New electricity market model may help Kazakh companies earn more
Baku, Azerbaijan, Feb. 28
By Ali Mustafayev – Trend:
The new electricity market model in Kazakhstan may improve the most efficient generators' earnings predictability, especially after the tariff freeze during 2016-2018, depending on the details of the first capacity auctions, Fitch Ratings said in a message.
The agency believes that the capacity market launch in 2019 will make Kazakh utilities' credit metrics increasingly dependent on cash flows from the modernization of existing units under long-term tariff mechanisms.
“The new model anticipates the segregation of the electricity market into electricity and capacity sub-markets, which will remain fully regulated with approved maximum caps for long-term tariffs with possible annual revisions. This will result in the transition from the current single electricity tariff to a double-rate tariff that will include electricity and capacity components,” according to Fitch.
Further, the electricity component will continue to cover generators' variable costs (mostly fuel) but will also allow all generators to earn an extra fixed margin of around 12 percent of the maximum costs for electricity generation which will be included in the total tariffs for generators.
“This extra margin will be funded by rebalancing the existing tariffs between generators, with no impact on end-user tariffs. As a result, electricity component of some generators may fall while others will see an increase, but mitigated by the new capacity component.”