ALMATY, Sept. 23 (The Conway Bulletin) — Korea-based Samsung Engineering said it was suspending construction work at a 1,320 megawatt coal-fired power plant near Lake Balkhash in Kazakhstan due to financing issues, throwing into doubt the feasibility of the $2.2b project that the Kazakh government has said is vital to meet growing demand for electricity.
Alluding to the impact of an economic downturn that has hit the economies and currencies of Central Asia, Samsung Engineering said it was worried that Kazakhstan couldn’t guarantee it would buy the power that the plant was due to generate.
“Samsung Engineering has been forced to temporarily halt the operation of the project because of an issue with the Kazakhstan government over the guaranteed purchase of the power to be produced from the project,” the company’s CEO Park Jung-heum told The Korea Times. He didn’t say when the roject might resume.
The Kazakh government has not commented.
A consortium led by Samsung Engineering and Korean Electric Power Corp. won the project tender in 2009. The project was due to be completed in 2020 and would have supplied 9% of Kazakhstan’s total electricity demand.
The power plant was due to cost $2.2b to build. Korean Eximbank and Korea Trade Insurance Corp. pledged additional loans of around $3.5b. In August, Samsung also said it was worried about the strength of Kazakhstan’s banking sector which is saddled with a large amount of bad debt, a legacy of the 2008/9 Global Financial Crisis.
Kazakhstan needs to increase its electricity generation capacity to power its export-oriented industrial sector and to feed its increasingly energy hungry population or face the prospect of black-outs. World Bank data showed that in 2014, Kazakhstan consumed around 88b kilowatt hours of electricity. In 2000, it consumed
48b kilowatt hours, figures that highlight the growth in demand.
Samsung’s decision to halt its big project at Balkhash is a serious setback for Kazakhstan’s energy plans.
It is also a litmus test for Kazakhstan’s ability to follow through with major infrastructure projects it planned during a period of high oil prices and steady export revenues.
>>This story was first published in issue 249 of the Business News section of the weekly Conway Bulletin which covers Central Asia and the South Caucasus