Journal of Business; ISSN: 2233-369X; e-ISSN: 2346-8297; Volume 6, Issue 2, 2017 Diferent Scenarios of Investments in Georgia’s Energy Sector 39 *Prof. Dr., Faculty of Business Management, International Black Sea University, Tbilisi, Georgia. E-mail: agagnidze@ibsu.edu.ge **MBA, Senior Analyst, JSC Galt & Taggart, Tbilisi, Georgia. E-mail: g.gvazava@bog.edu.ge Diferent Scenarios of Investments in Georgia’s Energy Sector Avtandil Gagnidze* Giorgi Gvazava** Abstract Various types of recent research point out the fact that Georgia’s energy sector (and in particular hydro energy sector) is one of the most attractive ones when it comes to investment opportunities. Hydro power remains the cheapest and the most “ecofriendly” source of power for Georgia. An essential part of Georgia’s hydro energy potential is still untapped (in fact, the current electricity generation represents just about 40% of Georgia’s estimated annual hydropower output potential). Currently, Ministry of Energy of Georgia has more than 60 HPP projects available for investment. For every potential investor, it is of vital importance to have general knowledge about what to expect from the desired sector, what the risks that could hurt the success of the investment are and if the expected rate of return equals or exceeds his or her required rate of return. This article is based on our previous article and develops three diferent scenarios for investment opportunities in Georgia’s Hydro Energy sector. For all three scenarios ex- pectations are evaluated and sensitivity analysis is provided. Keywords: energy sector, investment, hydro energy JEL: G17 Introduction that the “Hypothetical HPP” has the following 5 main indi- cators: • Installed Capacity - 7.62 MW • Average Annual Generation - 35.99 GW/hs • Capacity Factor - 54% • Cost of Construction- 13.19 mln. USD • Time of Construction – 2 years. During the year, the expected generated electricity by months is graphically shown below (Figure 1): Figure1: Generation Dynamics The total installed capacity of power plants in Georgia is 3,724 MW, where the share of HPPs is 75% (2,799 MW). Currently, 67 hydroelectric power stations operate in the country. The main part of them is located in western Geor- gia (on the rivers Enguri and Rioni basins). Nearly half of annual processing of the country produces 7 regulated HPPs, with the total installed capacity of 1,991 MW and the annual production exceeds 5 billion kWh. The total in- stalled capacity of the existing 12 seasonal stations is 646 MW while 48 small deregulated HPPs (up to 13 MW with the total installed capacity - 162 MW) provide only 5% of the country's annual processing. The total volume of water reservoirs is 2,259 mln. m3 (useful volume - 1,425 mln m 3 ). Most of the existing HPPs are outdated and require recon- struction/modernization to increase efciency. Since 2010, 18 HPPs have been gradually put into operation, with total installed capacity - 174 MW. Hypothetical HPP for Investment The articles published earlier (Gagnidze & Gvazava, 2018) explain how we determined the “Hypothetical HPP” using data of about 39 potential HPP projects defned by the Min- istry of Energy of Georgia. Finally, our research revealed