Is Kazakhstan Finally Ready To Attract Investments Into Its Electricity Sector?

The capacity market was finally launched on the 1st January 2019 in Kazakhstan to encourage investment for the renovation of old, as well as construction of new, power infrastructure facilities. Because of relevant amendments in the Power Law, all generating companies in Kazakhstan must maintain a specific generating capacity and, correspondingly, the participants in the wholesale power market (such as industrial consumers) have an obligation to pay for the availability of the specific generating capacity.

Any investor in the power sector of Kazakhstan, therefore, can now expect two different sources of income and compensation for expenses:

Proceeds from the sale of electric power in the free market under the power purchase agreements (PPAs) within price caps (such as the maximum limits to the prices that power plants can ask for the electricity they produce) approved by the Ministry of Energy, and Proceeds from the sale of capacity of a power plant (such as the availability of its generating facilities to produce electricity) to a designated-by-law single offtaker under the capacity purchase agreements (CPAs), within price caps established by the Ministry of Energy. Payments under the PPAs would cover the operating expenses of power plants, whereas payments under the CPAs shall cover the capital expenses of investments in new projects and in the modernization of existing power facilities.

The Ministry of Energy will determine annually an anticipated deficit of electric power, as well as develop and approve a promising layout of electrical capacities.

To meet the forecast deficit of electric power, if any, the Ministry of Energy will hold tenders for the construction of newly-commissioned generating plants and sign the so-called agreements for the construction of newly-commissioned generating plants with the tender winner, fixing the commissioning date of the generating plants and the tender winner's liability for failure to perform or for improper performance according to the terms of the agreement.

Within 30 calendar days after the signing of the aforementioned...