Armenia is currently a member of more than 40 different international organisations, including the United Nations, the Council of Europe, the Asian Development Bank, the Commonwealth of Independent States, the World Trade Organisation and the Organisation of the Black Sea Economic Cooperation. It is a member of the CSTO military alliance and also participates in NATO’s Partnership for Peace (PfP) programme. In 2004 its forces joined KFOR, a NATO-led international force in Kosovo. It is also an observer member of the Eurasian Economic Community, La Francophonie, and the Non-Aligned Movement.

The Armenian Gross Domestic Product per capita went from 2957 USD (purchasing power parity) in 2002  to 3500 USD in 2003 to about 4230 USD in 2004.  Armenia was the 3rd among 170 countries in GDP growth in 2002. The economic growth in recent years resulted from high rates of development within the construction industry, agriculture and service sectors. Despite rapid growth, the very small GDP base does not yet allow for achievement of a GDP per capita that would establish a high level of living standard improvement.

The growth in gross domestic investments and foreign direct investments (FDI) in Armenia testifies to the increase of economic agility, improvement of business environment and stabilization of the economy. However, given competitiveness and relative advantages, the volumes of domestic and foreign investment are still insignificant. In 2003, the volumes of gross domestic investments versus GDP amounted to 24.3% (a 2.23-fold growth as compared to 1995), and the volumes of net FDI versus GDP amounted to 5.7%, which is still very low. In terms of economic liberalization Armenia in 2004 was 42nd among 155 countries and was qualified as “basically liberal” by World Bank’s “Doing Business in 2004” report.

Armenia Energy Sector
It is anticipated that the intensive operation of the existing energy infrastructure will support the development of a more energy intensive economy in the upcoming decade. It is assumed also that during 2010-2020 energy intensiveness will stabilize, since during the previous decade new energy efficient technologies will have been built and operated in all sectors of economy.

At this point the safe, reliable and economically stable operation of the energy system is not assured. Large rehabilitation and modernization operations need to be carried out as well as projects associated with the continuous safe operation and eventual decommissioning of the Armenian NPP (Nuclear Power Plant).  The electric energy system of Armenia was developed to meet the base demand of the South Caucasus Unified Energy System, and was exporting 20-25% of its electricity generation. At this point the total installed capacity of Armenia’s electric energy system is excessive amounting to around 3144 MW, 2420 MW of which are operable. In 2004, the maximum load was 1161 MW.

The evaluation process at the power plants revealed that:

1. 38% of the installed capacity has been in operation for more than 30 years;
2. The primary equipment at Thermal Power Plant (TPP) has reached 200 thousand hours level and does not correspond to international standards in terms of technical, economic and ecologic criteria;
3. 70 % of the installed equipment at HPPs has been in operation for more than 30 years, and 50% for more than 40 years.

Accordingly, modernizing and replacing the generating capacity is essential.

Replacement and modernization is also needed in the electric energy and natural gas transportation and distribution networks, as well as at the underground storage of natural gas. Investments in these areas will greatly contribute to the continuing reduction of technical and commercial losses. A major portion of the country’s heat supply system is currently ruined, with only the Yerevan and Hrazdan TPP’s and Giumri heat supply systems working at partial capacity. In order to restructure the heat supply system to be able to meet the demand on it, future investments will primarily be used to import energy efficient technologies and contribute to energy conservation. 

Among the complications associated with the energy system of Armenia is the absence of domestic fossil fuel resources of industrial significance, the dependence of a significant portion of the energy capacity in Armenia on supplies from a single country and the limited capacity of the present transportation system. In the transition period, these difficulties were amplified by non-payment of debt to the energy and fuel suppliers, tremendous energy losses both from non-efficient consumption and from abuse, as well as the difficulties of restructuring the energy systems to a market basis..

The Armenian Government has already taken steps towards the
improvement of the above situation:

1. The electric energy and gas sectors have been restructured. The gas supply system and the electric distribution system, the Sevan-Hrazdan Cascade of Hydro Power Plants (HPPs), and the small (HPPs) have been privatized; the Hrazdan Thermal Power Plant (TPP) has been transferred to the Russian Federation in repayment of past debts; the financial flows management of the Army Nuclear Power Program (ANPP) has been transferred to the Russian company “INTER RAO UES”.
2. Reliability of energy supply has enhanced;
   Savings from optimization of generating plant operations permitted preservation of the lowest possible tariff for power generation, which greatly contributed to the efficient operation of the system; 
3. Collections from customers have greatly improved: with customers now paying their full electric and natural gas bills.
4. The Power System Operator and the Settlements Center have been established, as has a system of direct wholesale power purchase and sale contracts between  generators and the distributor;
5. Per Resolution No. 1694-N of November 6, 2003, the “2003-2007 Financial Rehabilitation Program for Armenia’s Energy Sector State-Owned Companies” has been adopted to resolve the burden of previous debts;
6. Modernization of Kanaker HPP units has been accomplished by German and World Bank loan resources;
7. Modernization of the greater part of the 220 kV transmission network substations by German and World Bank loan resources is nearly complete;
8. The second Iran-Armenia electric transmission line has been constructed;
9. The SCADA system has been implemented through USAID technical assistance;
10. The Koghbi gas metering node has been built by the EU Inogate project, and some modernization to the Abovian underground gas storage has been completed;
11. In 2005 the speed regulators at Tatev HPP of Vorotan HPP Cascade will be replaced with EU TACIS assistance;
12. The Japanese JBIC loan permitted the 2005 commencement of  modernization of 33×110 kV substations of the distribution network and procurement of about 150,000 single-phase electronic meters as well as the gradual implementation of the SCADA system in the energy sector;
13. A March 29, 2005 loan agreement between the RoA Government and Japanese Government provided 15.9 billion yen on preferential terms for construction of a new combined cycle power plant at the Hrazdan TPP in 2005-2007.
14. The first phase of construction of the Meghri-Kajaran section of Iran-Armenia gas pipeline has commenced;
15. grant provided by Iran, has permitted construction of the first 2.6 MW of wind power plant to begin at the Pushkin Pass.

Wind Energy Production in Armenia
The Republic of Armenia is an emerging market for wind energy and the following are the main reasons why Armaec is setting up its first set of wind farms in Armenia:

1. A land locked country with an average altitude of 1800m above sea level with an average wind speeds of 7.5 m/s – 9.5 m/s across its mountain ranges.
2. A PPA that has a feed in tariff of US $0.10 per KW (1,000 Watts).
3. A term of 15 years which is guaranteed by the Armenian Government for purchase of 100% of output.
4. A lenient planning regime.
5. Strong interest from EU institutions to finance the project. 
6. Proximity to grid lines from any site.  
7. Politically most stable country amongst the Commonwealth of Independent States.