KEGOC Modernisation II Loan

Location:

Kazakhstan

Project number:

38647

Business sector:

Power and energy

Notice type:

Public

Environmental category:

B

Target board date:

28 May 2008

Status:

Repaying

PSD disclosed:

19 Mar 2008

Project Description

The proposed project covers the modernisation of substations and high-voltage equipment of JSC "Kazakhstan Electricity Grid Operating Company” (“KEGOC”), the national transmission operator of Kazakhstan to ensure efficiency, reliability and safety of the national transmission system. The project will enable KEGOC to provide an efficient, reliable and non-discriminatory access to the grid thus ensuring operating efficiencies and smooth functioning of the system while facilitating development of a competitive market.

Transition Impact

The project supports the Bank’s strategic cooperation with the Government of Kazakhstan under the Sustainable Energy Action Plan (SEAP) currently finalised between the Government of Kazakhstan and the Bank.

The SEAP is designed “to promote the conservation or rational use of energy resources as well as the efficient and sustainable supply of power and energy, to achieve national energy security, address regional imbalances and improve industrial competitiveness”. By supporting this key infrastructure investment, the Bank will help KEGOC to provide an efficient, reliable and non-discriminatory access to the grid thus ensuring operating efficiencies and smooth functioning of the system while facilitating development of a competitive market.

The project will:

  • Support sector reforms by providing additional incentive to the Government of Kazakhstan to implement key reform objectives of SEAP, including improvements in tariff regime and regulatory arrangements to encourage investments in electricity transmission, distribution and generation.
  • Demonstrate new types of financing by introducing unsecured long-term syndicated financing, possibly in local currency, to a corporate client who relied in the past on sovereign guarantees, securities and pledges and is trying to diversify its creditor base and attract commercial financing, similar to other mature grid operators in the CIS and world-wide. Successful syndication will have demonstration effect for other similar institutions in Kazakhstan.
  • Promote commercial efficiency and functioning. Through the substations equipment rehabilitation and replacement, the investment will facilitate increased efficiency of the electricity system in Kazakhstan. Modernization of the transmission infrastructure offers numerous benefits in terms of system reliability, increased export/transit capacity and the ability to make more effective use of low-cost generating plants in northern Kazakhstan to serve domestic markets.
  • Assist in developing competition both on the national and regional levels by allowing low cost producers to effectively compete on the broader regional market. Strengthening the transmission capacity will ensure an efficient functioning of wholesale market and system reliability. The current technological obsolescence of the transmission sector is a substantial risk factor, which could adversely affect the transition to competitive relations in the power sector.

The Client

JSC "Kazakhstan Electricity Grid Operating Company”, the national transmission operator of Kazakhstan is a fully state-owned monopoly responsible for power transmission and dispatch. KEGOC’s role is to ensure stability and reliability of the national power system and equal access to the wholesale electricity market for both electricity producers and consumers.

EBRD Finance

The EBRD is considering to provide an up to EUR 127.5 million Loan including up to EUR 63 million equivalent denominated in Kazakh Tenge subject to local currency availability to the Bank. Up to EUR 127.5 million will be co-financed by a syndicated loan.

Project Cost

EUR 292 million.

Environmental Impact

Screened B/1, requiring a corporate environmental audit of the company operations and an environmental analysis of the proposed investment programme. The Bank has financed three previous investments with the company and has developed and agreed environmental action plans in the past. These are being well implemented by the company and their have been no major environmental or social issues reported to date.
In accordance with EBRD’s Environmental Policy, environmental investigations have been undertaken to assess the current environmental status of the site and environmental impacts associated with the project. The investigations showed that the Bank finance project is designed to meet Kazakh and EU environmental standards. The projects will provide efficient mitigation of environmental impacts.

In the context of EBRD’s potential participation in the project, Environmental Review Summary (ERS) of the project has been placed at the following locations accessible to public:

www.kegoc.kz

Technical Cooperation

None.

 

Business opportunities

For business opportunities or procurement, contact the client company.

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Email: procurement@ebrd.com

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