Electric Power Industry

T he electric power industry was and remains a key factor of the country’s industrial renaissance
and economic growth.
of all
The electric power generation accounts for about one tenth
industrial output of Kazakhstan, while thermal power stations in Karaganda and Pavlodar
supply almost half of the total power generation. Kazakhstan scores third among CIS countries in terms of
electric power generation.

The country currently has 54 thermal power stations, five hydroelectric power stations and one
nuclear power station. One of the hallmarks of Kazakhstan’s power generation sector is the presence
of some extremely large coal-fired plants with some of the cheapest coal available worldwide. It is
estimated that the nameplate capacity of the generating companies in Kazakhstan consists
of 17,000 MW (15,786 MW by way of thermal power, 1,105 MW by way of hydropower and
109 MW by way of nuclear power). Actual capacity is estimated to be between 10,000 MW
to 11,000 MW. About 70 percent of all electricity in Kazakhstan is consumed by the country’s heavily
industrialized north. Until 1999 Kazakhstan was suffering from electric power deficit - in the most
productive period (year 1990) electric power output was 85.3 billion kWh while consumption
was 104.7 billion kWh resulting in a power deficit of 18.4 billion. Currently, Kazakhstan manages
to cover the country’s electric power needs and, under positive circumstances, to sell the excess
abroad. The production of electric energy went up by 7% in 2001 compared to the 2000 figure.

Kazakhstan has a wholesale market for electric power and energy reserve pool, which helps
to assure stable prices for energy. Ministry of Energy has elaborated the long-term development
concept of the energy sector. The foundation of this concept is based on following key ideas:

· Development of electric energy production based on gas and solid fuel;

· Construction of renewable sources of electric power (small hydro power plants, use
of wind power and biomass);
· Building of a large transnational energy system, able to compete with other systems
of power transmission;
· Preserving of combined heat/electricity production in cities;
· Complete liberalization of energy system.

Currently, Kazakhstan energy sector is

undergoing reforms aimed at shaking off its
unprofitable and centrally planned past and gaining
an independence from the vestiges of the former
Soviet grid. Since gaining its independence,
Kazakhstan has undertaken an aggressive
privatization program, which
is currently almost over. Privatization of the country’s
power industry began in 1996 and continued
in 1997 with privatization of power production
facilities ($126.1 million and $128.3 million,
respectively, in direct foreign investments).
As a result, as many as 52 power stations,
more than 85 % of the country’s power
generation system, are now in private hands,
while only three big power stations remains
state-owned - Mangystau Electro-Technological
Industrial Complex, Shardarinsky Hydro-power
Plant and Ekibastouz GRES-2. Although the
pace of privatization in Kazakhstan has
significantly slowed down during the last two
years, the Kazakhstani government appears to be firmly committed to continuing privatization
and modernization of the power industry. Up to 100 percent of foreign participation
is permitted in developing power projects in Kazakhstan.

The Kazakhstan power transmission and distribution system is divided into three separate networks,
joining neighboring systems: the Russian network in the North West (European Russian); a network in
the North (Siberian Russia); and a third network in the South (servicing the Central Asian region comprised
of Southern Kazakhstan, Kyrgyzstan and Uzbekistan). The national transmission grid actually remains

Doing Business in Kazakhstan -1- Electric Power Industry

under the control of Kazakhstan Electricity Grid Operating Company (KEGOC), a state-owned entity. The
Government of Kazakhstan will continue to manage the inter-regional and international transmission networks,
while the 15 regional networks will be privatized, according to a unified program.

The country plans to construct five new combined heating and power stations: the 150 MW Uralskaya
TETS, the 450 MW Aktyubinskaya TETS, the 300 MW Mainakskaya GES, the 1280 MW Yuzhno-
Kazakhstanskaya TETS, and the 500 MW Zapadno-Kazakhstanskaya TETS-1. In addition, Kazakhstan
plans to build a new nuclear power station near Lake Balkash, with three units of 640 MW costing $2
billion each. The first unit is expected to become operational by 2005, and the last
one - by 2012. The nuclear plant will supply Almaty with energy and export electric power to China and
Central Asian states.
The country is considering building a 560-mile (900 kilometer) transmission line to export power from
Ekibastuz to Urumqi (China) in order to increase its electricity exports. The attractiveness of
exporting power for Kazakhstan is that the wholesale electricity price in China is 5-10 times higher than
Kazakhstan’s current production cost, with Kazakhstan’s costs to drop further with the completion of its
planned new generating facilities. Negotiations have proceeded on initial annual exports of 150
million kilowatt-hours beginning in 2000, with the power to be supplied by the planned new nuclear power
station near Lake Balkash.

One of the problems in the Kazakhstan power sector is a high amount of transmission and distribution
losses. It is estimated that at least 15 percent of all energy produced is being lost due to technical
factors. Kazakhstan currently has over 560,000 km of transmission lines, the majority of which are in
need of upgrading, repair or maintenance.

The International Bank for Reconstruction and Development (the World Bank) has agreed to extend a
USD 140 million loan to the Government of Kazakhstan and the Kazakhstan Electricity Grid Operating
Company (KEGOC) toward a USD 258.4 million electricity transmission rehabilitation project in 1999.
Additional financing were to be provided by KEGOC (USD 62.4 million) and the European Bank for
Reconstruction and Development (USD 56 million).

Doing Business in Kazakhstan -2- Electric Power Industry