Georgia successfully completes 3rd phase of the Energy Sector Reform Programme, a joint German KfW, French AFD and EU initiative

The programme envisages financial support to the energy sector reform of Georgia, jointly financed by Policy-Based Loans (PBL) from KfW and AFD, as well as a grant from the EU to support the implementation of the Energy Efficiency measures of the program. Two defined directions of the programme are a) regional integration of the energy market in compliance with Energy Community (EnC) treaty to strengthen Georgia’s position as a regional energy hub and b) Energy Efficiency (especially in buildings), the National Energy Efficiency Action Plan (NEEAP, released 2017) and the definition and implementation of respective Energy Efficiency Standards.

On May 28th 2020 the Minister of Finance of Georgia, H.E. Mr. Ivane Matchavariani and KfW Development Bank’s regional Director of Eastern Europe, Caucasus and Central Asia Mr. Olaf Zymelka signed the Loan Agreement of EUR 90 million for the “Support of Georgia’s Energy Sector Reform”. A second loan agreement worth of EUR 120 mln was signed on 22nd of May by the Minister of Finance of Georgia, H.E. Mr. Ivane Matchavariani and French Ambassador in Georgia, H.E. – Diego Colas, and AFD’s Director of the regional office for the South Caucasus Ms. Gaelle Assayag,

Continued support to the sector reform has been ensured by the Governments of Germany through the Federal Ministry for Economic Cooperation and Development (BMZ) and of France via the Agence Française de Développement (AFD).

The EU grant support of EUR 8,44 million under EU’s Neighbourhood Investment Platform (NIP), provided to the Georgian Government and administered by KfW will facilitate the elaboration of the secondary Energy Efficiency legislation in 2020-2021. Its aim is in particular to promote Energy Efficiency especially in the building sector in addition to the market reform measures to support moving Georgia from a centralized electricity market to an organised market as envisaged by EU’s Third Energy Package.

On June 2nd, the Program Steering committee of the Energy Sector Reform Programme came to the conclusion that the Sector Reform showed sufficient performance to make available the financial resources mentioned above. Key achievements were the recent adoption of a comprehensive law package to enforce Energy Efficiency in buildings and of a modern market concept for Georgia’s electricity market of the future.

Furthermore, to kick-start the sector development for Energy Efficiency in buildings and to support the implementation of EU-Energy Efficiency standards in Georgia, Germany also provided additional grant funding (EUR 7.4 million) for investments into Energy Efficiency Measures in social infrastructure (Kindergartens) in Batumi. In addition, KfW is preparing a school Energy Efficiency rehabilitation investment program for Georgia with the support of EU and German Government.

“KfW is happy to continue its fourth year assistance to Georgian energy reform, jointly with our trusted partners AFD and EU. With our combined efforts we work closely with the Government of Georgia and other stakeholders in moving ahead towards EU standards. KfW’s and its partner’s primary focus is to develop green economy through the promotion of public policies in favour of Energy Efficiency. Modernisation of the electricity market of Georgia is another milestone set forth to overcome EU approximation challenges.” said Hans Rieck, responsible for KfW’s Sector Energy in the South Caucasus.

“It is a great honour to continue supporting the ambitious reforms of the Georgian energy sector, along with our partners from KfW and the EU. These reforms will not only lead to a significant modernisation of the Georgian electricity market aligned with EU standards but will also foster a more sustainable development and green growth of the country through the promotion of renewable energy and energy efficiency”, said Gaelle Assayag, AFD’s Director for the South Caucasus regional office.

“I am pleased to see that further reforms towards a transparent, competitive and efficient energy sector are moving ahead. Through the joint efforts of the EU, KfW and AFD, and support of the Energy Community, Georgia has laid the foundation for a better use of energy by adopting key energy efficiency legislation based on EU rules and best practices.  I am looking forward to the necessary follow-up decisions that will pave the way for the rapid implementation of large-scale energy efficiency renovation programmes, which will bring savings, environmental and health benefits, as well as improved energy security to Georgia. These programmes will also provide a welcome boost to construction businesses, contributing to the country’s economic recovery”, said Carl Hartzell, Ambassador of the European Union to Georgia.

KfW Development Bank

KfW Development Bank is one of the leading financiers of development in Georgia and in the Caucasus Region. The aim of KfW´s work on behalf of the German Government is to assist in improving economic and social conditions in Georgia and the other countries of the South Caucasus. Accordingly, KfW finances investments in economic and social infrastructure and promotes the private sector – in particular small and medium enterprises.

KfW´s activities in Georgia started already in 1993. Since then more than EUR 1.3 billion have been invested in different sectors, among them are energy, financial, municipal infrastructure, environment and health sectors. App. EUR 500 million of the whole investment () is attributed to the energy sector of Georgia.

The French Development Agency (AFD)

AFD is the main actor of France’s development policy. AFD finances many sectors – energy, health, biodiversity, water, transport and urban development, digital technologies, training – and supports the transition to a safer, more equitable and more sustainable world. Through its network of 85 agencies, AFD operates in 115 countries. In 2019, it earmarked EUR 14.1bn to finance these projects.

AFD’s commitment in Georgia was first materialized by the opening of its South Caucasus Office in Tbilisi in 2016. Since then, AFD and the Government of Georgia have established a flourishing collaboration that has led to a portfolio of around 500 million of euros of engagements, in the sectors of energy, water and sanitation, agriculture and social welfare.

European Union

The EU is the largest donor in Georgia, with over 160 projects active in a variety of sectors supporting economic development, education, governance, justice, environment, energy or culture. Find out more at eu4georgia.ge.