Hopes and doubts about Czech investment in Kyrgyzstan hydro power project

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BISHKEK (TCA) — Czech company Liglass Trading is to pay $37 million to Russia’s RusHydro within a month to buy out its stake in Kyrgyzstan’s Upper Naryn cascade of hydro power plants project, Kyrgyz President Almazbek Atambayev said at his annual press conference on July 24.

The termination of the agreement with RusHydro on the construction of the Upper Naryn cascade was the right decision, Atambayev said. “I am convinced that Russian companies were not going to build the Upper Naryn cascade and did not even intend to start the Kambar-Ata HPP-1. It was just like ‘this is ours, and do not touch it’,” he said.

RusHydro statement

On July 25, the RusHydro JSC, which is among the largest Russian energy holdings, responded to the critical statements of the Kyrgyz President.

The Company considers inadmissible the statements of Kyrgyz partners including President Atambayev, Chairman of the Kyrgyz State Committee for Industry, Energy and Subsoil Use Duyshenbek Zilaliyev and other officials regarding the company’s fulfillment of its obligations for the construction of the Upper Naryn cascade of HPPs and its legitimate rights related to the denunciation of the agreement, the RusHydro statement says.

RusHydro has never made any statements about the intention to stop the construction of the Upper Naryn HPPs cascade, so the accusations of the Kyrgyz partners about the improper performance of RusHydro’s obligations are absolutely groundless, the company said.

The intergovernmental agreement on construction and operation of the Upper Naryn HPPs cascade was unilaterally terminated by the Kyrgyz side. The funds invested by the company in the implementation of the project must be returned to it in full according to the terms of the agreement. However, all attempts to negotiate it have not had any acceptable result for the company so far, the statement says.

RusHydro said it is ready for a constructive dialogue and discussion of options for repaying the debt by the Kyrgyz side. At the same time, the company has the right to initiate an international arbitration with a claim for compensation.

Background

In January 2016, Kyrgyzstan denounced the agreement with Russia on the construction of the Upper Naryn cascade signed in 2012. RusHydro said it had invested $37 million in the project and asked Kyrgyzstan to return the money.

It was planned to build the Naryn cascade within six years, and the first hydraulic unit of the main Naryn HPP-1 should have been put into operation in 2016. The Upper-Naryn cascade would include Ak Bulun, Naryn HPP-1, Naryn HPP-2, and Naryn HPP-3 power plants. The total capacity of the cascade should be at least 191 MW, with average annual electricity production of 1.55 billion kilowatt-hours. The project was estimated at $425 million in 2012, and it was increased to $727 million at the end of 2013.

On July 10, 2017 the Kyrgyz Government and the Czech company Liglass Trading CZ s.r.o., in the presence of President Almazbek Atambayev, signed an agreement on the construction and commissioning of the Akbulun HPP and Naryn HPP-1 of the Upper Naryn cascade, as well as construction of ten small HPPs in Kyrgyzstan. The agreements were signed by Duyshenbek Zilaliyev, Chairman of the State Committee for Industry, Energy and Subsoil Use of Kyrgyzstan, and Michael Smelik, Director of Liglass Trading.

According to the investment agreement, the Czech company has to contribute $37 million to the authorized capital of Upper Naryn HPPs cascade CJSC to start the procedure for transferring the stake of the Russian party in the amount of 50% of shares to Liglass Trading.

The project will be implemented, Atambayev believes

The agreement with the Czech company was well designed, it is good for Kyrgyzstan and it is much better than that with RusHydro, Atambayev believes. After the National Energy Holding shareholders’ meeting scheduled for August 4 approves the agreement, the Czechs will have to pay $37 million within a month to stop “barking” on the part of RusHydro, he said.

“There was a lot of talk that this company has never built HPPs, but for Kyrgyzstan it is important that there be money. If the Czechs pay $37 million, then it is a serious company, and if not, we will look for new investors,” Atambayev concluded.

Journalist investigation

Earlier, journalists from the Czech Republic and Kyrgyzstan conducted their investigations to clarify details about the small and little-known company which intends to implement major projects in Kyrgyzstan. The search for data about the company on Google did not give results, except for references to the Internet resources of Kyrgyzstan which reported on the agreement signed in Bishkek.

A letter from the head of the Czech presidential office, Vratislav Minar, helped to conclude the billion-dollar contract, journalists say.

According to official data of the Czech Republic, the business of Liglass Trading is production and trade, as well as rental of real estate, apartments and offices. The firm is engaged in wholesale trade in porcelain, glassware and cleaning products, production of rubber and plastic products, processing of metals.

Last week, the head of Liglass Trading Michael Smelik promised to explain the situation at a press conference in Bishkek on July 26. However, he did not come to Bishkek, but only posted a video message in which he said his company would keep the terms of the contract signed on July 10, 2017.

Opposite opinion

This week, Kyrgyz parliament member Janar Akayev criticized the officials who assigned the construction of ten small HPPs and two HPPs of the Upper Naryn cascade to the unknown Czech company with dubious reputation.

Kyrgyzstan’s Government and all responsible persons should answer for such a huge example of negligent performance of their duties and the greatest shame that they have brought upon our country, Akayev said to local media.

After media reports that the Czech company has practically no money on its accounts, he submitted an inquiry to the State Committee for Industry, Energy and Subsoil Use of Kyrgyzstan demanding to provide evidence that Liglass Trading had transferred a guarantee fee. On July 28, the Committee informed that Liglass Trading has paid a guarantee fee of more than $1 million and a 2 million soms fee for participation in the tender.

The agreement with Liglass Trading should be denounced, Kyrgyz ex-Foreign Minister Alikbek Jekshenkulov said to Vesti.kg. It is unclear how the foreign policy department could allow the unprofitable investor company to so easily obtain such a large-scale project. It would be better to get out of the current situation safely by breaking the deal with the dubious partner, he added.

A public figure and ex-head of the presidential staff Edil Baisalov believes that this issue should be investigated not only by a parliamentary committee, but also by national security bodies.