Kyrgyz energy system in urgent need of modernisation

Foreign investment needed

By Alisher Karimov

2012-06-11

DZHALAL-ABAD – A May 20 lightning strike at the Kurpsay Hydro-electric Power Station (HPS) has Kyrgyz leaders and analysts pondering the state of the country’s power system.

The lightning strike disabled one of the plant’s two transformers, halving the power station’s output.

Because the country can’t afford a new transformer, it will have to repair the old one, said Abdylda Israilov, deputy managing director of Elektricheskiye Stantsy (EK), the state-owned utility.

Repairs are estimated at 20m KGS ($425,500), Ministry of Industry and Energy official Chorobay Akunov said.

Renovation needed

The situation underscores that Kyrgyzstan needs to renovate its entire power system, said EK CEO Aman Tentiyev.

The country’s power infrastructure hasn’t been overhauled in 20-40 years, observers say. Its deterioration leads to frequent emergencies and blackouts. Even in the capital, whole neighbourhoods go without electricity for days at a time.

Simply put: “We need modernisation,” Tentiyev said.

That, however, costs money. For example, upgrading the Uchkurgan, Toktogul and At-bashi power stations would cost $70m (3.3 billion KGS), $56m (2.6 billion KGS) and $25m (1.2 billion KGS), respectively.

Such renovation is required though, not just to help existing power plants but also if the country tries to expand its power base.

Building new power stations is impossible without overhauling the entire energy system, said Kybanychbek Asanov, former Ministry of Energy and an independent economist now.

“We can’t say which is more important – building new HPS’s or reconstructing the existing facilities,” Asanov said. “Everything needs to be done in parallel.”

Rates too low

One reason the system has fallen into disrepair is that power rates, currently at 0.7 KGS (about 1 US cent) per kWH, aren’t sufficient to cover even routine maintenance, Tentiyev said.

“The power rate virtually hasn’t changed since 1991, going up only 177% since then,” Tentiyev said. “We need investors. The state doesn’t have the money.” The country went through several years of hyperinflation of 1,000-2,000% annually in the early 1990s, before the rate was reduced to double digits in the early 2000s.

Such low power rates hinder modernisation, said Azamat Arapbayev, chairman of the Parliamentary Committee for the Fuel and Energy Complex and Utilisation of Subsurface Resources, because “The rates make it impossible to cover expenses.”

But Asanov said average Kyrgyz can’t afford higher rates. “Raising the prices on utilities will be impossible for the average Kyrgyz citizen’s pocket, and people will complain,” he said.

And while the executive branch and parliament understand the power rates are too low, they’re not likely to increase them for that reason, independent analyst Dmitry Zilberman said.

Foreign aid sought

Attracting foreign investors is one solution, Arapbayev said.

“There are no funds for the reconstruction of existing facilities producing electricity for the Kyrgyz Republic, yet such funds will be needed in the future,” he said. “We can only hope that our partners – Kazakhstan, China and Russia – will invest in the energy system, because hydroelectric power is the cheapest in the world.”

Tentiyev is also reckoning on assistance from abroad. “We’ve reached agreement with the Asian Development Bank (ADB) on the allocation of about $40m (1.9 billion KGS) for replacement of equipment, which will be done within the next two years. This has all been approved in advance. The other HPS’s also constantly require maintenance, so we are seeking other international donors.”

The government considers a comprehensive search for financing essential.

The most urgent issue is reconstructing the power grids of Bishkek and Osh, according to Deputy Energy Minister Avtandil Kalmanbetov. The government is working on one-year and three-year plans.

Kyrgyzstan plans to provide some financing and to borrow from Germany and from riot reconstruction donors to help rebuild Bishkek and Osh’s power grids, he said. And China will provide loans for replacing the Ala-Archa sub-station outside Bishkek, Kalmanbetov added.

The issue of building power transmission lines has been solved through ADB financing, he said. “A credit agreement for $389m (18.3 billion KGS) for the Datka-Kemin line will be signed within the next few days, also one for $208m (9.8 billion KGS) for the Datka-Yug line.”

Work has begun on the lines, and they are set to go online in February 2013, he said.

However, reconstruction needs to go hand in hand with the introduction of new capacity, Tentiyev said.

“We have four HPS projects: Kambarata-1, two stations in the Upper Naryn Cascade, the Susamyr Cascade and the Kara-Kech power station,” Tentiyev said. “Negotiations with potential investors are in progress. These investors will most likely be from different countries.”

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