Russian state controlled electricity trader, Inter RAO, and Georgia have agreed to jointly manage the largest hydro power plant in the region, Enguri, Alexandre Khetaguri, the Georgian energy minister, said on January 12.

The Enguri HPP’s five generators with a total capacity of 1,300 megawatt are located on the Abkhaz side of the administrative border, and its arch dam is located on the Georgian-controlled territory.

Inter RAO said in a statement posted on its website on December 31 that “memorandum of understanding” was signed with Georgia on “effective exploitation” of Enguri HPP.

The Georgian authorities broke silence on the memorandum, which was signed in Tbilisi on December 28, only two weeks later with Energy Minister, Alexandre Khetaguri, saying at a press conference on January 12, that the deal is favorable for Georgia and would increase security of the country’s energy system and increase revenues from the power station.

“100% of the Enguri HPP’s shares remain under the Georgian state control,” he said. “As far as a joint management is concerned, it envisages setting up of a joint board with involvement of representatives from the Inter RAO and the Georgian side on a parity basis.”

He said that the memorandum itself did not represent a legally binding document. A contract, which, he said, was currently under elaboration, would lay out legal commitments of the parties based on this memorandum. Khetaguri said that he expected this contract to be ready in about less than two months.

The Georgian Energy Minister said that talks with the Russian side on the matter started in October, 2008 and Tbilisi agreed to sign the memorandum after the Russian side offered “acceptable proposals.”

He named three key factors behind Tbilisi’s consent to sign the memorandum. “These are: financial interest; security of Enguri HPP and security of the entire energy system of the country,” Khetaguri said.

He said that Inter RAO agreed to pay for the electricity generated by Enguri HPP and consumed by the Abkhaz side. “This is additional revenue of GEL 15 million,” Khetaguri said, adding that the Abkhaz side was consuming 1.2 billion kilowatt electricity from Enguri HPP annually. “The Abkhaz side has not been paying for consumed electricity,” he added.

In addition, he continued, Inter RAO had agreed to buy additional electricity for its southern regions from Enguri HPP. “This is about GEL 25 million additional revenue for the plant,” Khetaguri said.

He also said that the Russian company’s involvement would alleviate potential “security risks posed to the Enguri HPP by the Abkhaz separatists,” because the Russian company itself was getting more interested in proper operation of the plant.
 
He also said that Inter RAO’s assets in Georgia would represent a guarantee behind the Russian company’s commitments in connection to Enguri HPP.

Inter RAO owns 75% of electricity distribution company in Tbilisi – Telasi, as well as two thermal power generating plants – unit number 9 and unit number 10 (the latter is not currently functioning). Inter RAO also has the management right of two hydro power plants – Khrami I and Khrami II.
 
Some lawmakers from the parliamentary minority have already said that the Energy Ministry would have to present more firm explanation behind its decision to strike a deal with the company, which is controlled by the state, which fought a war with Georgia five months ago.

“We will summon the Energy Minister to explain details of the deal,” MP Levan Vepkhvadze of the Christian-Democratic Party, said on January 12. “We will have a tough conversation.”

At the press conference on January 12, the Energy Minister hinted that the Georgian side had limited room for maneuvering in connection to Enguri HPP, by stressing that the power plant’s generators were located on the Abkhaz-controlled territories.