Sector: Energy Partners: IFC GIF Activity: PPSA - Uzbekistan Syrdarya CCGT Funding: $2,000,000
CHALLENGE: Uzbekistan is highly dependent on domestic natural gas for electricity generation with 82 percent of its power stemming from gas-fired plants as the main energy source. However, 40 percent of these plants are obsolete and need to be retrofitted or replaced as much of the infrastructure was constructed during the Soviet era. As a result, the country’s energy supply is inefficient, uneven, and unreliable. The number of outages and their duration is high compared to regional standards, creating significant constraints for businesses and impacting economic development. For example, the number of days per year that firms experience electricity supply interruptions for at least one hour has increased from 23 to 24 between 2013 and 2017. The World Bank estimates that Uzbekistan’s energy consumption will continue to grow by 35 to 70 percent until 2030. To address inefficiencies and keep pace with future demands, the government seeks to replace the existing thermal power plants with combined cycle gas thermal (CCGT) plants. CCGT is a technology that combines a gas-fired turbine with a steam turbine to generate electricity at higher efficiencies. The Syrdarya CCGT project will efficiently enhance power supply to the country, adding up to 1.2-1.6GW of base load. This is critical for the integration of the large-scale renewable energy needed to provide the stability that is being planned and implemented for the country’s grid.
SOLUTION: The government requested support from the IFC to structure and competitively tender the project with an independent power producer. The GIF is supporting the IFC by providing funding for project preparation activities to improve the investment feasibility, as well as bolstering transaction implementation until the project reaches commercial and financial close. The GIF is also leveraging its private sector partners, or Advisory Partners, to pitch this investment opportunity and increase awareness of the project among CCGT developers and financiers. The GIF helped convene project developers, financial institutions, and other stakeholders to an investors’ conference to learn more about the project scope, the transaction structure, Uzbekistan’s power sector, and its PPP regulatory framework. Following the conference, the government received expressions of interest from 45 companies around the world.
EXPECTED IMPACT: This project will deliver cleaner power generation, mobilize $1 billion from the private sector, decrease tariffs through a competitive auction mechanism, reduce carbon emissions, and save natural gas. The successful structuring under a PPP scheme allows the government to develop lessons learned and best practices to mobilize experience, technological know-how, and the capital of qualified private sector investors for the project’s design, construction, financing, and operation. As this would be the first CCGT project to be competitively tendered and implemented, the GIF’s experience in supporting technical assessments and improving the standardization of project documents would have large-scale replicability on other potential PPP projects that the government may consider in the future. Additionally, the GIF’s active engagement in other projects in Uzbekistan—airports, roads, and solid waste—brings value by expanding relationships, building client ownership, and fostering a commitment towards a competitive process in future projects.