KAZAKHSTAN - The Power Sector.

The installed power generating capacity in Kazakhstan now is almost 19,000 MW. Some two thirds of this are generated by coal-fired plants based in the highly industrialised north, which accounts for 70% of the country's power consumption. These plants burn a dirty high-ash coal which pollutes Almaty.

There are 54 fossil-fuel fired plants and only five hydro-power stations. Only 10% of the hydro-power potential of 60 TWh has been developed, Kazakhstan being rich in coal and water.

A small nuclear plant at Aktau was closed down in late 1999. Astana is planning to have a new nuclear power station built near Lake Balkash, with three units of 640 MW each scheduled to be operational by 2012. This will supply Almaty and export power to China and other Central Asian neighbours. For the time being, Kazakhstan is a net importer of electricity. It buys between 12-17% of its electricity needs from Russia, Uzbekistan and Kyrgyzstan.

The country has faced serious power shortages since 1992, and a big part of the installed capacity is not being utilised. Until 1999, the winter season used to see several cities and towns manage with limited heat and power supplies. The focus of the government is to achieve self-sufficiency in power, but this may not be possible for some years.

Planned power sector reforms include privatisation of the system from generation to distribution. The state power company KazakstanEnergo, a cumbersome conglomerate, has been divested of its generation facilities and renamed Kegoc (Kazakhstan Electricity Grid Operating Co.). All major generating stations have been privatised, with 85% of the country's total capacity now privately owned.

The country's largest generating plant, the coal-fired 4,000 MW Ekibastuz No. 1 station, was bought in August 1996 by the US-Israeli AES-SunTree. It had been operating at 25% of its capacity. AES of the US has upgraded this to 65% of capacity. In October 1997 AES-SunTree acquired two hydro-power stations and four combined heat and power plants. The JV had problems with Kegoc not paying its dues and in 1998 resorted to London arbitration.

Kazakh Power Partners Ltd (KPP) has acquired the 650 MW coal-fired Karaganda-2 plant. KPP is a consortium comprising Independent Power of the UK, Public Service Colorado of the US and Samsung of South Korea. This and the AES-SunTree operation are examples of the new IPPs.

There are plans to build several new power plants in the country. The goal is to put in place an additional 10,000 MW in installed power generating capacity by 2010/12, mainly by attracting foreign investment. But critics complain that the government is still unsure what this sector should look like by 2010. The government says it intends to put the transmission of power into private hands.

Investors are daunted by a combination of low electricity tariffs set by the government, a high incidence of non-payment of bills and outright theft. The result has been a serious liquidity problem, with Kegoc owed huge sums by customers.