WORLD BANK’S ELECTRICITY TRANSMISSION REHABILITATION LOAN TO IMPROVE KAZAKHSTAN’S ELECTRICITY GRID
AND
PROFILE OF KEGOC, THE NATIONAL ELECTRIC POWER COMPANY
January 7, 2000
By ALEXANDER KATKOV
INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2000. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.
SUMMARY: The International Bank for Reconstruction and Development (the World Bank) has agreed to extend a USD 140 million loan to the government of Kazakhstan (GOK) and the Kazakhstani Electricity Grid Operating Company (KEGOC) toward a USD 258.4 million electricity transmission rehabilitation project, according to a press release issued by the World Bank on December 22, 1999. Additional financing will be provided by KEGOC (USD 62.4 million) and the European Bank for Reconstruction and Development (EBRD) (USD 56 million).
U.S. firms may wish to investigate the numerous potential business opportunities connected with this ambitious project. END SUMMARY.
1. PROJECT DESCRIPTION
The World Bank loan will be used to improve the quality of Kazakhstan’s electricity transmission and distribution, to develop a competitive electricity market, and to restructure KEGOC into a more efficient company.
According to the project description given in the press release, these goals will be accomplished by:
ú refurbishing substations (modernizing high-voltage equipment; replacing protective relaying and installing shunt reactors; improving the stability of the power grid);
ú upgrading dispatch controls (improving the reliability of the transmission system; enhancing the quality of the power supply; operating the organized electricity spot market/pool);
ú developing an administrative and technical management system (installing a computer-based management information system; creating a new corporate structure for KEGOC);
ú receiving technical assistance (project management and procurement; establishment of the electricity spot market).
2. GREAT POTENTIAL BUT IN A CHALLENGING BUSINESS CLIMATE
Despite the enormous potential, U.S. companies should keep in mind Kazakhstan’s challenging business climate. The U.S.’s import market share in power generation equipment is small (about 2.5 percent). This is mainly due to the geographic advantage of European and Asian companies, which are able to offer lower prices due to lower transport costs.
Kazakhstan has little experience with modern U.S. electrical equipment. Therefore, U.S. companies serious about this market will need to include a key educational component to raise awareness of the benefits of modern U.S. technology.
3. BACKGROUND INFORMATION ON KEGOC
KEGOC was established on July 14, 1997, and is the streamlined successor to Kazakhstanenergo, a Soviet-era vertically-integrated electric power producer and distributor. KEGOC’s assets include 23,463 km of power lines (ranging from 110 kV to 1,150 kV) and 73 power network substations (total transformer capacity: 29,414 MW). KEGOC, a fully state-owned company, is responsible for ensuring reliable intra- and inter-state electric power transmission; developing strategic industry plans, including technical policy plans; and organizing and operating the wholesale electric power market.
KEGOC cooperates with RAO ES (Russia) in the western and northern parts of Kazakhstan and with the national energy companies of Kyrgyzstan, Turkmenistan, Tajikistan, and Uzbekistan in the country’s south.
In 1998, KEGOC was identified by international industry experts as an impediment to further investment in Kazakhstan’s power generation sector due to its expensive stranglehold on producers via its transmission network. Industry experts are watching to see whether or not KEGOC can evolve into an operating network that will allow the market to determine transmission tariffs. Indeed, the path that KEGOC chooses will have important repercussions for future foreign investment in the energy sector.
In November, 1999, former Kazakhstani Minister of Finance, Uraz Dzhandosov, was appointed president of KEGOC. On December 20, 1999, during a series of U.S.-Kazakhstani bilateral government meetings, the GOK and the U.S. Trade and Development Agency (TDA) signed a USD 378,000 technical assistance grant agreement to go primarily toward drawing up tender and bidding documents for the above-mentioned electric power transmission project. KEGOC is expected to select the contractor from a short list of U.S. bidders.
4. CONTACT INFORMATION
Interested U.S. firms wishing to obtain detailed information on the project should contact:
KEGOC
162.zh Shevchenko Street
Almaty 480008, Kazakhstan
Tel:7 (3272) 62-60-27
Fax:7 (3272) 68-43-08
Contact: Mr. Uraz Dzhandosov, President
The World Bank (representative office in Kazakhstan)
41.a Kazybek Bi Street, 3rd floor
Almaty 480100, Kazakhstan
Tel:7 (3272) 60-85-80
Fax:7 (3272) 60-85-81
Contact: Mr. Kadir Tanju Yurukoglu, Resident Representative
EBRD (representative office in Kazakhstan)
41.a Kazybek Bi Street, 4th floor
Almaty 480100, Kazakhstan
Tel:7 (3272) 58-14-23
Fax:7 (3272) 58-14-22
Contact: Mr. Michael Davey, Country Director
Companies interested in learning more about project financing and the Kazakhstani market, may want to contact:
The Caspian Finance Center (a regional office of U.S. Exim Bank, OPIC and TDA)
C/o American Embassy Ankara
110 Ataturk Bulvari
06100 Kavaklidere
Ankara, Turkey
Tel: 90 (312) 468-6110, ext. 2079
Fax: 90 (312) 468-6082
Contact: Ms. Julie Panaro, U.S. Exim Bank Director
The U.S. Commercial Service Almaty
531 Seyfullin Street, 3rd floor
Almaty 480091, Kazakhstan
Tel:7 (3272) 58-79-18, 58-79-20
Fax:7 (3272) 58-79-22
Contact: Ms. Julie Snyder, Senior Commercial Officer
Mr. Alexander Katkov, Senior Commercial Specialist