Kyrgyzstan does not want to wait long for Russian investments in the electricity sector

Kyrgyzstan and Russia agreed on the construction of the upstream Naryn HPP cascade and Kambarata HPP-1, however, the current situation in the economy of the Russian party is unable to perform these projects, says the President of Kyrgyzstan Almazbek Atambayev.

MOSCOW, 24 Dec. Kyrgyzstan is considering the possibility of agreements with Russia on joint construction of hydropower plants and seeking new investors, said President of Kyrgyzstan Almazbek Atambayev. The President’s press Secretary Dmitry Peskov confirmed that the leaders of the two countries discussed this issue, but it is too early to talk about making some decisions.

We are talking about the construction of the upstream Naryn HPP cascade in Kyrgyzstan with the participation of “RusHydro” and the Kambarata HPP-1 with the participation of “inter RAO”. Kyrgyzstan and Russia agreed on construction of Kambarata HPP-1 and small HPP cascade on the Naryn river during the visit of President Vladimir Putin to Bishkek in 2012.

It was assumed that the Russian side allocates funds for construction, the Kyrgyz Republic grants the right of use of land and other assets as contribution to the authorized capital of the created joint ventures for the construction of power plants.

Financing schemes in question

“We with the Russian Federation entered into three agreements (…) two projects — the construction of the upstream Naryn HPP cascade and Kambarata HPP-1. We are on this subject this year met several times with the Russian leadership. It is seen that in the present situation, due to objective reasons, can not be completed (these projects — ed.) the Russian side”, — said Atambayev.

Kyrgyz President understands that the situation has changed. “Therefore, Kyrgyzstan should withdraw from those agreements and to seek other investors. We have no right to stop these projects. Unfortunately, our Russian friends will not be able to implement these projects. We, of course, still a little wait, but we must make a radical decision,” he added.

According to him, the current state of the Russian economy and the trends of its development, including oil prices, did not convince the President that something will change in the near future. “For me, this is sad news,” he said, adding, however, that the failure of these projects and also in Russian interests. “And Russia will be easy,” concluded Atambayev.

The President also said that he had found in this a mutual understanding with the Russian leadership and the decision will be economic, “no politics here”.

Peskov confirmed that the construction of power plants was discussed Monday at a meeting of the presidents of Russia and Kyrgyzstan. According to him, discussions are ongoing and talk about making decisions on this issue yet. The representative of “inter RAO” declined comment. In “RusGidro” are unable to provide you with comments before the text.

According to the Bishkek and Moscow agreements, the power stage of the upper Naryn HPP (Akbulunskaya and three Naryn) should be of 237.7 MW, the production of Kambarata HPP-1 — 4.3 billion kWh.h of electricity annually. In addition, it was assumed the construction of transmission lines to supply electricity to neighbouring States.

For the construction of Kambarata HPP-1 was the Russian-Kyrgyz company “Kambarata HPP-1”, in which 50% of the shares belongs to “inter RAO”.

A final decision on the financing of Kambarata HPP-1 was not accepted. It was not excluded that “inter RAO” can invest in the project funds received from the sale of “Rosneftegaz” 40% stake in Irkutskenergo. However, it is still negotiating the sale of stake is far from complete.

In addition, the company stated that such use of these funds is contrary to the decisions of the presidential Commission on fuel and Energy complex. Finally, the head of “inter RAO” Boris Kovalchuk has repeatedly stated that the project will be implemented only under condition of its financing the state: “inter RAO” is the operator of the project and their investment in it is not planning.

There is no land neighbors against

The project of construction of the upstream Naryn HPP cascade in Kyrgyzstan was estimated at 24 billion rubles, it was to implement a parity JV of RusHydro and Kyrgyz “power stations”, to Finance the construction Rosneftegaz.

In the spring of 2014 the Deputy Chairman of the management Board of RusHydro George Rizhinashvili said that for this purpose Rosneftegaz will allocate 12 billion rubles: 50% in RusHydro, 50% through the JV loan on concessional terms (LIBOR+1,5%). In exchange for money Rosneftegaz had to get 4-5% of RusHydro. However, the deal never took place.

Under the terms of the intergovernmental agreement, the Russian side lists 12 billion rubles in the authorized capital of ZAO “upper-Naryn hydroelectric power station”. In July RusHydro reported that it had already paid for the project 2 billion, which disbursed about 1 billion, and increases funding of the project by 1 billion.

The company noted that this will ensure funding of priority activities. While the company has several years there were problems with allocation of land. By July 2015 they have not yet been resolved: under feasibility study 3030 hectares was allotted only 554,4.

Sharply against the construction of the cascade was made by Uzbekistan, saying that it leads to deterioration of water balance and harm the interests of countries downstream of mountain rivers. In “RusGidro” but noted that the cascade of four hydroelectric power station, will not affect the water regime and will not affect the interests of Uzbekistan and Kazakhstan, and area of flooded land is minimal, and relocation is not required.

Chinese alternative

According to the Director of Fund of power development Sergey pikina, the problems of these projects is that they are very expensive and the current level of tariffs in Kyrgyzstan can not provide the desired return on investment capital. Pikin believes that if Kyrgyzstan agreement, Russian companies-operators of projects will have the opportunity for other investments.

“Still money out there and private investors, albeit with state participation, therefore, can be quite good that they will not be realized, at least, there will be no diversion of funds (companies — ed.). There are those assets where it is more profitable to invest,” commented Pikin.

At the same time he believes that Russian companies may be interested in participating in projects in Kyrgyzstan as contractors. “We need to divide the investment made, and the construction site. That will attract other companies for investments, this does not mean that you cannot participate in tendering procedures, including our company”, — said the Director of the Foundation.

However, this is a rather hypothetical options. “It is clear that the chance is much less due to the fact that money is not ours, but the Kyrgyzstan variants to find money for these objects not so much. There is China, which actively invest in Kyrgyzstan and, perhaps, probably, everything,” said Pikin.