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Uzbekistan must reform power sector to become energy hub - ADB analyst

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Baku, Azerbaijan, Oct. 9

By Fikret Dolukhanov – Trend:

It is the right time for Uzbekistan to transform Uzbekenergo, the old, vertically integrated state-owned electricity utility, into a modern, regional energy hub, Finance Specialist in Central and West Asia Regional Department at ADB Rafael Abbasov believes.

Uzbekistan is currently aiming its efforts to restore and expand regional cooperation, also within the electricity sector of Central Asia, says the author.

“A double-landlocked country located in the middle of the region, Uzbekistan wants to turn its geographic disadvantage into an economic advantage by restructuring the way it trades energy with its four neighbors [Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan]. Energy resources are abundant in Central Asia, but the resource mix differs from country to country. Regional cooperation could see these countries trade the most appropriate energy at the appropriate time – to everyone’s advantage,” Abbasov noted.

The author, however, underlines that to succeed, Uzbekistan must reform the legal, financial and regulatory structure of its power sector.

“The reforms could replace the existing utility-to-utility trade model with an energy exchange that could provide energy swaps not only among Central Asian countries but also with nearby energy-hungry ones like Afghanistan,” the ADB specialist said.

Also, according to Abbasov, to achieve trade fairness, Uzbekenergo needs to introduce international corporate governance principles coupled with segmented financial disclosures for generation, transmission, and distribution subsidiaries.

“Inevitably, this would lead Uzbekistan to consider corporate transformation and unbundling Uzbekenergo’s generation and distribution subsidiaries, creating more managerial capacity and revenue responsibility in the context of the new Central Asian electricity market. The expansion of regional power trade thus provides the impetus required to reform the utility and improve the performance of the national power sector,” the author said.

Abbasov concluded that creating a regional trading system for wholesale power supplies will greatly facilitate trade expansion and spur much-needed investment in the energy sector in Central Asia.

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Follow the author on Twitter: @FDolukhanov

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