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January 6, 2013 / joninews

What was ever investigated, Khudoni Dam and Offshore Mechanisms

Khudoni Dam and British Virgin Islands

As water swirls – so goes the political intrigue of the Georgian
business climate. Take for instance a massive hydro station project that
has been on hold for years; it is now being renewed under what some may
consider as mysterious and less than transparent circumstances. 

The proposed 201 metre Khudoni Hydro Power Plant construction is planned
for high mountains of west Georgia (2010 metres above sea level) on the
River Enguri. This is the source of water where the Enguri dam already
operates. However, something bigger is in the works, and it dates back
to the period of the Soviet Union and its centralized planning efforts
that make extensive use of the Enguri River’s vast water resources for
power generation. The proposed Khudoni project was until recently on
hold, almost forgotten by all those involved stakeholders, even those in
government and environmentalists, and those who are really suppose to be
in the know.

Mikheil Saakashvili, (and after Zurab Zhvania died under mysterious
circumstances) and while in government, the former PM was a staunch
environmentalist), and the Georgian government in 2005 revised the
Soviet project and began seeking outside investors. In 2007, a group of
Indian businessmen visited the Khudoni site in the Upper Svaneti region,
and gave the Georgian energy ministry a clear commitment to complete the
project.  The group represented a company called “Transelectric”, which
is owned by British and Indian investors, and registered in the Virgin
Islands.

Based on these promises, the Georgian government awarded the investors
the rights to build Khudoni with a price tag of 800 million USD. There
was no tender, no bidding competition or any such similar arrangement. One would have thought that they would have done one this for show, for
the sake of transparency and accountability, especially in the reform
minded government that came into power in the post 2003 Rose Revolution
period. 

In short, the Georgian public, as well as parliamentarians, are in the
dark as to who all are behind the biggest hydropower project currently
in their country, and even within the Energy ministry little is known
about it. There seems to have been a kind of lull after the rights to
build the dam were awarded in 2007. The energy ministry had the
impression that the group had abandoned its promises for some time.

As of now, construction work may start in 2011 and take four to five
years to complete. The dam will be 201 m tall, consisting of 170 m tall
concrete arches, and lays about two thousand meters above sea level. The
generators will be able to deliver 700 MW output, which is fairly large
in an international context, and per year estimated to produce 1.5
billion kWh of energy. 

Environmental and social impact: six villages and about a thousand
people will be displaced. The Khudoni HPP would intensify the
devastation of forests and wildlife habitat, the loss of river species
populations and the degradation of upstream catchments areas owing to
the flooding of the reservoir area in one of the most amazing highland
regions of Georgia. There are serious environmental concerns, both in
terms of changed ecosystem (forests) and change in the flow of the
river. Environmentalists think it will result in catastrophic
consequences to the local habitat. 

There is also question as where much of the profits for the export of
electricity will go when the company is registered as an offshore
company. Others think it is a good thing that Transelectric is able to
build it in a careless fashion without competition and proper oversight,
as getting it quickly up and running will further increase the country’s
capacity for export of electricity and to make up for a lost in foreign
direct investment and in light of less than a shiny business
environment.  

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