Kazakhstan: World Bank Supports Electricity Transmission To South

Oct 27, 2006 - Press Release - World Bank

ASTANA - The World Bank today approved a US$ 100 million loan for Phase II of the Kazakhstan North-South Electricity Transmission Project. The project will help ensure access to a reliable, cost-effective and high-quality supply of electricity for business enterprises and households in southern Kazakhstan. The project also supports regional integration by optimizing the use of energy resources through the international electricity trade. It will help to promote national and regional competition by allowing low cost producers in Kazakhstan, Tajikistan and Kyrgyzstan to compete on the broader regional market.

Strong economic growth and increasing diversification of the economic base have led to a sharp upswing in electricity demand in Kazakhstan in recent years. While Kazakhstan has sufficient capacity to meet domestic power demand, most of the country’s power generation comes from the northern part of the country, from power plants located in the coal-producing regions and hydroelectric facilities. Generation facilities in the south are limited to small hydro, combined heat and power plants and a high cost oil-fired power plant at Zhambyl.

Currently, demand exceeds supply in the south by approximately 966 MW (almost 50 percent of peak demand), and the deficit is expected to increase to 1,400 MW by 2010. At present, the deficit is met in part by supplies from the north and in part by imports from other countries of Central Asia. However, the existing 500 kV North-South (N/S) interconnector is already operating at capacity, and its reliability is low because of its single circuit design. Major interruptions on the line have increased significantly in recent years and have led to cut-offs of substations and severe frequency fluctuations.

Improving the North-South transmission links offers numerous benefits in terms of system reliability, increased export and transit capacity, removal of growth-retarding power constraints in the south, and the ability to make more effective use of low-cost generating plants in the north. The resulting low electricity tariffs would sustain the country’s competitiveness in energy-intensive exports (metals and petrochemicals). At the same time, the new line would allow Kazakhstan to become the “energy bridge” between Russia and Central Asia by opening the opportunity for increased electricity trade and better integrated power markets in the region.

“The World Bank has had a long and fruitful collaboration with the Kazakhstan Electricity Grid Operating Company (KEGOC) to support its efforts to modernize Kazakhstan's electricity transmission network and ensure that it meets the needs of its rapidly developing economy,” said Loup Brefort, Country Manager for Kazakhstan. “The building of the North-South line is critically important to sustain growth in the southern part of the country over the next decades, but it is also key to unlock opportunities for the development of the regional power trade between Kazakhstan and its Northern and Southern neighbors. The World Bank is proud to be associated, along with EBRD, the Development Bank of Kazakhstan and others, with the overall financing of this project. Not only are we offering particularly favorable financing terms but, with the strong support of KEGOC and the Government of Kazakhstan, we have processed this USD 100 million loan in record time - less than 5 months - thus ensuring that this strategically important project can proceed in a timely manner”

The project consists of the following four components: