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Electric Power Generation

Overview

 

2007

2008

2009

2010

2011 (est.)

Total Market Size

919

1,016

930

760

890

Total Local Production

170

150

120

90

90

Total Exports

11

6

10

6

10

Total Imports

760

860

800

670

800

Imports from the U.S.

58

70

80

60

80

In USD Millions. Source: The above statistics are unofficial estimates based on Kazakhstan customs data and industry sources.

Kazakhstan's power generation industry has undergone a challenging and painful post-Soviet transformation. The production and consumption of electricity in Kazakhstan fell significantly following independence in 1991. This was followed by an aggressive privatization program, followed by state involvement in a few generation companies. Robust economic growth since 2000 has helped boost generation to 78.9 billion kilowatt-hours (Bkwh) in 2007 and consumption to 76.9 Bkwh. In 2008, consumption reached 80 Bkwh. Due to the financial and economic crisis, generation of electricity in 2009 decreased to 78.4 Bkwh while consumption also fell to 77.9 Bkwh (due to production stagnation in metallurgical plants and the construction industry). In 2010, power generation was 82.3 Bkwh (4.9% increase comparing to 2009) and consumption 83.8 Bkwh (7.4% increase).

Transmission issues necessitate that Kazakhstan continue to import electricity in the southern part of the country, as the country's northern generating units are connected to a separate transmission grid.

The electric power industry remains a key factor in Kazakhstan’s industrial development and economic growth as electric power generation accounts for about one-tenth of all industrial output. The government of Kazakhstan has developed an action plan for electric power development up to 2015 which includes a list of power plants for reconstruction and modernization as well as the construction of new facilities. The country's power generation sector is projected to boost total capacity to 124.5 billion kWh by 2015. However, equipment in existing electric power plants will only allow an increase in energy production to 80 billion kWh. Therefore, the country plans to modernize existing facilities and construct new power plants in order to meet consumer demand and increase its export potential and reserve capacity.

However, financing for new generation facilities remains questionable. Kazakhstan's wholesale power tariff structure is expected to change in the near future once the new Law on Electricity, which took effect in January 2009, was officially implemented by Prime Ministerial decree. The decree will establish a seven-year price ceiling for electricity. The Agency for the Regulation of Natural Monopolies states that the purpose of the decree is to attract foreign investment by guaranteeing a stable, long-term price for power companies. However, industry experts note that Kazakhstan’s tariffs are among the lowest in the world, which they claim makes new facilities commercially non-viable. They also say that the government's proposed fixed prices would be below market rates and would discourage future investment in infrastructure. As it is, U.S. AES is the only foreign power company operating in Kazakhstan, and in 2008 they sold their major asset to Kazakhmys, a copper mining company that in turn sold the shares to Samruk-Kazyna, the state holding company.

Best Prospects/Services

Needs are great in the services market as Kazakhstan seeks to replace aging plants and equipment. Overall, 94% of Kazakhstan's gas turbines, 57% of its steam turbines, and 33% of its steam boilers have been in use for at least twenty years. Electricity transmission networks are inefficient, with losses during transmission and distribution estimated at approximately 15% of energy produced, although the actual number may be higher. Construction of new power plants and expansion of power distribution networks are priorities for the government and are likely to be implemented in the medium term. Some observers project steady growth in the market for a wide range of power generation and distribution equipment.

Major categories of goods imported by the electric power generation sector include fuel elements (non-irradiated), liquid dielectric transformers, inverters, parts for transformers and inverters, and vapor-generating boilers and parts. Considering the overall remodeling of the Kazakhstan Electric Grid Operating Company’s (KEGOC’s) systems and development of new power generation facilities, it is likely that demand for IT support, management, and communications systems will increase as well.

U.S. companies must prepare to compete with Russian, German and Chinese companies that have acquired strong positions in the market and are sometimes entitled to tax breaks and other preferential treatment (particularly when they qualify as investors and not only as importers). Attempts to sell equipment for the power generation sector are more likely to be successful if based on a strategic approach to the market and accompanied by appropriate training, servicing, and consulting programs.

Opportunities

Kazakhstan's economic development plan for 2007-2015 calls for the upgrade of power facilities, the launch of a north-south power transmission line, and the construction of small hydropower plants. For the program's implementation, new production facilities are needed and existing electricity producers have to be refurbished. The program envisions the installation of a gas turbine electricity station capable of producing 56 megawatts in Western Kazakhstan, an electricity station in Karachaganak (120 megawatts), a gas turbine plant at the SIPS-Aktobemunaigaz company (48 megawatts), and another in the country's south (60 megawatts). Small hydroelectric stations along the rivers in the Almaty region will be refurbished, and a pilot project for building wind-powered generators in the region is also planned. For all of these projects, Kazakhstan needs to attract approximately $21 billion to electric power development by 2015, according to the president of KEGOC.

The vast majority of those Regional Electric Companies (RECs) providing power distribution have not been privatized. As the privatization process moves forward, it will represent a major strategic opportunity for U.S. suppliers and investors, since most of the RECs are in very poor shape, with most equipment requiring urgent repairs and replacements.

The country plans to construct five new combined heating and power stations: the 150 MW Uralskaya TETS, the 450 MW Aktyubinskaya TETS, the 300 MW Mainakskaya GES, the 1280 MW Yuzhno-Kazakhstanskaya TETS, and the 500 MW Zapadno-Kazakhstanskaya TETS-1. In addition, Kazakhstan is considering building a new nuclear power station, with three units of 640 MW costing $2 billion each.

Kazakhstan has also started building a 560-mile (900-kilometer) transmission line to export power from Ekibastuz to Urumqi, China in order to increase its electricity exports. The attractiveness of exporting power for Kazakhstan is that the wholesale electricity price in China is 5-10 times higher than Kazakhstan’s current production cost, with Kazakhstan’s costs expected to drop further with the completion of its planned new generating facilities. The government is planning the construction of several Hydro Power Stations (HPS) in the Almaty region including Moinak HPS (capacity 300 Megawatt), Kerbulak HPS (capacity 50 Megawatt), and small HPSs on the Aksu River (capacity 235 Megawatt) and on the Tejtek River (capacity 390 Megawatt).

Although Kazakhstan has significant hydrocarbon resources concentrated in the west, this region still imports electric energy from neighboring Russia. In this connection, local authorities and oil companies are seeking to create their own power supplies. The primary focus is on the construction of a gas-turbine power station (GTPS) that will utilize local gas. The most significant projects in this area will be: construction of gas-turbine installations (GTI) with 48 Megawatt capacity at the Aktobemunaygas industrial complex; the start of the Tengizchevroil Ltd gas-turbine power station with 144 Megawatt capacity, completely covering the needs of the Tengiz oil-and-gas complex; and the construction of a 200 Megawatt GTI at the Kumkol (Kzylorda area) developed by Petro Kazakhstan Inc.

Kazakhstan’s new Accelerated Industrial Innovation Development Program (2010-2014) identifies the energy sector as one of its priorities in the overall plan to diversify the economy and significantly increase the country’s GDP by 2015. Key projects in the energy sector include:

  • Expansion and reconstruction of the Atyrau heat electrical power station, Atyrau Region (2007-2010)
  • Construction of transformer substation in Almaty city and Almaty Region (2009-2011)
  • Reconstruction of #8 block in Ekibastuz-1 hydro power station, Pavlodar Region, Ekibastuz (2010-2012)
  • Reconstruction of #2 block in Aksu hydro power station, Pavlodar Region, Aksu (2010-2011)
  • Construction of “Alma” substation, Almaty Region (2009-2014)
  • Construction of Monkay hydro power station, Almaty Region (2006-2011)
  • Construction of Balkhash heat power station, south-west bank of Balkhash Lake (2009-2014)
  • Construction of #3 energy block in Ekibastuz-2 hydro power station, Pavlodar Region, Ekibastuz, Solnechnyi village (2009-2013)
  • Construction of gas turbine power station on Akshabulak deposit, Kyzylorda Region (2008-2011)
  • Construction of gas turbine power station with capacity of 54MW, West Kazakhstan Region, Uralsk (2008-2010)