Since the commissioning of its first solar power plant in Aragatsotn region in December 2021, EU-Armenia SME Fund has grown its solar capacity seven-fold, with new investments in the regions of Gegharkunik and Kotayk. Currently more than USD 23 million, including own equity capital of c. USD 8 million, is being deployed across several solar projects.
Through these investments it is anticipated that over 30 MW of capacity will be operational by the end of the year. The investment team at Amber Capital expect that the portfolio will generate between 50 GWh and 55 GWh of green electricity per annum, which is equivalent to the annual consumption of c. 13,000 Armenian households. Savings on CO2 emissions alone are c. 25,000 tons per annum – a significant contribution for reducing the environmental impact of the country’s electricity matrix.
Beside environmental considerations, social and governance standards are of paramount importance for the investment team. The portfolio is being consolidated into a holding company, implementing best-in-class corporate governance standards. This includes having a well-functioning board of directors, transparent financial reporting, annual accounts audited by an external auditor and many other measures necessary to demonstrate a track record of sustainable growth and value creation. Taking such steps early-on can have a long-lasting impact.
Indeed, as the portfolio grows in scale, the company may become a prime candidate for capital market transactions as one of the leading renewable companies in the country. Such transactions will include issuance of bonds or listing of shares in an initial public offering (IPO), enhancing the depth of the local stock exchange. In any case, notwithstanding eventual listing considerations, a track record of high ESG standards is a necessity for any successful company and the investment team are committed to having these in place from the outset.
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Attractive as they are, solar assets alone are not sufficient to have a balanced generation within a renewable portfolio, as generation is limited to day-time only and has marked seasonality. For this reason, in 2024 the Fund invested in its first small hydro power plant, located in the region of Lori. Armenia has over one hundred of such small hydro power plants, which combined generate c. 10% of the country’s electricity.
However, a large number of these small hydro power plants were constructed around twenty years ago by individual entrepreneurs without proper regard for efficiency of hydromechanical equipment or the plant’s environmental impact. The Fund’s renewable strategy includes acquisition and refurbishment of selected hydro assets – increasing generation by deploying western equipment, implementing best practices in water monitoring and automation and employing appropriate incentives for operational staff to ensure hydromechanical equipment is used as efficiently as possible. As a result of capital expenditures and knowledge transfer, generation of power plants is increased, the hydro plants’ profitability is improved, environmental impact is mitigated and the country’s energy matrix receives a well-balanced, sustainable flow of green energy.
“The EU is proud to support the EU-Armenia SME Fund’s significant investments in renewable energy in Armenia. This initiative aligns perfectly with EU’s Resilience and Growth Plan for Armenia, and our commitment to invest in Armenia’s renewable energy production and support the potential of the country for clean energy. Investments in solar and hydropower are not only crucial for reducing carbon emissions and promoting energy independence and security, but also for creating new jobs in the Armenian economy. We are confident that this fund will play a vital role in Armenia’s journey towards a cleaner and more sustainable energy future.” said the Ambassador Vassilis Maragos, Head of the European Union Delegation to Armenia.
“Developing renewable energy projects is one of the key priorities for the EBRD in Armenia. We are delighted that our equity partner Amber Capital has been successfully supporting the private sector players in the renewable energy field. Promoting the use of clean energy sources is an important commitment for the society and future generation.” said George Akhalkatsi, EBRD Head of Yerevan office.”
Anushavan Simonyan, Managing Director at Amber Capital Armenia, summarised “Renewable energy remains a top priority for EU-Armenia SME Fund, and we will continue investing in this space, helping Armenia to transition toward a low-carbon economy and increased energy independence.”
The EU-Armenia SME Fund, a private equity fund managed by Amber Capital, was launched in Armenia in January 2020 with investments from the European Union (EU), European Bank for Reconstruction and Development (EBRD), Amundi-ACBA Asset Management, the Hirair and Anna Hovnanian Foundation and the investment team of Amber Capital. It has since raised further capital from C-Quadrat Ampega Asset Management Armenia, the Dutch Entrepreneurial Development Bank (FMO) and the Government of Armenia, as well as a number of Diaspora investors, with total committed capital of over USD 60 million. The Fund is committed to financing the sustainable growth of Armenian SMEs through capital investments and introduction of high standards of environmental, social and corporate governance practices.
