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Kyrgyz Energy Sector

Kyrgyz Energy Sector. Tetra Tech Inc. Almaty, November 8, 2010. Basic Facts about the Power Sector. 1991 Parastatal Kyrgyzenergo. 2001 - Unbundled 80 % state owned 13 % Social Fund 7 % private. Generation. Power Plants Co. Transmission. National Grid Co. Distribution.

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Kyrgyz Energy Sector

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  1. Kyrgyz Energy Sector Tetra Tech Inc. Almaty, November 8, 2010

  2. Basic Facts about the Power Sector

  3. 1991 Parastatal Kyrgyzenergo 2001 - Unbundled 80 % state owned 13 % Social Fund 7 % private Generation Power Plants Co Transmission National Grid Co Distribution Severelectro Vostokelectro Oshelectro J-abatelectro Restructuring of the Power Sector

  4. History of the Reforms • 1996 – Energy Laws adopted • 1997 – State Energy Agency (Regulator) created • 1997 – Kyrgyzenergo incorporated • 2001 – Sector unbundled • 2005 – SEA abolished • 2005 – Alamedin HPP cascade privatized to Chakan GES • 2009-10 – Severelectro & Vostokelectro privatized • 2010 – Chakan GES, Severelectro, Vostokelectro renationalized.

  5. Current Structure of the Power Sector Government of the Kyrgyz Republic Ministry of Energy (state policy) State Property Fund (representing GoKR as owner) Department for Regulation of Fuel & Energy Sector (the Regulator) JSC Power Plants (GenCo) JSC National Grid (TransCo) Large Industrial Customers & Distribution Enclaves Distribution Companies: JSC Jalalabatelectro JSC Severelectro JSC Vostokelectro JSC Oshelectro Consumers

  6. Power and cash flows within the sector

  7. Power Plants of the Kyrgyz Republic

  8. Kyrgyzstan’s High-Voltage Transmission Grid

  9. Service Area of the Distribution Companies

  10. Overview of the Distribution Companies • 1.2 million customers • The four DisCos are unequal in load, customers & average collected tariff:

  11. Challenges of the Power Sector Ensuring Power Supply

  12. Overview of Generation Issues • 3676 MW installed capacity; but only 3150 MW can be used • Kyrgyzstan is already overly dependent on hydropower: (95 % in 2007; 91 % in dry years of 2008 & 2009) • Thermal capacity = 728 MW, of which only ~ 200 work • Bishkek CHP plays critical role in securing supply to the north and in dry years • May cost up to $500 M to bring Bishkek CHP up to 400 MW (minimum needed to meet heating demand) • Kambarata 2 under construction won’t resolve winter problems.

  13. Generation for exports in 2007 left Toktogul unable to cope with 2008’s “1 in 4” dry year

  14. Toktogul inflow exceeded historical average for 9 years until 2008, but outflow was well above inflow in ’06 & ’07,mostly for excessive exports. Exports Historical Long Term Domestic Use GWh MCM Outflow Inflow Highest Volume on Oct 1

  15. Target demand in 2009/10 was planned 11% higher then actual 2008-09 demand (curtailed)

  16. Minimum Energy Cost of Generation Options

  17. CAPACITY EXPANSION WITH COAL WILL PERFORM MUCH BETTER THAN WITH KAMBARATA OPTIMISTIC ENERGY COSTS ARE SIMILAR, BUT THERE IS MORE RISK OF HIGHER COST WITH KAMBARATA CAPACITY EXPANSION WITH KAMBARATA WILL REQUIRE MUCH MORE INVESTMENT Comparison of Capacity Expansion Options, assuming Government financing of Kambarata 1 & 2

  18. Generation: High-priority Measures • Conduct a least-cost analysis for sector development and prepare prioritized investment plan • Prepare professional feasibility studies for Kambarata 1, Kara-Keche and Bishkek CHP • Conduct a least-cost comparison made between a Kara Keche coal plant and Kambarata 1. • Use truly open, competitive tenders for all new investment projects

  19. Challenges of the Power Sector Demand Management Issues and Tariffs

  20. Load Redistribution and Losses after Independence

  21. Monthly Load Redistribution

  22. Total Generation Domestic Use (82%) Exports (15%) Own Use (3%) Available for Domestic Sales System Losses (15%*) Billed Use (60%*) Unmetered Use (24%*) Billed @ full tariff (29%*) Discount on 150 kWh (16%*) Special Privilege (15%*) Paid for @ full tariff (20%*) Uncollected (10%*) * - % of 11,2 b. kWh Production for Domestic Use Only 1 in 5 kWh produced for domestic use is metered, billed and collected at full tariff (1996, billion kWh)

  23. Total Net Generation Own Use Domestic Use Exports Available for Domestic Sales System Losses (8,9% of Domestic Use) Sales to LIC Sales to DisCos Billed by GenCo Billed by DisCos Tech. Losses & Theft (36,2% of Sales to DisCos) Paid to GenCo Paid to DisCos Uncollected (17,3% of Billed by DisCos) About 1 in 2 kWh generated for domestic use in 2007was lost, stolen or uncollected (as reported by MIE)

  24. Total Net Generation Own Use Domestic Use Exports Available for Domestic Sales System Losses (9,2 % of Domestic Use) Sales to LIC Sales to DisCos Billed by GenCo Billed by DisCos Tech. Losses & Theft (31,6% of Sales to DisCos) Paid to GenCo Paid to DisCos Uncollected (10,2 % of Billed by DisCos) In 2008, about 2 in 5 kWh generated for domestic use was lost, stolen or uncollected (based on MIE data)

  25. ($ million) Total Production 14.645 billion kWh Exports System Losses Losses/ Theft Not collected Domestic Market Sales to DisCos Billed by DisCos Paid to DisCos Sales to LIC Paid to GenCo Billed by GenCo Of $300 M potential revenue from 2007 consumption @ 2¢ per kWh (current tariff), $120 M is lost, stolen or uncollected

  26. About 2 in 5 kWh generated for domestic use in 2008 was lost, stolen or uncollected (as reported by MIE). Total Generation Own Use Domestic Use Export Available for Domestic Sales System Losses (9,2% of Domestic Use) Sales to LIC Sales to DisCos Billed by GenCo Billed by DisCos Tech.Losse & Theft (31,6% of Sales to DisCos) Paid to GenCo Paid to DisCos Uncollected (10,2 % of Billed by DisCos)

  27. Own Use Total Net Generation Domestic Use Exports Available for Domestic Sales System Losses (7,7 % of Domestic Use) Sales to LIC Sales to DisCos Billed by GenCo Billed by DisCos Tech. Losses & Theft (25,6% of Sales to DisCos) Paid to GenCo Paid to DisCos Uncollected (4,9 % of Billed by DisCos) Almost 1 out of 3 kWh generated for domestic use in 2009 was lost, stolen or uncollected (as reported by ME)

  28. Within CIS, the Kyrgyz tariffs are lowest for industrial and next to lowest for residential use (residential tariffs in US cents/kWh as of July 1, 2009) (pre January 2010 and post April 7, 2010) 4,3 January and July 2010 increases, since rescinded

  29. History of Tariff Increases

  30. History of Tariff Increases

  31. Loss Reduction: High-priority Measures • Install Transmission Metering and Automatic Data Acquisition System (MADA) • Establish Independent MADA Operator as Data Center for Settlements • Install Distribution “Master Metering” to identify areas of high loss • Install a modern, secure billing system for entire distribution sector • Establish Loss Reduction program based on realistic loss reduction targets by RES rather than arbitrary Soviet-style one-size-fits-all targets

  32. Tariffs: Next Steps • Cost of Service Study • Management and Operational Audit • Develop set of Tariff Methodologies • Develop procedures for public input, comment and consultations • Through transparency and public outreach program, build confidence that tariffs are fully justified and that money will stay in sector and be used properly • Public Information Program about why tariff increases will be needed in the future; how the additional revenues will be used; how management will be held accountable

  33. Challenges of the Power Sector Transmission Security

  34. Transmission Issues • Part of Central Asian Transmission Loop • Built as part of integrated Central Asian power system to balance thermal power from KZ, UZ, TK with hydropower from TJ & KR for dual use (irrigation & electricity) • Currently a national security vulnerability • Uzbekistan can make the south dark and the north short of power • Kazakh by-pass can make power short in the north.

  35. Strategic Investments are Urgently Needed • System Security and Reliable Supply • Datka Substation and “Southern Lines” Project ($250M) • Datka-Kemin and Kemin Substation ($350M) • Status: 1 year negotiating with Chinese (after cancelling barter deal with Koreans) • (after dropping MOU with AES) • Export Kemin-Almaty ($140M) (in discussion) • Datka-Khodjent ($200M) [to be financed as part of CASA1000 Project]

  36. SWOT Analysis Positive Negative • Large hydro resources • Presence of transmission system • 100 % coverage of the end-use • consumers • Presence of legal and regulatory • framework Strengths • Lack of fossil fuels • Seasonal generation • Lack of strategic transmission • lines • Outdated distribution system • Lack of political will Weaknesses Internal • Opportunities for intra-regional • cooperation • Optimal use of water & energy • resources • Reliable supply • Export revenue Opportunities • National Energy Security • Import fuel supply & prices • Additional risks for private • investors Threats External

  37. Recent Developments • The President’s Energy Sector Transparency Initiative (July 20, 2010) • FESTI Implementation Program • Escrow Account for export revenues and expenditures for JSC Power Plants • fuels and electricity imports • Regulations on the Monitoring Committee • Selection of the Monitoring Committee • Regulatory Aspects • Request for the Management and Operational Audit • Need for the Cost of Service Study • Licensing conditions need to be reviewed to include enforceable • pre- and post-license conditions • ADB will fund: • MADA System for the wholesale market and limited SCADA • Study on the Settlement Center

  38. Major Donor Investments WB – Emergency Project for the Energy Sector ($ 70 mln.) – fuel and equipment procurement ADB – Power Sector Improvement Project ($ 45 mln.) – MADA, SCADA, communication upgrade, substation rehabilitation. KfW - Increasing Efficiency of Distribution Networks Project (€ 22 mln.) – metering and network rehabilitation in Bishkek

  39. Key Officials in the Kyrgyz Energy Sector • Minister of Energy Artykbaev Osmonbek • Head of Regulation Department Sultankulova Aigul • Head of State Energy Inspectorate Tumenbaev Akylbek • Director of JSC Power Plants Aitkulov Medetbek • Director of JSC NGK Mamyrov Rayimbek • Director of JSC Severelectro Toktogulov Tynchtyk • Director of JSC Vostokelectro Jumanazarov Rysbek • Director of JSC Oshelectro Artykov Asylbek • Director of JSC Jalalabatelectro Avazov Salaydin

  40. Thank you!

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