What were some of the decisions leading up to the joint venture of Samruk-Kazyna Invest Green LLP and the construction of a 50-MW solar farm?
In 2013, our colleagues from Samruk-Kazyna Invest went to London to meet United Green Group to explore opportunities for a partnership to develop the solar industry in Kazakhstan. Considering it was early days for the renewables sector here, this was a new market that required a new regulatory approach. As a sovereign fund with vast experience in international partnerships and responsible for the majority of the country's GDP, Samruk-Kazyna was the perfect partner for such venture, and United Green had a great deal of experience and knowledge in the solar industry; thus, it was a great merger. We also saw great support from the Ministry of Energy, which had established a new department for renewables at the time. The local akimat also joined with a USD4-million investment in our landmark project, Burnoye Solar-1. We started construction in 2014 with support from our shareholders, the European Bank for Reconstruction and Development (EBRD) and Clean Technology Fund.
How has this project increased confidence in a more sizeable solar and renewables sector in Kazakhstan?
Kazakhstan today finds itself in a bit of a trap. Our energy is amongst the cheapest in the world, second to last according to some estimates. As well as having a growing oil and gas industry, we have one of the largest coal reserves in the world. We have power plants that were installed 40-50 years ago; therefore, they are only paying for OPEX and incredibly cheap raw materials. That said, if we build more renewable energy plants, the cost of electricity would go up. Since everything depends on the low cost of energy, that would create a ripple effect in which the cost of everything will go up. Nonetheless, Kazakhstan has the potential to develop renewables to significant levels. From a political point of view, we have made many commitments. For example, our energy matrix is 1% renewables now, though our goal is to reach 3% by 2030 and 50% by 2050. We are constantly on the lookout and reforming ourselves in order to attract foreign investors to invest in renewables. As one of the major investors in this market, the main issue is the availability of long-term financing in our national currency. Auctions indicate growing competition and help us receive more attractive bids, though foreign entities typically require debt financing. We meet many investors every day who want to invest in Kazakhstan. Our prices are in tenge, and this confuses things as our currency fluctuates and has seen fairly drastic devaluation.
During Expo 2017, you secured a USD44.5 million finance package from EBRD for the Burnoye Solar-2 project. What are your objectives and how is the development progressing?
Construction has started, and we have completed about 20% of the work. We will finish construction and start electricity production in early summer 2018. We made our decision to keep investing and there are a few drivers for that, the key one being our strong partners. Burnoye Solar-1 was commissioned on time and is a successful project, producing far more than we expected. We have excellent financial settlements as well that are paid monthly without delays. The system and the laws are working; the feed-in tariff is also there and is not affected by the currency fluctuation. All of the government's commitments are being delivered. The market conditions have also become favorable for us in terms of equipment, as the solar industry is becoming more affordable. As the pioneers in this industry, this project and all future developments play a role that is far bigger than just business and contribute to the overall wellbeing of the nation.