08/27/2026
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The modernization of Kazakhstan’s energy and utility infrastructure will cost more than KZT 13.5 trillion. However, large-scale modernization should not lead to excessive tariff increases. To address this challenge, the National Project “Modernization of the Energy and Utilities Sectors” (MECS) was launched. The National Investment Holding “Baiterek” became the project’s financial operator. What financing instruments are being used, how many projects are currently underway, and what role does interest-rate subsidization play? These issues were discussed by Ruslan Tyulegenov, Managing Director of Baiterek Holding, in an interview with a correspondent of the business information center Kapital.kz.
– Ruslan, the MECS National Project envisages a fairly large-scale restructuring of infrastructure. What is its main objective?
– Put simply, the objective is to significantly upgrade the country’s energy and utility infrastructure and make it more reliable.
The National Project was approved by a Government resolution on December 25, 2024. It covers several areas at once: development of generation capacity, modernization of natural monopoly facilities, support for domestic producers, introduction of digital technologies, as well as support measures for socially vulnerable groups of the population.
One of the key targets is to reduce the level of infrastructure deterioration to 40% and the accident rate by 20%. Overall, the modernization is expected to cover more than 200 infrastructure companies across the country.
– It was previously stated that the total financing requirement exceeds KZT 13.5 trillion. What sources will the funds come from?
– The model was initially designed so that the entire cost of modernization would not be placed on a single source. Approximately KZT 6.8 trillion is expected to be provided through tariff-based sources. Another approximately KZT 6.8 trillion needs to be raised in the form of debt financing through second-tier banks, international financial institutions and other financial instruments.
Baiterek Holding is the financial operator of the National Project, while the actual financing mechanisms are implemented through our subsidiaries – the Development Bank of Kazakhstan and Kazakhstan Housing Company.
In particular, DBK works with projects of natural monopoly entities through a direct lending mechanism. Second-tier banks and international financial institutions are also involved in financing the projects.
KHC, in turn, provides financing to state-owned and quasi-public enterprises through the purchase of government securities issued by local executive bodies.
Thus, a two-level system has been established within the Holding, allowing a financial instrument to be selected depending on the type of project and its participant.
– How is the selection of projects for financing organized? How transparent is this process?
– One of the key instruments in this area has been the National Project’s Electronic Procurement Platform, launched in November 2025. It makes it possible to automate the project review process. After receiving positive conclusions from the technical operator, tariff regulator and financial operator, a project is included in the list of candidates for financing.
On the platform, the Holding has already reviewed 332 applications from natural monopoly entities totaling KZT 833 billion. Of these:
– How are the projects distributed among different areas of utility infrastructure?
– If we look at the projects being considered by KHC under the mechanism involving government securities of local executive bodies, the largest share is accounted for by heat supply.
Currently, this mechanism includes 132 projects with a total value of KZT 193.6 billion.
Of these, 50 projects worth KZT 95.5 billion are related to heat supply, 49 projects worth KZT 58.8 billion concern water supply facilities, 20 projects worth KZT 23.8 billion are in wastewater management, and 13 projects worth KZT 15.5 billion are in electricity supply.
Financing has already begun. As of August 25, 2026, government securities of 13 local executive bodies had been purchased for a total amount of KZT 160 billion.
– One of the main issues in modernizing utility infrastructure is its impact on tariffs. How is this impact expected to be minimized?
– This is one of the fundamental issues of the National Project. Infrastructure must be modernized, but financing should be structured in such a way that the investment burden does not lead to a sharp increase in tariffs.
To this end, among other measures, interest rates on loans can be subsidized. If the cost of financing exceeds 10% per annum, part of the interest rate may be subsidized from budget funds.
Why is this necessary? So that private natural monopoly entities can attract long-term resources – for up to 20 years – at a more affordable cost. The cheaper and longer-term the loan, the lower the financial burden on the project and, consequently, the lower the pressure on tariffs for consumers.
For 2026–2028, the national budget provides KZT 35.5 billion to subsidize part of the interest rate on loans to natural monopoly entities. To date, KZT 10.9 billion has already been transferred to KHC.
KHC has reviewed 26 projects with a total value of KZT 93.7 billion for interest-rate subsidization. Agreements totaling KZT 5.7 billion have already been signed for four of them.
– Can you list which projects have already received financing?
– Yes, financing is already actively underway. Through DBK, financing has been opened for 21 projects totaling KZT 55.7 billion. These include projects of Karagandy Zharyk LLP, TATEK JSC and AlES JSC. Second-tier banks are also actively joining the process. For example, Halyk Bank has financed projects of Stepnogorsk Teplotransit LLP in the heat supply sector.
In addition, projects of Atyrau Zharyk JSC, Zhambylskie Elektricheskie Seti LLP, Atyrauskie Teplovye Seti LLP, KOKSHETAU ENERGO LLP and a number of other enterprises have been approved. Their total volume is approximately KZT 300 billion. The signing of loan agreements and the opening of financing for these projects are scheduled for August–September 2026.
– You mentioned the possibility of cooperation with international financial institutions. Can you give an example of their participation?
– Yes, as I have already mentioned, international financial institutions are also participating in the implementation of the National Project. In particular, the European Bank for Reconstruction and Development has approved electricity supply projects for companies such as Alatau Zharyk Company JSC and Ontustik Zharyk Transit LLP.
The participation of international financial institutions makes it possible not only to expand access to long-term financing but also to diversify its sources. This is particularly important for infrastructure projects that are implemented over many years.
– At this stage, can we already say that large-scale modernization has moved into practical implementation?
– I would say that we have already moved from establishing the system to its practical operation. 2025 truly became the starting point. We needed to establish the regulatory framework, determine financing mechanisms and build interaction between the participants. For this purpose, the Law on the Development of the Capital and Cities of Republican Significance was adopted, along with 25 regulatory acts.
Today, this architecture is already operational. Applications are being submitted, projects are undergoing selection, financing sources are being determined, agreements are being signed and financing is beginning.
At the same time, we initially proceeded from the principle that the National Project should not depend solely on the budget or solely on tariffs. Therefore, the model combines tariff-based sources, long-term loans, funds from banks and international financial institutions, as well as an interest-rate subsidization mechanism.
– Ultimately, what result should the consumer receive?
– Ultimately, consumers are not concerned with financial mechanisms but with the quality of services: stable heating in winter, uninterrupted water supply, electricity networks capable of handling the load, and fewer accidents.
Therefore, the main result of the National Project is more reliable and modern infrastructure.
But there is another important component – the financial sustainability of this modernization. We cannot upgrade the networks today while creating problems for the industry or consumers tomorrow. That is why we use different sources of financing, attract long-term funds and subsidize interest rates. Our task is to carry out the necessary infrastructure upgrades while simultaneously containing the impact of investment costs on the tariff burden.
Source: https://kapital.kz/finance/152186/kak-modernizirovat-infrastrukturu-zhkh-bez-tarifnogo-shoka.html
