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Georgia's Energy Sector - Electricity Market watch - October 2018

11 Dec, 2018

GNERC updated Grid Code for Electricity on October 26, 2018 to include requirements of Energy Community’s regulation No 543/2013 concerning submission and publication of data in electricity markets. This update is one step forward to implement Georgia’s obligations under the Energy Community. The Grid Code sets general rules for gathering, submission and publication of information on ENTSO-E’s platform. The mentioned information includes: actual and forecasted loads, planned and emergency maintenance, grid congestions, NTCs, etc. The dispatch licensee - Georgian State Electrosystem (GSE) - is responsible for the data gathering and publication process and should prepare detailed instructions by April, 2019 and start publication by November, 2019.

MoESD revised the annual balance of electricity in November 2018. The forecast for annual electricity consumption growth for 2018 was revised downwards from 9.9% to 8.2% in November 2018. The high expectation for annual growth was caused by 11.8%y/y increase in consumption during May-July period. Since August 2018, the growth of consumption slowed down to average 2.6% y/y. As a result, consumption forecast was revised to follow the trend. Actual electricity consumption was up by 6.9% y/y and reached 7.4 TWh in 10M18. 

Updated annual balance of electricity also includes updated forecast of supply for November and December and actual figures for 10M18. According to updated balance, the import in 2018 is expected at last year’s record level of 1.5TWh. The record high electricity import in 2017 was caused by Enguri’s closure in winter reducing supply and 2018 import forecast is explained by increased electricity consumption.

Electricity consumption increased by 3.2% y/y in October 2018. The growth was driven by increased consumption of direct consumers (+40.5%y/y), as new companies were added to the group of eligible consumers, in line with legal changes effective since May 2018. Consumption by distribution licensees was down by 0.7% y/y in October 2018, caused by above-mentioned reallocation of eligible consumers. The addition of new commercial and household subscribers to the group was not sufficient to fully absorb the mentioned reallocation effect, especially for Telasi.


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Uzbekistan Economy - Understanding Uzbekistan

6 Dec, 2018

Uzbekistan is Central Asia's most populous country, comprising nearly half of the region's total. The country has over 1,800 mineral reserves with substantial deposits of gold, copper, uranium, coal and natural gas. 

The economy experienced the smallest contraction among its peers after the collapse of the Soviet Union in 1991. The country managed to increase its nominal GDP by 19x to US$ 67.1bn between 1992 and 2016. However, this was not sufficient to raise the living standards of the population with per capita GDP at US$ 2,124 in 2016 – one of the lowest globally, albeit up from US$ 167 in 1992.

Solid economic growth was insufficient for quality job creation given the rapidly increasing labor force. Uzbekistan’s annual average real GDP growth of 8.3% over 2007-16 was 6th highest in the world. Despite unprecedented growth levels public sector was unable to meet labor market demand with 500,000 new job seekers entering the market every year. 

A private sector-driven growth model and attracting foreign investment are high on agenda. Worsening external environment since 2014 required the economy to move towards a different growth model. At end-2016, newly elected president Shavkat Mirziyoyev acknowledged that the economy needed new drivers of growth and some dismantling given that it was still closed and centrally planned 25 years after the collapse of the Soviet Union. The government’s five-year development strategy, adopted in February 2017, is the country’s official roadmap of liberal economic reforms aiming to increase private investment in the economy.

Uzbekistan implemented a series of reforms under its development strategy in 2017-18. Institutional progress was rapidly acknowledged by international observers. The World Bank named Uzbekistan as one of the top improvers globally and the regional leader in terms of its total number of reforms in its 2018 “Doing Business” report. Despite this progress, the authorities have much work to do to move away from a state controlled economic model and combat widespread corruption. 

Uzbekistan has the potential to become the largest economy in Central Asia given its natural resources combined with the government’s commitment to promoting private sector-led growth. Moreover, Uzbekistan’s large FX reserves and low and affordable foreign debt provide a cushion against global market volatility. According to the IMF, the economy has the potential to grow by 5.0% in 2018-19, before accelerating slowly to 6.0% by 2022.


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Regional Fixed Income Market Watch | October 2018

16 Nov, 2018

Highlights

  • Real GDP growth in the US was an annualized 3.5% y/y (advance estimate) in 3Q18, after an annualized 4.2% y/y growth in 2Q18. Unemployment rate was unchanged at 3.7% in October 2018.
  • Real GDP growth in EU19 came in at 1.7% y/y in 3Q18, after 2.1% y/y in 2Q18. Unemployment rate in EU19 was unchanged at 8.1% in September 2018.
  • China’s economy grew by 6.5% y/y in 3Q18, 0.2ppts lower than in 2Q18.
  • Economic growth accelerated and came in at 6.5% y/y in Kazakhstan and 5.6% y/y in Georgia, while it slowed to 0.6% y/y in Russia and was negative 0.1% y/y in Armenia in September 2018, based on rapid estimates. In 9M18, real GDP growth was 3.7% y/y in Belarus and 0.8% y/y in Azerbaijan.
  • Annual inflation in the US was 2.5% in October 2018, up from 2.3% in previous month. Based on the Eurostat flash estimate, annual inflation in EU19 was 2.2% in October 2018, up from 2.1% in September 2018.
  • In October 2018, annual inflation was below the target level in Georgia (2.3%), Armenia (2.8%), Russia (3.5%) and Belarus (4.9%); inflation was within the target range in Kazakhstan (5.3%), and above the target in Ukraine (9.5%) and Turkey (25.2%).
  • Monetary policy rate was cut to 9.75% (from 10.0%) in Azerbaijan and it increased to 9.25% (from 9.0%) in Kazakhstan in October 2018. The policy rate has remained unchanged in other countries.

 

Please see the full report for detailed coverage of the fixed income markets of Georgia, Armenia, Azerbaijan, Belarus, Kazakhstan, and Ukraine.


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Georgia's Energy Sector - Electricity Market watch- September 2018

6 Nov, 2018

Energy community secretariat’s implementation report issued on 1 September 2018 measures Georgia’s progress for the first time. The report evaluates progress of 9 contracting parties, including Georgia, towards implementation of EU legislation (acquis communautaire) in sectors related to energy and environment. A report assesses a total of 37 sub-indicators across the nine sectors. Overall score of Georgia is circa 23% (out of maximum 100%), meaning that Georgia needs to make significant changes into legislation to become in line with EU rules and regulations. According to the report, out of 9 measured sectors, Georgia is moderately advanced in energy statistics, is on early implementation stage for electricity, renewable energy, energy efficiency, energy infrastructure and environment sectors, and ranks very poorly in oil, natural gas and climate sectors. We expect major changes into legislation for electricity, renewable energy and energy efficiency sectors by the end-2018, as set in protocol regarding accession of Georgia to the Energy Community charter treaty. According to implementation report, at least a year is needed for testing and adjusting the relevant implementing provisions and market instruments. Thus, Georgia is targeting to have fully functional and competitive wholesale and retail markets of electricity by 2020.

Electricity consumption increased by 3.9% y/y in September 2018, 4.9% below the planned level. Main contributors to the growth were eligible consumers and Energo-pro Georgia , while Telasi had the negative effect on growth. Consumption was below the planned level for all consumer groups.  In 9M18, electricity consumption is up by 7.3% y/y.

Demand on electricity was mostly satisfied by domestic generation  in September 2018. Main contributors to the growth of domestic generation (+3.5% y/y) were TPPs (49.5% y/y) and HPPs, other than Enguri/Vardnili (+9.5% y/y). Since the demand on electricity grew below the planned level, the supply by Engur/Vardnili was reduced by 12.4% y/y. 

Electricity imports accounted for 14.1% of total electricity supply. Imports came from Russia (96.6% of imports) and Azerbaijan (3.4%). ESCO was the sole importer of the energy in September 2018. ESCO’s supplier (Inter-Rao ues) and import country (Russia) was selected via tender procedure announced and closed in August 2018. Average price of electricity imports to Georgia was down 12.7% y/y to USc 4.2/kWh in September 2018. The decrease in price might be the result of ESCO’s tender for supplier.


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