OREANDA-NEWS. BMI View: Gas-fired power will maintain its dominance in the Uzbek power mix over the next decade, as robust domestic gas production coupled with a lack of export opportunities will weaken the rationale for diversification. The country's economic downturn, due to weak commodity prices and external demand, will further erode the government's ability to support power sector expansion - meaning modernisation of ageing gas and hydropower assets will become the pillar of Uzbek energy strategy.

Latest Updates And Structural Trends

- The development of Kyrgyzstani and Tajikistani hydropower will remain a contentious issue in Central Asia, as Uzbekistan strongly opposes developments due to worries that the downstream of the Amu Darya and Syr Darya rivers will suffer negative consequences.

- Uzbekistan's main commodity exports gas, gold, cotton and copper have seen a sizeable plunge in prices throughout 2015, albeit the drop has not been as pronounced as oil. Together these commodities account for nearly two-thirds of Uzbekistan export basket. We expect commodity prices to remain subdued in and remain significantly below the levels seen in previous years, despite a rebound in prices over the next few years. This will weigh on the government's ability to fund an expansion in power sector capacity.

- Few gas export commitments beyond the Chinese market mean Uzbekistan has few outlets for their gas production besides domestic consumption. This is largely a result of Russian demand for Central Asian gas having contracted significantly.

- The Uzbekistani government reportedly adopted a hydropower engineering development programme for 2016-2020, set to have a preliminary cost of USD890mn in November 2015. While the programme aims to rehabilitate and develop new capacity over the next five years, we will await concrete progress before revising our hydropower forecasts.

- Construction has started on a large-scale solar photovoltaic (PV) plant in the Samarqand region of Uzbekistan. The plant is the first of three 100MW plants that will be developed as part of a USD700mn solar project. The three projects are scheduled to come online by 2020, but we will wait to include the power plants in our forecasts until we see the project progress further.

- Uzbekenergo signed a memorandum of understanding with Mitsubishi Hitachi Power Systems to establish a joint venture in February 2015 that would be centred on rehabilitating the existing gas-fired power plant fleet in the country.