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2 2012

2012

Investment Program on Greenhouse Construction and Development in the Vicinity of Noragavit District of Yerevan

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Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

Prefice

Over the past 5 years, the average annual volume of vegetable crop production in Armenia has made up 800 000 tons, which is approximately 250kg per capita. This is quite a good figure. Nevertheless,, crop production in Armenia is highly seasonal in nature, as a result of which, during different seasons drastic price changes are recorded in the market, and export volumes cover a meagre per cent of the gross production. prod The development and expansion of state-of-the-art state art greenhouses is an effective measure for mitigating the seasonal fluctuations of crop production in Armenia, increasing the competitiveness both in domestic and foreign markets, as well as for reducing reducing the import volumes of crop production in the country. The existing greenhouses in Armenia were constructed decades ago and considerably fall behind the modern ones in technology and productivity. Except for the greenhouses constructed during the last 1-22 years (approx. 3 ha), the productivity of the rest of existing greenhouses fluctuates between 15 and 20 kg per square metre, while the modern ones are able to provide 4545 100kg product per square meter depending on the technological solutions applied. At A present, the Armenian producers are still unable to produce the appropriate amount, and varieties of vegetable, as well as to meet the rhythmicity requirements of the major foreign markets. The investment program on greenhouse construction and development developm in the vicinity of Noragavit district of Yerevan has been developed for the purpose of developing and enhancing state-of-the-art greenhouses. Within three years the program assumes constructing approximately 50ha greenhouse zone with engineering and logistic ogistic facilities in the vicinity of Noragavit district of Yerevan in accordance with the most modern technology requirements.

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Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

The aforementioned selection of the zone is conditioned by the availability of ground area and opportunity to use the Yerevan TPP TPP resources for centralized heat supply. The Greenhouses Development Program complies with the RA Government’s economic development strategy and objectives, in particular, with the creation of competitive economy, attracting investments, raising the level level of food security and poverty reduction. In terms of job creation, the effective use of lands, as well as ensuring additional local budget receipts from property and land tax, the program is of social and ecological significance also. The program is developed oped in accordance with the climate data in the vicinity of Noragavit district of Yerevan and the study and analysis on communal infrastructure and the Yerevan TPP resources. While developing the program, the comparative advantages of Armenia, such as the number of sunny days, the length of daylight, the availability of agricultural lands and water resources, as well as rather competitive tariffs of electric energy and gas have been taken into consideration. Through introducing the most modern technologies for greenhouse construction, the implementation of the program will enable the large and small enterprises to combine year-round year crop production and ensure the sufficient amount of products for export. This will give the opportunity to improve the productivity productivity of crop production, ensure the availability of the products in the domestic market and the comparative stability of prices. On top of that, the further greenhouse development will significantly mitigate the existing agricultural risks associated with weather changes.

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Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

Program Description

The Armenian Harvest Promotion Centre CJSC (hereinafter referred to as Program Manager) is authorized to manage the implementation of the investment program on Greenhouse Construction and Development in the Vicinity of Noragavit District of Yerevan. For the project implementation, the Program Manager will organize the investors’ selection, conclusion of contracts with the investors and contract management processes, the construction of the centralized system infrastructure for thermal and electric energy, water, gas supply and water discharge, as well as will provide the investors with land plots with their points to connect to the infrastructures and will bear the responsibility for the program implementation. implementation Under the investment program it is assumed to construct glass greenhouses with their supporting operation and- maintenance facilities /cold storage, processing, sorting, packaging facilities, etc./in the land area adjacent to Noragavit District of Yerevan, which will meet the modern technology requirements. State-of-the-art art greenhouses are at least 4 m high glass or polycarbonate steel frame structures with their heating, screening, blacking out, assimilation lighting (or without this), drip irrigation, modern dern automatic electric and computer climate control systems, as well as with their operation and maintenance supporting (cool storage, sorting, packaging, etc.) facilities for hydroponic and soil-based based crop production. Under the investment program, during three years 50 ha of greenhouses will be constructed in the 70ha of land area adjacent to the Yerevan TPP. On the assumption of the international experience in the area of greenhouse construction, the minimal economically optimal size of the greenhouses is is 4 ha together with the area for maintenance and supporting facility.

In case of availability of the required amount of

investments, the construction of two greenhouses with one maintenance and supporting facility in 4|Page


Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

10-12 12 ha land plot is more efficient. It will give the opportunity to cut back on the required investment volumes, reduce the product cost price and to raise its competitiveness. Taking into account the aforementioned preconditions, the positions of the existing greenhouses maintenance facilities ties as well as those to be constructed, we anticipate dividing the land area into 9 separate land plots each with 5-11 5 11 ha of land plots. The investors will have the opportunity to obtain one or more land plots. Planning the layout of the greenhouse is carried carried out in a way which will allow secluding plots from the main greenhouse area in order to construct a greenhouse for specialized bulb production in case if the need arises. Moreover, open field agricultural farms can also use the bulbs to be produced in the greenhouses. Program Manager, recruited on the basis of competition, which the Yerevan Municipality will organize, will manage the implementation of the investment program on Greenhouse Construction and Development in the Vicinity of Noragavit District District of Yerevan. The Program Manager will conduct the investor selection process for the program implementation, the main preconditions for which will be the timing for greenhouse construction and plot price payment, as well as the number of obtained land plots. plots. The respective land plots will be alienated to the selected investors through direct sales. Taking into consideration that the construction of greenhouses of the estimated dimensions requires milliards drams of investment, the provision of favorable conditions for local and foreign investors such as alienation of land plots to the investors through through installment sale, providing them with centralized system infrastructures for thermal and electric energy, water, gas supply and water discharge, can be the key to the program success. Investors will have the opportunity to obtain the land areas through installment sale for a term of one year.

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Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

After terminating the pledge of the land area(s) obtained under the present program and after land leveling for the greenhouses construction by the investor, in order to attract financial resources needed for the implementation mplementation of the program, (taking into account the opportunity to use the centralized system of the infrastructures) it would be expedient to provide an investor up to 80 % government guarantee of the land area(s)’s market value. We are also planning to construct a centralized system of thermal and electric energy, water, gas supply and drainage infrastructure for the greenhouses. We are planning to use the Yerevan TPP resources for the greenhouses heating. The investors will be able to connect to the infrastructures of the centralized system directly from the special points of their land plots. The availability of the centralized system of the main infrastructures will enable the investors to avoid rather sophisticated, time and resource consuming solutions solutions for electric power, water and gas supply, as well as for water discharge. As to the heat supply, the construction of the main supply infrastructure for the greenhouse zone will allow the investors to compensate the most part of the thermal energy generation gen cost. Meanwhile, the use of the TPP's thermal energy will promote the stability of the TPP's product consumption, on the one hand, and the investors will benefit from more affordable supply, on the other. Consequently, the product cost price will decrease; and the level of profitability and the product competitiveness will increase. The aforementioned factors will positively influence on the price of the investments’ payback period also. The estimated investment volume of the program will be about 35 35-40 billion Armenian drams, and the annual gross product of the greenhouses to be constructed will make at least 30 000-40 000 tons. Approximately 1500-2000 2000 new workplaces will be created for the whole value chain, ranging from the production to realization realizati of the product; only 800-1000 1000 of the employees will be employed at the greenhouses (15--20 workplaces per 1 ha of greenhouse).

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Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

Based on the practical results of the constructed greenhouses and on the availability of the required resources, we’ll discuss the feasibility and expediency to construct 65 more ha of greenhouses in the area of approximately 86 ha in the above mentioned zone for the second phase of the program.

The Main Program Implementation Arrangements We anticipate implementing the program during three years. The investment program timeline is entitled to change based on the investors selection deadline. deadline During the mentioned period approximately 50ha of greenhouses with their supporting operation and maintenance facilities will be constructed and operated in accordance with the modern technology solutions. The following arrangements will be implemented under the program: 1. The Yerevan Municipality will ensure that the actual land users vacate 156 15 ha land area in the vicinity of Noragavit district of Yerevan; 2. Organisation of the investors’ selection process for the program implementation by the Program Manager. Preference will be given to the investors who a) will obtain in more land plots, b) will offer the shortest payment deadlines for the right to use the centralized system infrastructures for thermal and electric energy, water, gas supply and water discharge, as well as for land alienation, c) will offer the shortest payment payment deadlines for the construction of state-of-the-art state greenhouses in compliance with the investment program requirements; 3. Alienation of separate land plots to the selected investors through direct installment sale, sal based on the cadastral value. The land sections ections which are overloaded with water mains, are not entitled to be alienated to investors and for these section free perpetual easement will be applied in order that the investors could purposefully use the obtained land plots; 7|Page


Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

4. Imposing liability for a breach of payment in installment and construction prescribed in the contract on the direct sale of the land plot; plot 5. Land site leveling, greenhouses construction on minimum 75% of the land (at least 1ha in the first year) with their operation and maintenance facilities by the investors; 6. Obtaining permission to construct roads and the centralized system infrastructures for the greenhouses thermal and electric energy, gas, water supply and water discharge; preparation of the design-calculation design calculation documents package for the infrastructures construction by the Program Manager; 7. Construction of the roads and centralized system infrastructures for thermal and electric energy, water and gas supply to the greenhouses , water discharge, as well as providing the investors with land plots with their points to connect to the infrastructures by the Program Manager; 8. Imposing liability on the Program Manager in case of default on ensuring the construction of the centralized ntralized system infrastructures for thermal and electric energy, energy water and gas supply to the greenhouses, greenhouses water discharge, as well as providing the investors with their land plots with the points to connect to the infrastructures; 9. Providing the Program Manager with free perpetual easement over the land area overloaded with the infrastractures for the maintenace of the infrastracuteres ensuring electric energy, gas, and water supply, as well as water discharge. 10. Managing the execution on of the contract terms concluded with the investors. 11. Managing the mainenance of the centralized system infrastructure for thermal and electric energy, water and gas supply, as well as water discharge by the Program Manager. Estimated energy requirements for the greenhouses: Electric capacity:

30 MW/h

Thermal energy consumption: 89 Gcal/h Gas consumption:

16000 m³/h.

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Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

Anticipated Program Outcomes 1. Attracting large-scale scale investments in the Armenian agriculture sector (the overall investment volume under the program will constitute 35-40 35 40 billion AMD); 2. Proper use of land areas in the vicinity of Noragavit district of Yerevan; 3. Development of state-of-the the-art art greenhouses and import of the most modern technologies t and know-hows hows in Armenia; 4. Promotion of the development of crop production and realization value chain, Expansion of the Armenian crop production and export volumes, (the annual gross product of the greenhouses to be constructed will make 30 000-40 40 000 tons), as well as improvement of productivity and quality; 5. Mitigation of the seasonal price changes of crop products in the domestic market; 6. Considerably decrease in import volumes along with the increase in crop production volumes; 7. Creation of new jobs; 8. Ensuring additional community budget receipts from the cost of the land to be alienated and, later on, from property and land tax; 9. Setting preconditions for the development of similar zones in the other regions of the Republic.

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Երևանի ջերմատնային գոտու ծրագրի ներդրումների կատարմանand աջակցման մեխանիզմները Investment Program on Greenhouse Construction Development

in the Vicinity of Noragavit District of Yerevan

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Program Describtion