1. FREE ECONOMIC ZONE IN SYUNIK………………………………………………………………….2
2. COPPER SMELTING PLANT ……………………………………………………….…….…….……..…..5
3. SAPPHIRE CRYSTALS PRODUCTION………………………………………………………………….8
4. MAGNESIUM PRODUCTION WITH NEW TECHNOLOGY…………………………………….11
5. GOLD REFINING PLANT ……………………………………………...…………………………..……...14
6. PRODUCTION OF ACID-RESISTANT MATERIALS……………………………………………...18
7. PRODUCTION OF THERMAL INSULATION MATERIALS………………………….......….....19
8. PRODUCTION OF SPECIAL SOLID GLASS……….…………………………………………….…...21
9. MACHINE MADE CARPET MANUFACTURING……………………………………………..........22
10. CONSTRUCTION OF DATA CENTER………………………………………………………………....24
11. EXPANSION OF FRESH VEGETABLE GREENHOUSE………………………………..….…......27
12. ESTABLISHMENT OF VEGETABLE GREENHOUSE…………………………………..……......29
13. EXPANSION OF CUT ROSES GREENHOUSE……………………………………………………….31
14. RENEWABLE ENERGY……………………..………………………………..…………………...………..33
 “SIMYONOVKA” WIND POWER PLANT
 “JERMAGHBYUR” GEOTHERMAL POWER PLANT
 “KARKAR” GEOTHERMAL POWER PLANT

15. SOLAR PV PLANTS CONSTRUCTION PROJECTS....................................................................38
16. 33rd DISTRICT IN YEREVAN .……………………………………………………..….….….……........43
17. NOAH ETHNOGRAPHIC DISTRICT IN YEREVAN……………………………………………….45
18. NORTH-SOUTH ROAD CORRIDOR …………………………...………………………..….…………48
19. SOUTHERN ARMENIA RAILWAY ....................…….…………….…………..………..…...…...…..53

1

BRIEF DESCRIPTION OF THE PROJECT
To foster regional economic cooperation and for further development of the national
economy, growth of the export volumes the Armenian Government has decided toinitiate the establishment of Free Economic Zone in the marz of Syunik which issituated at the border with Iran.
KEY INDICATORS








Location: Marz of Syunik, Republic of Armenia
Total area of the FEZ: 10-15 hectares on available plot land of 55 hectares
Total cost of the project: around 28 mln. USD (CAPEX)
Revenue (10 years): around 52 mln. USD
IRR of the project: 12
Permanent staff of the FEZ organizer: 60-70
Implementation type: PPPPARTIES INVOLVED
 Government of the
Republicof
Armenia; Organizer of the
FEZ(company
initiating,establishing andmanaging the FEZ)
 Residents of the
FEZ(companies
operating in the
FEZ)

2ESTIMATIONS Attracted residents during the project period: 100-120 companies
 Average annual exports from the FEZ: 80-100 mln. USD
 Target export destinations: Iran, Eurasian Economic Union, Middle East (UAE,
Kuwait, Qatar, Oman, Iraq, Lebanon), Turkmenistan, etc.
 Stock FDI: 350-400 mln. USD
 New workplaces during project lifecycle: 2500+

STREGHTS OF THE PROJECT














Government strong commitment, PPP implementation possibility
Government of the Republic of Armenia has initiated the project and is fullycommitted to the implementation of the project. The Government is ready to provide
its full assistance to the operator of FEZ by facilitating all processes and granting
special preferences.
Location / near the Iranian border
Fast payback of the project/ relatively high IRR
Cooperation opportunities with Iranian “Aras” Free Economic Zone /Distance 2km.
Negotiations has been started with “Aras” FEZ on possible cooperation
Possible signing of Free Trade Agreement (temporary) of Eurasian Economic
Union (EAEU) with IranStrong Armenian Diaspora
One of the important factors of establishing FEZ is Armenian Diaspora in Iran,
Russian Federation, Georgia and Middle East. which plays quite an influential andactive role in economic life in that countries. Diaspora can highly contribute to thepromotion of this FEZ among local companies and help to attract them to expand
and establish activities in the FEZ.
Armenia with its favorable investment and businesses climate can serve as agate to new markets.
North South Road Corridor which will connect the southern border of thecountry with its northern point by means of 556 km-long Meghri- Yerevan - Bavra
highway. The highway will be located nearby the FEZ.
Diverse trade regimes of Armenia: FTA with EAEU, CIS, GSP and GSP+ regimes
with EU, Canada, Switzerland,
Japan.

FREE ECONOMIC ZONE
MAIN AREA MASTERPLAN & MAININFRASTRUCTURE
TOTAL AREA: around 10-15 hectares(1)
Industrial / Production

3

(2)
(3)
(4)
(5)

area - 40.000 sq.m.
Office / Services area - 10.000 sq.m.
Warehouses / Logistics - 15.000 sq.m.
Business / EXPO center - 10.000 sq.m.
Parking area – 2000 sq.m.

EXPANSION OF THE PROJECTPHASE II

The vision of the Free Economic Zone is to create modern, international, business friendly
ecosystem with special comfortable living and working conditions. In this regard several
infrastructure developments are proposed as the second phase of the project
implementation. Particularly:

 Residential area: the living area will be constructed for permanent residence of
employees of resident companies.
 Sports and Entertainment Complex: sports complex will be a place ofentertainment and sports in the FEZ, tourist venue for various sporting events.
 Hotel complex: construction of 3-star hotel complex with 50 rooms capacity for the
temporary guests of the free economic zone. Several restaurants and cafes will besituated for the guests of the complex.
 Trade Center: grocery, stationery, products of personal use, clothes and otherstores will be functioning within the free economic zone.

4

Mining and metallurgy sectors have traditionally been the leading branches of the industryin Armenia. Copper is being produced in Armenia since 1777, when Alaverdi (Manes)
copper smelter plant was founded.
In the 1980s, Alaverdi copper smelter plant has beenfunctioning as a major metallurgical plant, theproduction capacity of which per year was at about 4042 thousand tons of refined copper, 30-40 thousand
tons of copperas and 200-220 thousand tons of sulfuric
acid from the gases formed.
Before the collapse of the Soviet Union, Armenia was
the third copper producing country among union
republics leaving ahead only Russia and Kazakhstan.
Currently,
Alaverdi
metallurgical
plant
was
reorganized as the "Armenian Copper Program"Company (Armenian cooper program), which annually
produces around 10 thousand tons of copper. The
company mainly uses the concentrates produced by “Base metals”, “Teghut" and "Zangezur
Copper and Molybdenum Combine".

Further development of the sector requires the use of new technologies addressed to thecreation of higher added value through the expansion of product procession.
It is expected that mining, especially production of copper will have a significant role in thedevelopment of economy of Armenia.

The operation of metallurgical enterprise engaged in copper production will have alocomotive role in the development of the economy and will promote the development ofother sectors by creating new workplaces, particularly expansion of copper processing up
to electro-technical copper, and later the organization of wire production will promote thedevelopment of electrical complex of Republic of Armenia.

5

CURRENT SITUATION AND POTENTIAL
The significant part of copper reserves are concentrated in copper-molybdenum mines(Kajaran, Agarak and Teghut), as well as in copper-pyrite mines (Kapan, Alaverdi,
Shamlugh) and gold-polymetallic (Shahumyan, Armanis) mines.
There are six companies in Armenia engaged in copper
mining and in the production of concentrate, the largest
companies among them are "Teghut" and "Zangezur
Copper and Molybdenum Combine" companies.
In 2014, the production of blister copper was about 10
thousand tons and the production of copper concentrate
amounted to about 190 thousand tons.
“Teghut” mine was put into operation in 2015, whichannually produces around 100 tons of copper
concentrate.
During the period of January-October in 2015, theproduction of copper concentrate was more than 250
thousand tons.
Currently there are 38 mines of metal minerals withapproved reserves registered in the state balance ofmineral resources reserves, which include 8 coppermolybdenum, 3 copper, 20 gold and gold-polymetallic and 2 multi-metal mines.
Explored and confirmed reserves of copper deposits are assessed at about 14 million
tonnes, which enables mining companies to operate for 100-120 years.
The feasibility and investment assessment of constructing copper smelting plant

The feasibility of building a copper smelting plant is conditioned by the following factors:

 The produced concentrate contains 22-27% copper, the actual quantity of produced
concentrate in 2015 will enable to produce about 65 thousand tons of refinedcopper and in case of implementation of complete projects of exploiting mines thesequantity will increase significantly, as a result it will allow to get 75-80 thousand
tons of refined copper from the copper. In conditions of the above mentioned
amounts the operation of a copper smelter becomes more expedient.
 Considering that the content of copper in the concentrate produced by mining
complexes is an average of 25%, therefore in case of exporting the concentrate thecompanies have to pay for the shipment of the remaining 75% of the valuelessgoods. The possibility of making savings of these costs is another essential factor forthe establishment of a new copper smelter in Armenia.

6

According to preliminary assessments the necessary investment is estimated about
400-450 million USD.
Taking into consideration that it is planned to build a plant with capacity of producing 80
thousand tons per year and based on the point that 1 ton copper costs 4500 USD
conventionally, the company's financial performance will be as follows.
Production
volume,thousand tons

80

Unit price
USD

4500

Annualrevenue,million USD

Profitability, %360

8Income,million
USD

Payback
period, year

28.8

13.8

The fact that concentrate also contain other metals (gold, silver, zinc, etc.) and that during
the manufacturing process sulfuric acid is formed is not considered in the revenue
calculations, while this will significantly increase the revenue. During the manufacturing ofconcentrates produced in Armenia the above-mentioned factors will increase the revenue
for about 20-25%.
Meanwhile, the profitability level is considered taking into account the lowest parameter.
The strengths of the project:• The availability of copper mines and the possibility of processing, enrichment andproduction of concentrate,• Creation of higher value added,• Reduction in transportation costs,• Multiplicative impact on other sectors.
The weaknesses of the projects:••

The emergence of possible environmental risks,
Sulfuric acid storage and distribution problems.

The models and technologies for building the copper smelter.
Two models are suggested for operating the copper smelter:••

Upgrading and expanding the existing capacity, in particular on the basis of
Alaverdi copper smelter,
Construction of a new plant.

The following technological methods may be used for the construction of thecopper smelter:••

Pirometallurgiacal method
Hydrometallurgical method.

7

The purpose of this project is to grow sapphire crystals and to cut plates from them forwide range of possible usage. Boules will be made weighing 32kg, 65kg and 82 kg, cores
sapphire and sapphire plates. Manufacturing focus will depend on the market conjuncture.
The overall cost of the project amounts to 44 mln. USD for 5 years.
Necessary investments about 20 mln. USD, depending on global market pricing.
Investments will be returned in the beginning of 5‐6 years.

Company named “Pure” will be arranged for this specific business project.
The proposal comes from a company initiative
group "Valef". The company "Valef" was founded
in 1998, but it was organized entirely based on
the staff of "Laserayin Tekhnika" Scientific
Production Association (SPA). For over 30 years ,this group of employees, later on the company
itself was working with Armenian manufacturersof sapphire crystals, in particular - "Sapphire"
APE, " Lazerain Engineering" NPA, Kirovakan
Chemical Plant , Institute for Physical Research of
NAS RA . The main activity of " Valef " isassociated with the supply and study of thesource material for crystal growth, quality controlof tungsten and molybdenum products for thethermal units for crystal growth apparatus, supply of equipment for the treatment ofcrystals (cutting, grinding, polishing), as well as the design of diamond instrument incooperation with "Almaz". In its type, the company "Valef" was the only one in the field to
supply and quality research for the entire metal base growth in Armenia.

The main structural units of the newly formed company will be:• Growth site (production sapphire)• The research site, quality control site
• The area of processing and manufacturing of semi-finished and finished products
By the end of the year 5 the Company will have 70-80 employees.
Main manufacturing implementation staff is located in Armenia. These specialists during
the past 20-30 years have been involved in growth, research, processing of sapphires aswell as other materials.

8

Main activities.
The company is planning the following two activities for the first five years:- Production and distribution of synthetic sapphire for high-tech industries- Production of various sapphire elements and sales
Application of the production

2’’ plates, are used for LED production

4’’ plated, are used for production of highlight LED, automotive
head and usual lighting lamps

6’’ plates, are used for production high-brightness LED and SoS (Silicon on Sapphire)

Production plan

During the first year there will bepurchased 15 machines, where fivemachines with 32 kg capacity, 10 machineswith 65kg capacity. 3 months will be
required for the arrangement of the
production and in 3 months for launchingcommissioning and trial crystallization.
Thus starting from 7-th month 5 machines
will be operating with 32kg and 10
machines with 65 kg. Considering the 80%
equipment load, the resulting sapphire
production in 6 months will amount 1152kg
and 3456kg. In total 4608kg.

During the second year, these 15
machines will produce 9216kg and additional new 15 machines will be purchased – 5 for
32kg and 10 for 65kg. After three months of preparations with the same assumptions (80%and 80%) these equipment will produce 1684kg and 6480kg accordingly.
9During the third year, the purchased 30 machines will produce 19584kg of sapphire. The
20 new machines (15 machines for 65kg and 5 machines for 82kg) on the same conditions
will produce 10080kg sapphire overall at the end of the third year all the machines
together will produce 29664kg.

On the fourth year, the 32kg machines will be replaced with 82kg. The latter together
with the remaining 65kg machines will produce during the fourth year there will be
produced 35136kg. The new 10 devices (82kg) in similar conditions will produces 6912kg.
The total production in the fourth year will amount to 42048kg of sapphires.
The assumed area for organizing the production consists of two halls each having an areaof 576 square meters, and the required number of rooms each 30-40 sq. m. Production
facilities are ABP grid, feeding from three different directions of power supply output of 4.6
MW. The water supply system is equipped with circulating water equipment a cooling(cooling tower and a pool - 500 m3).
Planned volumes and sales
Year
1 year
2 year
3 year
4 year
5 year

Total

Quantity4608
17 38029 66442 04844 352Total
1 843 200
6 952 000
11 865 600
16 819 200
17 740 800

138 052

55 220 800

Investment / Income dynamics

10Project cost
6 million USD to launch 1000 tons production
Payback period
5 years after the implementation

OVERVIEW

Equity investments
Depending on the conditions of project financing
ECOATOM LLC may offer 40-70% of shares topotential investor

Magnesium production plays significant role in strategic industries, such as energy, mining
and metallurgy.
The existing production technologies are highly ineffective due to high level of energy
consumption. This fact is considered as a main reason for prevention of application ofmagnesium in a wider scale.
Development of new and effective technologies is vital for the above mentioned industries,
especially at current recessionary economic climate.
ECOATOM LLC has developed a new hydrometallurgical
technology for production of magnesium.
Furthermore, the Company has developed small size
production units to demonstrate the application of the
new technology.
It should be indicated that the new technology is financiallysound both for the purpose of direct and indirect
investments.
It is proposed to set up a plant for production ofmagnesium with operational capacity of 1000 tons per
year. This annual capacity will be enhanced in the future
to 5000 tons per year. With this vision, Armenia may
become a regional center for magnesium supply.

COMPANY DESCRIPTIONECOATOM LLC founded in 1992, is a leading company in the field of research and11development of industrial technologies. The Company has developed numerous industrial
technologies with environmentally safe applications. Those are in the fields of renewableenergy, purification, mining and metallurgy. In particular, the Company has worked out
new models of electrodialisers which have been successfully installed in various industrial
areas. The new electrodialisers are designed to solve specific industrial problems such as
separation of certain elements and isotopes from solutions, production of hydrogen, andproduction of electricity through electrochemical generators. It is worthwhile to note that
the Company has made considerable industrial input to address the abovementioned
issues and has developed prototypes and testing models.
The Company's management comprises of highly reputable scientists and engineers. All ofthem are recognized for their valuable contributions to the development of science andresearch as well as for their innovations in technology and commerce.
MARKETFirst of all, the domestic Armenian market is an
important consumer. At present, Armenia plays aleading role in the region in terms of mining andextraction of certain metals. However, theproduction process of these metals is notcomplete. This issue can be resolved by theestablishment of magnesium production sincemagnesium is considered as one of the strongest
restorers of metals.
Additionally, magnesium has a strategic
importance due to its application in the defence
industry where it is used in production of various
explosives.

Most of the production is planned to be exported, preliminary purchase contracts are inplace.

FINANCIAL ANALYSIS
Financial analysis and cost calculations have been carried out. It has been estimated thatinvestment of USD 6 million would be required for the project. It should be noted thatinvestment of USD 100 mln, is normally required for the establishment of magnesium
producing plant in accordance with traditional production technologies. It should beemphasized that the new technology excludes the use of some very expensive components
historically present in traditional technologies. Thus, it reduces the level of investment
needed significantly. Moreover, production process is quite cost effective, which explains
the low level of cost of production of the metallic magnesium produced.
•

World market volume - 2,000,000,000 USD•

Estimated annual market growth ca. - 15-20%•

Players: China, USA, Kazakhstan, Russia•

Production cost - 2000 USD/ton

12

Cost of production of magnesium in China is known worldwide as the cheapest. It is around
USD 1800 per ton. As a result, China offers the lowest market price, which is USD 2600 per
ton, whereas in Russia and Europe the magnesium price is around USD 3100 per tones.

Cost price in case of traditional way of magnesium production using electrolysis 1800 - 2900 USD / ton
Cost price in case of using Ecoatom new technology of magnesium production - 550
USD / ton
Competitive advantages• Current available market offers - 3 times lower cost price•

Natural Resources - Armenia is rich with the raw material for magnesium
production

Project Implementation TimeframeYear 1: The Company will be provided with USD 1 mln, which will be utilized for the
purpose of establishment of the first module with 300 tons per annum production capacity.
For the first two months, the Company will get USD 0.4 mln in order to start the
preparatory work and build up a required technical structures and resources. For the restof the Year 1, the Company will need USD 60,000 on a monthly basis to pay salaries and tomeet its tax obligations.
Year 2: To fund the costs of the plant construction and mines (including licensing andexploration), theCompany will receive USD 1.5 mln. Meanwhile, the production of the first module will belaunched with 25 tons per month production capacity. It is estimated that this will bring a
profit of USD 75,000 on a monthly basis.
Year 3: The Company will receive USD 2.5 mln in order to fund the preparatory work of
the exploitation of the mine.
Year 4: The plant will start its operation with full capacity i.e. at 1000 tons per annum.

The loan tenor is to be 60 months with 36 month grace period. The loan will be collaterisedby the output of production. Additionally, it will be guaranteed by the presence ofcustomers in Armenia and Russia, who would buy the entire annual output (agreements
exist with selling price of USD 3000 per ton).
It should be noted that in three years period of time, the Company will make a profit of USD
3 mln, which will be directed to the repayment of the capital and accrued interest of the
loan.

13

Armenia is rich with various minerals and fossils. There are more than 500 sites inArmenia that are rich with more than 60 types of minerals (copper, molybdenum, iron,zinc, nepheline syenite mine, lead, mercury, arsenic, scandium, vanadium, etc.).
Armenia is also rich with gold, silver and platinum mines. The largest operating mines are
Zod and Meghradzor. Gold reserves
amount in gold-sulphide mines reaches
247 tons, meanwhile the same amount of
anticipated resources mines reaches 351
tons.
The process of gold refining can be
carried out by chemical, electrochemicalso-called Miller method.
The chemical method is used applying toiron sulphate, nitric and hydrochloric
acid. It can also be used in case of small
quantityrefinement
andtheelectrochemical method is expedient to be applied in the case of large-scale and continuous
processes, when refined material has no less than 900 fineness with low silver content.
The refinement using Miller method is carried out by means of contacting gold containing
material with chlorine gas referring to more than 700 fineness high-purity gold and highcontent of silver.
The selection of the listed gold refining technologies can be done based on the features of"Dore" alloy that is used as a raw material for refinement.
Currently there are some gold refining capacities, that can refine no more than 4 tons ofgold by chemical method.
They are the following: “Assat” LLC, located in the Masis town, Ararat region. The enterprise has an annualrefining capacity of 1.5-2 tons of gold, as well as mining concentration plant.

 "Gold Factor" LLC, based in Yerevan. The company has a license issued by the
Ministry of Finance of Republic of Armenia for refining precious metals and14•

producing bank gold and standard bullions, manufacturing bank gold and license
The company's capacity allows to refine 2 tons of gold per year.
PurposeThe close of the value chain and the acquisition of higher value-added through the
expansion of gold processing extracted in Armenia (as a result of refining "Dore" type ofgold alloy), which would enable to produce standard bank gold bullions of 999.9
fineness.
•

Obstacles-

Lack of strong gold refining plant,
Necessity of the international certification for standard bank gold bullions

Project attractiveness (relevance)
Currently there are 8 gold mines operating in Armenia (14 mines are still under
explorarion). The largest of them is Sotk mine, which is now operated by "GeoProMining
Gold" company and produces around 4.2 tons gold in "Dore" type alloy (in 2015 it willreach 4.7 tons).

As a result of an investment project
implementationby“LydianInternational” company, 10-12 tonsof gold alloys will be produced in
Armenia in 2017, which makes
expedient the construction of thegold affinage plant in Armenia.
In 2013 Armenia imported 3.8 tonsof gold, which was mainly used in
the production of jewelry or forsale as bank bullions.
According to the Strategy of Export-Led Industrial Policy approved by the Government of
Armenia, jewelry was identified as a priority sector (from the perspective of export
potential), in terms of which, in 2013 jewelry, watchmaking and diamond-cutting strategy
and a three-year appropriate action plan were approved. It supposes an implementation ofsuch actions and support toolkit by the state that will affect on significant increase of
production volumes resulting increase of demand for gold bullions.

15

The free economic zone operating in Armenia will also contribute to significant growth ingold consumption in the country. Taking into
account a long-term increase of demand for gold
and considering annual 6-7 tons of gold as aninternal demand in the domestic market, therefining (affinage) of gold alloys in Armenia canbe used in a production of bank gold bullions,
simultaneously taking part in international trade.
Examining sectoral developments in the externalmarket, it can be stated that during 2015-2020
continuous growth in consumption is expected in
Asian developing countries (India, China, Middle
East) up about 30% per year. In West, the jewelry
products consumption growth is expected to be relatively small, about 5% per year on the
average.
Taking into account the forecasted growth of gold demand (both internal and external), as
well as the application of new capacities in gold mining in Armenia, it is expedient to carryout gold refining (affinage) process in Armenia.
Affinage is an extraction process of precious metals from other compounds. Affinage can be
defined not only as an extraction process, but also as a certification of products andcompanies carrying out affinage. Gold mining companies not only produce refined gold, butalso assure (certify) the weight and purity of the bullions produced by them.
To be recognized as an object of the international trade, bank gold bullions produced in
Armenia will need to be certified (“London Good Delivery”) by the international
certification organization. For this purpose, it is necessary to cooperate with seven member
investment banks of London clearing company (London Precious Metals Clearing Limited,
LPMCL), which are the following: HSBC, JP Morgan, UBS, Barclays, Deutsche Bank andScotiaMocatta.
•

Scenarios and development
trendsTwo scenarios of refinement are
observed:

Scenario 1. Construction of apowerful plant on the basis of theexisting gold refining factory inArmenia (“Assat” LLC, Masis city)
through equipping it.
Scenario 2. Selection of the plant
construction
locationand16construction of a new gold affinage plant.
•

Market potential for company's products

 Jewelry sector in Armenia can become a domestic market for consumption (about 57 tons per year), Consumption can be also done in a form of standard bank bullions via London Stock
Exchange of precious metals,
 State Treasury.
•

Financial assessment of investments

According to preliminary estimates, the construction of the gold affinage plantwith up to 20 tons capacity will require investments up to 10-12 million USD.
International practice shows that affinage service cost is calculated at a rate of up to 1%of the value of the refined gold. That means, in case of refining 15 tons of gold, the annual
turnover of the company will reach about 6.5 million USD and if done via the London Stock
Exchange of precious metals, the company's profit will increase significantly.
•

Potential stakeholders

The entities mentioned below are eligible to participate in the funding for the gold
affinage plant construction:••••

Interested gold mining companies

Potential consumers (jewelry sector companies)
Banks

Sale of stock17

PRODUCTION OF ACID-RESISTANT
MATERIALS USING BASALT“Karakert stone factory” is equipped withtechnological melting machinery (open hearth
furnaces), which allows to produce basalt acid-resistant materials that are applicable in mining
and transport sectors, particularly in the sphereof transportation or storage of chemical

aggressive substances, producing basalt acid-resistant pipes and tiles.

Project's expediency and core directions of the required investments.
Project's implementation expediency is determined by the following factors:••

Armenia is rich with basalt having one of the largest basalt reserves in the world(350 mln cubic meters) which are of high quality.

Currently there is a big demand of basalt acid-resistant materials worldwide as their

exploitation period is ten times longer than period of the same products made ofmetal.

According to preliminary assessments the necessary investment for project
implementation is estimated around 5 mln USD.

18

Investments will be directed to:•

Repair, modernization and replenishment of the existing equipment for the
production of acid-resistant materials.

• Replenishment of working capital.

Application of materials.

Acid-resistant materials produced by basalt melting are applicable in the construction of
sewage pipelines, underground tunnel niches and tailing pipelines.
Expected outcomes
Annual production of up to 40 thousand tones of basalt acid-resistant materials.

PRODUCTION OF THERMAL INSULATION
MATERIALS USING PERLITE PROCESSING“Karakert stone factory” is equipped withtechnologicalmachinery,

which

gives

opportunity to process perlite and obtainthermal insulated foamed glass, which is

widely used in construction of thermal

insulation buildings and in the field ofenergy-efficiency.

Еxpediency of the program and themain directions of required
investments
The еxpediency of programs implementation is based on the following.
•

One of the largest world’s reserves of perlite (3 billion cubic meters) is located in19•

Armenia. Perlite in Armenia has high qualitative characteristics.

Nowdays energy efficient products are in great demand. The whole export potential
can be utilized by exporting to CIS and other countries of the region.

According to preliminary assessments the necessary investment for project
implementation is estimated around 10-12 million USD.
Investments will be directed to:••

Reconstruction and modernization of equipments, which are used for thermal
insulation materials production.

Replenishment of the working capital.

Current capacities allow producing about 430 thousand cubic meters annualy.
For annual production of 100 thousand cubic meters of thermal insulation materials
financial indicators will be as follows:
Production
volume,thousandcubic meters

Price/ USD

Annualrevenue/mln USD

Profitability%

Income, mln
USD

Payback
period year

600

60

10

6

2

100

Expected results••

Production of thermal insulation materials which have great demand inconstruction sector.

Increase of production and export volumes.

20

PRODUCTION OF SPECIAL SOLIDGLASS USING KANAZIT“Karakert stone factory” is equipped withtechnological machinery (open hearth
furnances), that allows making special

solid glass using kanazit. Solid glass is
widely used in aviation, space industry

and production of products for special
purposes.

Еxpediency of the project and main
directions of the required investments
Project's implementation expediency is determined by the following factors:••

The world largest reserves of perlite deposits (3 billion cubic meters), where perlite
is of high quality.

Nowadays solid glass has a huge global demand. There is certain high potential ofexporting solid glass to CIS and other countries in the region.

According to preliminary assessments the necessary investment for project
implementation is estimated around 15 million USD.
Investments will be directed to:•••

Maintenance of buildings and facilities.

Organization of perlite processing for the purpose of getting kanazit.

Purchase of equipment for solid glass production.

Expected outcomes•

Production of solid glass which has great deman worldwide.

21

Carpet weaving was one of the most developed

sectors in Armenia during Soviet Union period.
There were both handmade and machine madecarpet productions. Around 1.2 mln. sq. m. of

carpets was produced and sold in Soviet Union
republics as well as substantial quantity was
exported to Lebanon, Kuwait and other countries.

The biggest production site of machine madecarpets had a capacity of 1.5 mln. sq.m. of annual
production.

Duringrecentyears

newmanufacturing site was constructed in Armenia

which has 100 thousand sq.m. carpet production capacity.

These plants have retained their manufacturing capacities but are working with minimalloading. The aim of the investment project is to restore machine made carpet production in
Armenia.

Project's implementation expediency is determined by the following factors:•

Machine made carpet industries are still functioning and have necessary morally•

and physically not outdated equipment.

•wool in particular.

•

made of wool and synthetic materials.

Availability of appropriate labor force and possibility to use local raw materials,
Production has the potential to produce carpets, floor mats and carpeting both
Sales can be organized in Armenia, since studies have shown that in recent years
Armenia has imported about 500 thousand sq. m. of carpets and floor carpeting.
22•

If operate precise and optimal size of production capacity, it is possible to obtaincompetitive products and export to countries of the Eurasian Economic Union,
European Union and Arab countries.

According to preliminary assessments the necessary investment for project
implementation is estimated about 1,5 – 2,0 mln USD.
Invesments will be directed to:•••Renovation of the production buildings.

Technical inspection of the equipment, repair works if necessary.
Working capital required for uninterrupted production cycle.

Most of the required investments will be directed to replenishment of the working capital

For annual 200,000 sq.m. carpet production financial indicators will be as follows:

Production
volume,thousandsq.m.

Unit Price /USD

AnnualRevenue/million USD

Profitability%

Income,million USD

Payback
period / Year

200

30

6

10

0.6

4

Expected outcomes••

250-300 workplaces will be created.

Growth of production and export volumes of machine made carpets.

23

Company: Data Safe LLC
Location: Yerevan, Armenia
Project cost: USD 21M
General information about the initiator of the project:
The project involves the construction of a data center in Armenia by a group of investors
withsuccessstoriesintelecommunications (wireless and fiberoptic)
andsuccessful
startupmanagement team with more than 15
years of experience in ICT.
The investors of the project are
renowned for having founded one of theleading telecommunication companies
in Armenia GNC-ALFA CJSC where they
currently hold a stake. Particularly, GNCALFA CJSC was founded in 2007 and in
February 2012 the company became amember of Rostelecom PJSC group ofcompanies
andprovidestelecommunication services in RA underthe brand of “Rostelecom” as a subsidiary company. The network of Rostelecom Armenia issolely based on fiber-optic cable (FOC) infrastructure covering 80% of the territory of RA
and spreading for over 3000km. It is connected to region’s main terrestrial networks andlargest tra c exchange nodes as well as international channels of Iran and Georgia.
As one of the leading telecommunications companies of Armenia GNC-ALFA CJSC provides
a wide range of services to physical bodies, corporate clients and operators includingInternet access, Fixed telephony and new generation IP TV services.
The Government of Republic of Armenia, State institutions and Internationalorganizations, Corporations, local Commercial Banks and Financial institutions,operators are listed as corporate clients of GNC-ALFA CJSC.

24

Project description:
Within the scope of the project, it is planned to build the first ever Tier3 carrier neutral
data center in Armenia with a capacity of 500 Racks (300 in Stage 1 and 200 in Stage 2).

The project will allow the provision of services from A to Z including colocations, clouds, IT
security, caching of data content (Google, Akamai etc). The Services are targeted to both
domestic and International markets. During the first years of implementation of the project
it is expected that 71% of sales will be generated from International markets, including:• Iran – 60%• Middle East – 30%• Eurasian Economic Union – 10%

Increase in the share of domestic revenue is expected starting from Y3 related to the
expected growth of the local market both in B2G (E-Governance projects) and B2O (local
tra c increase requiring large upgrades in data storage and mirroring capacities).
The main advantages of implementing the project in Armenia are as follows:• Favorable geopolitical position which allows the company to become a gateway for
multinationals for cloud services for Iran and Middle East and countries of Eurasian
Economic Union.

• Existence of multiple path fiber–optic backbone connectivity with Georgia and Iran andultimately the shortest terrestrial route connecting Europe with Asia (using local Investor’s
telecommunication infrastructure).
• Existence of nuclear energy as well as fast growing alternative energy sector (solar)
with the possibilities of cheaper and green energy.
• Liberal data storing laws in the country.

• Existence of highly qualified ICT professionals in the country.

25

PROJECT FINANCIAL INDICATORS:
The main financial indicators of the project are presented below:
Investment

21M

EBITDA

0.6 M (first operational year)
1.1 M (second operational year)
2.4 M (third operational year)
4.3 M (fourth operational year)
6.4 M (fifth operational year)

Sales

Net Profit

IRR

Payback Period

1.1 M (first operational year)
3.2 M (second operational year)
4.9 M (third operational year)
7.2 M (fourth operational year)
9.7 M (fifth operational year)(1.6) M (first operational year)(0.2) M (second operational year)(0.9) M (third operational year)
2.2 M (fourth operational year)
3.8 M (fifth operational year)23%

7 months

26

Company: Mavas Group LLC
Location: Dzoraghbyur, Kotayk marz, Armenia
Project cost: USD 14M
General information about the initiatorof the project:
Established in 2005 as an international
freight forwarding company, Mavas Grouphas gradually expanded to providing
certification of food and nonfood products,
customs brokerage and laboratory services.

Since 2008 the Company started the
production of fresh tomato and cucumber.
Currently the Company operates 15
hectares of greenhouse constructed in accordance with latest Dutch technology. All the
production phases – heating, growing of plants, fertilization, CO2 enrichment, prevention of
possible diseases – are managed through automated systems controlled by qualified
international specialists. Greenhouses are constructed in six di erent blocks, which allows
to have 2.5 hectares equipped with special lighting systems ensuring 24 hour “sunlight”,
which is very important factor especially for growing cucumbers, which are very sensitive
to light.
The Company is one of the market leaders in Armenia for the production of fresh tomato
and cucumber with monthly capacity of 600 tones for tomato and 50 tones for cucumber. It
accounts for about 70% (as of 2014) of local production of fresh tomato and circa 95%(Y2014) of fresh cucumber. The company’s production capacities are 95% and 5% fortomato and cucumber respectively.
Mavas Group is also one of the major exporters of fresh tomato to Russian market and isdeveloping distribution network in other Eurasian Economic Union member countries.

27

Worth to mention that, with current capacities, the company is able to satisfy only 20% of
the demand from Russian partners. Meanwhile, important to point out, that the Russian
producers meet only 10-12% of Russia’s demand. Hence, there is a tangible gap to fill in. In
parallel with growth at Russian market, the company is considering expansion to
Kazakhstan, Belarus and Middle East countries as well.

Project Description:

The company is planning 6,5 ha of expansion on the already acquired land plot – on top of
the existing production of 15 hectares with a total project cost of 14M USD. The Company
would also like to fully or partially refinance the existing loans of USD33mln to local banks
to improve the cash flow and P&L profile of the Company. The expansion will allow thecompany to increase export volumes to traditional export markets using the economies ofscale and expand to new markets in a longer term.

The excess demand from current o -takers gives the opportunity to increase the exports
without any additional Sales e orts. The high quality products are highly demanded in dierent regions and new partners are eager to start cooperation with the Company. The
expansion will be at a lower cost than the construction of the previous hectares of thegreenhouse. Given the existing service area and other amenities the expansion project willtake advantage of the economies of scale.
PROJECT FINANCIAL INDICATORS:
Investment

21M

EBITDA

USD 8.5 M (first operational year)
USD 8.6 M (second operational year)
USD 8.7 M (third operational year)
USD 8.8 M (fourth operational year)
USD 8.9 M (fifth operational year)

Sales

Net Profit

USD 11.7 M (first operational year)
USD 11.8 M (second operational year)
USD 11.9 M (third operational year)
USD 12.0 M (fourth operational year)
USD 12.2 M (fifth operational year)

USD 1.0 M (first operational year)
USD 1.7 M (second operational year)
USD 2.3 M (third operational year)
USD 3 M (fourth operational year)
USD 3.7 M (fifth operational year)28Company: SPAYKA LLC
Location: Hrazdan, Kotayk Region, Armenia
Project cost: USD 100M
General information about the initiator of the
project:
Starting as an international freight forwarding
company, Spayka is now a group of companies, which,in addition to providing transportation services to EU
and CIS markets, also involved in fresh fruits andvegetables exporting, operating orchards andvegetables greenhouses, manufacturing of variety ofjuices with desserts, pickles and preserves. Packaging is another core activity of thecompany – it produces boxes and pallets from polystyrene foam to the best international
standards and health requirements for fishery and pharmaceutics.

The company started its operations in 2001 as a freight forwarding company and now hasa fleet of more than 200 trucks. In 2010, it launched production of packaging boxes andpallets from polystyrene foam and PP, made by cutting edge German technology. In 2011,
company established a new production line – Araratfood and Araratfruit canned products.
Currently, the company is the biggest exporter of agricultural products from Armenia. It
directly purchase agricultural products from farmers, process, package it, and distribute
through own controlled sales channels in CIS countries. During the years, the company has
developed long-term business relationships with the largest trading networks in target
markets, which allows organizing successful exports of high quality agricultural produce
from Armenia with a potential of more than 300 thousand tons.

Recently Spayka has established a new line of business – vegetable production ingreenhouses, constructed in line with latest available technological achievements in thefield. The greenhouse complex with total area of 30ha for radish production is located in in
Ararat marz and is operated since March 2015 by Spayka’s agro technical team. Currently
29company achieved a 20% radish market in Russia, successfully targeting European market
and planning to enter Iranian market shortly.
Project Description:
Within the project an up-to-dategreenhousecomplexwillbeestablished in Hrazdan region withtotal area of around 100ha. It will beequipped with modern technology toensure high yields, minimum costand maximum quality using naturaladvantages of local climate andlabor.

It is planned to grow tomato andpepper in this greenhouse. The projected production season will be from October to Julyand the projected annual production capacities will be 5,000 tons of pepper and 44,000
tons of tomato. The new semi closed greenhouse technology adding new value incompetitive climate advantages of the region which will allow decreasing production costs
by 15-35% and ensuring comparable quality. Current sales contracts with retail chains in
Russia allow covering about 5% of the tomato and 3% of the pepper demand of the Russian
market with this project.
PROJECT FINANCIAL INDICATORS:
Investment

USD 100M

EBITDAUSD 41.5M

Sales

Net Profit
IRR

Payback Period

USD 69M
USD 33M
24%
4.1

30

Company: Ecotomato CJSC & Armyanski Urajay LLC (jointly, “the Group”)
Location: Goght village, Kotayk marz, Armenia
Project cost: USD 26M
General information about the initiator of the project:
Established in 2011, the company is currently
operating one of the largest cut roses’ productionhydroponic greenhouses in Armenia, which is
fully designed and assembled by the leading
Dutch and French greenhouse technology supplier– DALSEM and RICHEL. The Group started its
operations from a two‐hectare greenhouse andgradually, during five years time, expanded to
18.5ha, of which 17ha are fully equipped andoperational greenhouses and the rest is service
area. The company is one of the market leaders ingrowing cut roses in Armenia with current
monthly production of around 1 million roses, growing up to 22 varieties. The company iscurrently holding exclusive rights on growing the main commercially successful types ofroses, among which are:
•
•
•
•
•
•
•

Red Naomi,
Penny Lane,
White Naomi,
Angelina,
Ski,
Sugar Lips,
AnnaKarina.

Around 25% of grown roses are sold on the local market and the rest exported to Russia,
Georgia, Belarus, the Netherlands and Sweden. The Company is constantly working on
31

expanding its exporting geography. Particularly, recently it started cooperation with thewholesalers in Kazakhstan, which soon will become the next export destination. The Groupis not exporting by its own, but rather cooperating with specialized leading
logistics/transportation companies at the export markets. Worth to mention that as a
producer of agricultural products, the company is exempt from paying profit tax (20%).
Additionally, membership of Armenia in EEU allows the Company to enjoy the customs
duty free exports to the countries of the Union: Russia, Kazakhstan, Belarus andKyrgyzstan.

Project Description:
The Company is planning 17 ha of expansion on the already acquired land plot – on top of
the existing production of 17 hectares with total project cost of 26M USD. The Company
would also like to fully or partially refinance the existing loans of USD 33 mln to local banks
to improve the cash flow and P&L profile of the Company.
The expansion will allow the company to increase export volumes to traditional export
markets using the economies of scale and expand to new markets in a longer term. The
excess demand from current o‐takers gives the opportunity to increase the exports without
any additional sales efforts. The high quality products are highly demanded in different
regions and new partners are eager to start cooperation with the Company. The expansion
will be at a lower cost than the construction of the previous hectares of the greenhouse.
Given the existing service area and other amenities the expansion project will takeadvantage of the economies of scale.
PROJECT FINANCIAL INDICATORS:
Investment

USD 26M

EBITDAUSD 18M (Second operational year)

Sales

Net Profit
IRR

Payback Period

USD 27.5M (Second operational year)
USD 10M (Second operational year)54%

18 months

32

According to Wind Energy Resource Atlas of Armenia elaborated by NREL /National Renewable
Energy Laboratory/ of USA in 2003, the economically justified potential of wind energy is about
450 MW.
The main perspective sites are located in Zod
pass, in Bazum Mountain (Qaraqhach andPushkin passes), in Jajur pass, in the territory ofGeghama Mountains, in Sevan pass, in the regionof Aparan, in highlands between Sisian and Goris,in the region of Meghri.
The first wind power plant in Armenia and in
Caucasus with total capacity of 2,6 MW was put in
operation at Pushkin pass in December 2005. At
the mentioned site it is foreseen construction ofwind power plant with total capacity up to 50MW.

In 2012 “Sanders and Partners” company with theassistance of German KFW Bank implemented
and provided Ministry of Energy and Natural
Resources of Republic of Armenia with the windpotentialassessingcomputermodeling
application. The application is a database for
1981-2011 wind potential assessment.

Monitoring works of wind potential at Qaraqhach
pass in the Shirak Marz have been completed by«Ar Energy», Armenian - Italian private company.
The company has obtained a licence from the
Public Services Regulatory Commission to
construct “Qaraqhach 1” wind farm with 20 MW
capacity, which will be later enlarged up to 140 MW.

33

“SEMYONOVKA” WIND POWER PLANTCONSTRUCTION PROJECT
The project assumes the installment of 34 MW wind
power plant in Gegharkunik region of Armenia. The
project site is located at Semyenovka pass area atelevation of 2,345m above sea level. The site is at
distance of 5km from the Tsovagyugh village. It has
well developed infrastructure with access roads,
proximity to railway and grid (35 and 110 kVtransmission lines).
Installed capacity
Annual energy generation
Required investment

34 MW

62.4 mln. kWh
60 mln. EUROWithin the framework of EU TACIS program “Assistance to Energy Policy of Armenia” themonitoring works have been carried out at Semyenovka pass in the Sevan region and theprefeasibility study for the construction of wind power plant was elaborated. Based on theanalysis of the landscape, the installment of 17 wind turbines (Gamesa G80) each with an
installed capacity of 2.0 MW is planned; hence the total installed capacity of wind park wil
be 34.0 MW.

Based on existing monitoring data, the average annual wind speed in the area is 6.4 m/s.
The gross annual energy production of the wind farm is 71.8 GWh, the calculated amount ofannual electricity delivered to the grid is 62.4GWh. The wind farm capacity factor is 21%.
The construction works are expected to last for 9 months, the project lifetime is estimatedto be 25 years. Government will provide land plot for the construction of WPP, support for
obtaining all necessary permits, determine up-front fixed tariff and ensure purchase of allelectric energy produced by the plant.
PROJECT FINANCIAL INDICATORS:
Project IRR (%)
NPV, €
Simple payback period (years)
Production cost, €/kWh

11.6%
701, 600
8.90.075534

RENEWABLE ENERGY
Geothermal Energy
During the recent years one of
the most actual and important
problems in Armenia isinvestigation and explorationof the geothermal sources – asrenewable energy resource
withcapacity to “firmcapacity”
forbase-load
coverage.
Utilizationofrenewableenergy resources reduces
dependence on imported fuels
and will increase energy security level. It will also increase the own Renewable energy productionin the whole energy production, as well as will reduce an amount of the greenhouse gas
emissions.

“JERMAGHBYUR” GEOTHERMAL
POWER PLANT CONSTRUCTION
Investigations have been conducted to reveal the
precise sites of geothermal energy sources forconstruction of geothermal power plant

One of these sites is Jermaghbyur, where according
to geological and geophysical explorations highpressure (20-25 atmosphere pressure) hot water/up to 250°C / resources are considered to beavailable in depth of 2500-3000 meter. In case ofconfirmation of this data, it will be possible toconstruct the first geothermal power plant inArmenia with 25MW capacity in this area

35

JERMAGHBYUR GPP:
GENERAL CHARACTERISTICS
Plant location
Geothermal resources min. temperature, depth
Required investments
Installed capacity
Tariff used in economic calculations
Break-even tariff (self-covering)
Plant factor
Annual generation
Construction and installation
Plant operation cycle
Project overall duration
Payback period

36

Jermaghbyur, Syunik Marz
250°C
2500-3000m
44 mln. USD
25 MW
4.50 US cent per kWh2.44 US cent per kWh
88%194.4 mln. kWh
2 years
28 years
30 years
12 years including 2 years ofconstruction

“KARKAR” GEOTHERMAL POWER
PLANT CONSTRUCTION PROJECTThis area is the center of the youngest volcanic
activity in Armenia. In this area, carried out
detailed geological mapping and a variety ofgeophysicalsurveys,includingmagnetotelluric, seismic, magnetic and gravity
surveys.
As a result of project’s implementation at
Karkar geothermal site power plant of 28 MW
capacity will be constructed.
Installed capacity
Investments required

Surveying

28 MW
106 mln. EURO
Temperature
110° C(mln. US$)

Temperature
130° C(mln. US$)

Temperature
300°C(mln. US$)

0.5

0.5

0.5

Wells

43-75

29-52

25-39

Substation

0.5

0.5

2

Road access

0.5

0.5

Power plant
Transmission line

27

22

2.7

48

2.7

2.7
0.5

Equipment
transportation

0.27-0.41

0.21-0.31

0.34-0.49

Contingency

5.6

4.5

10

Engineering
Total

5.6

4.5

85.67 - 117.91

64.41 - 87.51

3710

99.04 - 113.19

Project Background:
Armenia has a significant advantage in terms ofsolar energy: the country is situated in theproximity of subtropical zone; most territory of
the country have favorable climatic conditions
that make wide use of solar energy possible.
There are on average more than 2500 sunny
hours per year and the average annual amountof solar energy flow per square meter ofhorizontal surface is about 1720 kWh (theaverage European 1000 kWh). One fourth ofthe country’s territory is endowed with solar
energy resources of 1850 kWh/m2.
Additionally, wide variety of siliceous raw
material from various sources and morphology
is also available in the country.

38

12.5 MW DASHTADEM PV PLANTCONSTRUCTION PROJECT
Project cost: USD 15.98 million
Location: Dashtadem‐Talin, Aragatsotn Province (Armenia)
IRR: 15%
Net proﬁt 2020: USD 249,172
EXECUTIVE SUMMARY
Feasibility study was prepared for a Solar PV 10.47 MW power plant located in themunicipality of Dashtadem-Talin. These works are part of the activities carried out by Aries
for the Armenia Renewable Resources and Energy Efficiency Fund within the contract“Feasibility Study and Transaction Advisory Services for Preparation of Utility-Scale Power
Project”.
The land plot used for the study was selected during the previous stages of the projectbased on meteorological, topographical, environmental and other characteristics, as well as
shape, available area and accesses, in order to optimize the development of the project.
ARIES has rendered a plant design, including its grid connection infrastructure, adjusted tothe specific characteristics of the Site, in order to assess the feasibility of a PV plant in theselected Site.
The proposed design consists of 4 units with nominal output power of 2.3MW plus one unit
with nominal output power of 1.2 MW, each one formed by several parallel and series
associations of photovoltaic modules, which in turn are mounted on fixed structures withhorizontal PV module assembly.
Considering the estimated costs and production, as well as the financial structure andconditions expected for the project, a financial assessment has been rendered with a resultof US$ cents 6.63 per kWh.
The preliminary site analysis results indicate that the selected area for the photovoltaic
plant is suitable: good solar resource, good communication infrastructures, adequate
orientation, without environmental constraints and free from trees or any kind of building
which could produce shadows, decreasing theperformance ratio of the photovoltaic
modules.
SITE LOCATION
Location: Dashtadem-Talin, Aragatsotn
Province (Armenia)
Geographical coordinates and altitude:
Latitude: 40º 20.305’ N.
Longitude: 43º 50.307’ E.
Altitude: 1400 m above sea level.

The plant generation will be 21.30 GWh in the first production year and 18.89 GWh
by the end of the projection period.

39

Financing of project investments
The project CAPEX financing is envisaged to be performed by SREP, IBRD, commercial banks
and equity. For the base case the overall financing scenario of the current project is summarized
in the following table.
Overall project financing scenario

Financing sources

Type

IBRD

Concessional Loan

SREP

Concessional Credit

Guarantee covered Commercial Bank

Guarantee Uncovered Commercial Bank
Developer (equity)%US$

50% 7990651

Loan

30% 4794391

Equity20% 3196260

Loan

Income Statement
YEAR
Net Revenue
Operatingand maintenancecost
EBITDA
Depreciation
EBIT
Interest expense
EBT
Corporate tax
Net profit

2018

2019

2020

2021

2022

2027

2032

2037

2042

US$ 1577756 1569868 1562018 1554208 1546437 1508161 1470832 1434427 1398923

US$ (213675) (219017) (224492) (230104) (235857) (266850) (301917) (341591) (386479)
US$
US$
US$
US$
US$
US$
US$

1364082 1350851 1337526 1324104 1310580 1241310 1168915 1092836 1012444(743700) (743700) (743700) (743700) (743700) (743700) (743700) (743700) 620381 607151 593826 580403 566880 497610 425215 349135 1012444(339022) (310691) (282361) (254030) (225700) (83381) (12652) (5993) 0
281360 296460 311465 326373 341180 414229 412563 343142 1012444(56272) (59292) (62293) (65275) (68236) (82846) (82513) (68628) (202489)
225088 237168 249172 261099 272944 331383 330050 274514 809955

The project is feasible from the financial point of view. It shows a tariff need of US$
cents 6.63 per kWh in the base case where the 50% of the project is financed by SREP
concessional credit and 30% by WB guaranteed commercial loan. Fully concessional
financed project (SREP+IBRD) will lower the tariff to US$ cents 4.79 per kWh and fullycommercial without WB guarantee will reach a tariff of US$40

55 MW MASRIK PV PLANTCONSTRUCTION PROJECT
Project total cost: 65,230,000 USD
Location: Mets Masrik, Gegharkunik Marz (Armenia)
IRR: 15%
Net proﬁt 2020: USD 488,709
EXECUTIVE SUMMARY
Feasibility study was prepared for a Solar PV 46.55MW power plant located in themunicipality of Masrik. These works are part of the activities carried out by Aries for the
Armenia Renewable Resources and Energy Efficiency Fund within the contract “Feasibility
Study and Transaction Advisory Services for Preparation of Utility-Scale Power Project”.
The land plot used for the study was selected during the previous stages of the projectbased on meteorological, topographical, environmental and other characteristics, as well as
shape, available area and accesses, in order to optimize the development of the project.
ARIES has rendered a plant design, including its grid connection infrastructure, adjusted tothe specific characteristics of the Site, in order to assess the feasibility of a PV plant in theselected Site. The proposed design consists of 20 units with nominal output power of
2.3MW, each one formed by several parallel and series associations of photovoltaic
modules, which in turn are mounted on fixed structures with horizontal PV module
assembly.
Considering the estimated costs and production, as well as the financial structure andconditions expected for the project, a financial assessment has been rendered with a resultof US$ cents 6.39 per kWh.
The preliminary site analysis results indicate that the selected area for the photovoltaic
plant is suitable: good solar resource, good communication infrastructures, adequate
orientation, without environmental constraints and free from trees or any kind of building
which could produce shadows, decreasing theperformance ratio of the photovoltaic modules.
SITE LOCATION
Location: Mets Masrik – Mets Masrik,
Gegharkunik marz (Armenia).
Geographical coordinates and altitude:
Latitude: 40º 13.564´N.
Longitude: 45º 43.565´E.
Altitude: 1930 m above sea level.

The plant generation will be 89.11 GWh in
the first production year and 79.01 GWh by the end of the projection period.

41

Financing of project investments
The project CAPEX financing is envisaged to be performed by SREP, IBRD, commercial
banks and equity.
For the base case, (scenario 1) the overall financing scenario of the current project issummarized in the following table.
Overall project financing scenario
Financing sources

Type

IBRD

Concessional Loan

SREP

Guarantee Uncovered Commercial Bank
Developer (equity)
YEAR
Net Revenue
Operating andmaintenance costs
EBITDA
Depreciation
EBIT
Interest expense
EBT
Corporate tax
Net profit

US$

Loan

30%

19570725

Equity20%13047150

Concessional Credit

Guarantee covered Commercial Bank

Income Statement

%

Loan

50%

32617875

2018
2019
2020
2021
2022
2027
2032
2037
2042
5693641 5665173 5636847 5608663 5580620 5442492 5307784 5176410 504828(782853) (802424 (822484 (843047 (864123 (977676 (110615 (125150 (14159
4910789 4862749 4814363 4765616 4716497 4464817 4201634 3924902 363232(3050880 (305088 (305088 (305088 (305088 (305088 (305088 (305088 1859909 1811870 1763483 1714737 1665617 1413937 1150754 874023 363232(1383887 (126824 (115259 (103695 (921307 (340363 (51645) (24463) 476022 543627 610886 677785 744311 1073575 1099109 849559 363232(95204) (108725 (122177 (135557 (148862 (214715 (219822 (169912) (72646
380817 434902 488709 542228 595449 858860 879287 679647 290585

The project is feasible from the financial point of view. It shows a tariff need of US$
cents 6.39 per kWh in the base case where the 50% of the project is financed by SREP
concessional credit and 30% by WB guaranteed commercial loan. Fully concessional
financed project (SREP+IBRD) will lower the tariff to US$ cents 4.59 per kWh and fullycommercial without WB guarantee will reach a tariff of US$ US$ cents 11.43 per kWh.

42

Investment project of construction of the 33rd district (Firdusi) in Yerevan in the field of urban
infrastructure is prepared and is in implementation process.

According to the investment program the area is more than 5 hectares, where it is planned toconstruct round square of about 40 meters hight and 85 meter in diameter, under which it isdesigned to build amulti storeyed underground parking.
The square will be surrounded
by a number of new streets,
public and service facilities,business centers, hotels andresidential buildings. It isplanned to build a total area ofaround 200,000 square metersof buildings. According to theproject new buildings will have
7-9 and 12-13 floors. 19th
century’s monument buildings
will remain in their places.

According to the presented
project, this area, from one side,
being located near the Republic Square and from the other side near to Tigran Mets Street(according to A.Tamanyan’s general plan it was called Sothern Avenue), in future will beconnected with new road with Vernissage and it may also have cultural functions.
BENEFITS OF INVESTMENT PROJECT
•
•
•
•
•
•
•

Special price of $1500 per square meter of land for limited time offer
More than 10% of income across each lot
Possibility to implement project development during 3 years of construction process
Landscaping and site improvement
Connection to all external engineering communications
Consultancy during architectural construction workflow
Assistance during submission for architectural and construction permits

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Attractiveness and the advantages of theinvestment project according to the plan:••

Investor will deal only with thepurchase of the land, and the full
implementation of the tasks will be
carried out by construction
companies under the coordinationof the Government of Republic of
Armenia.

Investor won’t deal with the
aspects concerning engineering
infrastructure, improvement
activities, lighting, asphalt paving,as all this will be implemented by the specialized companies.

IMPLEMENTATION PERIOD OF THE INVESTMENT PROJECT IS 3-4 YEARS AND THE TOTALCOST OF PROJECT IS 89.9M USD.

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Location: Yerevan,
Armenia
Project cost: 98.34 mln.
USD
Project Background"Noah" ethnographic
district investment project
intended to develop a 9.2
hectare land plot situatednear the Dalma gardens,
in the geographical centerof Yerevan. It is planned to
implement a new systemof pedestrian streets,
which will give an
opportunity to locate various social and cultural groups like carpet weaving, handicrafts,
painting and also manuscripts exhibitions, museums, hotels, residential areas, ethnic foodvendors and more. The biblical tale of Noah and such unique district will play a major rolein the development of the cultural tourism.
The district is planned to build up with a local typical, cozy streets with the view to Mount
Ararat and with 2 to 3 floor buildings designed in the national folk style. Total construction
area of this project budget is about 98,500,000 USD. Taking into account that current
investment is taking place under the patronage of the Government of the Republic of
Armenia investors will receive unique benefits during project realization. These benefits
will be tangible during architectural project approval and construction permission process.

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46

CONCEPT
The proposed site for a new development is surroundedby various public services such as the Dalma Mall, Karen
Demirchyan Sports and Concerts Complex, Armenian
Genocide Memorial, and high‐rise residential towers.
Capitalizing on the already heavy foot‐traffic to the area,
the proposed project aims to offer unique activities thatwould appeal to locals and tourists alike. New
development would be of low‐rise and mid‐risebuildings with uses such as residential, commercial,retail, and cultural.

Carrying on the theme of uniting the different architectures of the Armenian provinces andcities such as Goris, Dilijan, Van, Kharberd, etc.,
the district will bring together Armenian wines,
foods and crafts from the regions, in one
centrally ‐located tourist haven. Amongst thequaint homes, unearthed history will create theenvironment of an open‐air museum, shops
occupying the ground floor will beckon visitors
enter and examine the artisanal goods, gourmet
delicacies
and highfashion,and lively market vendors will offer samples of theirfresh, locally grown produce to the shoppers. The
pedestrian streets of this residential neighborhood will
be open to the wider public, who can wander amongst
the historic symbolism of these folk homes and engage
in the activities offered in and around them.
Technical and economic figures of Noah ethnographic district
1
2
3
4
5
6
7
8

Site area
Gross area
Construction total area
Development budget
Total retail income in 5 years
Net profit
Return on investment within 5 years (ROI)
IRR

47

92.000 sq.m.
38.000 sq.m.
152.000 sq.m.
98.34 mln. USD
209.9 mln. USD
111.6 mln. USD
114%
23%

Concession, Investment and PPP implementation opportunities
North-South Road Corridor
Estimated length of North-South
Road Corridor
Design speed
Passing time
The length of existing road
Speed
Passing time
Total investment

470 km100 km/h
4,5-5 hours
about 560 km
30-90 km/h
9,5-10 hours

about 2,0-3,0 billion USD is estimatedfor project implementation

Brief presentation of the investment project
Existing and agreed financing: ADB financing - 500 milion USD

 EIB financing - 66 million + 132 million USD

 NIF (Neighbourhood Investment Facility) grant - 13.5 million + 13.5 million USD
 EADB financing - 150 million + 350 million USD
 Total – 1.225 million USD
Remaining – 0.7-1.7 billion USD

Implementation period - 2010 – 2020

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The North-South Road Corridor investment project is aimed at reconstruction of the
2nd - 3rd category carriageway with a speed limit of 30-90 km/hour that runs 560 km
from the Armenian border with Georgia at Bavra to the border with Iran at Agarak andupgrading it to 470 km-long 1st category high-speed carriageway with a speed limit of 100110 km/hour enabling
to cross the mentioned
sectionduringdecreased 4.5-5 hours
instead of current 9.510 hours.
It will increase the
comfortability
andsafety by ensuring thefulfilment of the Project
goal in to make theNorth-South Road atransit carriageway forpassenger and cargotransportation from theEast to the West within
scope of TRACECA and
Silk Road Projects.

The North-South Road Corridor: East (South) - Iran border –Agarak – Bavra – Georgian border – Batumi – Poti – West (North)The preliminary estimated cost of construction works of the North-South Road
Corridor investment program is about USD 2-3 billion (excluding VAT and the cost ofland acquisition and resettlement), of which USD 150 million will be allocated for
consulting services in respect to design works and technical supervision.
՝

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Tranches 1-2-3 are in the implementation process, required financing is available,
construction of total 3 tranches is expected by the end of 2018.

TRANCHE 4, ARTASHAT-AGARAK
Estimate length of Artashat-Agarak /border point/ section is: 354 km
Road will be reduced by about 85 km
Feasibility Study is ready. Preliminary Design for all section and Detail Designfor
Sisian-Qajaran section is ongoing.
Designer: SPEA-IRD Consortium (Italy)
Tender for Construction of Section Agarak-Qajaran will be announced in April
2016 and Contract Signing planned in July-August 2016.
Completion of Construction: 2019. Financed by EADB loan: $ 150 million
More financing opportunity for Tranche 4:- EADB loan: $ 350 million- ADB loan: $ 170 million
Possiblity of PPP and new cofinancing by other IFI.

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TRANCHE 5, GYUMRI-BAVRA
Estimated length of Gyumri
bypass- Bavra/border point/
is 60 kmGyumri-Bavra section will be
implemented under EIB loan
proceeds
Estimated cost: about $150
millionEstimated construction
period: 24-36 months
Feasibility Study, Preliminary
Design and Detail Design are
financed by NIF Grant,
Contract Signed
Designer: Lotti (Italy)
INVESTMENT AND PPP
IMPLEMENTATIONOPPORTUNITIES- The Feasibility study on
Artashat-Qajaran road section (220 km) is ready. The preliminary design for 220 km longsection will be presented by the end of 2017, followed by detailed design for Sisian-Qajaran(60km) road section to be presented by the end of 2016.
80% of the mentioned section may be separated and considered as a project implemented
under concession (Investment and PPP). The current carriageway will be preserved as afree alternative to toll-road. The section envisages 0.5-8 km long tunnels with two lane
single carriageway and the total length of tunnels: for about 25km. The length of current
road of the mentioned section is 305 km, which as a result will be reduced by 85 km. To
note, merely the length of Sisian-Qajaran section will be reduced by half and will become
60 km long road.

The estimated preliminary cost of construction works for the total Artashat-Qajaran roadsection is USD 2 billion (including the cost for consulting services, and excluding VAT andthe cost for land acquisition and resettlement), of which the preliminary estimated cost of
construction works in Sisian-Qajaran road section is USD 600 million (including the cost for
consulting services, and excluding VAT and the cost for land acquisition and resettlement).
- The Feasibility study on Qajaran-Agarak road section (42 km), including the Tunnel (5km), is available. Merely the Tunnel will reduce the length of the road by 12 km with a freealternative current road to be preserved. The Tunnel is envisaged to be equipped with twolane singe carriageway with the cost that of totaling USD 140 million (including the cost for
consulting services, and excluding VAT and the cost for land acquisition and resettlement).
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The mentioned Tunnel may be separated and considered as a project implemented underconcession (Investment and PPP). The road part with length of 37km will be constructedby Eurasion Development Bank’s loan till end of 2019.

- The Feasibility study and Detailed Design is being procured for Gyumri bypass roadsection, which will be ready by the end of 2016 and 2017 accordingly. The mentioned
section may be separated and considered as a project implemented under concession(Investment and PPP). The current carriageway will be preserved as a free alternative totoll-road. The estimated preliminary cost of construction works is USD 80 million(including the cost for consulting services, and excluding VAT and the cost for landacquisition and resettlement).
MAIN QUESTIONS AND ANSWERS

In which form and volume will be the state participation in the concession(Investment and PPP)?
Under concession (Investment and PPP) projects, the state will co-finance VAT(20%) and the cost of land acquisition and resettlement. The State already financed,
financing and is going to finance for about 1-1.5 bln. USD from total cost of project,which is already 50% of preliminary estimates.

What type of concession (Investment and PPP) it will be?
The following sequence is envisaged based on preference:- Build-Own-Operate-Transfer- Build-Operate-Transfer,- Build-Transfer-Operate- Build-Own-Operate- Buy-Build-Operate

The mentioned options are subject to discussion, and preference will be given merely tothe interested organizations upon submission of properly developed and well-justified
price offer.
What are the other intended terms of the concession (Investment and PPP)?

A relevant legislative regulation may set up the State's commitment towards the return offunds/compensation of difference in regard to the planned activities by the end ofoperating.

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The Southern Armenia railway project description
The Southern railway construction project inArmenia will create opportunity to restore
Armenia's role as a transit country located on the
Silk Road in the important part of the overland
supply corridor leading to Europe. A 3,000
kilometer-long Silk Road is an ancient transport
corridor, which passed through China, Central andWest Asia, Iran, Turkey, Armenia and some
European countries, providing commercial ties
between them.
Length of railway lines
Estimated speed
Minimum curve radius
Maximum curvature
Traction type
Cargo traction
Estimated width of the arrival-departurelines

304.71 km

80 km per hour for passenger trains
500 m for ordinary cases,
300 m for complicated ones
30%

Electric

2100 tons

550 and 850 m

The project supposes:••

Construction of 84 bridges with a total length of 19.618 m;
Construction of 60 tunnels with a total length of 10.2360 m;

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•
•

Construction of 27 stations, including 13 intermediate stations and thereconstruction of Gagarin station;
Construction of edaphic posters of 152,73 km for the entire line.

The purpose of the Southern Railway construction••

It becomes the shortest transport route between the Persian Gulf and the Black Sea
ports, Central and East Asia, including China and Europe, significantly savingtransportation costs and time.
The project will significantly contribute to the implementation of the passenger andcargo transportation to EU member countries, obviously reducing the distance of oil
products transportation to the European countries from Iran and regional countries.
The importance of the Southern Railway construction••

In case of project implementation, as a key element for the international overlandtransportation between the Persian Gulf and Black Sea ports, it will become themost suitable corridor for overland transportation from the Persian Gulf to Europe
and as well as from the perspective of cargo and passenger transportation from thePersian Gulf to the Southeast Asia. It will especially become irreplaceable as a resultof reducing oil transportation distance from Iran to Europe.
Due to the project, as a key part of the functioning North-South internationaltransport corridor between the Central, Western Asia and Europe, significant
infrastructures will be created that will greatly promote the economic developmentof the region.
Cooperation

•

•

•

On July 28, 2012 the Government of the Republic of Armenia signed a concessionagreement on the construction of the Southern Armenia railway with “Russia FZE”
company, founded in the United Arab Emirates.
“Russia FZE” signed a contract on the project’s implementation study with “China’s
communicating Company” (CCC), and as a result a feasibility study of a new
construction project, as well suggested a new alignment was prepared. The
presentation of the preliminary alignment and the feasibility study of the Southern
Armenia railway construction took place on February 19, 2014.
On January 20, 2016 a memorandum of understanding was signed between the
Ministry of Transport and Communication of the Republic of Armenia and theMinistry of Transportation and Urban Development of the Islamic Republic of Iranregarding the railway networks connection between the two countries, according
which the construction of the railway in the territory of Iran will start after the
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•
•

completion of the 30 % of railway construction in the territory of Armenia.

Negotiations were held with the interested companies of different countries
regarding the participation in the project implementation process.

The Government of Georgia expressed its satisfaction regarding the project crucial
for the region, hoping that the project will also have its positive impact on thedevelopment of the Georgian economy.

The main provisions of the project’s feasibility study

The economic calculations were made based on the following estimated annual cargovolumes:••

initial short-term (up to 2025): 15.4 million tons per year;
long-term (up to 2035): 18.3 million tons per year.

As a result, taking into account the upward and downward directions, annual cargovolumes will be around 25 million tons.
According to the preliminary estimates, the required investment amount for the
project is around 3.2 billion USD, which does not include:
•
•
•
•
•

the costs necessary for the implementation of the technical inspection and control
electricity costs
environmental and land acquisition costs
duties, taxes, as well as project expertise and control costs
other costs for construction permits, formulation of the final act.

The calculated internal profit rate of the project is 5.5%. It is estimated that even incase of 3% internal profit, the profit will be around 1.18 billion dollars.
The project’s return on investments is calculated for 24 years. In case of failing the cost
recovery period, the Government of RA is ready to discuss the possibility of the concession
period extension for extra 20 years.
The main projections

Domestic cargo volumes forecast
It is predicted that on average about 3.52 million tons of domestic cargo will betransported through new railway.
•

Transit cargo volumes forecast

Currently European importers are importing oil from Iran mainly through the strait of
Hormuz, the marine transportation. According to the preliminary estimates, in 2011, Iranexported about 20.57 million tons of oil to Europe. After the construction of the new55

railway, a part of oil can be exported from Iran to European Union countries firstly
overland to the Black sea and then through marine transportation up to the destination
point. This will significantly reduce transportation costs compared with marinetransportation. Thus, it is projected, that after the launch of the new railway, the transit
transportation volume (mainly oil and oil products) will amount to 7.9 million, 8.7 millionand 10.12 million tons, respectively on an initial, short-term and long-term basis.
•

Transit passenger volume forecast

Taking into account, that the railway is the most convenient overland transport corridor
between the countries of the Persian Gulf and the Black Sea regions, exploring othertransportation indicators, it is expected that the volume of transit passengers (mainly
tourism) in upward direction amounts to 270,000, 340,000, 510,000 persons per year,
respectively on an initial, short-term and long-term basis, in downward direction and
310,000, 390,000 and 590,000 persons per year, respectively on an initial, short-term andlong-term basis.
Expected outcomes
•

•

•

•

The new railway that will connect the Persian Gulf to Europe is the key element
missing of the North-South transport corridor. Its construction creates a strong
bridge, improving trade and passenger transportation between Central andSoutheast Asia, including China.

After being implemented, the new railway will provide the most convenient andspeedy overland transport corridor between the Southwest and Central Asia,
particularly the Persian Gulf and the Black sea, as well as between the neighbouring
European countries. The time for cargo transportation from Middle East to Europe
time will be reduced up to 1.5 times.
After being implemented, the new railway will reach the following transportation
oriented results: facilitate trade between North and South of Armenia, cargo andpassenger transportation, extraction of mineral resources and export to Europe, oil
export from the Persian Gulf to Europe, Central and West Asia, carrying out trade,
barter and cargo transportation.
Southern Armenia Railway, located on the ancient Silk Road and being a missing
link of overland transport corridor leading to Europe, after its construction, will
promote the economic development of the Persian Gulf’s oil producing countries,
providing comfortable, convenient and rapid transit corridor for Southwestern andCentral Asia, China and Europe. It will provide real economic benefit for allparticipating countries.

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MINISTRY OF ECONOMIC
DEVELOPMENT AND INVESTMENTS
OF THE REPUBLIC OF ARMENIAINVESTMENT POLICY DEPARTMENT

T: + 374 11 597 127

E: investment@mineconomy.am

W: www.mineconomy.am

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