Energy Sector of Uzbekistan

ENERGY SECTOR OF UZBEKISTAN

January 2007

Currently, Uzbekistan is the largest electricity producer among the Central Asian republics and a net exporter of electricity. The country has a total installed generation capacity of 12,300 MW. Uzbekistan achieved self-sufficiency in energy after gaining independence in 1991. Today, about 50% of the power-generating facilities of the Central Asia Integrated Power Grid are located in Uzbekistan. This power grid also incorporates the power systems of Turkmenistan, Tajikistan, Kyrgyzstan, and southern Kazakhstan.

Unfortunately, Uzbekistan’s maintenance of its power systems has largely deteriorated over the past years and much of the equipment in generation, transmission, and distribution systems is outdated and extremely inefficient. At present, it needs serious renovation and upgrading to meet the growing demands of the economy. The facilities require rehabilitation by introducing more efficient and environment friendly equipment so that they can operate at their design capacities. There are currently no manufacturing facilities in the country for the production of equipment used in power generation and transmission.

Renovation of the energy sector is a priority for the government of Uzbekistan. The growing demand for electricity and the wear of the existing power generating facilities in the country has motivated the government to develop a long-term program, spanning 2001-2010, for the reconstruction and development of the sector. In December 2001, the Government of Uzbekistan approved a Generating Capacity Development and Rehabilitation Program for the Energy Sector until 2010, envisaging an increase in the installed capacity of national power stations by 15% by 2010, which requires investments up to $1 billion. This program presents good opportunities for international contractors and suppliers of energy equipment and services.

A. Market highlights & best prospects

The following section will describe the general situation of Uzbekistan’s power-generating industry, a privatization plan, the government policy on industry reconstruction and development, and the policy’s influence on prospective involvement of foreign contractors and suppliers, procurement regulations, and statistical data.

I. Market Profile

General overview

Uzbekistan is the largest producer of electric power energy in Central Asia. However, according to estimates, at the current rate, by 2010, demand for primary energy may exceed projected production. The installed capacity of the country (12,300 MW) comes from 39 power plants, including 11 large thermal power plants with a total capacity of 10,600 MW and 28 hydroelectric power stations with a total capacity of 1,700 MW. There are no nuclear power plants in Uzbekistan.

Thus, electricity in Uzbekistan is derived primarily from thermal plants with 85% of thermal plants powered by natural gas. The remaining 15% are powered by coal and heavy oil. The largest natural gas-powered facilities include the Syrdarya (3,000 MW), Tashkent (1,860 MW), and Navoi plants (1,250 MW). The Talimardjan Thermal Power Station, with its unique 800 MW turbines, is largely complete (the first block of the station was commissioned in 2005). The most significant coal-powered facilities are two power plants in the vicinity of the Angren mine near Tashkent, the largest one being Novo-Angren (2,100 MW). About 11.5% of electricity in the country is produced at 28 hydroelectric plants, the largest being the Charvak Hydroelectric Station (600 MW) and the Khodjikent Hydroelectric Station.

In 2005, Uzbekistan generated 47.581 billion kW/h of electric power, which was 4.2% less compared with 2004. Power exports reached $16.9 million and included electricity mainly exported to neighboring countries (Tajikistan and Kyrgyzstan during the winter period). For instance, it was recently announced that Tajikistan will import 600 million kW/h of electric power from Uzbekistan during the first quarter of 2006 and 900 million kW/h will be exported during the summer period. The power system of Tajikistan experiences shortages in winter and surpluses in summer within the range of 1 to 1.5 kW/h. Such winter shortages are covered with power flows from the Republic of Uzbekistan and other sources. Summertime hydroelectric power surpluses are transmitted to Uzbekistan and other countries in the region. Rather than exporting electricity, it has been more common for Uzbekistan to export raw materials, especially natural gas, which the neighboring countries use in their own thermal power plants. Uzbekistan increased electricity production by 3.5% in the first 11 months of 2006 to 44.585 billion kilowatt- hours. Heat and power plants produced 38.775 billion kilowatt-hours in the period, up 7% year-on-year, and hydroelectric and block plants produced 5.81 billion kilowatt-hours, down 15.2%, including 513 million kilowatt- hours produced by hydroelectric plants, down 19% year-on-year.

The Uzbek power system is located in the central part of the United Central Asian Power System (CAPS), which includes the power systems of Kazakhstan, Kyrgyzstan, and Tajikistan. The Turkmen system that has previously worked with CAPS is now working with the Iranian Power System. As noted above, Uzbekistan accounts for over 50% of electricity generated by the System. Presently, CAPS works in parallel with UES of Russia through a number of single-chain high voltage power lines (VL-500 kV) connecting Southern and Northern Kazakhstan.

The total length of electricity lines is over 230,000 km. Mostly 500 kV and 220 kV lines connect the power system to the systems of the neighboring countries.

Most of the equipment for power generation was produced in Russia, other parts of the former Soviet Union, and by Soviet trading partners in Central and Eastern Europe. The physical condition of CAPS and UDC has deteriorated to an extent that makes it difficult to maintain reliable operation and develop a responsive regional wholesale power market without significant investment to rehabilitate the infrastructure. The current technical state is inadequate for modern metering and telemeter, telecommunications, frequency control, information systems, and supervisory control and data acquisition.

The facilities require rehabilitation with more efficient and environment-friendly equipment so that they can operate at their design capacities. There are currently no manufacturing facilities in the country for the production of equipment used in power generation and transmission.

Renewable energy

Uzbekistan possesses huge potential resources of renewable energy. Climatic conditions of Uzbekistan are especially favorable for utilizing solar energy. The potential of only solar energy is estimated at 51 billion toes (tons of oil equivalent or toe). The use of currently existing solar energy technologies and equipment would allow production of 179 million toe, which is more than three times current annual extraction of fossil fuel in the country. In the late 1980’s, a solar furnace was built in the country with a capacitance rate of 1,000 kW and a focus temperature of 3,000 degrees Celsius. Presently, solar energy is used mainly for hot water supply. A few manufacturers in Uzbekistan namely Uzgeliokurilish, Encom, and Photon, produce flat solar water heaters. The total area of installed solar collectors in the country is estimated at 40,000 square meters. The marginal utilization of solar energy in Uzbekistan is caused by low gas and electricity prices and the absence of a government renewable energy development program.

According to ADB, in many remote rural areas, decentralized generation through renewable energy sources, mainly through small hydropower plants, offers a competitive and environmentally friendly option for addressing electricity shortages (these electricity shortages are caused mainly by the fact that these areas are located far from the electricity grid). The hydropower potential from natural water flows is estimated to be about 20,000 MW, about 30% of that from small hydropower plants. Only 30% of the small hydropower plant potential is currently being used.

The recently compiled atlas of winds estimates that the gross potential of wind energy in Uzbekistan at 2.2 million toe. The technical potential of wind is about 430,000 toes. It is roughly estimated that about 75% of the country can’t be used to generate power with the help of wind because wind flows are seasonal in this part of Uzbekistan. However, there are two regions in the country, Karakalpakstan and in the Tashkent Region, with high potential for construction of wind power stations. Currently, the lack of meteorological stations with a modern data collection and registration system in the regions with good prospects for the wind power industry precludes more precise estimate of the technical potential in such regions. Small wind power stations are installed in one of the remote districts of Karakalpakstan and in Charvak near Tashkent.

The reserves of biomass resources are also estimated to be considerable, at least

2.65-2.95 toe. Small facilities generating power from biomass are operational in some small poultry and animal husbandry farms of Uzbekistan.

The government of Uzbekistan has developed a small-scale hydroelectric plants construction program in order to increase utilization effectiveness of the hydroelectric energy potential of the rivers and irrigation channels of the country. In July 2005, the Government of Uzbekistan requested ADB assistance to develop small hydropower plants along the existing irrigation canals and reservoirs. The proposed Rural Renewable Energy Development project, worth about $30 million, foresees construction and operation of five small-sized hydropower plants. In addition, the Ministry of Agriculture and Water Resources plans to implement a program of small-size power facilities to introduce about 440 MW of additional capacity and 1.3 billion kW/h of power output. Government control

According to the Energy Charter Secretariat, the government owns the power sector of Uzbekistan. It is a part of the so called “fuel and energy complex” (FEC), to which the coal industry, the district heating systems, and the distribution systems for certain other types of energy products (liquid fuels, etc.) also belong. The head of the FEC is the Deputy Prime Minister of Uzbekistan. Despite recent efforts in restructuring aimed at making Uzbekistan’s power system more market-oriented, the structure remains a vertically integrated, government-owned monopoly.

In February 2001, the Government of Uzbekistan issued a decree on partial privatization, de-monopolization, and deregulation of the power engineering and coal mining industries. The Ministry of Power and Power Supply that controlled electric power generation was transformed into the Uzbekenergo State Joint-stock Company. It is an open-type joint stock company incorporating the JSC Ugol (Coal) as an independent legal entity. Major power stations and electric grids were also transformed into joint-stock companies, and were partially offered to foreign investors.

However, Uzbekenergo still holds the controlling shares of those companies. For instance, the subsidiary enterprise Uzelectroset (Uzbekistan electricity grid) took charge of all high-voltage transmission lines (110-500 kV) used for transporting electricity within Uzbekenergo. The main tasks of Uzbekenergo include power supply and dispatch, development program drafting, promotion of investment, R&D support in the coal and renewable energy sources industries, and the promotion of energy efficiency. Financial status of the industry and tariffs

Since Uzbekenergo State Joint-stock Company is virtual a monopoly in production, transmission and sale of power, the government of Uzbekistan regulates all tariffs for energy. As the Energy Charter Secretariat notes, price and tariff regulatory functions for the FEC are distributed among several state bodies. One such body is the Department of Price Settlement under the Ministry of Finance of the Republic of Uzbekistan, which deals with economic regulation. The Department is, in fact, setting the tariffs for all forms of energy. Another one is UzEnergoNadzor, which is responsible for technical regulation in the electricity sector. The Ministry of Finance has price-setting functions regarding electricity and energy products. These functions are further divided into two subdivisions, one deals with all prices and tariffs for electricity and energy products for industry residential consumers, and the other deals with prices for coal and oil products for retail customers.

Uzbekenergo elaborates the draft electricity tariffs and submits them to the Ministry of Finance for approval. Draft tariffs developed by Uzbekenergo for electricity and heat take into account the annualized forecast costs in the power sector and the profits needed to assure the development of the sector. Depending on changes in the cost of power production, the tariffs can be revised and adjusted. All electricity end-users are differentiated by categories of tariff groups depending on their activities, irrespective of the form of ownership.

The average price for power in Uzbekistan in 2006 stood at $.29/kWh, lower than in many other countries of the CIS. Nevertheless, this represents significant increases compare with the average weighted tariff as of July 2003, which was $.126/kWh.

As the Energy Charter Secretariat notes, one of the greatest challenges that Uzbekistan faces in restructuring the power sector is the problem of cross-subsidies and direct government subsidies. Both subsidies and cross-subsidies lead to negative consequences, such as inefficiency, insolvency, etc. The officially stated purpose of cross-subsidies is to keep the prices of electricity and other energy products low for consumers and businesses that cannot afford to pay the real price or enjoy special supply rights. As a result, the consumers and businesses that do not have such privileges pay a higher price for electricity, which results in higher cost of their products, and often renders them uncompetitive. Eventually, such businesses fail or just stop paying the bills. Uzbekenergo eventually finds out that its cash flow does not cover the cost of fuel and other expenses. In the absence of bankruptcy procedures and enforcement, this leads to a situation where everyone owes everyone else, with the only distinction being that some owe more than the others. In an environment like this, businesses cannot be properly run because managerial decisions cannot be made on economic grounds. Government Policy

No FDI has been reported thus far in the power sector, although the Uzbek government is trying to attract foreign capital for the rehabilitation of the national power industry. The State Property Committee (SPC) of Uzbekistan announced in August 2006 that the tender for the state's shares in Navoi and Tahiatash Power Plants failed. The privatization consultant for the tenders was Russian Finam Investment Company. The tender failed to draw bids, though several foreign investors showed interest in the bids, and even purchased tender documents. The tender on the sale of 39% shares of Navoi Power Plant (TES) and 38.9% shares of Tahiatash Power Plant was announced on November 29, 2005. In January 2006, the SPC extended the tender deadline to March 1, 2006. No information is available on whether the government will make another attempt to sell the objects and reduce the sales price. The established capacity of Navoi Power Plant is 1,250 MWatt. The annual volume of electric energy produced by the plant makes up over 6.4 billion kWt/h. The established capacity of Tahiatash Power Plant is 730 MWatt, and its annual volume of electric energy produced totals some 2.8 billion kWt/h.

There are several reasons why FDI into Uzbekistan’s energy sector has been far below potential up to now. The Energy Charter Secretariat stresses the following:

 Probably the most important deterrent to FDI is the Uzbek government’s ambiguous approach to privatization, which keeps the energy sector under heavy state control. Although the government is offering numerous privatization deals to foreign investors, they have shown little interest.  The government has had a policy of maintaining low energy prices for the population that made foreign investment largely unattractive. However, electricity and gas tariffs have been increased significantly in recent years and are now close to long-run marginal costs.  Non-payment is a serious problem, but the government started to tackle it by launching a metering program. It is now almost completely implemented for the electricity and gas sectors. However, the above-mentioned issue of cross- subsidies and direct government subsidies still deters complete resolution of this problem.  Some observers perceived the legislative framework as vague, cumbersome, and unpredictable. For the time being, there is no independent regulator of the energy sector. Regulation is considered as being strategically important and many decisions are still made at the highest political level.

Growing demand for electric energy and depreciation of the existing power generating facilities in the country has motivated the government to develop a long-term program for reconstruction and development of the sector for 2001-2010. This program shall provide a lifetime extenuation for the existing power generating capacities. The program also includes the introduction of new generating capacities for 1,748 MW, transformer capacities on 2,429 MVA, and installation of 1,355 km of 220-500 kV power transmission lines. Large involvement of international consultants, contractors, and equipment suppliers are needed for the implementation of these programs. Generally, in accordance with Uzbek legislation, the contractors or suppliers are selected through open tender process. However, the government usually prefers a bidder that offers investments, loans, or similar attractive financing sources for the relevant project. A detailed description of the program is as follows:

Plans for the Reconstruction and Development of Energy Generating Capacities

The plans for the Reconstruction and Development of Energy Generating Capacities for 2001-2010 includes modernization of energy facilities, reconstruction and further development of the power transmission networks, and construction of new power generating capacities, including:

- Maintenance and modernization of worn-out Electric Power Station (EPS) equipment;

- Increasing capacity for the existing Heat Power Stations (HPS);

- Decrease in fuel consumption; and

- Introduction of up-to-date technologies.

Implementation of this program would allow the reduction of fuel consumption rates, meet gas saving rate on approximately 540 million cubic meters per year, raise the capacities of functioning power stations by 905 MW, and ensure extenuation of the equipment operation for the next 8-10 years.

Within the framework of this program, the first 800 MW power units at the Talimarjan State

District Power Station of the condensing type was commissioned in 2005. The Program requires introduction of additional Steam-Gas Turbines Units (SGTU) at the Tashkent SDPS, Navoi SDPS, and Mubarek HPS. The Program implementation also would allow annual savings of 300,000 tons of conventional fuel. Total generating capacities to be introduced by year 2010 shall reach 1,748 MW.

Uzbek Ministry of Agriculture and Water Resources shall implement a program of small- size Power Facilities construction to introduce about 440 MW of additional capacities and 1.3 billion kW/h of power output.

Reconstruction and further development of the power transmission networks is also one of the most important directives of the energy sector improvement plans. Its implementation would reduce its dependence on energy systems of neighboring countries, and increase the efficiency, reliability, and flexibility of the electric energy transmission networks.

Plans for restructuring of the fuel resources utilization There are plans to reduce the gas consumption of the power stations and increase the coal based power output, which will include:

- Construction of the second coal supply line and equipment installation at the Novo-Angren SDPS;

- Modernization of the existing coal supply facilities at the Angren SDPS;

- Efficiency increase oriented reconstruction and re-equipment of the power facilities.

The above measures shall improve the fuel balance structure, increase the coal-used portion of the power output from 4.7% to 15%, and decrease natural gas consumption from 85% to 71.1%. Investments of $254 million are expected in the coal industry in a 10-year period. Uzbekistan mined 3.168 million tons of coal in 2006, or up 10.1% year- on-year. Uzbekenergo has already transferred the Angren Thermoelectric Power Station to coal consumption and creation of new stations, and transfer of existing stations from gas to coal consumption is expected.

Upcoming projects

Reconstruction of two power-generating blocks of the Syrdarya State District Power Station (SDPS) has been completed. The feasibility study of the project has been financed by USTDA. Siemens carried out and completed the reconstruction of two 300MW energy blocks of SDPS on account of the EBRD loan. The Program for Reconstruction and Development of Energy Generating capacities requires reconstruction and introduction of additional Steam-Gas Turbines Units (SGTU) at several other heat power plants of the country including:

1. Construction of the steam-gas units at the Tashkent SDPS. The first block of the Tashkent State District Power Station was commissioned in 1963, and the last twelfth in 1971. The capacity of the station is 1,860 MW. The Japan Bank for International Cooperation (JBIC) issued credit for 24.95 billion yens (about $221 million) in 2002 for this project. The project stipulates installation of a 370 MW combined-cycle unit at Tashkent SDPS.

The first tender for construction of this unit was held in 2005, and its results were found unsatisfactory. Mitsui and Marubeni of Japan passed the preliminary stage, but Mitsui failed to submit the necessary documents in time. At a later stage, it was found that application of Marubeni did not meet the requirements of the tender. In mid-2006, Uzbekenergo State Joint-Stock Company re-announced the tender on selection of a general contractor. Re-announcement of the tender will postpone reconstruction for almost a year.

Uzbekenergo calls applicants for the full-turnkey EPC-Contract under this project. The project shall consist of engineering, procurement, manufacturing, transportation, erection, installation, and commissioning, including modification and project management of a complete operable gas turbine combined cycle power plant to be constructed by an EPC Contractor with a single responsibility on the full turnkey basis in the premises of the Tashkent SDPS. The power plant uses natural gas from the gas fields of Uzbekistan. The power plant consists of one gas turbine generator, one unfired heat recovery steam generator, and one steam turbine generator complete with all the associated auxiliary equipment and those will be configured multi-shaft arrangement.

2. Modernization of the Navoi SDPS. The estimated cost of the project is $200 million. It will include installation of a new energy block with combined-cycle units with a capacity of 370 MW. Uzbekenergo is expecting relevant proposals from interested international contractors.

3. Reconstruction of the Mubarek Heat Power Station. It will require introduction of new capacities of 106 MW. The estimated cost of the project is $100 million. Uzbekenergo is open to international bidders.

4. With the purpose of enhancing power supply reliability of the power grid and reducing power losses in transmission, a project to construct a 500 kV high voltage power supply line between Syr Darya TPP and Sogdiana Substation will be implemented in 2005-2007. Islamic Development Bank (IDB) will fund the project; currently, it is in project prospecting/surveying stage. The Board of Executive Directors of the IDB approved a loan as an “installments sale” and “leasing” in the amount of $25.1 million with a 15-year maturity, including a three-year grace period. Preparations are currently underway to go ahead with implementation and a tender will be held to select an adviser for project oversight.

The goal of the project related to the rehabilitation of main power transmission grids is to meet power requirements of the Central Asian Republics with a view to support economic growth. As a special objective, the project will pursue the improvement and enhanced efficiency of the power transmission system and better trade in electricity among such countries, as well as improved efficiency of the main power transmission grids through the rehabilitation of 500 kV substations, control, protection, monitoring systems, and auxiliary equipment.

5. Uzbekistan plans to attract credit of the Asian Development Bank (ADB) in the amount of $30 million for construction of five small hydroelectric power stations in 2007. The Uzbek government and ADB plan to construct three hydroelectric power stations (HPS) in Dargom channel in Samarkand region – Gulba HPS (capacity 5 MW), Shaudarya and Bagishamal stations (6 MW each). Two more stations will be constructed in the Ferghana and Tashkent regions. The Small HPS in the Fergana region will be located at the Karkidon water reservoir (11 MW); the Pioner HPS will be in the Tashkent region (8 MW). Total annual electricity production of these small stations will make up 182 million kW/h. Uzvodenergo said the projects are under development. ADB may allocate the loan as early as in 2007, and the realization of the project is expected to begin in 2007 or 2008. Within the framework of the program on development of small hydroelectric power stations, Uzbekistan plans to construct 15 stations with a total capacity of 440 MW, which will allow annual production of 1.36 billion kW/h. Uzvodenergo is completing construction of the first of the two energy blocks of Tupalang hydroelectric power station, which will have a capacity of 30 MW. In total, the two energy blocks of Tupalang station will produce 63 million kW/h.

Methods of procurement

Major involvement of foreign contractors and suppliers is expected for the maintenance, reconstruction and development of the power generation and transmission facilities. The procurement of the foreign contractors for each project or assignment shall be implemented through open tender process. The rules of the tender are described in the Resolution No. 456 of the Uzbek Government issued in November 2000. However, the bidder with an attractive proposal for financing sources, such as long-term loan arrangements, can apply for exceptional preferences in the tender. The tenders for each project and assignment will be announced in the domestic and international press.

B. Competitive Analysis

I. Domestic Production.

Most of the equipment for the power industry was produced in Russia, other parts of the former Soviet Union, and by Soviet trading partners in Central and Eastern Europe. Only limited specifications of this equipment were produced in Uzbekistan. The Uzelectroaparat Factory in Tashkent produced switchboards and other small devices for power stations. Another plant, Uzbekcable, produced cooper-wire cables for the power- transmission lines.

Currently, the above companies have old technology and no capability to meet the required quality and reliability standards.

II. Third country import.

As noted above, Germany’s Siemens won the tender and completed the reconstruction for two (out of ten) turbines of the Syrdarya Thermal Power Station in 2002. The project on the modernization of these two units increased the plant's capacity by 600 MW. At the present time, the established capacity of the Syrdarya plant is 3000 MW. The project, estimated at $45.44 million, was partially financed by a $27.8 million loan from the European Bank for Reconstruction and Development.

Another German Company, "ABB Kraftwerker Berlin," together with its local partner, won the tender for the repair of steam turbines, pumping equipment, and generators at the Novo-Angren Power Station. III. U.S. Market Position

U.S. companies have not been involved directly in reconstruction and development projects in the power generating industry of Uzbekistan. There are also no records of direct imports from the U.S. in this sector.

C. End-User Analysis

The largest consumer of power equipment and services in Uzbekistan is, directly or indirectly, “Uzbekenergo,” the state owned monopoly producer, electricity grid operator, and seller. Since Uzbekenergo’s legal status is as a state-owned, joint-stock company, it would be right to say that the electric power generation industry of Uzbekistan is a state- controlled sector.

According to World Bank, the Central Asian Republics (CARs) will need to get an intra- regional agreement on electricity transit in place for having access to export markets including Pakistan, Iran and some other countries. Major new power generation projects in Central Asia will only be feasible if there is assured access to export markets outside the region. Western investors currently view the new generation projects as high-risk ventures. Pakistan and Iran have the added attraction of experiencing their peak demand in the summer when the largest potential electricity surpluses exist in Central Asia. Once agreements are in place they will then have to be carefully managed to ensure the benefits from intra-regional trade are optimized. Access to these markets like Afghanistan, Pakistan, Iran, China, and Russia will particularly benefit the Kyrgyz Republic and Tajikistan since they are the countries with the potential to export significant quantities of electricity. Uzbekistan (and to some extent Kazakhstan), have the potential to export thermal power in the winter and also benefit in their role as prospective transit countries and as potential power traders.

D. MARKET ACCESS

I. Business environment

The Government of Uzbekistan generally welcomes joint-venture initiatives. Since the Government is more interested in bringing in new technology and development of this industry, it welcomes any interested foreign companies by offering tariff exemptions for the import of equipment.

In some cases, local joint venture partners depend on their foreign partners to shoulder the majority of the capital investment, because they often have little working capital and face high interest rates from local banks. However, large investment projects approved and guaranteed by the government, create an opportunity for the export of machinery, equipment, parts, materials, and consumables, as well as a technical assistance on import duties free base.

The rapid pace of change and the high degree of uncertainty in the legal and regulatory environment may present significant problems for U.S. businesses in Uzbekistan. Legislation often contains exclusions and exceptions and the authorities are frequently able to issue special regulations or grant permissions or, vice-versa, ban on a case-by-case basis. Therefore, U.S. firms operating in Uzbekistan are advised to use a capable and experienced local partner or attorney.

Some concerns of foreign firms entering the country should be focused on the underdeveloped level of banking, telecommunications, and transportation networks.

II. Financing

All projects for reconstruction and development in the energy sector are included in the Investment Programs of Uzbekistan. It was determined that these projects would be financed from Uzbekenergo's internal funds, foreign and commercial loans, investments, and other sources. The Government of Uzbekistan decrees that all receipts from privatization in the sector shall be reinvested into the renovation projects.

In most cases the potential contractor offers the government financing sources for a specific project, such as long-term loan with attractive terms and conditions. Exim banks, commercial banks, IFIs, or other export promoting financial institutions could provide such loans, covered by the Government L/G.