch and Pierce Atwood Attorneys LLC.

HIPP MONITORING AND EVALUATION REPORT

Six Month Assessment

USAID HYDROPOWER INVESTMENT PROMOTION PROJECT (HIPP) CONTRACT NUMBER: EEM-I-00-07-00005-00 DELOITTE CONSULTING LLP IN COLLABORATION WITH BLACK & VEATCH AND PIERCE ATWOOD ATTORNEYS LLC. USAID/CAUCASUS OFFICE OF ENERGY AND ENVIRONMENT MONDAY, FEBRUARY 13, 2012

DISCLAIMER: The authors views expressed in this publication do not necessarily reflect the views of the United States Agency for International Development or the United States Government.

List of Acronyms Acronym GoG HIPP HP HPP ICG IFI IM IPD IR M&E MoE MOU MW TNA TWh USAID USG USTDA Term Government of Georgia Hydropower Investment Promotion Project Hydropower Hydropower Plant / Hydropower Project Investment Coordination Group International Financial Institutions Information Memorandum Investment Projects Department Intermediate Result Monitoring & Evaluation Ministry of Energy Memorandum of Understanding Megawatts Training Needs Assessment Terawatt Hours US Agency for International Development US Government US. Trade and Development Agency

HYDROPOWER INVESTMENT PROMOTION PROJECT (HIPP)

Deloitte Consulting LLP, in collaboration with Black and Veatch, and Pierce Atwood Attorneys LLC presents its six month Monitoring and & Evaluation (M&E) report under the United States Agency for International Development (USAID) Hydropower Investment Promotion Project (HIPP). Project Background and Progress Background Implementation of the HIPP in Georgia fits under USAIDs Enhanced Energy Security Assistance objective in Intermediate Result (IR) 1 Facilitated Hydropower Investment. This IR has two Sub-IRs: 1.1 Investment opportunities in Georgia promoted; and 1.2 Improved availability of quality data and analytical tools. Cross cutting elements of IR5 Strengthened Energy Management Capacity, also contribute to this IR. The purpose of this 3-year Project is to support increased hydro power generating capacity in the winter to decrease dependence on imports and thermal energy, and thereby increase Georgias energy security. HIPPs activities will not directly increase generating capacity because it will work at the pre-feasibility and promotion stage in order to stimulate private sector investment in hydro power. The goal is to identify, leverage, and incentivize investment opportunity, resulting in private sector commitment to construct run-of-river hydro power leading to increased generating capacity and locally produced energy. The principal result of the Project will be securitized deposits of at least $70 million for the development of approximately 400 MW of new run-of-river Hydro powerplant (HPP) capacity. Additional results of the Project include: at least 20 partnerships (Memorandum of Understanding/MoUs) initiated between the Government of Georgia (GoG) and private sector; a minimum of $3 million leveraged to conduct HPP studies; at least 3 energy agencies undertaking capacity strengthening; at least 20 site-specific HPP studies cost shared with investors; at least 30 analyses, studies, evaluations and/or assessments (including cost-shared); at least 15 types of promotional materials developed detailing HPP investment opportunity; at least 30 promotional activities conducted; at least 500 financial institutions, investment companies and private investors exposed to hydropower opportunities; approximately $500 million in public and private resources ($) leveraged by the US Government (USG) for energy infrastructure projects under development by project end; about 2.4 Terawatt Hours (TWh) of newly available energy (projected and/or actual); at least 15 studies, research/analytical papers conducted, including using modern modeling and planning tools; among others. Outputs of the activity include: (1) detailed database of small and medium sized hydropower plant sites available for private investment (2) web site for the Ministry of Energy (MoE); (3) deal book(s); (4) white papers, research and analytical papers, feasibility studies, etc; (5) Investment Coordination Group (ICG, now Investment Projects Department/IPD); (6) investment promotion plan detailing schedule and locations for road shows, trade fairs, etc; (7) promotional materials; (8) MoUs signed between GoG and investors; (9) partnerships between USAID and donors/International Financial Institutions (IFIs) for cluster development; (10) cost-sharing agreements between USAID and investors; (11) database of

HYDROPOWER INVESTMENT PROMOTION PROJECT (HIPP)

potential investors; (12) assessment report of potential markets, including Turkey, among others. At the time of this report, the MoE was considering eliminating their Projects Investment Department (IPD). The GoG was considering the formation of a Renewable Energy Fund and nominating a Fund Manager to coordinate all activities related to the Renewable Energy Fund. The MoE suggested that the Fund Manager with a full staff to support the Fund may perform some or all the functions that were intended to be performed by the MoEs IPD. Progress The first year work plan of the Project has several activities related to the review and assessment of: HPPs; Transmission expansion in Georgia and eastern Turkey; Legal and regulatory environment in Georgia and Turkey for future HPPs constructed in Georgia; In addition, HIPP is supporting the MoE in establishing a long term promotional strategy and initiating that strategy with some promotional collateral. Note that the main goal of the project, the signing of MoUs by strategic investors for at least 400 Megawatts (MW) of new HPPs, will not occur in the first year of the project. The initial 6 months of the Project were focused on due diligence of the proposed small and mediumsized power plants, the transmission network and the legal and regulatory framework. That work progressed very well even though in August 2010 the MoE requested that HIPP focus on new HPP cascades with new sites not included on the MoE website. 6 Month Assessment ~Highlights Project Launch Event. Numerous HPP site visits including a site visit to the proposed Alpana HPP with USAID. Preliminary assessment of proposed HPP sites. Initial analysis of past transmission studies and visits to several transmission substations First IFIs event. Training Needs Assessment (TNA) for the personnel within the MoE that participate in HPP Investment Promotion. Turkish Power Market Legal and Regulatory Review including multiple meetings with Turkish power sector personnel. First Georgia Hydropower Development Conference. After a meeting with the MoE, the Project completed several key tasks that support the promotion of Georgian HPPs during the 4th quarter of 2010 including: Development of 4 hydropower clusters. Recommendations on the organization of the MoEs Investment Projects Department (IPD), proposed modifications to the Charter of the MoE and draft job descriptions for each staff position in the Department. Draft Treaty on Cross-Border Energy Trading. Information Memorandum (light). Program for supporting a series of 4th quarter road shows including revisions to the MoEs generic presentation to investors, talking points, etc.

HYDROPOWER INVESTMENT PROMOTION PROJECT (HIPP)



Providing extensive comments on the MoEs MoU for HPPs of less than 100 MW, including revisions to the text on both legal and technical issues. Proposal for energy trading to Turkey by small HPPs Initial Market Sounding of Turkish developers, Georgian developers and USG institutions supporting overseas investment.

Evaluation of key indicators As part of the first annual work plan for HIPP, a monitoring and evaluation matrix was created for the life of the Project. The table below provides an evaluation of the progress of HIPP against the first year targets.

HYDROPOWER INVESTMENT PROMOTION PROJECT (HIPP)

Assessment of Progress to Date Against Each Indicator The table below indicates the progress made to date for each of the indicators specified in the HIPP Monitoring and Evaluation Plan approved by USAID.
Work Plan Task Linkage Crosscutting TARGETS Source of Data MoE contract records (to be maintained within ICG); project confirmation MoE records; project verification Life of Project $70 million Year 1 $0 Actual Months 1-6, Year 1 $0

# 1

Key Indicator / Program Result Bonds (in $) on deposit to secure rights for new HPP site development Public and private resources ($) leveraged by USG for energy infrastructure projects New capacity (in MW) under construction as a result of USG assistance Amount of newly available energy, projected (in TWh)

Comments on results No security deposits are expected until after the tenders are completed in 2011 or 2012 No resources are expected until after the tenders are completed in 2011 or 2012

Crosscutting

$500 million

$0

$0

Crosscutting

MoE records; with project verification

400MW

0 MW

No new capacity is expected until after the tenders are completed in 2011 or 2012 No new energy production is expected until after the tenders are completed in 2011 or 2012 New energy production (operational) is projected no earlier than 2011/2.

Crosscutting

MoE records; project verification

1.4 TWh

.03

0 TWh

Ratio of newly available energy produced during winter months consumed domestically Ratio of self-generated energy (projected) to total amount of gas and

Crosscutting

MoE records; project verification

20%

N/A

Crosscutting

MoE calculations, project verification

30 %

26%

N/A

Statistics are not available on partial years, only for calendar years.

HYDROPOWER INVESTMENT PROMOTION PROJECT (HIPP)

electricity consumed (projected) 7 ICG [now IPD] active; meetings not less than once/quarter Number of studies, research, analytical papers produced Number of sites validated as suitable for investment promotion Number of energy agencies undertaking capacity strengthening Number of promotional activities conducted Task 1 ICG (IPD); project verification Yes Yes No On hold pending MoE re-staffing of the IPD.

Task 1

Project records

15

15

15

Task 1

ICG (IPD); project verification

80

20

10

10

Task 2

Project records

ESCO, GSE, MoE, GNEWSRC

11

Task 3

ICG/IPD Records; project confirmation

30

12

Variety of promotional materials detailing HPP opportunity produced and disseminated

Task 3

ICG/IPD records; project confirmation

15

1) 2) 3) 4) 1) 2) 3)

Project Launch IFI Event 1 IFI Event 2 Brussels Conference HPP 1-pager Market Sounding Presentation Georgian Energy Sector Presentation 4) Transmission Brochure 5) Hydro Investment Opportunities

13

Number of financial institutions, companies and investors exposed to HPP opportunities Number of site-specific

Task 3

ICG records, project confirmation

500

100

49

14

Task 4

Project / USAID records

20

Investors are not expected to request

HYDROPOWER INVESTMENT PROMOTION PROJECT (HIPP)

HPP studies cost shared with investors 15 Resources leveraged to conduct HPP studies Task 4 Project / USAID records $3 million $500,000 0

feasibility studies for HIPP identified clusters until 2011 or 2012. Investors are not expected to request feasibility studies for HIPP identified clusters until 2011 or 2012 HIPP assisted Peri Group in establishing a relationship with USTDA re request for assistance on a feasibility study. HIPP also provided PERI with assistance in completing the application for assistance from USTDA.

HYDROPOWER INVESTMENT PROMOTION PROJECT (HIPP)

USAID Hydropower Investment Promotion Project (USAID-HIPP) Deloitte Consulting Overseas Projects - HIPP 36 a Lado Asatiani Street Tbilisi, 0105, Georgia