The Namakhvani project clearly evidences numerous systemic shortcomings in the state policy of hydro resource management, legal failings and unsubstantiated, nebulous concessions. In almost all its aspects, the current Namakhvani project is fraught with significant legal violations.

SELECTING THE INVESTOR

• The body authorized to select the developer for the Namakhvani Hydroelectric Power Plant (HPP), a project of strategic importance, was the Ministry of Energy of Georgia. However, instead of the state, the decision was made by a commercial entity JSC Georgian Energy Development Fund (GEDF). This arrangement led to significant flaws and infractions in terms of the transparency and openness of the project:
• The Georgian public is yet to be informed on which companies participated in the call for expression of interest by GEDF and on the criteria based on which the Clean Energy Group was selected as the developer for the Namakhvani HPP (The company later changed both its name and owner and today presents itself as Enka Renewables).
• Notably, the winner of the expression of interest was obligated to redeem the assets of the GEDF-affiliated LLC Namakhvani, namely, the already issued environmental and construction permits, as well as other assets related to the Namakhvani project. By announcing the expression of interest, GEDF was essentially selecting a buyer for the assets of its own affiliate.
• Further, the Acquisition Agreement, published with a two-year delay, has revealed that granting of the construction permit by the state was directly tied to the 6.7 USD payment set by GEDF. This arrangement entailed significant risks and potentially undermined the possibility of objective and impartial decision-making regarding the permit.

THE BUILD, OWN AND OPERATE (BOO) AGREEMENT

• Part of the documentation required by the legislation on public-private partnership as a precondition to the signing of the agreement on the Namakhvani HPP project has not yet been made public. This includes cost-benefit analysis by the Ministry of Economy and Sustainable Development and fiscal risk assessment by the Ministry of Finance. The latter is a necessary precondition for the agreement and its absence puts the legality of the state’s decision to sign the agreement under question.
• The state signed the agreement in 2019. However, the document remained secret for two years and was published only in February 2021. Unfortunately, evaluation of the terms of the agreement reveals that the Georgian government has conceded state interests for the benefit of a private company. The contract does not guarantee the state adequate compensation for its concessions.
• The 30 March 2019 opinion by the Ministry of Justice was also first made public in 2021; the Social Justice Center has brought the matter of concealing the document to the court before its publication. Due to the legal risks and the scope of the obligations taken by the state, the ministry was extremely critical in its remarks. However, the analysis of the final version of the agreement reveals that most of the ministry’s remarks have been ignored.
• With the publication of the agreement the public has also learned that the state was unable to guarantee that in the period not covered by the Power Purchase Agreement the energy generated by the HPP would stay in the country and would be used to satisfy the needs of its population. The company is free to export generated energy and restricting its ability to do so will be considered a breach of the terms of the agreement by the state.

LAND TRANSFERS TO THE COMPANY IN ADVANCE

• Several months before issuing the environmental and construction permits for the Namakhvani HPP, the government of Georgia (GOG) transferred to the company state lands needed to develop the project, namely plots in the Rioni valley with the total size of 576 hectares.
• This fact turned the procedure of issuing the environmental and construction permits into a mere formality. Further, it made clear that the government had already decided that the Namakhvani project would be developed and that both permits would inevitably be granted based on this decision. The actual proceedings simply codified this decision

THE ENVIRONMENTAL DECISION

• An environmental reports exists only for one of the plants in the cascade, the Lower Namakhvani HPP. The environmental impact of the Upper Namakhvani HPP has not been assessed and, therefore, the permit has not been granted. This fact also undermines the legality of the environmental permit for the Lower Namakhvani HPP. By splitting the permits and assessing the environmental impact of each plant separately, the administrative bodies responsible for the project not only neglected environmental protection principles and standards for environmental impact assessment, but also violated the law.
• Fundamental environmental rights have been infringed upon in the process of granting the environmental permit. The decision was made without proper public participation. The local population was essentially deprived of its ability to attend public hearings on the planned activities, as they were held far from the project area. Furthermore, during the discussions the state failed to respond to justified and critical inquiries coming from the public.
• The environmental impact assessment produced by the company does not contain complete and mandatory studies. In the absence of such research, the permit was granted with conditions and the company was only obligated to present crucially important studies later. The legislation does not allow for any kind of conditional permits and such an approach directly contradicts the principles of environmental protection. Making any preliminary decisions without full and comprehensive information on the project and without mandatory expert assessment is not legally permissible.
• Importantly, the company has violated even this conditional permit and has not presented the necessary studies to the state. It received a one-time fine for this infraction on 18 January 2021, following an inspection by the Department of Environmental Supervision.

THE CONSTRUCTION PERMIT

• Due to its scope, the Namakhvani Hydropower Plant Cascade forms a legally defined facility of special significance. This status entails the presence of elevated risks and the demand for the construction to proceed with extraordinary caution and only after thorough research. Despite this, during the process of issuing the construction permit for the HPP the government employed all legally permissible concessions and granted the permit without proper documentation and with specific conditions.
• According to the law, conditional construction permit can be granted only based on substantiated motion and only in specific circumstances. Despite this, the government body responsible for granting the permit itself offered the construction company a simplified procedure to obtain the permit, with the company merely accepting these terms. The substantiated motion demanded by the law simply does not exist.
• Another important issue is the obligations take upon themselves by governmentaffiliated entities. On the one hand, the fund managed by the Ministry of Economy (GEDF) obligated itself to assist the company to acquire the construction permit. On the other hand, Technical and Construction Supervision Agency, also operating under the Ministry of Economy issued the construction permit in absence of the necessary documentation and the required justified appeal by the permit-seeker. Both decisions lead the public to further question legality of the issued permits.
• Notably, the state has been excessively passive in its supervision of the construction process. Despite the company violating the conditions for the construction permit, inspections done in October 2020 and March 2021 did not reveal infringements and did not pursue administrative sanctions against Enka Renewables.

^{The full research can be found in the attached document}

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