POWER GENERATION

Most of Kazakhstan's energy generation comes from the Ekibastuz, Almaty, and Karaganda regions, and is based largely on coal. Due to a high concentration of Kazakhstan's heavy industry in these areas, it is also the largest user of electricity, approaching 70% of all electricity consumed. About two-thirds of total electricity production is generated at coal-fired plants, and the remainder comes from petroleum-fired plants and seven hydroelectric stations.

The Government of Kazakhstan privatized 70% of the country's power generation facilities inherited from the Soviet Union, and has taken privatization even further than many countries in Europe. Although Kazakhstan is a major exporter of petroleum resources, it is a net importer of electricity generation. In 2000, it generated 51.4 billion kWh, consumed 54.3 billion kWh, imported 2.9 billion kWh, and exported 287 million kWh. The additional three billion kilowatt-hours was imported from Russia and neighboring Central Asian states. Both consumption and generation appear to be moving off of their 1998-99 lows and should continue to increase as other investments accelerate and industry revives.

Kazakhstan's Power Generation, 1991-2001

(click on the chart to view the larger version)

In 1997, the Government of Kazakhstan created joint stock companies out of state-owned Kazakh Energo, and created the Kazakhstan Electricity Grid Operating Company, KEGOC, allowing free access to the grid and standard tariffs. In the late 1990s, the rules of the wholesale energy market were rewritten to produce growth-led reform and better reflect business concerns.

The citizens of Kazakhstan and its industry are increasingly starting to realize that energy is a product with a cost attached, rather than a public entitlement. Collection remains a problem due to Kazakhstan's historical legacy of "free" power, but has improved dramatically. Access Industries, which successfully turned around an integrated group of generation and distribution companies known as Access Energo in Northern Kazakhstan, reports that cash collections are 92% of receivables, and total collections are even greater, with further improvements expected. To assist in these efforts, metering and billing systems are areas that need continuous improvement and upgrading, since much of the existing stock is significantly aged. Since Kazakhstan does not produce its own electric power equipment, it relies on foreign imports. GE has supplied generators, and ABB has provided engineering design, equipment supply, and construction services for the power generation and electric transmission/distribution industry. Aside from the U.S., other major equipment suppliers are Germany and Russia.

The Kazakhstan electricity network is still inefficient. In 1995, losses during transmission and distribution were approximately 15% of energy produced; although upgrades have been made, it is reasonable to assume that losses are still significant. Given Kazakhstan's immense size, (four times the size of Texas) opportunities for U.S. equipment suppliers who could follow from major investor acquisitions and management contracts continue to exist.

Access Energo, with majority interests in the Ekibastuz Thermal Station and the 380 MW Petropavlovsk Heat and Power Station and Regional Power Distribution Company, has over 1 million customers. Another company active in Kazakhstan and elsewhere in the CIS is AES. Since 1996, AES has invested more than $150 million in Kazakhstan's power generation industry. In August of that year, AES purchased Kazakhstan's largest power plant - coal-fired Ekibastuz GRES-1 - with a nominal production capacity of 4,000 megawatts, and a number of others in 1997, bringing the nameplate capacity to over 8100 MW. AES' strategic commitment to the CIS market is characteristic of the long-term approach needed in this challenging sector.