KfW Secures €135m Financing for Armenia–Georgia Back-to-Back
The Armenian government approved in March 2026 the signing of two new financing agreements with German development bank KfW for the Caucasus Transmission Network project - a €120 million loan under the "Caucasus Transmission Network - NIF" programme, and a €15 million grant under "EU Caucasus Transmission Network – NIF Phase II."
The financing underpins a project that has been in development since 2014, with the aim of establishing a controlled power exchange corridor between Armenia and Georgia. The two countries operate at different voltage levels, and grid synchronisation requires the construction of an HVDC converter station in Armenia, without which a reliable energy transfer between the two systems is not possible.
Technical scope
The core infrastructure is a 500/400/220 kV HVDC converter station to be located in Ayrum, Armenia, close to the Georgian border, with a final rated capacity of 1,050 MW. On the Georgian side, the connection will be established from the Marneuli substation via a 500 kV overhead line; on the Armenian side, from the 400/220 kV substation at Ddmashen via a 400 kV line.
The Ayrum facility is specified on a turnkey design-and-construct basis, covering design, manufacturing, delivery, installation, commissioning and acceptance testing of the HVDC back-to-back converter station with VSC technology, rated at approximately 350 MW.
The exchange capacity between Armenia and Georgia is planned to rise from the current 200 MW to 350 MW in the first stage, with a subsequent increase to 1,050 MW based on regional market demand.
Armenia's 2026 state budget has allocated AMD 45.6 billion for the programme, of which AMD 43.5 billion represents loan funds and AMD 2.1 billion is co-financing.
The project has faced a protracted procurement process. The tender for Lot 3 — the Ayrum HVDC converter station — was previously cancelled under KfW Procurement Guidelines on grounds of lack of competition, after prequalified bidders failed to submit technical and financial bids. On 19 December 2025, HVEN announced that the project would continue, though only one of the seven pre-selected participants had submitted a full bid package.
The project has three main components: the Ddmashen substation, the Ayrum border converter station, and the 400 kV overhead line connecting them. The transmission line contract was awarded to India's KEC International Limited, which is required to build approximately 109 km of 400 kV lines.
Regional context
The project aims to establish better energy interconnections to enable energy exchange and transit not only between Armenia and Georgia but across the South Caucasus more broadly, and to allow Armenia — via Georgia — to connect to the EU's ENTSO-E power grid. The arrangement is designed as a seasonal win-win: Armenia would export power to Georgia in winter when Georgia faces hydropower shortfalls, while importing surplus Georgian hydropower in summer.
The Ayrum station also forms an integral component of the wider North–South Energy Corridor, which is intended to link the power systems of Iran, Armenia, Georgia and Russia.
KfW has been the lead financier of the Caucasus Transmission Network since the programme's inception, with earlier tranches supporting the initial stages of the interconnection works. The new agreements represent a continuation of that commitment as the project moves towards the construction of its critical HVDC component.
