ENERGY IN THE KYRGYZ REPUBLIC

ENERGY IN THE KYRGYZ REPUBLIC: 

10 FREQUENTLY ASKED QUESTIONS

    1. What are the regulatory requirements for construction and operation of hydro, solar or wind power plants (RES plants) in the Kyrgyz Republic?

The design, construction and operation of a RES plant require respective licenses and permits issued by the competent authorities. In particular, it is required:

    • to obtain the right to construct the RES plant;

    • to obtain the right to use the land plot upon which the RES plant will be constructed;

    • to obtain all necessary construction licenses;

    • to obtain licenses to sell electricity;

    • to develop a feasibility study report on the RES plant construction project;

    • to obtain an environmental impact assessment report;

    • to execute a power purchase agreement and a grid connection agreement.

    2. What land use rights are required to be obtained by a company wishing to construct a RES plant? 

A company wishing to construct a RES plant must hold the right of ownership or temporary use of the land plot where the RES plant will be constructed. In addition, this land plot must be classified as the energy sector land and its intended use must be the construction of a RES plant. 

Foreign entities defined by the Kyrgyz law as entities registered in the Kyrgyz Republic and having at least 20 percent of their shares owned or otherwise controlled by a foreigner may only have the right to lease the land for the period of up to 50 years. Foreign ownership of land is prohibited by law.

    3. What licenses are required to be obtained by a contractor constructing a RES plant? 

The contractors performing project design and construction works must hold a power plant design and construction license issued by the State Agency for Architecture, Construction and Housing Sector under the Cabinet of Ministers of the Kyrgyz Republic. The contractor must also be able to construct the RES plant with certain capacity (MW) and complexity which is determined by the level of responsibility indicated in the license. The design and construction license do not have an expiry date and are valid in the entire territory of the country.

The design license and the construction licenses are issued within 30 days from the date of filing the full set of documents required. 

    4. What is the license fee?

The license fee is 1,000 Kyrgyz Soms.

    5. How can a company bid for the right to construct a new RES plant? 

According to Kyrgyz law, the right to construct a new RES plant (except major electric power production facilities and main power transmission lines) must be granted through tender by the Ministry of Energy of the Kyrgyz Republic. If the cost of the project is more than 1 billion soms, the project must be awarded through direct negotiations.  It is also possible to implement a RES project under an investment agreement concluded with the Cabinet of Ministers, in which case the tender is also not required.

The construction of major electric power production facilities1 must be undertaken in accordance with the National Energy Program or a separate resolution of the Cabinet of Ministers of the Kyrgyz Republic.

    6. What government agency is authorized to regulate the operation of RES plants and what documents are required to operate a RES plant?

Under Kyrgyz law, the Ministry of Energy of the Kyrgyz Republic is authorized to regulate the operation of all RES plants. The companies generating electricity from RES are exempt from obtaining the electricity generation (production) license. However, if electricity is generated by a hydro power plant with an established capacity of over 30 MW, it will be necessary to obtain the respective license.

The companies intending to sell electricity must also obtain the electricity sale license from the Fuel and Energy Sector Department of the Ministry of Energy of the Kyrgyz Republic. The license is issued within 30 days from the date of filing the full set of documents required. The license does not have an expiry date and is valid in the entire territory of the Kyrgyz Republic.

    7. Who is authorized to develop a feasibility study report on the RES plant construction project? 

Before starting construction of any RES plant, it is necessary to develop a feasibility study (the "FS"), describing the location, capacity and other technical characteristics of the RES plant. To develop the FS, the customer (the owner of the land plot where the RES plant will be constructed) must execute a FS contractor agreement with an organization having relevant experience and qualification. Subsequently, on the basis of the FS, the design documentation for the construction of the RES plant will be developed.

    8. What is a state environmental impact assessment report and what is its purpose?

A state environmental impact assessment report is a report issued by the Ministry of Natural Resources, Ecology and Technical Supervision of the Kyrgyz Republic, based on the findings from the review and assessment of the FS on the construction of the RES plant. The company wishing to construct a RES plant must obtain an environmental impact assessment report for each proposed project. This report is a prerequisite for implementing the project. If the report issued by the environmental protection authorities is negative, the construction of the RES plant will be prohibited.

    9. Why do companies execute power purchase agreements and with whom are these agreements executed?

Pursuant to Kyrgyz law, any RES-generated power not used for personal consumption and not contracted to individual off-takers must be purchased by a power company determined by the designated authority which has concluded an appropriate contract, regardless of which power company's grid this RES plant is connected to. The Ministry of Energy, by its order, designated National Electric System of Kyrgyzstan JSC ("NESK") as a single offtaker who will purchase electricity from RES producers. During the grace period of 25 years, the tariff for RES electricity purchase by NESK will be set at 3.40 soms per 1 kWh multiplied by the coefficient of 1.3 (in total, 4.42 soms per 1 kWh). The tariffs for RES electricity will be set by the producer and consumer on a contractual basis.

    10. Does a company need to execute a transmission agreement and, if so, with whom is such an agreement executed?   

Kyrgyz law requires energy companies to execute electricity transmission agreements to ensure the transmission of electricity generated by the RES plant. The agreement must be executed with NESK which is the owner of the power distribution and transmission networks. Also, according to the law, the owner of RES plant must execute a service agreement with the Kyrgyz Electricity Settlement Center for the collection and processing of electricity metering data.

Kalikova & Associates' Energy Practice

K&A has vast experience in advising clients on the matters related to the development and financing of energy projects in Kyrgyzstan, as well as subsequent legal support of such projects. Our experience in the energy sector covers legal services related the creation and operation of joint ventures for the planning and construction of large, medium and small hydroelectric power plants, solar power plants and electrical networks, and transactions involving the purchase, sale, transmission, distribution and export of electricity.

For mining, oil & gas related inquiries please contact partner and Energy Practice leader Mr. Magomed Saaduev.

Tel.:  +996 312 66-60-60

         +996 777 96-04-18

E-mail: msaaduev@ka.legal