Information for Investors

Investment Environment in Georgia

 

In accordance with 2019 World Bank ranking report on Doing Business, Georgia occupies the sixth position in terms of ease of doing business. Respectively, Georgia is recognized as one of the most attractive countries for investment-making. Since the energy sector is one of the priority directions for Georgia, the investors can benefit from extremely favorable conditions in this area. Georgian government is implementing a number of large-scale reforms in the energy sector in order to fulfill the obligations under the Association Agreement between Georgia and EU and Protocol on ‘’Accession of Georgia to Energy Community Treaty’’. The efforts of the Georgian Government will create additional incentives for the investors, will approximate the Georgian energy market with European energy markets and make the legislation more transparent and efficient.

The investors have a possibility to use concession in implementation of projects that involve public and private cooperation in conformity with the Georgian Law on Public and Private Partnerships. On the basis of the concession contract, the concessioner, in return of the expenses incurred by him, will be reimbursed directly or indirectly from the end consumer of public partner and final consumer. The law underlines the importance of the energy sector for the state economy and solely for the energy sector, allows selection of the private partner by the state via direct contracts. The rule for developing the project of public and private partnership is stipulated in the #426 Decree of the Georgian Government issued on August 17, 2018. Identification of the potential public and private partnership project and offering it to the relevant authority as well as carrying out the related functions will be provided by the Agency of Public and Private Partnership.

As for the projects that are not Public and Private Partnership projects, the rule for their implementation is regulated under the #515 Regulation of the Georgian Government issued on October 31, 2018. The latter regulates the process of drawing up the agreement/memorandum between the Government and the investor on project implementation that may cover technical-economic survey for power plant construction and/or the construction itself. The Decree also defines the conditions for transferring the rights on the land plot to be used for project implementation. At the same time, the Government, within its competence will provide the support to the entity to obtain all licenses and permits required for the implementation of the project.

Regulatory Legislation of the Energy Sector

The main regulatory legal framework for the electricity, natural gas and water supply sectors consists of the Georgian Law on Electricity and Natural Gas with its secondary legislation, including the ‘’Rules for Control and Licensing of Activities in the Electricity, Natural Gas and Water Supply Sectors’’ approved by Georgian National Energy and Water Supply Regulatory Commission; ‘’Rules for Supply and Consumption’’ regulating the electricity, natural gas and water supply sectors, Network Rules, Rules for Natural Gas Network, etc. As for the regulation of the energy markets, the relevant rules are stipulated in the Rules for Electric Energy (Capacity) Market  and Rules for Natural Gas Market 

Georgian National Energy and Water Supply Commission issues the following licenses for free of charge [1]:

  • License for electricity production
  • License for electricity transmission
  • License for electricity dispatch
  • License for electricity distribution
  • License for natural gas distribution
  • License for transportation of natural gas
  • License for water supply

Interestingly, the Georgian Law on Energy and Natural Gas forbids issuance of two or more distribution licenses or water supply license in one territorial unit (town, village, settlement)

Georgian Law on State Support to Investments allows issuing preliminary licenses/permit which becomes effective after the holder of the license/permit submits the documents confirming that the established license/permit conditions have been met. The term and rule for issuing the preliminary license is defined by #232 Decree of the Georgian Government on Approving the Regulation on Issuing Terms and Rules for  Preliminary License/Permit as of October 17, 2007.

For the Commission to issue the license, electricity supply by the wholesale supplier, generation of electricity by power plants with project capacity below 13 mW, supply of natural gas and import and export of electricity and natural gas is not required.  

Electricity Sector

In Georgia, the following power plants are operating without fixed tariffs:

  1. Every power plant constructed after August 1, 2008 which is not a source for guaranteed capacity
  2. Power plant with project capacity below 40 mW which is not a source for guaranteed capacity

Energy market is operated by Electricity System Commercial Operator (ESCO). The energy market is the fastest growing and developing market, which together with appropriate legislative changes is also expressed in the increased number of direct customers, wholesale suppliers and direct contracts. The criteria for direct customers are defined in the GoG #18 Decree on Approval of the Mandatory Criteria for Direct Consumers of Electricity as of January 28, 2019.

Via electricity transmission lines, Georgia is connected with all neighbor countries. Electricity is exchanged from Georgia to Russia, Turkey, Azerbaijan, Armenia and vice versa. Also, from Russia to Turkey and from Azerbaijan to Turkey. Electricity transmission and transit is provided by JSC SakRusEnergo, LLC EnergoTrans and Georgian State Electricity System.  The latter is the dispatch license holder and  the transmission system operator at the same time. Connection to the electricity generator’s network is regulated under the Network Rules approved by GNERC.