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Part I, Renewable Energy Facility M&A in Kazakhstan:

Due Diligence Issues for Consideration

Kazakhstan's Progress in Low-Carbon Development Strategies and Renewable Energy Sources

As of September 2022, 52 countries had approved their low-carbon development strategies. European Union and the United States of America set carbon-neutral targets by 2050 and China by 2060.

In December 2020, at the Climate Change Ambition Summit (organised by the UN, the UK, and France in partnership with Chile and Italy), President Tokayev K.K. announced a new goal for Kazakhstan to achieve carbon neutrality by 2060, confirming Kazakhstan's commitments under the Paris Agreement on Climate Change (Paris, 12 December 2015).

The Strategy for achieving carbon neutrality of the Republic of Kazakhstan until 2060 was developed taking into account global climate trends and in compliance with relevant international obligations. According to the Strategy. The development of RES will act as a key condition for successful decarbonisation. Therefore, wind, given its quality and availability in the country, will be a key resource for development in the earlier stages, while solar energy will be a key technology at a later stage when the cost of investment in solar power plants will decrease significantly. In the long term, the use of RES will be accompanied by electricity storage systems, which will allow the regulation of the electricity supply and better integration of RES in the energy system[1].

In accordance with the data provided by the Financial Settlement Center of Renewable Energy LLP (FSC)[2], Kazakhstan power generation from Renewable Energy (RE) facilities in Kazakhstan increased by 21% to 3.9 billion kWh in the first nine months of 2022. The share of electricity generated by RE facilities was 4.6% of total generation in the Republic of Kazakhstan, compared to 3.9% a year earlier[3]. While as of 2021, 134 RE facilities were operating at 2010 MW[4], 12 RE projects with a total installed capacity of 385 MW were completed in 2022[5].

Based on the statistics above, it is fair to say that the RE market continues to make remarkable progress and represents a fast-growing industry in Kazakhstan. This is due to the well-established legal and institutional framework that complies with international standards as well as international best practice. RE facilities are regulated by Kazakhstan Law "On supporting the use of renewable energy sources" dated July 4, 2009 (hereinafter the “RE law”), as well as the Order of the Minister of Energy of the Republic of Kazakhstan dated March 2, 2015 No. 164 "On approval of the Rules for the centralised purchase and sale by the Financial Settlement Center of Electrical Energy produced by facilities for the use of renewable energy sources" (hereinafter the "Rules").

The RE projects are appealing to investors due to the following:

  • A long-term (20-year) Power Purchase Agreement (PPA) is concluded at a fixed price[6];
  • in 2018 Kazakhstan moved from a system of supporting feed-in-tariffs to a mechanism of auctions for RE projects that provides for fair competition, transparency, and investment climate improvement (auctions are conducted annually, and information on capacity and zones is published on the websites of the Ministry of Energy[7] and KOREM[8]);
  • guaranteed purchase of all electricity produced and supplied to the grid (creation of a reserve fund at the FSC for these purposes);
  • preferential fixed tariffs for electricity generated by RE facilities with annual indexation;
  • exemption from payment for the transmission of electric energy.
In addition, investment preferences are provided depending on the type of investment projects. RE facilities fall under the category of investment and priority investment projects implementation. Investment preferences include tax preferences, state in-kind grants and exemption from customs duties.

This article sets out some of the key energy sector-specific issues for consideration by a buyer in a legal, due diligence process for a potential RE project M&A deal in the Republic of Kazakhstan.

What Qualifies As a RE Projects?

Pursuant to paragraphs 1-4 of Article 1 of the RE law, renewable energy sources are energy sources that are continuously renewable through naturally occurring processes and are defined in the law as:

  • Solar Power
  • Wind Energy

  • Hydrodynamic Energy of Water
  • Geothermal Energy:

    Heat of Ground, Groundwater, Rivers, Water Bodies.
  • Anthropogenic sources of primary energy resources include consumption waste, biomass, biogas and other fuel from waste used to produce electrical and/or thermal energy.

At What Stages Can a RE Projects Be Acquired?

Investing at each stage will attract a different type of investor due to its different emphasis, consideration and risks. In order to acquire a RE project, there are three distinct stages.

Generally, in Kazakhstan, when a company wins a PPA auction, it sells a RE project. This is usually the first stage at which a buyer acquires a RE project. The RE auction mechanism has a special regulation[9].


According to the RE law, auctions are organised and conducted by the auction organiser (the Kazakhstan Electricity and Power Market Operator JSC) using an electronic platform[10]. The purpose of auctions is to determine the most efficient auction price for electricity from renewable energy sources, taking into account the location plan for renewable energy facilities.


After the auction, a winner concludes a PPA. The winner will usually sell the RE project at this stage. In other words, the project is sold from scratch but with a concluded PPA.

At the second stage, it is common for a RE project to have:

  • PPA
  • Design documentation
  • Architectural planning specifications
  • Technical specifications for connection to the sources of engineering and utility provision
  • Some Consents and Permits.

  • As a rule, construction can already be started at this stage. The RE project will require significant capital investment to complete construction.


    At the third stage a RE facility has been constructed and is generating electricity and revenue. Such a RE project is sold at full price to cover all costs to the seller and make a profit. Obviously, this project will be the most expensive for a potential buyer.

Key Contractual Components of the Legal Due Diligence of a RE Facility

The key contractual components of the Legal Due Diligence of a target company to be acquired are:

  • Corporate Structure

  • Corporate Law, Corporate Finance and Corporate Governance

  • Competition and Antitrust
  • Land Plots

  • Grid Connections Arrangements

  • PPA
  • Consents and Permits

  • Financing Documents

  • Construction Contracts
[1] Presidential Decree “On the approval of the Strategy for Achieving Carbon Neutrality of the Republic of Kazakhstan until 2060” No. 121 of 2 February 2023.
[2] FSC is a legal entity established by the system operator and determined by the authorised body, which carries out, in the manner prescribed by the RE law, the centralised purchase and sale of electricity produced by renewable energy facilities, energy waste disposal facilities and flood electricity supplied to the electric networks of the unified electric power system of the Republic of Kazakhstan.
[3] Renewable energy generation increased by 21% in one year at a time / Financial Settlement Center for the Support of Renewable Energy Sources LLP. URL: https://rfc.kz/news/detail/vyrabotka-elektroenergii-vie-vyrosla-srazu-na-21-za-god-3 (date of access: 16.01.2023).
[4] Development of renewable energy sources / Ministry of Energy of the Republic of Kazakhstan. URL: https://www.gov.kz/memleket/entities/energo/activities/4910?lang=en (date of access: 16.01.2023).
[5] The outcome of 2022 in Kazakhstan: the real sector of the economy / Prime Minister of the Republic of Kazakhstan. URL: https://primeminister.kz/ru/news/reviews/itogi-2022-goda-v-kazahstane-realnyy-sektor-ekonomiki-28112047 (date of access: 16.01.2023).
[6] Order No. 33 of the Minister of Energy of the Republic of Kazakhstan dated 30 January 2018 established the marginal auction prices. For example, for wind power plants it is 21.53 tenge per kWh, for photovoltaic solar energy converters - 16.96 tenge per kWh, for hydro power plants - 15.2 tenge per kWh, for biogas plants - 32.15 tenge per kWh.
[7] Ministry of Energy of the Republic of Kazakhstan. URL: https://www.gov.kz/memleket/entities/energo?lang=en (date of access: 17.01.2023).
[8] JSC “Kazakhstan Operator of Electricity and Power Market Operator”. URL: https://www.korem.kz/eng/ (date of access: 17.01.2023).
[9] The Order of the Minister of Energy of the Republic of Kazakhstan dated December 21, 2017 No. 466 “On Approval of the Rules for Organisation and Conduct of Auction Bidding, Including Qualification Requirements for Auction Bidders, Content and Procedure of Bid Submission, Types of Financial Support for Auction Bids and Terms of Payment and Return, Procedure of Summing Up and Determination of Winners”.
[10] KOREM’s electronic trading platform: https://vie-trade.korem.kz/.

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