Kazakh Majilis approves ratification of intergovernmental agreement with Korea on Balkhash TPP

Kazakhstan, Astana, 13 March / Trend, D. Mukhtarov /

The plenary session of the Majilis (lower chamber of parliament) of Kazakhstan approved the draft law 'On ratification of the Agreement between the Government of the Republic of Kazakhstan and the Government of the Republic of Korea in the field of development, financing, design, construction, operation and maintenance of the Balkhash TPP' on Wednesday.

"Ratification of this intergovernmental agreement will allow for the introduction of an acceptable return on investment and project financing model," the Deputy Prime Minister of Kazakhstan, Minister of Industry and New Technologies Aset Isekeshev said, presenting the draft law at the plenary session of the Majilis.

Agreement between the Government of the Republic of Kazakhstan and the Government of the Republic of Korea in the field of development, financing, design, construction, operation and maintenance of the Balkhash thermal power station was signed in August 2011. Under the agreement, the government of Kazakhstan has identified Samruk-Energo JSC (from the Kazakh side) and Korea Electric Power Corporation and Samsung C&T Corporation (from the Korean side) as shareholders of the Balkhash TPP.

According to Isekeshev, the main purpose of the intergovernmental agreement is to develop inter-governmental cooperation between Kazakhstan and Korea for the successful implementation of the 'Construction of the Balkhash Thermal Power Plant' project and the creation of favorable investment conditions in Kazakhstan.

Under subparagraph 2 of Article 11 of the Law of the Republic of Kazakhstan 'On International Treaties of the Republic of Kazakhstan', the intergovernmental agreement requires ratification, as its implementation sets rules differing from those provided by the laws of the Republic of Kazakhstan.

Basic agreements on the project were signed in February 2012: The framework agreement, shareholders agreement and agreement for the sale of shares in the Balkhash Thermal Power Plant.

"At present, work is underway at the preparatory period facilities as well as priority works (construction yard planning and leveling sites for office buildings, railway station, access roads and intra-roads along railroad tracks). Construction of these facilities will be completed by the end this year," Issekeshev said.

He said that the project documentation is being worked out. It is planned to get a state examination in August 2013.

"Balkhash Thermal Power Plant (TPP) plans to announce an open international tender in March this year to choose an operator on exploitation and technical maintenance of the station," the Deputy Prime Minister said.

He said that the conditions of the contracts are being discussed.

It was previously reported that the structure of financing the project involves drawing borrowed financing (70 percent) and the contributions of shareholders (30 percent) in proportion to the participation in the Balkhash TPP: "Samruk-Energo" (25 percent plus one share), Samsung C&T Corporation (75 percent plus one share).

"Kazakhstan's share in the capital of Balkhash TPP is 45.335 billion tenge ($ 1 - 150.6 tenge)," Issekeshev said. "Around 16.092 billion tenge have been allocated from the budget of the Republic of Kazakhstan and the allocation of 10.964 billion tenge from the Kazakh National Fund has been approved. It is necessary to allocate 18.279 billion tenge for further formation of the share capital of the Balkhash thermal power plant in 2014-2016."

He said that the ratification of the intergovernmental agreement will create an acceptable model of returning investments and project financing.

"The ratification of the intergovernmental agreement is required for the Kazakh government to choose which organization will purchase electric power from the Balkhash station and the main terms of the power purchase contract: price, volume and terms for concluding the contract," he said.

The agreement is aimed at strengthening mutual cooperation in the electricity production field in the Republic of Kazakhstan and the Republic of Korea, as well as attracting new technologies. It envisages joint obligations of the parties to create favorable conditions for the economic efficiency of the project, which will:

- Increased energy independence of Kazakhstan, reliability of power supply by creating reserves of electric power in the southern zone of the Republic of Kazakhstan;

- Meeting the electricity demand of industry, utilities and the public sector in South Kazakhstan area.

Adopting the Kazakh law on the ratification of the above-mentioned agreement will not lead to negative social, economic or legal consequences.

The ratification of the agreement will not require changes to current legislation of the Republic of Kazakhstan.

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