GEORGIA: Strengthening of Capacity of PPP Agency
PPIAF supported the government of Georgia in improving capacity and the PPP framework as it relates to power sector projects. Public officials from the PPP Agency, Ministry of Finance, Ministry of Economy and Sustainable Development, energy regulator, and key municipalities with power sector projects in their investment planning were trained on many aspects, including technical, economic, financial, E&S, and corporate social responsibility aspects of power sector PPPs.
Particular attention was paid to strengthening the capacity of the PPP Agency on matters related to economic justification of projects at the concept level, including cost-benefit or other applicable types of economic evaluation of projects; risk allocation in power sector PPPs and evaluation of related public liabilities; the relationship between the equity return expectations and levels of risk borne by project developers; sufficiency of E&S preparatory work to avoid major delays with projects at implementation stage; as well as valuation and comparison of additional contributions proposed by project developers as part of their corporate social responsibility measures. This will benefit not only the PPP Agency staff but also the staff of the Ministry of Economy and Sustainable Development, which is responsible for the identification of PPP projects in the power sector, the Ministry of Finance responsible for screening the PPP projects for fiscal risk, and the staff of the regulatory commission responsible for the energy sector (Georgian National Energy and Water Supply Regulatory Commission).
Additionally, the government was provided with recommendations on good-practice documentation for power sector PPPs and balanced risk allocation, as well as tariff modeling in the long term and what assumptions and considerations should feed into such a model.
Overall, the government has an ambitious power sector agenda and is thinking about the best power sector planning moving forward. Given the limited fiscal space, PPPs are good candidates for providing value for money in the power sector especially given that the energy sector PPPs are self-sustaining in general. In the near future, such best practices in risk allocation in power sector PPPs will hopefully be evident, and the government can codify them in regulation or official guidance. Additionally, taking into account that Georgia is on a path towards a more liberal market structure, taking into account sustainable tariff regimes as per the training provided will be beneficial to the government and people.