Overview

In USD Millions; Source: the above statictics are unofficial estimate based on Kazakhstan customs data and industry sources.

Best Prospects and Services

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 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 will need to be prepared for competition from Russian and German companies that have acquired strong positions in the market and sometimes are 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.  The ability of U.S. suppliers to secure project financing is also key.

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 these projects, Kazakhstan plans to attract about $21 billion to electric power development by 2015, according to the president of the Kazakhstan Electric Grid Operating Company (KEGOC).  It should be noted that energy rates in Kazakhstan are some of the lowest in the world, and firms operating in this sector state that new investment will not be economically feasible until rates rise significantly.  In this light, it is uncertain how the GOK will attract the necessary investment.

The vast majority of Regional Electric Companies (RECs) ensuring 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 is considering 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.  Negotiations have proceeded on initial annual exports of 150 million kilowatt-hours beginning in 2010.  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).

Though 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.  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; start of Tengizshevroil 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 (Kzyl Orda area), developed by Petro Kazakhstan Inc.

KazKuat is managing the $252 million Moinak Hydro Power Station project in the Almaty region, with a planned capacity of 300 Megawatts.  The project includes a $200 million credit from China’s Development Bank.  For the first stage of the project, which is evaluated at $50 million, Kazakhstan’s Development Bank will provide a $25 million credit with the remaining half to provided by another development institution (probably, EBRD).  According to the terms of the deal, construction will be conducted by Chinese workers and necessary equipment will come from Chinese suppliers.  The construction of the Moinak hydropower plant started in May 2006 and is scheduled to be finished by the end of 2009.  Moinak is owned by the state-owned KazKuat JSC (51%) and the private company Birlik JSC (49%).