On April 25, 2019, the Government of Georgia, JSC "Georgian Energy Development Fund", JSC "Namakhvani", JSC " Electricity System Commercial Operator ", JSC "Georgian State Electro system" and LLC "Clean Energy Group Georgia" (renamed - Enka Renewables Ltd. (Hereinafter - "Enka", the "Company")) signed an Agreement on construction, ownership, and operation of the Namakhvani hydropower cascade (hereinafter - the "Agreement", "2019 Agreement"). The conclusion of the agreement was preceded by the selection of Clean Energy Group Georgia LLC[1] through expression of interest (selection process)  announced by JSC Georgian Energy Development Fund (GEDF). [2]

The role of GEDF in the project implementation and investor selection process is also deserving attention. As the public is aware, at one of the stages of the Namakhvani HPP project implementation, GEDF subsidiary JSC Namakhvani was involved in the process. In 2015, the conclusion of the environmental expertise (license) was obtained by this company. Later, mentioned license together with other documents owned by JSC Namakhvani, was handed over to Enka Renewables Ltd.[3]

Thus, although the details of the expression of interest are not fully public, it can be assumed that JSC "Georgian Energy Development Fund" by the expression of interest selected the company to which the shares and assets of JSC "Namakhvani" and, consequently, the project should have been transferred. Accordingly, by this mechanism, the GEDF was practically granted the authority to select the company implementing the energy project instead of the state. Although it is true that the state owns 100% of GEDF shares, GEDF is still a commercial entity; And in our opinion, whether the practice of disposing of the state's natural resources by the company, is justified, should be the subject of further discussion. Moreover, even though GEDF exercised public authority, the company's management did not consider itself bound by administrative law and contended that the Georgian Energy Development Fund was a Joint Stock Company and had no obligation to disclose public information about expression of interest related to Namakhvani HPP.[4]

Consequently, by the decision of the Fund the criteria for selecting the winner, the proposals of the participants of the expression of interest, and the composition of the selection commission would remain confidential. It should be noted, that the closure of essential information about an energy project of state importance[5] in this form with the state company deciding whether or not to make it public should be considered as non-transparent and undemocratic practice.

According to the Agreement itself, the Namakhvani HPP Cascade Project is a Public-Private Partnership (PPP) project. It should be noted that the Georgian Public-Private Partnership[6],  legislation  which entered into force several years ago,[7] regulates the implementation of a part of the energy investment projects. Mainly, in practice, the scope of the law covers energy projects that envisage the guaranteed purchase of electricity generated by the power plant. Thus,  although the work on implementation of the Namakhvani HPP project started before the law entered into force, the project was still fell within the scope of Public-Private Partnership legislation and was defined as a PPP project, which is an important factor for evaluation of the Agreement.  

The requirements of the Law of Georgia on Public-Private Partnership are relevant to the selection of the company "Clean Energy Group Georgia" as a project promoter. According to Article 27 of the “Rules for Development and Implementation of Public-Private Partnership Project” approved by Resolution # 426 of the Government of Georgia on August 17, 2018, a person who has not fulfilled its duties during the implementation of the public-private partnership project over the last five years, is not allowed to participate in the selection process. The rule approved by the resolution refers that the projects that were implemented before the enactment of the public-private partnership legislation, however, according to the definition established by the law, they are still considered as PPP projects. As mentioned, in the energy sector, such projects are mainly those that provide for the guaranteed purchase of electricity by the state. Shuakhevi HPP project is one of such projects. As it is known, the right to implement Shuakhevi HPP was granted to the Norwegian company "Clean Energy Invest". This company, together with Clean Energy Group A.S. (a shareholder in Enka Renewables), is part of Clean Energy Group.[8] Thus, even though the issue of the fulfillment of its obligations by Clean Energy Invest in the Shuakhevi HPP project, due to the collapse of the tunnel two months after the opening of the HPP is questionable, and the local population is actively talking about the damage caused by the Shuakhevi HPP,[9] the state selected Clean Energy Group - the company affiliated with the Clean Energy Invest - to implement the large-scale Namakhvani HPP project. Given that, as stated in the preamble to the agreement, the process of selecting a private partner was completed before the law on public-private partnership came into force, it is difficult to allege direct violation of the law. However, the provision in the Law, which requires that a private partner in  breach of the PPP project obligations should not be allowed to the selection process, reflects the general principle of good governance that a company that is already in default before the state should not be selected to implement another project. Consequently, the decision to transfer the Namakhvani HPP project to Clean Energy Group Georgia is questionable and requires at least additional justification from the side of the state. Furthermore, the affiliation of the Namakhvani HPP project with the company responsible for the construction and operation of the Shuakhevi HPP raises well-founded and legitimate fears in the public regarding the company's capabilities and qualifications.

In sum, under the 2019 Agreement, Enka was officially granted the exclusive right to implement the Namakhvani project. The Agreement regulates the legal relationship between the Government and the company around the Namakhani HPP project, sets out and defines in detail the rights and obligations of the Government and the company, the obligations of other parties to the Agreement, the terms of the Guaranteed Power Purchase Agreement (PPA), (tariff, duration) project implementation periods, terms, etc.

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