DHInfrastructure has been working with the World Bank since 2013 to assess financial and operational challenges facing the Kyrgyz Republic’s energy sector. This work began with the development of an Energy Sector Policy Note that assessed these challenges and provided recommendations for solving them. In 2016, the World Bank wanted an update to the Policy Note to reflect tariff changes in the electricity sector as compared with Government’s Medium-Term Tariff Policy (MTTP) and to incorporate analysis of the district heating sector’s financial and operational performance. In 2018, the World Bank wanted another update to the Policy Note to incorporate data from 2017 and evaluate proposed tariff reform paths. Most recently, in 2019, the World Bank wanted to update the Policy Note to forecast electricity and district heating sector cost-recovery tariffs and deficits through 2023 using updated 2018 data and to analyze each utility’s ability to service its debt. The World Bank also wanted recommendations for mitigating hydrologic risk.
In 2013, DHInfrastructure assessed challenges related to supply reliability and quality, financial viability, affordability, and regulation and governance. We analyzed the sector’s historical performance and assessed projected supply and demand scenarios to develop detailed reform recommendations. In 2016, we developed financial models for the electricity and heating sectors to calculate the deficits caused by low tariffs in the previous three years. We compared these deficits to deficits that would have occurred under the MTTP under different sensitivities. In 2018, we updated the financial models to incorporate 2017 data and forecast sector deficits under each tariff scenario through 2023. Most recently, in 2019, we updated the financial models to assess tariff path scenarios and forecast sector deficits. We also updated each utility’s debt service through 2045 based on new capital expenditure plans and incorporated the updates into the cost projections. Finally, we developed a model for mitigating hydrologic risk through a combination of tariff adjustments, cash reserves, contingency loans, a stabilization fund, and weather insurance.