By Choi Kyong-ae
A Korean consortium’s 6 trillion won ($5 billion) project to build a coal-fired power plant in Kazakhstan may be derailed due to the Kazakh government’s lack of a payment guarantee, industry observers said Sunday.
Kazakhstan recently notified Korean lenders and the consortium led by Samsung C&T and Korea Electric Power Corp. (KEPCO) of its decision not to provide a government guarantee for the project. Instead, the Kazakh government has offered to support the project under the ordinance of the prime minister, a Samsung C&T official said Sunday.
“The Korean lenders, including the Export-Import Bank of Korea and Korea Trade Insurance Corp., were originally scheduled to extend a combined $3.5 billion in loans to the project. But they now worry non-performing loans if a government guarantee is not there,” he said.
In order to not derail the project, Samsung C&T said the Kazakh government and the Korean lenders were “in negotiations to make a breakthrough.”
In 2009 during the Lee Myung-bak administration, the Korean consortium won the project to build a 1,320 megawatt coal-fired power plant by 2020 in Balkhash to supply 9 percent of the country’s overall power. Samsung C&T planned to set up a 50:50 joint venture with a local company. The joint company would inject $1.5 billion to build the plant, a spokesman for Korea Eximbank said.
The Korean state-run utility KEPCO wanted to buy Samsung C&T’s stake in the plant to operate it for 20 years, he said.
In June last year, President Park Geun-hye helped the project take a step forward when she paid a visit to Kazakhstan. In a renewed contract, the joint venture was reportedly allowed to provide electricity produced at the plant for 20 years to Kazakhstan for $940 million per year.
Samsung C&T, a construction unit of Samsung Group, has spent more than $200 million to build a railway system and other infrastructure facilities near the plant site, according to local reports. But it didn’t confirm the expenditure.
“In fact, there has not been any tangible results since 2009 between the two countries to push forward the project” the Eximbank spokesman said.