A short note from the lawyer on the topic: How the contractor for the construction of a nuclear power plant in Kazakhstan will be selected?
Kazakhstan has finally decided to build a nuclear power plant (NPP), which makes sense given the country's vast uranium reserves and growing energy deficit. The government of the Republic of Kazakhstan (“RK”) is trying to act as transparently[1] as possible and it is even going to hold a national referendum on 6 October 2024 on whether it is worth building a nuclear power plant in Kazakhstan. In this short note, I do not aim to answer this question, as it is strictly better to ask such questions to experts in the relevant field rather than the common people. Rather, as a lawyer, I am intrigued by the question - how exactly are the procedures for selecting a contractor for NPP construction carried out? Considering that only the estimated[2] cost of the NPP is 15 billion dollars, and any selected investor will receive compensation for all its costs and profits directly or indirectly from the state budget, at some point there will be a question that the applicable selection procedures should ensure a transparent choice of the most favorable and safe for Kazakhstan proposal from all possible.
Based on public information[3], there is already a “short list” of four potential contractors for NPP construction:
1) China National Nuclear Corporation (CNNC);
2) Korean company Korea Hydro & Nuclear Power (KHNP);
3) Russia's Rosatom State Corporation;
4) French company Électricité de France (EDF).
At the same time, it is not clear who exactly chose these four companies in the “short-list” and based on what legal framework this person has such competence. Thus, according to the Law of the Republic of Kazakhstan dated January 12, 2016 № 442-V ЗРК “On the Use of Atomic Energy”, the Government of the RK has the right to decide on the area of NPP construction and the decision to build a nuclear power plant (that is, the relevant ministry must decide that it is conceptually necessary to build a nuclear power plant) and such a decision was made. However, it can be argued that it is not within the competence of the RK Government to decide at its discretion, without an open tender and without applying the norms of the Law of the Republic of Kazakhstan dated December 4, 2015 No. 434-V “On Public Procurement” or the Law of the Republic of Kazakhstan dated October 31, 2015 No. 379-V “On Public-Private Partnership” (the “PPP Law”), which companies will be in the “short-list” and to determine who will implement the project at the expense of the state budget. For the same reason, the Ministry of Energy of the Republic of Kazakhstan does not have the same right. Moreover, there is no such right of Kazakhstan Atomic Power Plants LLP (KNPP LLP)[4]. All we know about the contractor selection procedure for NPP construction in Kazakhstan is the assurance of the RK Government that “The selection of the contractor for NPP construction in Kazakhstan will be based on economic feasibility, technological reliability, environmental safety and compliance with international standards”[5]. It sounds nice, but it does not reassure, because immediately there are unpleasant associations with such projects as the Balkhash TPP project[6], which died in disuse because in due time someone in the Government of the RK decided not to bother with holding an open tender when selecting an investor for the project. The Balkhash TPP project is a vivid example of the established in Kazakhstan vicious practice of implementing large infrastructure projects not within the framework of transparent rules established for all, i.e. within the framework of the same PPP Law, but based on a special legal framework created specifically for each particular investor through international treaties. At the same time, the provisions of these international treaties, if ratified, prevail over the national legislation of the Republic of Kazakhstan, which allows some foreign companies, which the Government of the Republic of Kazakhstan for some reason has chosen as investors, to receive preferences and benefits in Kazakhstan that are not available to other investors, without any competition. Importantly, it is not clear who in the Government of the Republic of Kazakhstan and why decided to provide these or those preferences in each case. Such a non-transparent scheme has recently been put on stream[7] by the Ministry of Energy of the Republic of Kazakhstan for the implementation of large-scale renewable energy projects, even though there are perfect working rules and procedures established by the Law of the Republic of Kazakhstan dated July 4, 2009 № 165-IV “On Supporting the Use of Renewable Energy Sources” and the PPP Law.
What is interesting is that for some reason the RK Government at some point[8] decided to implement the NPP project as a simple procurement of works and services for construction, but not operation of the plant[9]. At the same Russian Rosatom stated[10] that it is ready for any format of project implementation that best meets the interests of the Kazakhstani side. That is, it would be possible to implement the NPP project in Kazakhstan within the framework of the PPP Law under the build-operate-transfer (BOT) scheme, when the investor builds the NPP at its own expense, then recoups its costs and receives profit by selling the generated electricity during the operation of the power plant for 8-15 years. Rosatom is using such a scheme for the construction of the Akkuyu[11] NPP project in Turkey, and it will allow Kazakhstan to transfer some of the risks to the investor and pay in installments during the 8-15-year term of the PPP contract.
If the RK Government is, however, going to implement the NPP project not within the framework of general procedures of the PPP Law or the Law on Public Procurement, but based on a special international treaty as discussed above, then we can only hope that at the referendum the people of RK will vote against the construction of NPP.
As they say, let's wait and see.
With respect,
Shaimerden Chikanayev
Advocate. Partner of GRATA law firm. PhD student at the Faculty of Law of the Chinese University of Hong Kong.
*Shaimerden Chikanayev is currently on a study sabbatical until 2026, not an employee of GRATA.
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[1] A special page on the Internet, “Frequently Asked Questions about NPPs”, has even been created. Available at: https://www.gov.kz/situations/723/intro?lang=ru
[2] Watch the news: https://kz.kursiv.media/2024-08-27/zhnb-aeskzchinaprice/
[3] See official information at: https://www.gov.kz/memleket/entities/atyrau/documents/details/692076?lang=ru
[4] KNPP LLP is a 100% subsidiary of National Welfare Fund Samruk-Kazyna JSC. Therefore, in accordance with Article 19 of the Law of the Republic of Kazakhstan dated February 1, 2012 № 550-IV “On Sovereign Wealth Fund”, procurement of goods, works and services of KNPP LLP is carried out in accordance with the legislation of the Republic of Kazakhstan on procurement of certain subjects of quasi-governmental sector.
[5] See the answer to the question - “Won't Kazakhstan be dependent on the NPP builders?”. Available at: https://www.gov.kz/situations/723/1481?lang=ru
[6] See news at: https://forbes.kz/articles/samsung_ct_corporation_otkazalas_ot_proekta_stroitelstva_tes_v_rk
[7] See Order of the Minister of Energy of the Republic of Kazakhstan dated February 20, 2024, No. 71 “On Approval of the Action Plan for the Development of the Electric Power Industry until 2035”.
[8] Initially, the RK Government apparently considered the PPP mechanism for the purposes of project implementation. See the news: https://kz.kursiv.media/2023-10-16/zhnb-ppnuranium/
[9] See the answer to the question - “Will Kazakhstan not be dependent on the parties - builders of NPP?”. Available at: https://www.gov.kz/situations/723/1481?lang=ru
[10] See the news at: https://www.kommersant.ru/doc/7168084
[11] See: https://akkuyu.com/upload/iga-ru.pdf
