ADB lends US$580m for Central Asian power sector upgrades

15 November 2018, Week 45, Issue 936

The Asian Development Bank (ADB) has agreed to lend Turkmenistan and Kazakhstan US$580 million for initiatives that will strengthen the energy sector. It intends to disburse the funds within the framework of two new loan agreements.

The bank unveiled one of these agreements on November 8, saying in a statement that its board of directors had approved plans to lend the sum of US$500 million to Turkmenistan’s state power provider Turkmenenergo. The utility intends to use the funds to cover most of the cost of the National Power Grid Strengthening Project, which provides for the establishment of an interconnected national transmission network covering four of Turkmenistan’s five provinces, it said.

According to the bank, the project envisions the construction of about 1,100 km of new 500-, 220- and 110-kV transmission lines over the next five years. It also calls for Turkmenergo to build several new sub-stations during the same period, including 220-kV facilities in Dashoguz, Balkan and Ahal, as well as 500-kV facilities in Dashoguz and Balkan.

The utility will be able to use these new structures to make domestic power transmission operations more reliable and efficient, the ADB said. In turn, these improvements will also “boost Turkmenistan’s capacity to trade electricity with Kazakhstan, the Kyrgyz Republic, Pakistan, Tajikistan and Uzbekistan and increase the volume of current electricity exports to Afghanistan,” it stated.

The project carries a total price tag of US$675 million, the bank said. Turkmenergo has pledged to cover the remaining US$175 million, it added.

Additionally, the ADB said, the project will help the utility “improve [its] project and financial management capacity ... particularly [with respect to] incorporating good practices on evaluation, investment decision-making, as well as higher safeguard requirements.”

 

Kazakh funds

In a separate statement dated November 12, the bank said it had agreed to lend the equivalent of US$80 million to Samruk-Energy, the largest power generating company in Kazakhstan. The credit will be denominated in Kazakhstan’s national currency, the tenge.

The loan deal provides for the firm to use the funds to “help increase its balance sheet flexibility by reducing foreign exchange risk, enhance its operational efficiency and identify a renewable energy pipeline,” the statement said. It will also help Samruk-Energy mitigate the financial losses that occurred when the tenge lost value because of the drop incrude oil prices, the bank added.

The ADB commented that one of the most serious consequences of the tenge’s fall had been a reduction in the amount of money available to cover the costs of Samruk-Energy’s 10-year development strategy. This plan covered the 10-year period ending in 2025 and emphasised renewable energy development. It aimed to lift the company’s renewable generation capacity from 100 MW to 850 MW by 2025.

Joseph Murphy

Edited by

Joseph Murphy

Editor

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