Kyrgyz Republic : Power Sector Rehabilitation Project

Energy / Electricity transmission and distribution

The Kyrgyz Republic power sector is characterized by aging assets, high commercial losses, below-cost tariffs, and poor performance of sector companies. The project addresses these issues by (i) rehabilitating the 1,200-megawatt Toktogul HEPP, which is critical for national and regional power supply; (ii) establishing the Kyrgyz electricity settlement center (KESC), which will reduce commercial losses and improve sector financial performance; (iii) assessing the safety condition of dams on the Naryn cascade and identifying remedial measures; and (iv) conducting a public information program to gain support for sector reforms.

The Kyrgyz Republic is a landlocked Central Asian country with a low per capita income (ranked 186 in the world); small area (200,000 square kilometers); and low population (5.55 million). The country enjoys abundant hydropower potential owing to its mountainous terrain covering 80% of the country. The Kyrgyz Republic is a net exporter of electricity to the regional Central Asian power system (CAPS).

Total installed generation capacity is 3,863 megawatts, of which 81% comes from HEPPs and 19% from thermal combined heat and power plants (CHPPs). Toktogul HEPP and other HEPPs in the downstream Naryn cascade have produced an average of 92% of the total country electricity output since 2002. Almost 100% of the population is connected to the electric grid. Toktogul HEPP, with multiyear storage capacity and producing 50% of the average electricity output, plays a critical role as an export source and a frequency regulator of the CAPS.

The country is the largest net exporter of electricity to the CAPS, with average annual exports of 2,100 gigawatt-hours (GWh) since 2002. Exports of hydro-based electricity occur during summer when electricity is produced above domestic demand; this is associated with water release for regional irrigation needs. Coal, oil, and gas are imported during winter to supply CHPPs. However, winter demand is not met because of (i) limitation of hydro generation caused by water release constraints, (ii) insufficient CHPP capacity, and (iii) lack of import sources with surplus electricity. Unserved winter demand is estimated at 20% of total supply or 1,200 GWh.

7.Power assets are generally over 30 years old and approaching the end of their economic life. This results in reed reliability and high system technical losses (15% of net supply). Despite modest domestic growth forecast at 1.5% per annum, major rehabilitation, replacement, and augmentation of power sector assets is required. The sector also suffers from high commercial losses (25% of net supply), poor financial management and performance, and tariffs below cost recovery.

The Government of the Kyrgyz Republic has identified $4 billion of planned investments in the power sector from 2012 to 2017 This is consistent with required investments of $6 billion from 2012 to 2022, as identified in a sector study financed by the Asian Development Bank (ADB). Required investments include rehabilitation and construction of new thermal and hydropower plants and transmission and distribution assets. Financing for future sector investments is being coordinated through the ADB-sponsored Central Asia Regional Economic Cooperation program. The project addresses a time slice of required sector investments.

Considering the extent of financing available and the critical importance of HEPPs, the government identified rehabilitation of HEPPs as a top priority. An assessment of HEPPs on the Naryn cascade was conducted and it was concluded that all HEPPs require rehabilitation; rehabilitation of Toktogul HEPP was identified as the first priority. Failure of Toktogul HEPP would affect the stability of the CAPS and be catastrophic for the Kyrgyz Republic's electric supply. Toktogul HEPP has been in operation for over 35 years, but no large rehabilitation has been undertaken. Critical equipment is failing, resulting in availability dropping to 80%. It is considered that availability rates will continue to drop in the absence of rehabilitation. A complete rehabilitation of primary and secondary electrical and mechanical equipment is required.

A phased rehabilitation program of Toktogul HEPP has been prepared. The project includes the replacement of secondary electrical and mechanical equipment, which has been identified as the first priority. Replacement of this equipment is critical as failure could result in loss of the total station output for over 1 year. Following completion of the priority phase, further rehabilitation should be done on a turbine and generator unit basis as part of future sector investments. The rehabilitation work to be carried out under the project is independent of future phases and is required regardless of timing of implementation of future phases.

Except for Kambarata 2, dams on the Naryn cascade were designed and built from 1960 to 1980. Since then, international design criteria for dam hydrological and seismic safety have become more stringent. Naryn hydropower plants lie in an active seismic zone, increasing the geological hazard of rockfalls and landslides. Furthermore, existing dam designs may not cater for the impact of climate change on hydrology and variation in seasonal flow rates. The structural safety of the dams needs to be assessed and dam monitoring procedures reviewed. A dam safety assessment study of Naryn cascade dams is essential to identify required remedial measures and is proposed as part of the project. Impacts of climate change will be identified in a separate study to be financed by the Global Environment Fund.

Tariffs are below cost recovery, with a weighted average consumer tariff of $0.022 per kilowatt-hour. It is estimated that a weighted average tariff of $0.05 per kilowatt-hour is required for full cost recovery. A review of the tariff policy is being conducted, with general acceptance from all sections of the government that tariffs must be raised. The Ministry of Energy and Industry (MOE) draft energy strategy includes a target of reaching the full cost recovery tariff by 2016. Nevertheless, the government is concerned about implementing tariff reform after negative public reaction in 2010 following tariff increases (which have since been partly reversed). A public information program as part of the project will be carried out in 2013 to inform the population on (i) experiences in similar countries, (ii) ongoing sector developments and reforms, and (iii) benefits to be achieved from an effective tariff policy.

High commercial losses and poor sector financial performance are partly attributable to inadequate wholesale and retail metering; and poor procedures for distribution of sector revenues to generation, transmission, and distribution companies. Reliable and current data on energy flows are not available, which impedes identification of losses. In addition, distribution of sector revenues by the MOE is based on operational priorities and carried out in an inconsistent manner preventing proper financial planning by power companies, including open joint-stock company Electric Power Plants (EPP), the owner of Toktogul HEPP.

Projects to improve retail metering, under funding from the Government of Germany, and wholesale metering, under ADB funding, are under implementation. The wholesale metering project will introduce an automated metering and data acquisition system that will identify domestic and international energy flows. Also under implementation under the ADB project is a study on the corporate structure, organizational design, and technical system configuration for the proposed KESC.

Increased reliability of national and regional power systems

Improved operational performance of the Kyrgyz Republic power sector

The project took effect on 14 Dec 2012. Project implementation has been extended by two years from 30 June 2017 to 30 June 2019. The Ministry of Energy and Industry (MOEI) was abolished in November 2015 following a government reorganization, and its function as executing agency under the Project is transferred to the Ministry of Economy (MOE). In July 2016, another government reorganization took place where State Committee for Industry, Energy and Subsoil Use (SCIESU) was created and designated to assume the project implementation from MOE.

Lot 1 for supply of underwater inspection equipment was completed in 2017.

Lot 2 for secondary electrical and mechanical equipment turnkey contract is ongoing. All four 500kV transformers were delivered, and three of them were installed and commissioned, the forth transformer will be commisioned by end-November 2018.

For Lot 3, High Voltage XLPE Cables Turnkey Contract, three out of four cables have been connected to the transformers installed under Lot 2. Installation works will be completed in end-November in parallel with the transformers.

For Lot 4, rehabilitation of 500 kV Substation & 500 kV Cable Transition Point (switchyard) which is funded from the project savings as an additional package, the contract was awarded on 27 December 2017. The EA and consultant are completing detailed design of the equipment and are preparing for factory acceptance tests to be followed by delivery and installation works over remaining nine months.

For the component of the Kyrgyz Electricity Settlement Center (KESC), the KESC was established in 2016 and is provided with office space and financing while staffing is ongoing. Elaboration of the rules and procedures for the settlement mechanism is continuing. The procurement of the Metering Data Management equipment and software for the KESC's operations is advertised on 28 Sep 2018. The component is scheduled to be completed by 30 June 2019.

Rehabilitation of Toktogul HEPP

Establishment of electricity settlement center

Dam safety assessment

Public Information Program

The contract for dam safety assessment was awarded to Temelsu International in June 2014. Draft inspection reports for Kurpsai and Toktogul dams and hydropower plants (HPPs) were submitted in July 2015 while those for Tashkumyr, Shamaldy-Sai and Uch-Kurgan dams and HPPs were submitted in November 2015. Periodic inspection reports for Uch Kurgan and integrity checks for Naryn Cascade were submitted in August 2016. A study on current technical condition of Uch-Kurgan HPP dam bridge was submitted in Oct 2016. Draft Final Report was submitted and presented by the Consultant in Nov 2016.

KESC Consultant recruitment is delayed due to change in executing agency following government reorganizations in Nov 2015 and July 2016. A change in implementation from MOEI to MOE took effect in May 2016, while another change in implementation from MOE to SCIESU took effect in October 2016. The KESC consultant was recruited in September 2017.

Public Information program Consultant is recruited in June 2014. A public information program was carried out and completed in Aug 2015.

Project Implementation Consultants has been engaged. Bidding documents for the engineering contractor were issued in Aug 2013. Contact award is delayed due to absence of qualified bidder. The package was then divided into 3 lots. The contract for Lot 1-Underwater inspection was awarded in May 2015. Contract for Lot 2-Electrical equipment was awarded in Dec 2015 while contract for Lot 3-HV Cables was awarded in Dec 2015. Additional package (Lot 4-Toktogul Switchyard Rehabilitation) was awarded in Dec 2017.

Under Lot 1, underwater inspection has been completed; implementation of Lots 2,3 and 4 is ongoing.

Project Implementation Consultant (PIC) is engaged effective March 2013. The Consultant will: (i) review conceptual design and bidding documents; (ii) assist EPP in the recruitment of an engineering contractors in accordance to ADB's Procurement Guidelines; (iii) develop and implement comprehensive project management plans to ensure the most efficient, timely, and economical implementation of the project; (iv) supervise the engineering contractors for supply, installation, commissioning and testing of equipments, and (v) supervise the installation of equipment by EPP.

Dam Safety Assessment Consultant was engaged in June 2014 following QCBS method with a standard quality: cost ratio of 90:10. The Consultant carried-out an assessment of the condition of all five hydropower plants and appurtenant structures and dams of the Naryn Casacade, as well as made proposals for enhancing safety of the plants by giving recommendations for improving maintenance or for making repair works or remedial measures to be adopted by EPP. The scope of work includes (i) data collection and review, (ii) annual inspection of dam safety, (iii) periodical assessment of dam safety, and (iv) structural integrity checks.

Operator for establishment KESC and Public Information Program. Estimated 78 person-months (international and national) of consulting services are required to develop and establish a KESC and design a Public Information Program to increase public awareness on: (i) the benefits and functions of AMDA and KESC; (ii) the success of power sector metering project and management reform in Georgia, and (iii) the benefits of an effective tariff policy. The international operators shall operate the center for 24 months and recruit and train national staffs who will continue the operations thereafter. Consulting firm for KESC was engaged in September 2017 and for Public Information Program in June 2014.

Consultants were recruited according to ADB's Guidelines on the Use of Consultants.

For Toktogul HPP Rehabilitation, EPC contractors for three (3) lots comprising of (i) electrical equipment, (ii) high voltage cables, and (iii) underwater inspection for the rehabilitation of Toktogul HEPP were procured following procedures under international competitive bidding for single-stage single-envelope. ADB's standard bidding documents (SBD) for Plant Design, Supply and Install were used. Contract for Lot 1-Underwater Inspection was awarded in May 2015 while those of Lot 2-Electrical Equipment and Lot 3-HV Cable were awarded on 21 Dec 2015 and 12 Oct 2015, respectively.

Additional procurement package, EPC contract for 500 kV substation and 500 kV transition point rehabilitation, was added in the project scope and was awarded in Dec 2017.