OREANDA-NEWS. April 27, 2009. After decades of under-investment, northern Kazakhstan’s coal-fired power plants are prone to doing two things: failing to supply local inhabitants with constant heat during bitterly cold winters; and coating the surrounding area with coal dust, reported the press-centre of EBRD.

The Central-Asian Electric Power Corporation (Caepco) is a privately owned company that operates four combined heat and power plants in northern and central Kazakhstan. With help from the EBRD, in the shape of an equity investment, Caepco is planning to revamp its units to ensure residents keep toasty warm in winter and breathe cleaner air, while factories have enough energy to keep running.

The project, which is the EBRD’s first equity investment in the Kazakh power sector, also has the advantage of cutting Caepco’s carbon emissions by improving the efficiency of its energy production and distribution facilities.

“It’s amazing to see a company go into the less glamorous area of local networks and generation and remain attractive to outside investors,” says Aida Sitdikova, Principal Banker in the EBRD’s Power and Energy team and the operational leader for the project. “It’s a tough climate in northern Kazakhstan – temperatures go below -30° C in winter – so Caepco’s investment plan is very rewarding for the local population.”

The EBRD is buying a stake worth EUR46 million in Caepco, which accounts for 6 per cent of Kazakhstan’s electricity. The capital will be used for the company’s investment programme up to 2013, including the upgrade of generation and distribution assets to boost efficiency and reliability.

“We are helping Caepco to implement an ambitious investment plan,” notes Rita Sa Couto, Associate Banker in the Power and Energy team. “The combined heat and power plants will remain reliant on coal, but they will use the best technology available in Kazakhstan.”

As well as cutting carbon emissions, Caepco aims to slash dust and sulphur oxide emissions by 80 and 40 per cent respectively by using wet scrubbers. The improvement in air quality will go beyond Kazakh legislative requirements, although it will not yet meet EU standards.

“To meet EU standards you would need to build a new power plant which would be very costly and the tariffs for users would be unaffordable,” adds Dariusz Prasek, Director for Project Appraisal in the Environment and Sustainability Department. “We need to have a pragmatic approach, but one that doesn’t weaken the EBRD’s commitment to protecting the environment.”

As well as bringing social and environmental benefits, the Caepco project is expected to have a strong transition impact. “Caepco is not currently listed, but it plans to do an IPO in six years,” says Nandita Parshad, Director of the Power and Energy team. “This deal is creating interest in the Kazakh power sector and we hope it will create even more interest as the investment plan progresses.”