ADB to allocate more than $120 million to strengthen energy system in southern Kazakhstan

The Asian Development Bank (ADB) will invest $122.2 million in strengthening the power grid in southern Kazakhstan under an agreement with the Kazakhstan Electricity Grid Operating Company (KEGOC).

The project’s contractors have already begun developing a feasibility study. Once all the documents are approved, they will build two 500-kilowatt overhead power transmission lines that will stretch for 475 kilometers. Additionally, the Shu, Jambyl and Shymkent electrical substations are expected to be upgraded to boost the capacity of the power grid by 75%. This upgrade should eliminate overloading, reduce losses during energy transmission and increase the overall reliability of the regional energy supply.

As KEGOC explained, the project will facilitate the integration of large-scale electricity generation, including renewable energy, into a unified network. The company also noted that the ADB funds have been raised on favorable terms, although no details were provided.

«This lending agreement demonstrates the confidence of international financial institutions in the procurement procedures of the Samruk-Kazyna Group [the parent company of KEGOC] and KEGOC, whose activities meet the standards required for international public companies. The new architecture of the national power grid will enable us to integrate the significant potential of renewable and traditional energy sources in southern Kazakhstan into the national power balance. Our export and transit potential will increase significantly and the energy security of the entire region will be enhanced,» emphasized Nabi Aitzhanov, CEO of KEGOC.

In turn, Suzanne Gaboury, director general of the private sector operations department at the ADB, stated that the bank will hold technical consultations on integrating renewable energy sources and developing Kazakhstan’s national power network. The ADB will also support KEGOC in implementing gender-inclusive standards. This partnership between the ADB and KEGOC is expected to help the country achieve its zero-emission goals, facilitate energy transition and expand the use of renewable energy sources, Gaboury highlighted.

The ADB was established in 1966 and includes 68 member countries, with 49 of them from Asia. Since 2017, the ADB has been investing in expanding the power grid in Central and Western Asia as part of its technical assistance program.

KEGOC has been operating in Kazakhstan since 1997. The government-run Samruk-Kazyna controls 85% of the company, while the Unified Accumulative Pension Fund holds 6.87% and the remaining shares are in free circulation. As of July 22, KEGOC’s shares were traded at 1,482 tenge per share ($3.11).

Last fall, KEGOC issued additional shares worth $47.4 million on KASE and AIX. The company described this as a secondary public offering. Demand for the stock was 1.5 times higher than the offer, with Kazakhstani investors purchasing the majority of these shares.

KEGOC planned to use the raised funds for further development, although some analysts suggested that the money might be used for dividend payouts. Following the deal, Samruk-Kazyna’s share decreased from 90% to 85%.

In the first quarter of the year, KEGOC reported a 58% increase in net profit ($44.9 million). In early May, some media outlets reported that KEGOC would allocate 97% of its net profit for 2023 to dividend payouts. This decision was approved at a general meeting of shareholders, resulting in total dividends of $88.4 million or $0.33 per share.