Outage

Eastern Europe and Central Asia

Investment Shortfalls in the Power Sector in

DIRECTIONS IN DEVELOPMENT
Energy and Mining

nosniknaH lezneDecreiP neruaLizenerV nodEnaynabalaB inAegatuO

Outage

Investment Shortfalls in the Power Sector in

Eastern Europe and Central Asia

Outage

Investment Shortfalls in the Power Sector in

Eastern Europe and Central Asia

Ani Balabanyan

Edon Vrenezi

Lauren Pierce

Denzel Hankinson

©2011 The International Bank for Reconstruction and Development / The World Bank
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ISBN: 978-0-8213-8738-2
eISBN: 978-0-8213-8739-9
DOI: 10.1596/978-0-8213-8738-2

Library of Congress Cataloging-in-Publication Data

Outage : investment shortfalls in the power sector in Eastern Europe and Central Asia /
Ani Balabanyan ... [et al.].
p. cm. -- (Directions in development)

Includes bibliographical references.
ISBN 978-0-8213-8738-2 (alk. paper) -- ISBN 978-0-8213-8739-9
F1i. n aPnocwe.e r3 .r esPoriuvracteizs-a-tiEounr-o-pEeu, rEoapset, erEna-s-tFeirnna. n4c. e . P2ri. v aPtoizwaetir orne-s-oAusrica,e sC--eAnstiraa,l . C5e. n tGrallo-b-al
Financial Crisis, 2008-2009. I. Balabanyan, Ani, 1978-
3H3D2.96570'22.2E--8d5c2222 O29081 12000161 397

Contents

Foreword
Acknowledgments
Abbreviations

Chapter 1

Chapter 2

Chapter 3

Chapter 4

Executive Summary
setoN

Introduction

Impacts of the Financial Crisis
Macroeconomic Effects
Effects on Power Sector Financial Performance
setoN

Financing Needs
Investment Gap
Sources of Financing Available After the
Financial Crisis
setoN

ixiiixvx

18

9

31411652

27725354

v

viContents

Chapter 5Conclusions
Effects of the Financial Crisis
What the Financial Crisis Did Not Affect

Chapter 6Recommendations
Prioritize Public Spending
Create Favorable Environments for Investment
Role for the World Bank
setoN

Appendices
Appendix A : Overview of Power Sectors in Case Study Countries
Appendix B : Priority Investments in Case Study Countries

sexoBBox 1.1:
Box 2.1:
Box 3.1:
Box 4.1:
Box 4.2:
Box 4.3:
Box 4.4:
Box 4.5:
Box 6.1:

Impact of the Financial Crisis on Profitability of
State-Owned TPPs in Ukraine
World Bank
Lights Out?
Report Highlights
Energy Outlook in ECA
How Did the Energy Crisis Affect the Power Sector
in the Kyrgyz Republic?
How Do EU Directives Affect Investments in
Romania, Serbia and Ukraine?
How Will the Recent Political Changes Affect
Future Financing of Power Sector Investments in
the Kyrgyz Republic?
Why Are Fuel Expenditures Continuing to Rise for
TPPs in Ukraine in 2010?
How Has the Financial Crisis Affected Commercial
Lending in Armenia?
Why Is Restructuring Affecting Private Investments
in Generation in Romania?
Seven Do’s and Three Don’ts for Creating a
Better Investment Climate

748494

3545750646

5637

40181137383245485

Box 6.2:
Box 6.3:
Box 6.4:

Figures
Figure 1.1:
Figure 1.2:
Figure 2.1:
Figure 3.1:
Figure 3.2:
Figure 3.3:
Figure 3.4:
Figure 3.5:
Figure 4.1:
Figure 4.2:
Figure 4.3:
Figure 4.4:
Figure 4.5:
Figure 4.6:
Figure 4.7:
Figure 4.8:

Contentsvii

Creating Regional Markets for Electricity in
South East Europe
World Bank Assistance in Support of Turkey’s
Energy Reforms
How a PRG Enabled Privatization of a Distribution
Company in Albania

066236

Gross Domestic Product Annual Growth by Region,
2000–09
2
Change in Power Sector Revenues, 2007–09
3
Objectives and Approach of the Report
11
Impacts of the Financial Crisis in Each of the
Case Study Countries
13
Percent Change in GDP, 2006–10 (projected)
14
Quarterly Change in Electricity Consumption,
2007–09
17
Change in Power Sector Revenues, 2007–09
21
Change in Operating Expenditures, 2007–09
22
Actual and Planned CAPEX in Armenia, 2006–11
28
Actual and Planned CAPEX in the Kyrgyz Republic,
2006–12
28
Actual and Planned CAPEX in Romania, 2006–11
29
Actual and Planned CAPEX in Serbia, 2006–12
29
Actual and Planned CAPEX in Ukraine, 2006–11
30
Peak Demand and Available Capacity in Armenia,
2006–19
31
Generation and Consumption in the Kyrgyz Republic,
2006–20
32
Peak Demand and Available Capacity in Romania,
2007–17
32

viiiContents

Figure 4.9: Peak Demand and Available Capacity in Serbia,
2007–25
Figure 4.10: Peak Demand and Available Capacity in Ukraine,
2008–29
Figure B4.3: Projected Profitability of State-Owned TPPs in
Ukraine, 2010
Figure B4.4a: Dollarization of Loans and Deposits in Armenia
Figure B4.4b: 12-Month Credit Growth in Armenia
Figure 5.1: What Were the Impacts of the Financial Crisis?
Figure 6.1: World Bank Governance Indicators for the Five Case
Study Countries

Tables
Table 1.1:
Table 1.2:
Table 1.3:
Table 3.1:
Table 3.2:
Table 3.3:
Table 4.1:
Table 4.2:
Table 4.3:

Growth in Electricity Consumption, Peak Demand
and Exports, 2008 –09
Investment Needs in the Study Countries,
2009–15, US$ millions
Short- and Long-term Priority Investments in
Each Country
Exchange Rates in Case Study Countries,
2008–09
Tax Revenues, Budget Deficit, and Public Debt
(% of GDP), 2008–09
Operating and Profit Margins, 2006–09
Size of Investment Needs and the Investment Gap
in the Case Study Countries
Comparison of Investment Gap to GDP, State
Budget, Sector Revenues, and Sector Capital
Expenditures, US$ millions
State Budget Deficits in the Case Study
Countries, 2008–11, % of GDP

33339324348495

357516152435314