The Washington-based International Finance Corporation (IFC) said on Tuesday that it has helped the principal U.S. owner of Armenia’s largest hydroelectric complex to obtain $140 million in loans that will be used for boosting its capacity.
Under a takeover agreement with the Armenian government signed in June 2015, the New York-based energy company ContourGlobal paid $180 million to purchase the Vorotan Hydropower Cascade. It thus became the first Western firm to gain major assets in the Armenian energy sector partly controlled by Russian energy giants.
The deal also committed ContourGlobal to investing $70 million in the three hydroelectric plants making up the cascade. The plants were built in Soviet times on the Vorotan river flowing through the mountainous Syunik province. They currently generate roughly 15 percent of Armenia’s electricity.
IFC, which bought a 20 percent stake in the Vorotan complex later in 2015, indicated that the new owner will be able to invest twice as much with the multimillion-dollar funding secured by it.
“The package includes a loan of $45 million for IFC’s own account and parallel loans of $65 million from FMO, the Dutch development bank, and $30 million from DEG, the German Investment and Development Corporation,” IFC said in a statement.
FMO and DEG are controlled by the Dutch and German governments respectively, while IFC is part of the World Bank Group.
“The loans will help ContourGlobal upgrade the 404-megawatt Vorotan complex, parts of which are almost four decades old … The financing is expected to boost electricity reliability, providing a steady supply of clean power to additional 60,000 residential customers,” read the IFC statement.
“Increasing [Vorotan’s] capacity is key for Armenia, a country that imports fuel to cover around 90 percent of its energy needs,” it added.
IFC sought to help Armenia increase its reliance on renewable energy sources even before buying into the Vorotan facilities. Through its Armenia Sustainable Energy Finance Project launched in 2010 jointly with the Austrian government, the multilateral institution has provided financial and technical assistance to Armenian companies involved in hydropower generation.
Over the past decade, hydropower’s share in electricity production in Armenia has risen from 20 percent to around 32 percent thanks to more than 150 small and privately owned hydroelectric plants built on the country’s fast-flowing mountainous rivers. Electricity generated by them is much cheaper than that of thermal-power plants. The latter accounted for 35 percent of Armenian electricity output last year, according to the National Statistical Service (NSS).
NSS data also shows that the combined output of Armenian hydroelectric plants rose by almost 7 percent in 2016, nearly equaling the amount of electricity supplied by the Metsamor nuclear plant.