The Asian Development Bank (ADB) has approved a $200 million policy-based loan to strengthen Uzbekistan’s power sector by improving its financial sustainability and ensuring adequate investment in critical infrastructure.

The Power Sector Reform Program will provide budget support and targeted policy actions aimed at restructuring the power sector to enable competition and create a conducive environment for private investment. The program will also streamline sector oversight to ensure fair and transparent competition and consumer protection.

“Reliable and affordable electricity supply is essential for driving economic growth and socioeconomic development,” said ADB Energy Specialist Seung Duck Kim. “As a first of its kind in Uzbekistan’s energy sector, this policy-based loan will be critical to support complex reforms and deepen private investment. By encouraging private sector participation, the program will support the government’s ultimate objectives of creating jobs and improving the quality of life. Clean energy transition will be at the center of reforms to accelerate the development of modern and reliable energy infrastructure that will put greenhouse gas emissions into structural decline.”

While Uzbekistan is fully electrified, the quality of service is poor and unreliable due to transmission bottlenecks and aging power generation and distribution assets. The power sector has also struggled to fund new investments because of its weak financial performance.

The government has initiated structural and policy measures to improve oversight in the power sector and financial sustainability. It has also moved towards reducing greenhouse gas emissions in the electricity supply chain and improving energy efficiency by upgrading regulatory standards and adopting a district heating efficiency improvement program.

ADB’s program supports these reforms, with the goal of increasing private sector participation in power generation to at least 15% in capacity terms and improving revenue collection to 99% by 2023. The measures will help reboot the economy and bring new employment opportunities as the country recovers from the coronavirus disease (COVID-19) pandemic.

The program was jointly developed with the Agence Française de Developpement, which will provide cofinancing of a €150 million loan (around $169 million). The program also benefits from close development partner coordination and harmonized technical assistance support from ADB, the European Bank for Reconstruction and Development, and the World Bank.

ADB sector reform support for Uzbekistan has focused on improving the internal management system and institutional strengthening of Uzbekenergo, the state-owned power utility. Since 2018, ADB has expanded its support to the policy reform agenda, including a new tariff methodology, a sector master plan, transaction advisory support for public–private partnership projects, and policy advisory on the design and structure of the reformed power market.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.