Project Features. Power Sector Improvement Project (RRP KGZ ) $ 44.8 million (62.7% grant % loan) ADF amount:

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1 Power Sector Improvement Project (RRP KGZ ) Project Concept Outline Project Features ADF amount: ADF Country allocation: ADF Regional allocation: PPTA Budget (TASF IV): Sector (subsectors): Themes: Safeguards: Gender: Board consideration: Expected physical completion: $ 44.8 million (62.7% grant % loan) $ 17.8 million $ 27.0 million US$ 225,000 (S-PPTA) Energy (electricity transmission and distribution; energy sector development) Economic Growth; Regional Cooperation and Integration; Capacity Development Environment - Category B Involuntary Resettlement - Category B Indigenous people - Category C No Gender Elements Sep 2010 Dec

2 Power Sector Sector Performance 1 General Obsolete Soviet system. Vertically integrated utility unbundled in No substantial capital investment or efficiency gains through reform. Generation 95% of energy from hydropower; low output in winter. Low efficiency thermal power; expensive imported fuel. Transmission Frequent faults Inherent bottlenecks (north south) Technical loss at 6%. 3 Distribution Distribution loss at 26% of which 40% reported to be commercial. Obsolete end-user meters; insufficient master meters. Inadequate customer database and poor billing system. Power Sector Sector Performance 2 Power Trade Largest next exporter of CAPS (2,200 gigawatt-hours ave ) Recent reduction low hydrology; less regional cooperation Tariff End-user tariff = Kyrgyz Som 70/kWh ( 1.5/kWh). Cost recovery 2.3/kWh (without considering future investments) Financial Performance All utilities have poor performance. Energy sector quasi-fiscal deficit = 4.9% of GDP (2007) 4 Governance Country fiduciary system is weak. Energy sector also has poor governance. Non-transparent flows of electricity and cash. April Event partly related to public anger towards corrupt energy sector. 2

3 Power Sector Government Strategy 1. Transparency 2. Energy efficiency (loss reduction). 3. Energy security and energy trade Decree on Transparency Initiative for Fuel and Energy Sector (July 2010) 5 Utility performance monitoring Transparent management of cash flow (including escrow account) Transparent tariff methodology Transparent competitive procurement and power trade Information disclosure Participation Impact, Outcome, Output Impact Stronger reliability of national and regional power supply. Outcome Better operational efficiency of the power companies. 6 Output 1. Automated Metering and Data Acquisition System (AMDA) linking 190 substations with control centers; Recommendation on Wholesale Electricity Transaction Settlement Mechanism 2. Substation Rehabilitation of over 50 selected substations 3. Supervisory Control and Data Acquisition System (SCADA) linking seven major substations with control centers 4. Corporate Management Capacity Building of National Electric Grid of Kyrgyzstan (NEGK) 3

4 Project Scope AMDA & Settlement Mechanism Settlement Center (proposed) Accurate, tamper-free commercial metering data (i) between power companies (ii) between neighboring countries Metering System MHC NEGK Access Router VPN Enterprise Router GGSN Brings transparency and accountability to power sector. Sets basis for improved commercial operations. Enhance regional power trade. Feeder-wise data to contribute to distribution loss reduction. Cellular Provider GPRS Interface 7 GPRS Modems in 190 NEGK substations, and EPP switchyards used for power trade APN Project Scope AMDA & Settlement Mechanism EPP LICs Export DISCOs NEGK S V O J Settlement Center (proposed) Customers 8 DISCOs = distribution companies (Jalalabadelectro, Oshelectro, Severelectro, Vostokelectro), EPP = Electric Power Plant, LICs = large industrial consumers, NEGK = National Electric Grid of Kyrgyzstan. 4

5 Project Scope Substation Rehabilitation Replacement of obsolete circuit-breakers and instrument transformers (current and voltage transformers) in over 50 selected substations. Avoidance of accidents and faults. Meeting accuracy class requirement for regional power trade. 9 Project Scope SCADA & Communications Upgrading to modern SCADA linking seven major substations with control centers. Installation of optical fiber communication. 10 Real-time data makes informed dispatching decision possible. Reduced technical losses from avoided overloading. Detection and prompt remedy of faults adds to system stability. Future development to include remote control. Optical fiber enables upgrading of protection relay system. Leasing of dark-fibers to telecom companies. 5

6 Project Scope Corporate Management Improvement Advisory service to improve financial management (e.g. introducing IFRS and corporate accounting software) Preparation of business plan Improved management practices. Loss reduction. Long-term planning and tariff petition. Transparency. 11 Implementation Schedule Project Processing Consultant Recruitment Outline Design/ Procurement Installation Board approval: Sep 2010 Contract award: Jan 2011 Contract award: Dec 2011 Commissioning: Dec Project closing: June