World Bank helps to further strengthen power supply reliability in Armenia

The World Bank Board of Executive Directors today approved a US$52 million loan for the Electricity Transmission Network Improvement Project (ETNIP) for Armenia. The new project will improve the reliability of the power transmission network and system management, and support the Government’s efforts in ensuring adequate electricity supply across the country.

Armenia’s National Energy Security Concept prioritizes rehabilitation of key power transmission network assets as a prerequisite for reliable power supply in the country. This project through its first component - strengthening of the power transmission network - targets two major facilities which have the highest rehabilitation priority.

Rehabilitation of the Ashnak substation through replacement of all key equipment will help reduce the number and duration of equipment failures caused by technical reasons, and, thus, improve the reliability of power supply for almost 120,000 electricity consumers. The Ashnak substation was commissioned in 1983 and has undergone no major rehabilitation since then. This substation is essential for ensuring reliable power supply to consumers in Eastern and North-Eastern parts of Armenia, including a large dairy products company, an asphalt plant, and a diamond polishing and jewelry production factory, which employ around 3,500 people.

Rehabilitation of the substation of the Yerevan Thermal Power Center (YTPC) which accounts for 20 percent of total annual electricity generation in Armenia will help reduce the incidence of equipment failures. The overall cost of meeting the electricity demand in the country will significantly increase if it is disconnected from the grid due to failure of its substation. The substation was commissioned in 1965, and has not been rehabilitated since then. Therefore, it is essential for ensuring adequate and low-cost electricity supply to all of the 1,040,000 electricity consumers in the country.

“Currently the power sector of Armenia faces a number of challenges, including supply adequacy and reliability. The project focused on rehabilitation of the selected substations will improve power system reliability, and bring direct benefits to all power consumers in Armenia,” said Laura E. Bailey, World Bank Country Manager for Armenia. “This will allow avoiding increased incidence of power supply outages, as well as associated significant social and economic costs.”

Under the second component - improvement of the power system management - establishment of a back-up dispatch center is envisaged which will allow improving the management of the power system.

Specifically, it is important for ensuring continuous management and control of the power system in case the primary dispatch center (located in down-town Yerevan) fails due to technical or other reasons. The back-up dispatch center will allow to immediately restore the control and management of the power system in case of such failure.

“Armenia's power system will need around 500 MW of new gas-fired generation capacity to preclude the emergence of a supply capacity gap by 2020,” said Arthur Kochnakyan, World Bank Task Team Leader of the Project.  “Preparation of a new electricity generation project is another critical activity that will be implemented within this project. The Government plans to construct a new combined cycle gas turbine, which will require a number of preparatory activities for which no financing is available.”

Total financing of the project is US$69.16 million, of which US$17.16 million will be the Government’s contribution. The World Bank will provide a US$52 million IBRD loan of variable spread with a 14.5-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$2,118.730 million.