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Armenian hydro plant gets EBRD backing
The European Bank for Reconstruction and Development is lending €1.1 million
to an Armenian mini-hydroelectricity project that will bring the country one
step closer to achieving its goal of obtaining 70 per cent of its energy from
renewable sources, particularly hydropower. Bazenc CJSC, an Armenian company
set up in 2000 to run a small hydropower plant on the Yeghegis River, will use
the loan to install a second turbine which, while only working for three
summer months, will increase the company’s total electricity production by 23
per cent.
New energy laws since 2001 have tried to create an attractive climate for
entrepreneurs dealing in alternative energy sources. The electricity will be
sold to the Armenian government, under guarantees lasting until 2016, at
prices negotiated once a year. Energy supply has been a critical issue for
Armenia since independence in 1991. To make up shortfalls, the government in
1995 reopened a nuclear power plant at Hrazdan that had been closed since an
earthquake in 1988.
This five-year loan is part of the Early Transition Countries (ETC) initiative
launched last year to stimulate market activity in Armenia, Azerbaijan,
Georgia, the Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan. It uses a
streamlined approach to financing more and smaller projects, mobilising more
investment, and encouraging economic reform. It is part of an international
effort to address poverty in the Bank’s seven lowest-income countries of
operations. The Bank accepts higher risk in projects it finances in these
countries, while still respecting the principles of sound banking.
The EBRD is also supporting Bazenc in acquiring a Clean Development Mechanism
(CDM) status for its mini-hydro projects under the Kyoto Protocol on reducing
greenhouse gas emissions and limiting global warming. CDM is the Kyoto
mechanism enabling project sponsors in developing countries, which do not have
targets for greenhouse gas reduction themselves, to sell their carbon credits
to countries with Kyoto targets. If Bazenc gets CDM status, it will be the
first such mini-hydro project in Armenia to be able to sell carbon credits.
This will help sustainability of the project, as carbon credits will be paid
for in hard currency. The Bank also expects to demonstrate that Armenian
small-scale renewable energy projects can benefit from the international
emissions trading market.
The Bank identified Bazenc while conducting a survey for potential CDM
projects in the Caucasus and central Asia in 2004. Initial CDM activities are
being financed from the Netherlands Environmental Trust Fund at the EBRD. The
Bank has also established a Clean Development Mechanism Project Support
Facility for the Early Transition Countries supported by the ETC Multi-Donor
Fund. The Bank offers technical assistance for emission reduction projects,
helping companies to monetise emission reductions as carbon credits.
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