UZBEKISTAN - Local Energy/Fuel Market Prices.

The government maintains low prices of energy and fuels and says this is necessary to promote domestic industry's competitiveness and maintain the living standards of the population. The prices are in soums, the local currency. Their US dollar equivalence is according to three different exchange rates: the Official Exchange Rate (OER), the Curb market Exchange Rate (Curb ER), and the Nominal Market Exchange Rate (NMER) - calculated as 0.6 x OER + 0.4 x Curb ER.

The domestic prices at the beginning of 2003 were as follows, according to the World Bank's June 2003 report:

Electricity, wholesale per kWh: 13.10 soums (the local currency), equivalent to three exchange rates of the US dollar: $0.0135 (OER), $0.0124 (curb ER), and/or $0.0130 (NMER). Electricity, retail per kWh: 13.10 soums, $0.0135, $0.0124, and/or $0.0130. Natural Gas, wholesale (to power plants), per 1,000 CM: 17,700 soums, $18.23, $16.70, and/or $17.58. Natural Gas, retail, per 1,000 CM: 7,657 soums, $7.88, $7.22, and/or $7.61. Natural Gas, retail for cooking, per 1,000 CM: 7,657 soums, $7.88, $7.22, and/or $7.61. Natural Gas, retail for heating/000 CM: 3,550 soums, $3.66, $3.35, and/or $3.53. Coal, wholesale per ton: 18,300 soums, $18.84, $17.26, and/or $18.18. Coal, retail per ton: 5,650 soums, $5.82, $5.33, and/or $5.61. Crude oil, wholesale per ton: 21,500 soums, $22.14, $20.28, and/or $21.36.

Petroleum Products:

Gasoline (A-72, A-76), wholesale per ton: 227,500 soums, $234.27, $214.62, and/or $225.99. Gasoline (A-72, A-76), retail per litre: 255 soums, $0.26, $0.24, and/or $0.25 Gasoline (A-92, A-93), wholesale per ton: 273,000 soums, $281.12, $257.55, and/or $271.19. Gasoline (A-92, A-93), retail per litre: 295 soums, $0.30, $0.28, and/or $0.29. Diesel, wholesale per ton: 132,686 soums, $136.63, $125.18, and/or $131.81. Diesel, retail per litre: 255 soums, $0.26, $0.24, and/or $0.25. Fuel Oil, wholesale per ton: 20,400 soums, $21.01, $19.25, and/or $20.27.

The Prospects: The World Bank said in its report these prices and relevant "energy policies" were unsustainable, and the reasons were discussed under: - available energy resources vis-a-vis consumption patterns; - available power production capacity compared with consumption trends, energy consumption per capita; - energy intensity of the economy; and - the foreign borrowing by the energy sector.

The World Bank noted a "clear evidence" that production of oil and condensate was declining, adding: "Such declines may be permanent, because the producing reservoirs are experiencing drop in pressure and water influx (see OMT & Gas Market Trends of next week).

Almost all of the power plants in Uzbekistan are very old, their age averaging more than 30 years, and are in need of substantial rehabilitation. According to estimates reported by the World Bank in June 2003, (up to $1.15 billion investment would be required in the thermal generation plants alone in the next 3 to 5 years".

Given that 90% of the power production is from thermal sources, maintenance requirements are high. However, due to lack of resources, the level of maintenance being carried out is far from adequate. "As a result, the reliability of plant and equipment is very poor".

At the same time, the local demand for electricity is increasing, particularly during peak periods both in the summer and winter and the system is "unable to meet this peak demand already". According to data mentioned by the World Bank, "there is a peak-period deficit of about 800-900 MW in winter". Further deterioration is very likely, "unless resources are mobilized urgently".

As regards final consumption of natural gas, the World Bank in its June 2003 report noted that "the access to gas policy was implemented without any metering, and this is proving to be a significant problem - due to low prices, there is significant over consumption, but there is no way to measure actual consumption". Consequently, "losses of 20% or more" were reported, compared to a loss level of 2% or so in well-run gas distribution systems.

The self-sufficiency policy has also resulted in the energy sector accumulating considerable amounts of debt, mostly in the hydrocarbons segment (see above). The debt service period will peak in 2005.