KAZAKHSTAN - The Power Sector.

The installed power generating capacity in Kazakhstan now is 18,240 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 is rich in coal and water.

A small nuclear plant at Aktau was being 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 between 2005 and 2012. This will supply Almaty and export power to China and other Central Asian neighbours.

The country has faced serious power shortages since 1992, and more problems are expected in the short-term because a big part of the installed capacity is not being utilised. In winter several cities and towns have to 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.

Kazakhstan currently buys more than 15% of its electricity needs from Russia, Uzbekistan and Kyrgyzstan. Periodic payment difficulties have caused electricity supplies to be cut, with the Kazakh industry and population having had to endure frequent power cuts in winter.

Planned power sector reforms include privatisation of the entire system from generation to distribution. The state power company Kazakstanenergo, a cumbersome conglomerate, has already 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 (including APC likely to be taken by Gazprom).

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. But it has been operating at 25% of its capacity. AES is to upgrade this to 65% of capacity. In October 1997 AES-Sun Tree acquired two hydro-power stations and four combined heat and power plants. The JV has 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, mainly by attracting foreign investment. But critics complain that the government is still unsure about what this sector should look like a decade from now. 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 about $800m by customers.