OREANDA-NEWS. On 11 July 2008 KEGOC published the speech of its President at the International Forum:

Dear Ladies and Gentlemen!

Advanced electric power structure is the basis of economy. At present electric power industry of Kazakhstan fully provides national economy with electricity supply and is characterized by:

• Big share of electricity generated at coal-fired combined cycle power plants with co-generation of electric and heat energy.

• Advanced scheme of transmission lines with 220-500-1150 kV high voltage lines being backbone networks.

• Unified and vertically-organized system of operational dispatch control.

Electric power in Kazakhstan is generated at 58 power plants of various forms of ownership. Their total installed capacity is 18980 MW. Generating capacities in Kazakhstan are mainly represented by thermal power plants with 88 % of installed capacity, other 12 % belongs to hydro power plants. All electric energy facilities are united into Kazakhstan Unified Power System by 220 – 1150 kV National Grid. Total length of 6 kV and more network is 325 ths. km, 23.3 ths. km out of them are 220-500-1150 kV transmission lines. Kazakhstan UPS operates in parallel with power systems of Russian Federation and countries of Central Asia thus improving reliability of electric power supply to consumers as well as creating technological basis for inter-state electricity trade.

Today competitive wholesale electricity market is efficiently operating in Kazakhstan. Development of competition at the wholesale market is based on free access to services on electricity transmission via National Grid and furnishing wholesale consumers with an option to select electricity supplier. Regional energy companies execute dispatching and trading in electricity in regional retail markets.

High rates of economic development observed in Kazakhstan during last years (annual GDP growth is 9-10 %) are accompanied by the corresponding increase in volumes of electricity consumption, the annual growth is 5-7%. The results of 2007 show that the consumption amounted to 76.4 bln. kWh exceeding the level of 2006 by 6.5 %.

At present due to high rates of economic development as a whole, electric power sector faces challenges on rapid increasing of power plant capacities and evolving of national and regional electric networks. Pursuant to forecast electricity balance, approved by the Ministry of Energy and Mineral Resources, electricity consumption within Kazakhstan UPS will make 95 bln. kWh by 2010 and will increase up to 124 bln. kWh by 2015. Thus the growth by 2015 will make 47.6 bln. kWh. or 62 % against 2007.

In this regard the main task is to provide necessary volumes for extension, modernization, construction of new electric energy facilities which will ensure covering of Kazakhstani consumers’ demand as well as creating export and transit potential and power reserves. The state renders comprehensive support to these plans.

The Government approved “Action Plan for Development of Electric Energy Sector in the Republic of Kazakhstan for 2007-2015” which indicates all necessary facilities subject to be constructed and extended up to 2015 and the list of measures for ensuring the execution of this plan was elaborated, particularly:

-Improvement of investment attractiveness of the sector.

-Boosting of energy saving technologies and efficient use of energy resources.

-Development and involvement of renewables into the energy balance of the country.

-Elaboration of framework and determination of major trends in evolving nuclear power.

For implementing the measures on generation development in accord with the Action Plan up to 2015 approved by the Government of the Republic of Kazakhstan, generation shall be invested with USD 12.9 bln. for construction of power plants both in the North and South of the country. The biggest new power plants among those to be constructed are as follows:

1. Balkhash TPP with capacity of 2640 MW;

2. Moinak HPP - 300 MW;

3. Karaganda CPP-4 - 570 MW;

4. CPP-3 in Astana - 240 MW;

5. Taldykorgan CPP - 370 MW.

Extension of existing power plants is anticipated in main industrial centers with commissioning of 2700 MW new generating capacities.

The projects on development of National Grid comprise as follows:

- Construction of 500 kV second transmission line of Kazakhstan North-South Transit (1150 km).

- Construction of 500 kV interregional transmission line North Kazakhstan – Aktubinskaya Oblast.

- Construction of 500 kV Alma SS connected to Kazakhstan National Grid via 500-220 kV lines.

- Kazakhstan Electricity Transmission Rehabilitation Project, Phase II.

Volume of investments into the National Grid will make USD 1.6 bln. by 2015.

In the near outlook the most serious issue in the sector of electricity transmission and distribution is rehabilitation of regional electric networks. Complex modernization of distribution networks requires attraction of about USD 7 bln. investments.

Taking into account sluggish development of electric power sector due to long-lasting implementation periods of the projects for construction of electric energy facilities alongside with ensuring of implementation of Government Action Plan up to 2015, long-term plans till 2030 for the sector development are already under consideration.

Within this period there is a possibility of constructing six large TPP with capacity not less than 2000 MW each, in different country regions (in Kostanai, Pavlodar, Aktubinskaya, Almaty, Mangistau, East Kazakhstan Oblasts), at that the selection of different types of power plants in terms of the fuel used (coal-fired and nuclear power plants) is possible. Available hydropotential of Kazakhstan allows implementing of hydro power plants construction with total capacity up to 1450 MW.

Development of Kazakhstan National Grid in the long-term perspective envisages construction of 500 kV long-distance lines for connecting electric networks of West zone oblasts of Kazakhstan with central and south regions of Kazakhstan, and ensuring power transmission from new large power plants to deficit regions, thereby providing solution of some issues concerning country energy independence.

Such facts as growth of electricity consumption and environmental consequences under the wide use of organic fuel for generation, increase in prices for energy carriers have already raised questions on involvement of renewables into the Kazakhstan power balance.

Renewables expansion is anticipated including for the purpose of electricity generation. The Republic of Kazakhstan possesses a huge potential of renewables such as hydro, wind and solar energy. At present pilot projects on the use of wind energy are under implementation. In future the use of small rivers energy, construction of small HPP and wind turbines will increase.

Notwithstanding the availability of sufficient volume of fuel and power resources for providing electric and other energy for long-term period (hundreds of years), it is anticipated to implement investments into energy saving and energy efficiency in the nearest future. To this effect we are working with leading international financial institutes such as EBRD.

At present, new editions of the Law “On Energy Saving”, Sectoral Program on Energy Saving, as well as draft law “On State Support of Renewables Use” are being elaborated.

Kazakhstan has stable investment climate, Government undertakes a great number of measures to improve investment attractiveness of electric power sector. In view of high capital intensity and long-term payback periods of investment projects in electric energy sector, constant legislative and price stability is the more important fact in this regard. At present the Government is preparing amendments to current legislation with a view to establish adequate regulatory environment aimed at improving attractiveness of generating sector for potential investors.

KEGOC Company is a system operator; it operates 1150-220 kV National Grid and exercises operational dispatch control of Kazakhstan Unified Power System. The Company exercises modernization of National Grid. Currently the first phase of modernization is under completion comprising replacement of all telecommunication systems of the Company including satellite and high-frequency communication, integration of advanced dispatch control system SCADA-EMS, modernization of protective relays and automation, partial replacement of high voltage switching equipment at 43 substations.

All the equipment installed within the Project is made by leading world producers such as ABB, Siemens, AREVA, etc. Financing has been carried out through raising EBRD and IBRD loans. Currently the Company is starting the second phase of modernization which will cover replacement of obsolete equipment (with expired service life) at 55 substations. Financing of the project to the amount of EUR 255 mln. is carried out through raising of EBRD syndicated loan.

As a result, KEGOC Company is a contemporary electric energy company equipped with latest equipment and having highly-qualified personnel trained in leading sector-specific training centers of Europe.

The Company is implementing the abovesaid projects for the network development – construction of 500 kV transmission line of North-South transit, financed by DBK, IBRD, EBRD (project cost is about USD 360 mln.), and is ready to start construction of major facilities such as 500 kV Alma SS and scheme of power delivery from Moinak HPP. Total volume of investments under these projects is about USD 312 mln.

KEGOC JSC is one of the rapidly developing companies of electric energy sector of Kazakhstan. Electric power sector of Kazakhstan is looking forward to your investments and high technologies into generation and electric networks.