1
120 HA SEMI-CLOSED GREENHOUSE
CONSTRUCTION PROJECT IN NORAGAVIT AREA
CONTENTS
GREENHOUSE INDUSTRY TRENDS OF ARMENIA ................................................................................. 3
PROJECT DESCRIPTION ................................................................................................................................ 5
INVESTMENTS ................................................................................................................................................. 7
OPERATING COSTS ........................................................................................................................................ 7
PROJECT SUMMARY ...................................................................................................................................... 9
APPENDIX 1
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GREENHOUSE INDUSTRY TRENDS OF ARMENIA
Agricultural production in high-tech industrial greenhouses is considered to be one of the most
profitable and prospective sectors of agriculture. This kind of greenhouses gives opportunity to organize
a whole-year agricultural production, and provide a high yield from unit area and maximal profits.
Armenian greenhouse industry, which today covers more than 200 hectares of production territory, has
been developed in the recent 10 years. In 2003, there were 39 ha of operating small greenhouses, which
means that the greenhouse area has expanded 5 times in 12 years. The construction of large industrial
greenhouses started in 2011. Over the past 5 years in different regions of Armenia a number of glass and
plastic high-tech greenhouses were constructed with a total area of over 80 hectares,where the main
cultivated crops are tomatoes, cucumbers, roses, radish, and strawberry (see Charts 1 and 2). The
construction was carried out by French and Dutch greenhouse manufacturing companies.
Total Area (ha)
Currently produced crops
80
6%
70
6%
60
21%
50
Tomato
Raddish
40
25%
30
Rose
20
Cucumber
42%
10
Strawberry
0
2011
2012
2013
2014
2015
Chart 1: The area of high-tech greenhouses in
Armenia, 2011-2015
Chart 2: Currently produced crops in high-tech
greenhouses of Armenia, 2016.
Armenia has all the favourable preconditions for the
development and expansion of greenhouse
industry, which are:
1. Favourable local geographical and climate conditions:
-
More than 300-320 sunny days a year, allowing to grow fruits and vegetables all year round
without the use of expensive assimilation lighting technologies;
-
Mild winter climate that reduces the cost of heating;
-
The difference between day and night temperatures allowing to grow high-quality products at
the lowest cost in the hot summer months;
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-
Availability of fresh water resources.
2. Favourable tax system for agricultural production. Armenian Government chose agriculture as
one of the country’s strategic development directions in the Government’s long-run
development policy of the 2014 – 2025. As a result favorable tax system for agricultural
production has been adopted, including exemption from profit tax, zero rate value added tax
during export and for a number of products during import (including greenhouses, seeds, cocopeat substrate, fertilizers, products for biological control, etc.).
3. Wide export markets: Georgia, Eurasian Economic Union member states, Middle East, etc..
Besides, exports from Armenia to the EAEU countries are free from customs duties and the
customs procedures are more simplified.
Armenia has a great potential to multiply the quantities of such greenhouses and production volumes, as
already existing local experience has proved that high-tech greenhouses are an efficient solution for a
whole-year crop cultivation.
In recent years, new semi-closed technology has been actively used in greenhouses in the European
countries and the United States, which has a number of advantages compared to the older technology.
All the above mentioned conditions have become the basis for the development of 120 ha semi-closed
greenhouse construction project in Noragavit area. The choice of this particular area is related with
favorable land conditions which will enable construction of the greenhouses with relatively low land
preparation works, as well as the availability of necessary water, electricity, natural gas and thermal
power resources.
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PROJECT DESCRIPTION
According to the project it is planned to construct three 40 hectares semi-closed greenhouse complexes
with 120 ha total area. Each of the three greenhouses will consists of two units of 20 hectares with its
technical-administrative block (storage, packaging section, etc).
The Yerevan TPP’s thermal energy resources can be used as an additional impulse for the construction
of the greenhouses in Noragavit area. The TPP’s resources can be used to provide the heating for the
greenhouse with up to 40 hectares which as a result will considerably reduce the heating expenses
(approximately 30% natural gas savings).
The invsetment calculations for greenhouse construction are based on the commercial and technical
proposal of semi-closed greenhouse submitted by leading French greenhouse manufacturing company
Richel Group, which has more than 50 years experience in the implementation of large investment
projects worldwide, including 15 years experience in the CIS countries. Annually around 250 ha of
greenhouses are constructed worldwide by Richel. In Armenia during 2014 – 2015 Richel has
constructed 47 ha high-tech greenhouses, and a number of projects have been launched for 2016-2017.
According to the technical proposal the greenhouses are a steel construction with the height of 9,7 m
(on top) covered by double layer polyethylene. The greenhouses will be equipped with drip irrigation,
heating, CO2 systems, as well as cooling and automated climate control systems. The crop cultivation in
the greenhouse will be made by hydroponic system, using coco peat substrate. By having excellent water
retention, drainage and air conditioning properties coco peat substrate allows the plant to develop a
strong root system and to uptake its food with very little effort, in this way providing higher yields.
Besides, it is completely organic and doesn’t pollute the environment.
The natural pollination of plants will be carried out using bumblebees, and the pest control in the
greenhouse will be organized mainly through biological protection products, which together with fresh
irrigation water will enable to get ecologically clean products.
Besides, semi-closed technology enables to create an optimal microclimate inside the greenhouse by
reducing the risks of pests and diseases and enabling the plant to grow faster and healthier. Thus, usage
of this technology will reduce the costs on means of biological and chemical pest control, as well as
salary costs, as in this case less workforce will be required. Moreover, the heating costs will be
considerably reduced, which is related with the new ventilation system.
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Taking into consideration the advice of European experts and the climate conditions of Armenia it is
planned to cultivate tomato in one cycle. By transplanting the plants in mid-August (if grafted 50-60
days young plants), the yield will be harvested from September to mid-June. In general, depending on
the season, the annual harvest is estimated to be 54 kg per square meter.
The investments to carry out 120 ha greenhouse project sum to 139.9 mln EUR, which will totally be
paid off in less than 7 years. Yearly it is expected to get around 64.8 thousand ton yield (valuing to 66.7
mln EUR in total). The main part of the production will be exported to the EAEU and Middle East
countries.
INVESTMENTS
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According to the project schedule land preparation works, construction of infrastructures as well as
installation of the first 20 ha greenhouse unit is planned to carry out during 2017, so that the greenhouse
is put into operation in December, 2017. Thus, the first yield of tomatoes is planned to harvest in
February, 2018. The second 20 ha greenhouse unit will be constructed by June, 2018.
The total investment required for the implementation of the 40 ha project is about 46.65 mln EUR,
including:
- 22.23 mln EUR investments in the first year for the land preparation works, construction of
infrastructures, acquisition and assembly of 20 ha greenhouse structures and technologies,
- 21.85 mln EUR in the second year, necessary for the construction of the second 20 ha greenhouse.
-2.56 mln EUR to acquire land. Note that the cadastrial value for 1 square meter land is 5.65 EUR,
and the payment for it will be made in equal parts within 2 years starting from the third year,
when the project generates enough financial resources to cover that cost.
It is planned that 30% of the investments for construction and operation of the greenhouse will be
financed by owner's equity, while 70% will be financed through long-term loans.
According to the estimates, the investments will be fully paid off after 6.7 years. The expected profit
margin of the greenhouses will be around 38%.
OPERATING COSTS
Variable and fixed costs are based on actual results of existing companies with similar technologies. The
annual operating costs for a greenhouse with 40 ha production area varies around 13.1-14.6 mln EUR1.
Below you can find the pie chart representing the cost structure (expressed in percentages).
The main directions of expenses are: acquisition costs of agro-technical products (including fertilizers,
plant protection products, artificial pollination costs, plants, coco peat substrate and other agro-technical
products) 28%, utility costs (including gas, electricity, water) 25%, salary costs 15%, and packaging 18%.
1
Excluding amortization.
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For normal functioning of 40 ha greenhouse
about 443 employees are needed, of which 43
administrative and 400 production (10 people per 1 ha): The operation of the greenhouse will be carried
out with the consultancy of an expert invited from abroad. Selling and marketing costs are not included
in the calculations. They will be carried out from the free cash funds.
Chart 3: The Structure of Fixed and Variable
costs of 40 ha greenhouse
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PROJECT SUMMARY
Total Greenhouse area
Production area (tomato)
Administrative area
123.6 ha
120 ha
3.6 ha
Total Annual Production
Total Annual Revenues
Number of created jobs
64.8 thousand ton
66.7 mln EUR
1329
Total Investments
Long term loan
139.9 mln EUR
92.6 mln EUR
Loan period
Grace period
Annual interest rate
Payback period
Discounted payback period
Marginal profit /PM/
Net present value /NPV/
Internal rate of return /IRR/
7 years
1 year
7%
6.7 years
9.3 years
38%
2 828 974
11%
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