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June Electronic Bulletin

CASA-1000 Funding Approved by the World Bank Group

On 27 March 2014 the World Bank Group’s Board of Directors approved US$526.5 million in grant and credit financing for the Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for four countries: Afghanistan, Kyrgyz Republic, Pakistan, and Tajikistan.

As reported by the World Bank, in addition to the infrastructure investments, the World Bank Group will also provide country-specific community support programs through a Multi-Donor Trust Fund and the Afghanistan Reconstruction Trust Fund. These programs will help improve livelihoods in communities living along the project corridor and facilitate revenue-sharing.

Of the total project financing, Afghanistan will receive US$316.5 million in the form of an IDA grant; Pakistan will receive US$120 million in IDA credit; Kyrgyz Republic will receive US$45 million in IDA grant and credit; and Tajikistan will receive US$45 million in grant financing.

“CASA-1000 can help improve performance in the transportation, telecommunications, and industrial sectors – all of which are critical elements of a functioning economy and all of which depend on electricity,” said Laura Tuck, World Bank Vice President for Europe and Central Asia. “Improvements in the transparency of revenue management will be implemented by the Central Asian countries, demonstrating their commitment to improving the performance of their energy sectors.”

The Energy and Electricity Laws Amendments to Reestablish an Independent Energy Sector Regulator to be Reviewed by the Government of Kyrgyzstan

The amendments to the Energy and Electricity Laws to reestablish an independent energy sector Regulator and to establish an independent settlement center successfully passed coordination within the Economics Department of the Prime Minister’s Office. Now the amendments are being reviewed by the Department of Organizational Work of the Prime Minister’s Office.

The Government established an interagency working group to draft normative and legal acts to reform the energy sector of the Kyrgyz Republic. The respective order was signed by Prime Minister Jantoro Satybaldyev on 17 March 2014.

It is reported that this order was approved to reform the energy sector of the Kyrgyz Republic with the use of modern management tools in energy companies.

The working group has been assigned the task of developing draft normative and legal acts, as well as drafts of internal documents of the energy companies within a two-month period.

The objectives of the efforts of this working group include creation of an automated system of commercial electricity metering; separation of functions of governance and regulation and  management modernization at energy companies; improvement of the tariff methodology with a focus on the vulnerable population; increase in transparency of energy companies; introduction of management contracts in the distribution companies; strengthening the role and responsibilities of Boards of Directors and the General Directorate of energy companies to ensure their improved performance.

The working group consists of the representatives of ministries and agencies, research and development institutions, energy companies, civil society, and donors, including USAID Mission Director Michael Green and RESET’s Kyrgyzstan Country Director Ms. Olga Terenteva.

RESET Continues Analysis of Financial Statements of Kyrgyz Energy Companies

In early March Mr. Jim Hogan, RESET Governance Advisor, made presentations to NESK and EPP, the respective state-owned transmission and generation companies, and JSC Severelectro, Kyrgyzstan’s largest distribution company, on the analyses of their financial statements. The RESET team held follow-up meetings with NESK accountants and financial specialists to discuss certain computational problems and omissions in its Financial Statement due to human error and inattention.

More findings of the analysis showed numerous restatements of prior year amounts according to conclusions of the Chamber of Accounts that conducted an audit of these periods. Auditors’ opinions for several periods appear tortuous and partially qualified.

While some work is needed to bring the financial statements into compliance with the international standards of accounting, it was revealed that NESK made improvements towards reducing its expenses.

The detailed analysis of the NESK’s cost of sales showed that until 2013 the company incurred considerable costs for transit of energy (on the territory of Uzbekistan), However, from 2013 NESK succeeded to exempting such transit from this fee imposed by Uzbekistan and reduced expenses. This was made possible by the commissioning of the Datka-South substation, which gave NESK an advantage during negotiations with Uzbekistan.

There are still open questions regarding foreign exchange loss / income and discussion of this issue is planned during the next meeting.  RESET also scheduled a mid-April meeting with the external auditor of NESK to clarify the issue.

NESK thanked RESET for useful advice and findings and requested technical assistance in improving the quality of their annual reports and accounting.  RESET promised to provide NESK with the updated version of international accounting standards in Russian and training on preparation of financial statements in April.

RESET Delivers Presentations on Power Sector Supply-Demand Balance in the Kyrgyz Republic.

Mr. Avtandil Kalmambetov, RESET Senior Technical Advisor, made a presentation on Power Sector Supply-Demand Balance to Mr. Osmonbek Artykbaev, Minister of Energy and Industry of the Kyrgyz Republic. During the meeting Mr. Jim Hogan, RESET Senior Corporate Governance Advisor, also shared with the Minister the RESET report entitled A Rapid Assessment of Electricity Supply under Alternative Scenarios in the Kyrgyz Republic, on which the presentation was based.  At the request of Minister Artykbaev, Mr. Hogan provided him a letter summarizing the results of the report and an amended Power Sector Supply-Demand Balance presentation.

Subsequently, Mr. Hogan made a presentation to a meeting of donors to share the insights gained from the meeting with the Minister.

The amended overview of the Power Sector Supply-Demand Balance was made to the Minister of Energy and Industry and his senior staff. The Minister was very pleased with the presentation and suggested several minor modifications. At the conclusion of the meeting, the Minister embraced the results and requested that the presentation be made to the Prime Minister as a collaborative effort between RESET and the Ministry.

USAID SARI Regional Energy Initiative USAID REMAP Afghanistan
USAID REMAP CAR
USAID REMAP Washington