Funding totalling $140 million has been arranged by World Bank Group member IFC to help upgrade the 404MW Vorotan Hydropower Cascade in Armenia - the first major international debt financing package in the country’s power sector.
The funding, which will go to project owner ContourGlobal Hydro Cascade, a subsidiary of ContourGlobal, includes a loan of $45 million for IFC’s own account and parallel loans of $65 million from FMO, the Dutch development bank, and $30 million from DEG, the German Investment and Development Corporation. ??
The loans will help ContourGlobal refurbish the complex, parts of which are almost four decades old. The upgrade is expected to boost electricity reliability in the region, providing a steady supply of clean power to additional 60,000 residential customers. ?
“We are very pleased to have completed this innovative long-term financing package for Vorotan and we would like to thank our partners at IFC, FMO, DEG, for their commitment to the project,” said Ara Hovsepyan, General Manager of ContourGlobal Hydro Cascade. “We would also like to thank the Government of Armenia for its work in facilitating these transactions. They provide a stable, long-term capital structure, which allows us to continue our work while making sure that the operational performance, safety, reliability, and efficiency of this plant are maintained at world-class standards.”
This financing package arks IFC’s first debt investment in Armenian infrastructure. In addition to the loan, IFC is a sole provider of an interest rate swap, which will help ContourGlobal Hydro Cascade hedge the interest rate risk on the financing package, protecting it from any fluctuations in the interest rate.
“Supporting renewable energy is IFC’s top priority and is part of our commitment to address climate change,” said Wiebke Schloemer, IFC Regional Industry Head of Infrastructure for Europe, the Middle East and North Africa. “Globally, we have seen how private businesses can help spur the development of energy infrastructure. The upgrade of Armenia's Vorotan complex will help provide clean energy for tens of thousands of people. This investment is also expected to open the door to additional private investment in the country’s vital infrastructure.”
The Vorotan Cascade includes three hydropower plants and provides 15% of Armenia’s electricity. Increasing its capacity is key for Armenia, a country that imports fuel to cover around 90% of its energy needs.
In 2015, IFC bought a minority stake in ContourGlobal Hydro Cascade to support the entry of an established private sector power developer and operator in Armenia, helping the company acquire, operate, and rehabilitate the Vorotan Hydro Cascade.