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Georgia's Tourism Sector - Tourism Market Watch | May 2017

9 June, 2017

The number of visitors at Georgia’s mountain resorts reached a historical high during the 2016-2017 season. Mountain Resorts Development Company (MRDC), the managing entity of Georgian winter resorts, has released a summary of the season. Thanks to favorable weather conditions, the season opened early in December in Gudauri and by the end of the year, all winter resorts were receiving guests. The early start provided a welcome boost, as the total number of visitors to Georgia’s winter resorts exceeded 400,000 (+37.0% y/y) during the season.

Gudauri remains the most popular ski resort, hosting more than 276,000 visitors during the season, up 37.1% y/y. The number of visitors to Gudauri has increased more than three-fold from almost 89,000 visitors during the 2011-2012 season. The resort’s proximity to the Russian border makes it especially attractive for Russian skiers. Currently Gudauri features 10 ski lifts, with combined tracks of approximately 70km, and visitors can enjoy skiing, snowboarding, paragliding, and heli-skiing. MRDC and the Ministry of Regional Development and Infrastructure are currently working on a 7.5km Kobi-Gudauri ski lift, which will connect Gudauri with Kazbegi. The project is expected to be finished by end-2018 and will be the longest lift in the Caucasus. Other projects include an artificial lake for snowmaking purposes, which would prolong the winter season in Gudauri.

Major development is in the works for Bakuriani, which hosted over 115,000 visitors in the 2016-2017 season, up 24.6% y/y. The coming years will see Olympic infrastructure development at the resort, with a biathlon track, ski jumping hills, and an ice hockey rink in the pipeline. Furthermore, Georgian Reconstruction and Development Company (GRDC), in a PPP with the Georgian government, plans to invest GEL 100mn in the development of the Kokhta-Mitarbi resort, adjacent to Bakuriani. The resort will be developed according to a master plan prepared by the industry leader, Geode. 

The number of international arrivals was up 5.7% y/y to 0.55mn in May 2017. Out of the top four source markets, there was strong growth from Armenia (+8.9% y/y), Azerbaijan (+8.5% y/y) and Russia (+16.8% y/y). A 24.4% y/y decrease in arrivals from Turkey, in line with the downward trend of the last few months, was the main drag on growth in the total number of visitors. Arrivals from the EU were up 13.0% y/y to over 28,000 visitors, while Ukraine also posted solid growth (+20.2% y/y).

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Georgia's Energy Sector - Electricity Market Watch | April 2017

6 June, 2017

Electricity deficit in 2017 bridged by imports rather than TPPs. Electricity imports in 4M17 have already exceeded 2016 total imports by 85.1% and 2017 planned imports by 7.6%. 886.7 GWh of electricity (+138.2% y/y) was imported in 4M17, with Azerbaijan being the main source of imports (62.7% of total) and the rest coming from Russia (24.2%) and Armenia (13.1%). Relative prices of TPP-generated electricity and imports were the main reason behind choosing imports over TPPs to satisfy high demand (5.3% higher than planned) and make up for low HPP generation (11.0% lower than planned).

Price volatility on the Turkish market led to a reduction in the number of companies willing to export from Georgia to Turkey, leaving unallocated capacity of 4MW out of the 250MW allowed export capacity (ATC) in May 2017. Private companies with priority access to the Meskheti transmission line connecting Georgia and Turkey will be the main exporters to Turkey in 2017. Armenia has also become an attractive market for Georgian companies. Among the exporters to Armenia, besides the privately owned GIEC, is ESCO. In exchange for the imported electricity during 4M17 (116.3GWh), ESCO is exporting electricity to Armenia in May and June.

IMF has declared PPAs for power plants as a fiscal risk for Georgia in its country report issued in April 2017. IMF recommends refraining from initiating any PPA agreements until the institutional framework is in place. Taking into consideration the existing fall-winter period power deficit, partial PPAs currently under negotiation, with cumulative installed capacity of up to 500MW, are permitted to proceed, as long as the guaranteed purchase period is limited to eight months and the purchase price to USc 6.0/kWh.

Domestic consumption increased 7.9% y/y in April 2017 and 9.1% y/y in 4M17. Consumption of distribution companies increased 7.1% y/y in April: consumption was up 8.5% y/y by Telasi, 6.2% y/y by Energo-Pro, and 8.1% y/y by Kakheti Energy Distribution. The Abkhazian region’s electricity usage was up 13.7% y/y and accounted for 18.4% of domestic consumption. 

Growth in domestic consumption was met mostly through imported electricity. Total electricity supply from domestic sources was down 6.6% y/y, while imports increased almost six-fold. Three quarters (74.9%) of domestic consumption needs were met by hydro generation; the rest was satisfied by thermal (8.9%) and imported (15.2%) electricity, while the newly built wind power plant accounted for 1.0% of total electricity supply.

Wholesale market prices in Georgia were 16.0% above the Turkish market clearing price in April 2017. The Georgian wholesale price in April 2017 was flat at USc 4.7/kWh (+0.7% y/y), mainly due to the low import price and a change in the balancing electricity purchase price methodology. Starting April 1, the price paid by the market operator (ESCO) to deregulated HPPs for balancing energy supply was lowered from the highest regulated TPP price (14.234 tetri/kWh) to the highest regulated HPP price (9.4 tetri/kWh). In April 2017 the share of such electricity in total balancing energy market was 9.1%, while imports were the leading component (52.3%). Overall, electricity traded through the market operator in April 2017 reached 280.0 GWh, 29.1% of total electricity supplied to the grid, with the rest traded through bilateral contracts.

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Georgia's Tourism Sector - Tourism Market Watch | April 2017

4 May, 2017

The number of international arrivals was up 10.2% y/y to 0.51mn in April 2017. Out of the top five source markets, there was strong growth from Armenia (+13.2% y/y), Azerbaijan (+7.1% y/y), Russia (+16.5% y/y), and Ukraine (+27.2% y/y). The number of arrivals from Turkey continues to exhibit a downward trend  (-19.2% y/y), as border delays persist in Sarpi. Arrivals from the EU were up 44.8% y/y to over 26,000 visitors.

The number of international arrivals was up 11.1% y/y to 1.78mn visitors in 4M17. The number of visitors increased from all major countries except for Turkey (-15.5% y/y). Armenia (+14.6% y/y) and Russia (+24.1% y/y) were the largest contributors to overall growth, with Ukraine also posting double-digit growth (+20.2% y/y). The number of visitors from Azerbaijan posted a modest increase of 4.9% y/y, but from the high base of 4M16 (+22.9% y/y).

While the top four source markets accounted for 82.6% of international arrivals in 4M17, secondary source markets also posted robust performances. The number of Iranian visitors was up 3.3x reaching 66,000 visitors in 4M17, mainly due to an inflow of Iranians during Novruz Bairam. The number of Indian visitors was up 139.8% y/y to over 16,000, while the number of Israeli visitors increased 66.8% y/y to almost 19,000 visitors. Arrivals from the EU were up 26.3% y/y to over 65,000 visitors in 4M17, with Germany (+43.2% y/y), Poland (+29.8% y/y), and United Kingdom (+26.0% y/y) driving the growth.

The tourist category continues to drive arrival growth in April 2017. The number of overnight visitors (‘tourist’ category) was up 29.7% y/y and accounted for 43.6% of international arrivals. Same-day arrivals were down 2.1% y/y, while the number of transit visitors was flat (+0.3% y/y). The number of tourist arrivals is up 26.9% y/y to 0.74mn in 4M17, while the number of same-day visitors is down 1.8% y/y and the number of transit visitors up 11.3% y/y.

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Georgia's Energy Sector - Electricity Market Watch | March 2017

1 May, 2017

Domestic consumption increased 8.4% y/y in March 2017, with distribution companies (+8.2% y/y) driving the growth. Electricity transit from Azerbaijan to Turkey amounted to 4.0 GWh in March 2017, down 84.1% y/y. The large reduction in transit was largely the result of lower transit capacity due to the high level of electricity imports. Total electricity supply from domestic sources was down 12.2% y/y, while imports more than doubled (+133.6% y/y) in March 2017. Total hydro generation decreased 21.7% y/y. The drop in hydro generation was partially compensated by TPPs, which posted a significant increase (+26.5% y/y), albeit from a very low base in March 2016 (-56.2% y/y). The guaranteed capacity fee was down 59.0% y/y to USc 0.34/kWh, with guaranteed capacity provided by each of the five sources for the entire month. 

The share of electricity imports in total electricity supply was at a historical high of 29.6% in March 2017. More than half of the imported electricity came from Azerbaijan (56.8%), with the rest imported from Russia (27.0%) and Armenia (16.2%). 61.6% of the Abkhazian region’s consumption was satisfied by Enguri/Vardnili generation, while the rest was met through imports from Russia via the Salkhino line. The average price of imported electricity in Georgia was USc 3.9/kWh, up 38.0% y/y from the fully subsidized price of USc 2.8/kWh in March 2016 (-57.7% y/y). The main reason for such low prices in the last two years was the subsidized price of electricity imported from Russia (via the Salkhino line) to meet the Abkhazian region’s continuously increasing demand.

Electricity consumption by the residential sector, which accounted for one-third of the electricity supplied by distribution companies, was down 1.6% y/y in 2016. The rest was consumed by non-residential subscribers, whose usage was up 12.5% y/y in 2016 and contributed 5.2 percentage points to the overall 6.2% increase in Georgia’s electricity consumption. The key drivers of growth were new commercial entities added to the distribution grid. Telasi posted the largest increase (+28.7% y/y) in the non-residential sector, followed by Energo-Pro Georgia (+5.7% y/y) and Kakheti Energy Distribution (+2.9% y/y). 

Natural gas consumed by TPPs was down 19.5% y/y in 2016, while electricity generated by TPPs decreased by only 6.0% y/y. Commissioning of the more efficient Gardabani combined cycle power plant at the end of 2015 was the main driver of this improvement. Gardabani CCGT accounted for half of TPP-generated electricity in 2016, partially substituting for the less efficient Mtkvari TPP and Tbilsresi blocks, which operated at full capacity in previous years.

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