VZCZCXRO4136
OO RUEHAG RUEHAST RUEHBI RUEHCI RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK
RUEHKW RUEHLA RUEHLH RUEHLN RUEHLZ RUEHNEH RUEHNP RUEHPOD RUEHPW
RUEHROV RUEHSK RUEHSL RUEHSR RUEHVK RUEHYG
DE RUEHTA #1620/01 2680609
ZNR UUUUU ZZH
O 250609Z SEP 09
FM AMEMBASSY ASTANA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6332
INFO RUCNCIS/CIS COLLECTIVE 1965
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 1334
RUEHKO/AMEMBASSY TOKYO 2033
RUEHUL/AMEMBASSY SEOUL 0985
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEAIIA/CIA WASHDC
RHEFAAA/DIA WASHDC
RHEHNSC/NSC WASHDC 1520
RUEKJCS/SECDEF WASHDC 1401
RUEKJCS/JOINT STAFF WASHDC
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEHAST/USOFFICE ALMATY 1882

UNCLAS SECTION 01 OF 02 ASTANA 001620 
 
SENSITIVE 
SIPDIS 
 
STATE FOR SCA/CEN, EEB/ESC 
STATE PLEASE PASS TO USTDA 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON ENRG EINV KZ
SUBJECT:  KAZAKHSTAN:  NEW POWER LINE INCREASES ENERGY INDEPENDENCE 
 
REF:  (A) ASTANA 0419 
      (B) 08 ASTANA 1373 
      (C) ASTANA 0251 
 
ASTANA 00001620  001.2 OF 002 
 
 
¶1.   (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.   (U) SUMMARY:  On September 17, Kazakhstan President Nursultan 
Nazarbayev attended a ceremony in the northern Kazakhstan city of 
Ekibastuz to mark the completion of the country's second north-south 
power transmission line.  The 500 kilovolt (kV) line, completed 
ahead of schedule at a cost of $290 million financed by the World 
Bank and European Bank for Reconstruction and Development, will 
allow the country's national grid operator to deliver power 
generated in Kazakhstan's north to major load centers in the south. 
President Nazarbayev celebrated the completion of this new line by 
asserting that Kazakhstan's southern region, including the major 
cities of Almaty, Shimkent, and Taraz, would no longer depend on 
power transmission from Kazakhstan's southern neighbors, and that 
Kazakhstan has "become fully independent from all other electricity 
exporters."   END SUMMARY. 
 
¶3.   (SBU) The completion of the second north-south transmission 
line is an important development for Kazakhstan that will 
substantially contribute to the Kazakhstan Electric Grid Operating 
Company's (KEGOC) ability to supply southern load centers with power 
during winter peak demand.  Until completion of the first 
north-south transmission line in 1997, southern Kazakhstan operated 
in isolation from the power system in the north, due to design 
limitations of the Soviet-legacy Central Asia Power Grid (CAPG) that 
linked Kazakhstan with Uzbekistan, Kyrgyzstan, Tajikistan, and 
Turkmenistan.  In recent years, the supply from the CAPG has become 
unreliable, with frequent line faults, generation capacity 
shortfalls, and mismanagement by grid-operating companies in other 
CAPG countries resulting in outages in Kazakhstan's south (ref A). 
The new line will also help alleviate frequent over-loading of the 
existing north-south 500kV line.  The April 15 outage that plunged 
Kazakhstan's southern load centers, as well as Kyrgyzstan's capital 
Bishkek, into complete darkness for many hours resulted from such 
overloading. 
 
¶4.  (SBU) KEGOC and representatives of the Tashkent-based 
Coordinating Dispatch Center (CDC) confirm that the second 
north-south transmission line will improve supply reliability in 
Kazakhstan's south and KEGOC's flexibility to respond to emergency 
situations and unsanctioned drawing of load in other parts of the 
CAPG (ref A).  (NOTE:  Should KEGOC temporarily withdraw from the 
CAPG, Kyrgyzstan will likely bear the brunt of such a decision, as 
was the case in February and April of this year.  END NOTE.) 
 
¶5.  (SBU) Contacts at KEGOC and CDC asserted that KEGOC does not 
intend to discontinue its coordinated operation as part of the CAPG. 
 KEGOC will continue to rely on hydroelectric facilities in 
Kyrgyzstan and Tajikistan for least-cost, peak-load generation and 
to regulate capacities and balance power (ref B).  Moreover, 
Kazakhstan's ability to meet the country's current power demand 
through existing generating capacities may partially result from the 
approximately 10 percent fall in consumption that has accompanied 
the global economic decline and reduced Kazakhstan's industrial 
output.  Furthermore, Kazakhstan's marginal cost for production at 
its more expensive plants, such as the Dzhambul power plant in 
Taraz, is considerably higher than power sourced from Kyrgyzstani or 
Tajikistani hydroelectric plants.  As economic activity increases, 
growth in demand will ensure that Kazakhstan remains reliant on 
continued parallel operation within the CAPG for least-cost power 
generation. 
 
¶6.  (SBU) COMMENT:  The completion of the second north-south 
transmission line demonstrates that Kazakhstan -- like its neighbors 
Uzbekistan, Kyrgyzstan, and Tajikistan, who are also pursuing 
expansions of their national high-voltage transmission grids -- 
considers it a priority to invest in critical economic 
infrastructure.  While the line will immediately improve the 
 
ASTANA 00001620  002.2 OF 002 
 
 
reliability of power supplied to Kazakhstan's south, the expanded 
capacity in the long term will also enhance dispatch optimization 
and regional trade in what has effectively become an expanded CAPG. 
For Kazakhstan, and for the rest of the Central Asian region, the 
greatest challenge in the coming decade will be to finance new power 
generation capacities whose costs dwarf, by an order of magnitude, 
the cost of transmission capacity construction.  It is therefore 
especially important to develop market infrastructure and policy 
initiatives at the regional and national levels that ensure adequate 
revenues for the power sector.  END COMMENT. 
 
HOAGLAND