World Bank further strengthens power supply reliability in Armenia

The World Bank Board of Executive Directors has approved a US$40 million loan for the Additional Financing of the Electricity Supply Reliability Project for Armenia.

This additional financing would scale up activities to enhance the impact of the ongoing project and cover the cost of rehabilitation of three substations essential for Armenia’s power transmission network – the Haghtanak, Charentsavan-3, and Vanadzor-1 substations.

The average age of Armenia’s power transmission assets is around 45 years and most of them have not undergone any major rehabilitation or upgrade over the past decades. The ongoing Electricity Supply Reliability Project has been designed to enhance the reliability of the power supply in the country by improving the capacity of the power transmission network back-bone infrastructure.

Around 230 km of outdated transmission lines from the Hrazdan Thermal Power Plant to the Shinuhayr substation is under replacement. The investments will increase the capacity and reliability of the targeted section of the transmission network by lowering frequency of line failures and related power supply outages.

“The rehabilitation of the targeted substations will improve power system efficiency and reliability, and bring direct benefits to all power consumers in Armenia,” said Jean-Michel Happi, World Bank Country Manager for Armenia. “This would allow avoiding increased incidence of power supply outages, as well as associated significant social and economic costs.”

The new financing is targeting the assets that have a high priority in the list of investment needs. The Haghtanak substation requires rehabilitation and extension and is critical for ensuring reliable power supply to distribution substations and consumers in the western parts of Yerevan. Charentsavan-3 and Vanadzor-1 serve residential and large industrial consumers in the north-eastern and northern Armenia. Charentsavan-3 also functions as switching stations linking to other six substations.

Rehabilitation and extension of the three substations need to start as soon as possible. Several key sections of plant and equipment are well beyond their economic life and their increased incidence of failure could have significant negative implications. In particular, some of the substations have equipment that was commissioned back in 1930s and have never undergone any rehabilitation since then.

“The capacity of the High Voltage Electric Networks (HVEN), which remains the implementing agency for this operation, has been strengthened under the ongoing project,”said Arthur Kochnakyan, World Bank Task Team Leader of the Project. “This is essential to ensure the efficient implementation and sustainability of the new investments.”

The project builds on the World Bank experience and draws extensively upon the lessons of previous engagement in the power sector of Armenia, as well as on transmission projects implemented in other countries.

Total financing of the project is US$50 million, of which US$10 million will be the Government’s contribution. The World Bank will provide a US$40 million IBRD loan of variable spread with a 10 year grace period and the total repayment term of 25 years.

Since joining the World Bank in 1992 and IDA in 1993, the commitments to Armenia total approximately US$ 1,961.73 million.