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- 17 Jan 2022
Uzbekistan's competitive landscape is fully dominated by Uzbekenergo, the country's state-owned utility, which monopolises generation, transmission and distribution. While there have been attempts to privatise parts of the sector in Uzbekistan, such efforts have gained little traction. The company is responsible for 98% of total power generation in the country.
The power industry in Uzbekistan operates under the framework of the JSC Uzbekenergo (UE) that was established in 2001. The majority of power generation, transmission and distribution assets in Uzbekistan are therefore subsidiaries of the UE. In total, the company comprises 53 subsidiaries, of which there are 39 joint-stock companies, 11 unitary enterprises, two societies that hold limited liability and the branch of Energositch. As a result of the unbundling of the power sector Uzbekenergo owns at least one major subsidiary for the generation, transmission and distribution segments. As such, the offering of stocks to private investors was partial at best and means that Uzbekenergo maintains its monolithic position in the Uzbek power market.
- Energosotish is the only purchaser and supplier in the country's wholesale electricity market. The company therefore buys electricity from generators before selling it on to regional distribution companies.
- Uzelectroset is the transmission system operator. The company provides transmission, network and dispatch services - including seven high-voltage transmission and network affiliate operators. Furthermore, 14 regional distribution companies distribute power in Uzbekistan. Uzbekistan maintained the controlling stock in this company and other subsidiaries after parts of the companies were offered to foreign investors.
In April 2019, the company was reorganised in three new joint-stock companies, namely:
- JSC 'Thermal Power Plants' - management of thermal power plants generating electric and thermal energy;
- JSC 'National Electric Grids of Uzbekistan' - operation and development of electric grids of the country as well as export, import, transportation and interstate transit of electric power, performing functions of a single power purchaser from entities that produce electric power;
- JSC 'Regional Electric Grids' - management of regional electric grid entities distributing and selling electric power to ultimate consumers.
Most of the country's generation capacity is owned by UE. There are some exceptions, however, as Uzsuvenergo (part of the ministry of Agriculture and Water Resources) owns six hydropower plants.
Many of UE's generation units have been decommissioned or are getting close to the end of their operating life and are therefore inefficient, meaning investments in generation assets will be a key part of its strategy. The long-term outlook for UE is intrinsically linked to whether the company can improve generation efficiency, reduce transmission losses and increase electricity tariffs to cover long-term supply security costs.
The company states that a full-scale modernisation of generation facilities, electrical grids and substations is a focus policy to enhance the stability and sustainability of the energy system. We highlight that we have seen limited traction in the modernisation plans,and expect economic volatility and a tough operating environment to continue to dissuade investors. It is worth noting that Uzbekistan has signed a memorandum of understanding (MoU) with Mitsubishi Hitachi Power Systems to modernise thermal facilities and has announced plans to modernise and expand existing small-scale hydropower facilities.
Mitsubishi Hitachi Power Systems (MHPS)
In July 2019, Mitsubishi Hitachi Power Systems (MHPS) signed a memorandum of understanding with the Ministry of Energy and Mitsubishi Corporation under which the three firms will collaborate in a comprehensive service and maintenance programme (CSMP) for power plants owned by Uzbekenergo. The agreement was reached after joint economic talks between Uzbekistan and Japan aimed at promoting bilateral trade and economic development. The CSMP aims to enhance O&M technologies and applies to three power plants: the Navoi plant operated by Thermal Power Plants of Uzbekistan (formerly, State Joint Stock Company Uzbekenergo), where MHPS previously supplied equipment; and two plants currently under construction, the Navoi-2 and Turakurgan plants. Specifically, MHPS will provide parts supply for the gas turbines in use at the power plants concerned, assign engineers to the sites to perform regular inspections, and train Thermal Power Plants of Uzbekistan's engineers in O&M using IoT.
MHPS was formed on February 1 2014 through the integration of the thermal power generation systems of Mitsubishi Heavy Industries and Hitachi. The company provides combined cycle power plant technology, which will be key to improving the efficiency of gas-fired generation in the country. In November 2016, the company announced that it had received a full turnkey contract order for equipment for the Turakurgan thermal power plant - including gas turbines and steam turbines. This came after the company received a full turnkey contract for a 450MW combined-cycle gas turbine (CCGT) at the Novoi 2 gas-fired facility. Both projects are being built by Uzbekenergo, financed by a loan from the Japan International Development Agency and reserves allocated from the Fund for Reconstruction and Development of Uzbekistan.
Hyundai Engineering & Construction
Hyundai Engineering & Construction, in a consortium with Daewoo International, signed contracts to develop two 450MW CCGTs at the Talimarjan facility in 2013. The first unit was commissioned in August 2016 and the second unit came online by the end of that year. The equipment used at these two power plants was sourced from the Mitsubishi Corporation, which is expected to help reduce the cost of electricity generation by 30% compared to existing infrastructure.
It was also announced by Uzbekenergo in January 2017 that the consortium signed a contract for the delivery of equipment and construction of two CCGT units at the Taktiash thermal power plant in the Autonomous Republic of Karakalpakstan (north-west Uzbekistan). This announcement came on the back of the consortium winning the tender for the deal in December 2016.
This move follows a trend that sees Japanese and South Korean companies looking to invest in Uzbekistan's broader economy.