Almaty Power Consolidated

Cancelled

In April 1996 the government of Kazakhstan sold a power and heat generation and distribution business, Almatyenergo, to Belgian company Tractebel. Almatyenergo owned the city of Almaty's 5 power and heat plants and the afferent distribution networks. Almatyenergo was supplying electricity, heat, and hot water services to Almaty’s 1.2 million inhabitants. The sale of Almatyenergo to Tractebel (from October 2003 a subsidiary of Suez Lyonnaise des Eaux) was not subject to a public tender. After the purchase Tractebel created a new company, Alma-Ata Power Consolidated (APC), endowed with the fixed assets purchased from Almatyenergo. Tractebel paid a reported $340 million for Almatyenergo. Tractebel pledged to boost output by 30% and spend $270 million to upgrade Almatyenergo's several power stations and electricity grid. At the time of the divesture Almatyenergo had generating capacity of 1,307-MW by gas, coal, oil or hydro and heating capacity of 875M-W. APC quickly ran into problems. Tractebel attempted to collect unpaid debts soon after taking over operations in 1996. APC began serving notices to its 140,000 delinquent power customers, including several state agencies and ministries, that it would be cutting off service if bills remained unpaid. Tractebel even published the list of debtors. As Tractebel began cutting off some services, public protest grew. Despite the protests, the company was successful in increasing the percentage of bills paid on time and in cash. There were also disagreements between Tractebel and the authorities over tariffs, which had to be approved by the Kazakhstan Antimonopoly Committee. Tractebel requested tariff increases a number of times, largely without success. Additionally, foreign gas supply began to be disrupted due to a payment dispute between neighboring countries. In February 1998, Tractebel released a statement in the Almaty Herald that blamed the Kazakh government for the gas supply problems. In November 1999, Tractebel threatened international arbitration over what it claimed was the failure of the Government to honor contractual guarantees regarding the rates charged by the Almatyenergo utility. According to the Wall Street Journal, in December 1999 Tractebel also disclosed that it was under investigation by the Kazakh government over an alleged $50 million bribe to three Kazakh businessmen, who had received “consulting fees” in connection with a natural gas concession. In early 2000 Tractebel claimed that contractual commitments over tariff increases with Almatyenergo were not honored by the Kazakh Government and launched legal action in the International Arbitration Court in Stockholm. In April 2000 Tractebel agreed to a buy-out with KazTransGas, a government-owned gas transmission company. Tractebel left Kazakhstan, sold its interest in Almatyenergo and Intergas (a gas transmission company) to KazTransGas, and dropped the arbitration case for a reported $100 million settlement. Tractebel and KazTransGas issued a joint press release on April 28, 2000 stating that Tractebel “has no longer any involvement in the electricity and heat production and distribution business in Kazakhstan.” In addition, the company’s statement indicates that the two parties had waived all claims against each other. Under the termination agreement, Tractebel was obligated to continue to advise KazTransGas during a 3-month transition period. Soon after Tractebel finally left Kazakhstan collection rates reportedly declined by 30%. The Kazakh Government has been operating the Almatyenergo plants through KazTransGas since April 2000. None None