Legislative changes in Kazakhstan to support renewable energy sources

In a nutshell:

In the July 2016 issue, we informed you about the changes in Kazakhstan’s renewable energy laws arising from the introduction

of annual indexation of flat feed-in tariffs amid the changing exchange rate for the Kazakh Tenge (KZT) against foreign currencies. Back then, no procedure for the implementation of the basic indexation mechanism was specified, though.

Only on 17 April 2017, Resolution No. 207 was passed by the

Government of the Republic of Kazakhstan to supplement the

provisions relating to the determination of flat tariffs (Resolution

No. 271 dated 27 March 2014). With these changes, the indexation

formula for flat tariffs has now been specified.

Indexation formula

Resolution No. 271 dated 27 March 2014 was added item 11-2 which provides for the indexation of flat tariffs once a year, taking into account inflation and changes in the exchange rate against convertible currencies. This only applies to projects where the power producer has foreign currency liabilities, and also only if the exchange rate of the domestic currency against convertible currencies changed by 25% or more on the previous year. In such cases, indexation is calculated according to the following formula:

T_t₊₁ – indexed flat tariff calculated based on the above-mentioned

formula, rounded down to a full tiyn;

T_t – current flat tariff, approved by the Government of the Republic

of Kazakhstan, taking into account earlier indexations if carried out;

VPI_t – Consumer Price Index (CPIt), cumulative for 12 months before 1 October of the indexation year, determined based on information from the competent state statistics authority;

USD_t+1 – current exchange rate of the tenge against the US dollar as of 1 October of the indexation year, determined based on information

from the National Bank of the Republic of Kazakhstan;

USD_t – average exchange rate of the tenge against the US dollar,

calculated for 12 months before the indexation date, determined

based on information from the National Bank of the Republic of Kazakhstan.

The adjustment of feed-in tariffs will not apply to flat tariffs paid for solar modules made of Kazakh silicon (Kaz PV) with a total capacity of 37 MW used for the transformation of solar energy.

The adjusted tariff rates are advertised by the Financial Settlement

Centre on its website no later than 15 October of the year.

Advantages

Regulating the indexation system may facilitate obtaining financing

for RE projects.

Disadvantages

Nonetheless, this provision will take effect not earlier than two years following its first official publication in standard printed media.

It remains to be seen how investors will react to the long awaited

indexation of feed-in tariffs. If you have further questions, Rödl & Partner will be happy to assist you.

Newsletter

E|nEws
- Issue: August 2017

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