Energy Privatisation Enters Last Lap

Preparations to denationalise Kyrgyzstan’s electricity industry have been going on for eight years, and although the concluding phase is now imminent, there are fears that this too may take longer than anticipated because the government and parliament disagree about what form the privatisation should take.



The government adopted its privatisation programme for the state-owned Kyrgyzenergo as long ago as 1998. As a first step, the firm was transformed into a joint-stock company, with the state retaining a 94 per cent stake and private individuals holding the other six per cent in shares. All the repair companies within the Kyrgyzenergo group were handed over to local government.



Subsequently, Kyrgyzenergo was broken up into several components. The state retained a controlling stake in Bishkekteploset, which provides the capital with heat, and in four electricity distributors. Elektricheskiye Stantsii, which operates the country's power stations, and Natsionalnaya Elektricheskaya Set, the national grid, are wholly owned by the state and will not be privatised.



The final phase of privatisation will involve issuing a licence to run these companies, placing them under commercial management, or selling them outright to strategic investors. Energy experts interviewed by NBCentralAsia say this is the sticking point which has caused so much disagreement that the reform is unlikely to be concluded any time soon.



In June, Prime Minister Felix Kulov proposed speeding up the privatisation process, given that the first three stages had been completed. The prime minister told NBCentralAsia that the government had already offered parliament a number of options for resolving the matter.



“The parliamentarians say only two options need considering – issuing an operating license or a management deal. What we are saying is that the third option – sale – also needs to be looked at. Whatever happens, all the final options for denationalisation will be coordinated with parliament,” Kulov told NBCentralAsia.



In the wake of the prime minister’s proposal, a number of non-government organisations spoke out against privatising the electricity industry, arguing that the government’s only concern was to make the international financial institutions happy, and that it had not considered the impact of a likely rise in energy prices for domestic consumers.



Zamirbek Esenamanov, who chairs the parliamentary committee for industrial and business development and natural resources, believes that Kyrgyzstan must learn from what happened in Kazakstan and Moldova, where investors bought electricity distribution companies from the state and then sold them back at several times the price.



Other commentators suggest that even the soft option of issuing a licence to operate power companies, an idea supported by many parliamentarians, could be rejected in the end. The deputy speaker of parliament, Tairbek Sarpashev, said his colleagues had not identified any reformers in the government brave enough to champion any of the options on offer, so even getting the licensing proposal through the legislature would be “problematic”.



(News Briefing Central Asia draws comment and analysis from a broad range of political observers across the region.)