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  • District Heating

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    KYZYLORDA DISTRICT HEATING MODERNIZATION

          The European Bank for Reconstruction and Development (the “EBRD” or the “Bank”) has developed a project (the “Project”) together with the State Communal Enterprise Kyzylordateploelektrotsentr (the “Company” or “KCHP”) and the Akimat of the City of Kyzylorda (the “Akimat”) to upgrade the district heating (“DH”) system in the City of Kyzylorda (“Kyzylorda” or the “City”) in the Republic of Kazakhstan.

          The Company at the moment is 100% owned by the City Akimat. The Company operates a combined heat and power plant (“CHP”), boiler houses and a district heating network in the City.

          The current role of the KCHP is to deliver the electricity and district heat in cost-effectively and uninterrupted way to the customers. Its business includes typical services:

    • District heating services – including heat transportation, distribution and supply of heat energy, construction, operation and maintenance of DH heating equipment such as DH network, pumping stations, heat exchanges, also large boiler houses and autonomous smaller boiler houses.
    • Electricity services – including generation and sales of electricity to the grid services, operation and maintenance of CHP and gas turbine plant.

          Most of the electricity and heat generation facilities as well as district network are significantly deteriorated. During last decade the Company initiated the modernisation of its CHP to replace oil with combined heavy gas oil and natural gas fired technology. As a result, the first natural gas turbine was put in operation in 2005.

          The Company covers about 50% of the City’s needs in electricity demand and almost over 90% of heat supply. The remaining electricity demand is currently covered by more expensive sources from the neighbouring industrially developed regions and the hot water is mainly generated by individual hot water boilers installed by the City residents in their households. The project will include measures to modernize and optimize the infrastructure of the centralized heat supply through the reconstruction of networks, the replacement of a number of gas turbines and the installation of individual boiler houses equipped with heat meters that provide automated control and regulation of heat supply. This will lead to increased energy efficiency, reduced consumption of hot water and heat loss in the system and more strict compliance with environmental requirements.

          LLC CECT Infrastructure Consulting and BDC Consulting provide project implementation support services, including assistance with procurement of goods and services. The project is underway.

    URALSK DISTRCT HEATING MODERNIZATION - FEASIBILITY STUDY

          The City of Uralsk (population ~270,000) is the administrative centre of the Western Kazakhstan Oblast. Joint Stock Company “Zhaiykteploenergo” provides district heating (“DH”) services to budget entities, businesses and approximately 87 per cent of households in Uralsk. The Company operates a centralised Combined Heat and Power Plant (the “CHP facility”), 17 smaller local heat only boilers as well as 220 km of DH distribution network. Approximately 93 per cent of heat supplied by the Company is generated at the central CHP facility. The Company is wholly owned by the Akimat of the City of Uralsk (the “City Akimat”). Until 2016 April the Company was owned by the Western Kazakhstan Oblast Akimat (the “Oblast Akimat”).

          The plant at the central CHP facility is deteriorated and in need of replacement or repairs. Plant is frequently taken offline for repair which brings a substantial risk to the reliable heat supply to the City. Heating tariffs of the Company are higher than the average in Kazakhstan; however the Company is at a disadvantage due to the lower efficiency of the CHP facility coupled with higher fuel costs. DH supply service providers in other regions of the country use coal, while the Company burns natural gas, which is relatively more expensive. The Company’s gas supplies are extracted in the region,  but are currently piped to a Russian facility for processing and then shipped back to Uralsk. As a result, current gas prices are approximately KZT 16,000 per m3; the approximate price in Aktobe is KZT 5,000 per m3. Oblast and City Akimats are both concerned about tariff levels and potential tariff increase given the affordability constraints in the region.

          The Company’s DH distribution network is also deteriorated with an average depreciation rate of approximately 50 per cent. 109 km of the DH distribution network pipeline require repair, including 41 km of pipe subject to imminent emergency repairs. Modernisation of the DH network, the CHP and boiler houses of the Company is required to improve efficiency, optimise operating costs and reduce CO2 emissions.

        The Company has undertaken an investment programme to upgrade approximately 22 per cent of the DH networks in the City and install building-level heat metering in multi-apartment dwellings. The Company claims that these investments have reduced heat losses from 20 per cent of heat supplied in 2012 to 18 per cent in 2015.

          The European Bank for Reconstruction and Development (the “EBRD” or the “Bank”) is considering providing a senior loan to the Company. The proposed financing will support rehabilitation and modernisation of the DH infrastructure in the City (the “Project”).

        The project is envisaged to be co-financed by the capital grant from the Government of Kazakhstan (the “GoK”) and the Oblast Akimat as part of the Budget Programme 073 (“Enhanced Partnership Framework Arrangement (the “EPFA”) Programme”). The total capital grant portion is expected not to exceed 40 per cent of the total Project cost whereas the Oblast Akimat shall contribute at least 10 per cent of the capital grant to be allocated from the GOK’s central budget under the EPFA Programme.

        The Project envisages a modernisation of the City’s DH system through a Priority Investment Programme (“PIP”) which may include, inter alia: (i) rehabilitation/modernisation of the City’s existing heat generation plants and CHP facility if possible, or construction of new plant; (ii) reconstruction of the DH transmission and distribution infrastructure, including networks and pumping stations; (iii) other demand side measures, focusing on increasing energy efficiency, reducing losses, improving reliability of heat services, and environmental standards. Detailed information on the Project is provided in Annex 5.

         Respectively, EBRD engaged in May 2018 Clean Energy Solutions (Austria) and BDC Consulting KZ to prepare a comprehensive feasibility study (“FS”) to determine the PIP for rehabilitation and upgrade of the entire DH system inclusive CHP in the City, developed from a long-term investment strategy, and evaluate its benefits, including assessing its environmental and social feasibility as well as assessment of the implementation capacity of the Company and recommendations development for optimisation of the Company’s organisational structure and operational performance during the Project implementation period.

          The feasibility study formed  the basis for project appraisal and approval by the EBRD, the GOK and the regulator, the Committee of the Republic of Kazakhstan for Regulation of Natural Monopolies and Competitiveness Protection (“CREM”), with the purpose of approval of long-term tariffs for the Company. specialists provided a service for the development of a feasibility study.

    AKTOBE DISTRICT HEATING MODERNIZATION

          The European Bank for Reconstruction and Development funds an investment program to modernize and improve the efficiency of Aktobe District Heating  running on gas from a thermal power plant located in the city of Aktobe in northwest Kazakhstan. Currently, the heat and power plant owns and operates 9 steam boilers, 6 steam turbine generator sets, 5 water boilers and the necessary auxiliary systems.

          The overall task of the consultants is to assist the  Project Implementation Group in the tendering process and technical supervision (in accordance with the rules and regulations in force in the Republic of Kazakhstan) over the implementation of contracts, including the design, supply, installation and commissioning of equipment and facilities operation. The project will have a significant impact on the transition process and will provide a significant increase in efficiency, and an increase in the GHP’s capacity.