Renewable Energy Projects In Kazakhstan: Project Structuring, M&A And Key Legal Issues For Investors

What Creates Value in a Kazakhstan Renewable Energy Project?

Kazakhstan’s renewable energy sector has become an important part of the country’s energy transition and decarbonisation agenda. The market continues to attract strategic investors, project developers and lenders interested in wind, solar, hydropower and hybrid projects, including projects incorporating energy storage solutions.

For an investor, however, the value of a renewable energy project is determined by much more than the physical assets being developed or operated. The principal value drivers are the legal and regulatory rights that allow the project company to develop the facility, connect it to the electricity grid and generate revenue. These may include auction rights, power purchase agreement (PPA) rights, land rights, grid connection capacity, permits, construction approvals and financing arrangements.

This is particularly important in an M&A transaction. A buyer acquiring a project company is not simply buying shares in a corporate vehicle; it is acquiring a package of contractual, regulatory, land, grid and financing rights that must remain valid and usable after closing. The central legal question is therefore whether the rights underpinning the project’s valuation are valid, enforceable, transferable and capable of supporting the buyer’s investment case.

This article considers the main project structures available for renewable energy projects in Kazakhstan, the stages at which such projects may be acquired, and the key legal due diligence and transaction issues that investors should consider.

Kazakhstan’s Renewable Energy Framework

Renewable Energy Sources and Project Types
Under Kazakhstan law, renewable energy sources are energy sources that are continuously renewable through naturally occurring processes. Article 1 of the Law “On Support for the Use of Renewable Energy Sources” dated 4 July 2009 includes solar energy, wind energy, hydrodynamic energy of water, geothermal energy, biomass, biogas and certain forms of energy produced from consumption waste or other renewable-origin resources.

Although solar, wind and hydropower projects generally fall within the same renewable energy support framework, their practical legal and regulatory profiles differ. Solar projects are typically more dependent on land rights, irradiation assumptions, equipment supply and grid connection. Wind projects require additional attention to wind measurement, turbine siting, transportation logistics, noise, biodiversity and bird migration. Hydropower projects also involve water-use rights, hydrological conditions, environmental impacts on water bodies and, where applicable, the safety of hydraulic structures.

The legal classification and technical characteristics of a project may affect the applicable support mechanism, tariff or auction-price regime, grid connection arrangements, project documentation, reporting obligations and contractual structure. Accordingly, an investor should verify the specific project category, installed capacity, location, auction documentation, PPA terms, grid connection arrangements and any special obligations applicable to storage or other technical features.

Principal Project Structures
Renewable energy projects in Kazakhstan may be developed through different legal structures. The three principal routes are (i) the auction mechanism established under the renewable energy support framework;

and (ii) special arrangements based on intergovernmental agreements (IGAs) for strategically important projects.

Auction-Based Projects
The auction mechanism is the standard route for renewable energy projects in Kazakhstan. Auctions are organised through an electronic platform to determine the auction price for electricity generated by renewable energy facilities. The price is determined through competitive bidding and cannot exceed the applicable maximum auction price established under the regulatory framework.

Following a successful auction, the winning bidder becomes entitled to enter into a PPA with the Financial Settlement Centre (FSC), acting as the central purchaser of electricity generated by renewable energy facilities.

From an M&A perspective, the principal value drivers of an auction-based project include:

• the right to enter into and perform a long-term PPA;
• the auction price established through the auction process;
• statutory indexation mechanisms;
• inclusion of the project in the renewable energy facilities location plan; and
• secured project development rights.

A buyer should therefore verify not only that the target company won the auction, but also that the resulting rights remain valid, that all post-auction obligations have been satisfied and that no event has occurred that could result in the loss or termination of those rights.

The Direct Agreement / Bilateral PPA Projects
The direct agreement / bilateral PPA option can be described as an alternative to the centralized renewable-energy support mechanism.

Here the renewable energy producer enters into a power purchase agreement directly with a consumer, with the electricity price and other commercial terms agreed between the parties, subject to Kazakhstan's electricity-market rules.

From an M&A perspective, the direct agreement model can be attractive where a project has a strong corporate offtaker willing to enter into a long-term bilateral PPA. However, unlike the centralized auction model, the project's revenue profile depends more directly on the creditworthiness of the particular offtaker and the negotiated contractual protections.

Intergovernmental Agreements
For certain large-scale or strategically significant projects, Kazakhstan may implement renewable energy projects through an intergovernmental agreement. An IGA is not a general alternative to the auction mechanism. Rather, it may be used where a project requires state-level coordination because of its size, strategic importance, investment volume, technology requirements or infrastructure complexity.

An IGA may facilitate government cooperation regarding:

• land allocation;
• supporting infrastructure;
• grid connection arrangements;
• administrative coordination;
• investment protection;
• stabilisation commitments; and
• cooperation between Kazakhstan and the investor’s home state.

An IGA does not, however, replace the project-level agreements required to develop and operate the facility. Depending on the project, the investor may still need PPAs, EPC contracts, financing documents, land agreements, grid connection agreements and operation and maintenance arrangements.

M&A Opportunity - Project Lifecycle and Acquisition Stages
A renewable energy project may be acquired at different stages of development. The later the project is in its lifecycle, the more development risk is generally removed, but the acquisition price may also increase. The appropriate due diligence therefore depends heavily on the project’s stage.

Post-Auction / Pre-Construction
The first acquisition opportunity may arise after the project company has won an auction and entered into, or become entitled to enter into, a PPA. At this stage, the project is often an early-stage development asset. Its principal value may lie in the right to develop the project at the auction price and under the relevant support regime.
The buyer should verify, in particular:

• whether the project company was duly recognised as the auction winner;
• whether the PPA was executed within the required timeframe;
• whether required financial security was provided;
• whether the project was included in the relevant renewable energy facilities location plan; and
• whether any delay or non-compliance could result in termination or loss of project rights.

This stage usually carries the highest development risk because land, design, grid connection, permits and construction arrangements may still be incomplete.

Construction Stage
Once the project enters development or construction, the target company may have accumulated additional project rights and documents, including a signed PPA, land allocation documents, design documentation, technical specifications for grid connection, construction permits or notifications, EPC contracts, financing documents and regulatory consents.

The key M&A question at this stage is whether the project remains capable of reaching commercial operation within the applicable contractual and regulatory deadlines. Failure to achieve construction milestones or commissioning deadlines may reduce the effective revenue period under the PPA or create termination risk.

The buyer should review construction contracts, permits, grid connection documents and correspondence with state bodies to identify delays, disputes, cost overruns, variations and unfulfilled obligations.

Operating Stage
An operating project presents a different risk profile. Construction risk has largely been removed, but the buyer is acquiring an operating business with an established revenue history and an existing contractual and financing package.

Due diligence should cover:

• commissioning documentation and actual generation performance;
• metering and settlement history;
• payments by the offtaker;
• compliance with PPA obligations;
• O&M arrangements;
• environmental and technical compliance;
• contractor and supplier warranties;
• existing debt and security interests; and
• •disputes with grid companies, contractors, lenders or authorities.

The Core Value Drivers: Land, Grid and PPA
For most renewable energy M&A transactions, three areas deserve particular attention because they determine whether the project can physically operate and monetise its electricity: the project site, grid connection and PPA.

Land Rights
The existence of a land plot is not sufficient. The buyer must determine whether the project company controls all land and property rights required for construction, operation, grid connection and the full intended project life.

The review should cover:

• the legal basis for land allocation or lease;
• term and validity of the land right;
• cadastral boundaries and designated purpose;
• permitted use and land category;
• encumbrances and servitudes;
• access roads and transmission line corridors; and
• risks of withdrawal, termination or other loss of the land right.

Land documentation should also be tested against the PPA, project design and grid connection arrangements to ensure that the project company controls a coherent project site rather than a collection of incomplete or inconsistent rights.

Grid Connection
Grid connection is a fundamental project value driver. Under the renewable energy support framework, renewable energy facilities are entitled to access the electricity grid, with the relevant power transmission organisation responsible for providing access through a connection point in accordance with the applicable technical specifications.

The grid connection process typically involves preparation and approval of the Power Delivery Scheme of the Power Plant (Схема выдачи мощности электростанции), obtaining technical specifications and entering into the relevant grid connection arrangements.

The Power Delivery Scheme is prepared by a specialised design organisation and forms part of the pre-design documentation for construction or modification of electrical installations. It must be agreed with the relevant energy transmission and/or energy-producing organisation and with the system operator, Kazakhstan Electricity Grid Operating Company JSC (KEGOC), where required under the applicable rules.

Following approval of the Power Delivery Scheme, the developer applies for technical specifications. These establish the technical requirements for connection, including the connection point and other parameters necessary for integration into the electricity network.

From an M&A perspective, the buyer should verify the power delivery scheme, technical specifications, connection point, available capacity, connection deadlines, allocation of connection costs, metering requirements, dispatch arrangements and curtailment risks. Technical specifications should also be checked for validity through the relevant design and construction period, since expiry may create material delay, redesign or re-approval risk.

PPA and Auction Compliance
The PPA is usually the central project document in a renewable energy transaction. It should nevertheless be treated as a conditional value instrument rather than as a guaranteed revenue stream. Its economic value depends on continued compliance with auction, construction, commissioning, reporting and financial-security requirements.

The buyer should review:

• auction documentation and the auction result;
• the project’s inclusion in the renewable energy facilities location plan;
• PPA execution date and term;
• applicable auction price or fixed tariff, where relevant;
• indexation mechanism;
• construction and commissioning deadlines;
• electricity supply schedules;
• force majeure provisions;
• termination rights and delay liability;
• transfer restrictions and change-of-control provisions; and
• financial security and any claims made or capable of being made under that security.

For auction-based projects, the developer must comply with applicable construction and commissioning milestones. The PPA framework provides specific deadlines depending on the technology. Failure to comply may result in significant commercial consequences, including termination rights, claims under performance security and a reduction of the economically effective period during which the project benefits from the renewable energy support mechanism.

Auction prices are subject to indexation under the Rules on Indexation of Fixed Tariffs and Auction Prices approved by Government Resolution No. 1063 dated 17 December 2024. The current mechanism includes one-time indexation during the construction period and annual indexation thereafter.

Financial security is also a key diligence item. Security for participation in renewable energy auctions is provided in favour of the FSC and may take the form of a bank guarantee or standby letter of credit. The buyer should verify that the relevant security was properly provided, remains valid and will not create an unexpected claim or replacement requirement as a result of the transaction.

Legal Due Diligence: Buyer’s Position
Renewable energy projects are highly regulated and depend on a chain of interrelated legal rights. M&A due diligence should therefore go beyond corporate records and material contracts. The buyer must establish whether the legal framework supporting the project’s valuation is valid, enforceable and capable of surviving the transaction.

The principal areas of review are:

• corporate structure and ownership;
• change-of-control restrictions;
• auction compliance and PPA validity;
• land rights;
• grid connection arrangements;
• construction and permitting;
• environmental compliance;
• financing arrangements;
• EPC and O&M contracts;
• tax matters;
• metering and settlement arrangements;
• disputes and claims; and
• transaction-specific regulatory approvals.

The overarching diligence question is simple: does the project company own and control all rights necessary to continue development or operation of the renewable energy facility after the buyer acquires control?

Corporate Structure, Change of Control and Regulatory Approvals

Corporate Structure and Ownership

Renewable energy project companies in Kazakhstan are commonly incorporated as limited liability partnerships. Corporate diligence should cover the target’s legal status, charter documents, participants, charter capital, beneficial ownership, management bodies, corporate approvals, tax status and historical transfers of participatory interests.

The buyer should verify that the seller has good title to the participatory interest, that the interest is not pledged or otherwise encumbered, that required participant approvals have been obtained and that no restrictions apply to indirect changes of control. Shareholder loans and related-party debt should also be identified.

Change-of-Control Risk
A share sale should not automatically be assumed to be neutral for regulatory or contractual purposes. Depending on the project, the transaction may require consent or notification to the FSC, the Ministry of Energy, the grid company, lenders, other participants or state authorities.
Where consent is required, the relevant approval should generally be addressed as a condition precedent to closing. The SPA should also allocate the risk of delayed or unavailable consent and address any required amendments or replacement of project securities.

Antimonopoly and Strategic Object Issues
A renewable energy M&A transaction may require prior consent or notification to the Agency for Protection and Development of Competition if it qualifies as an economic concentration and applicable statutory thresholds are met. This analysis may also be relevant to offshore transactions affecting a Kazakhstan market participant or competition in Kazakhstan.

The buyer should separately assess whether the project or related infrastructure is classified as a strategic object. A renewable energy facility is not automatically a strategic object merely because it is an energy asset. Associated substations, transmission lines and other infrastructure may, however, require a strategic-object analysis. If the relevant rules apply, government approval and the state’s priority right may need to be considered.

Construction, Environmental and Operational Risks

Construction and EPC
For projects under construction, the buyer should review EPC, construction, design, procurement, equipment supply, technical supervision and author supervision contracts. The review should address contractor licences, construction permits, approved design documentation, delays, cost overruns, variation orders, liquidated damages, performance bonds, equipment warranties, customs compliance and commissioning documentation.

Construction risk should be tested against the PPA timetable. A project may remain technically capable of completion while nevertheless losing economic value if commissioning is delayed beyond the period contemplated by the PPA or support mechanism.

Environmental Compliance
Renewable energy projects may create material land-use, water, biodiversity, waste, noise and construction impacts. Environmental due diligence should therefore be proportionate to the project technology and location.

Wind projects may require particular attention to bird migration, biodiversity and noise. Hydropower projects require detailed review of water-use rights, hydrological conditions and environmental obligations. For all projects, the buyer should identify unresolved environmental approvals, monitoring obligations, violations and potential claims.

Operating Compliance
For operating projects, diligence should include metering devices, settlement statements, payment history, dispatch and balancing issues, O&M arrangements, technical compliance, environmental monitoring and disputes affecting generation or revenue.

Financing and Tax

Financing
In a share acquisition, the buyer generally inherits the target company’s existing financing arrangements. The financing package should therefore be reviewed in detail.

• loans and shareholder debt;
• security over participatory interests or project assets;
• pledges of PPA receivables;
• direct agreements;
• change-of-control restrictions;
• cash waterfall arrangements;
• lender consent requirements; and
• events of default.

The buyer should determine whether closing itself triggers a consent requirement, mandatory prepayment, default or other adverse consequence under the financing documents.

Tax
Tax due diligence should cover outstanding tax liabilities, investment preferences, customs exemptions, VAT, related-party financing, withholding tax, capital gains tax, tax losses and ongoing tax audits or disputes.

Turning Due Diligence Findings into Transaction Protection
The purpose of legal due diligence is not merely to identify risks. The findings should be translated into the transaction structure and the SPA so that material risks are either eliminated before closing, allocated to the appropriate party or reflected in the purchase price.

Depending on the issue, the buyer may use:

• conditions precedent for regulatory, lender and corporate approvals;
• specific conditions relating to auction compliance, PPA validity, land rights and permits;
• seller warranties covering project status and compliance;
• specific indemnities for identified regulatory, environmental, tax or contractual risks;
• price adjustments or escrow arrangements;
• milestone-based payments for early-stage projects; and
• post-closing or pre-closing covenants requiring the seller to preserve the project and its key rights.

For early-stage projects, staged consideration may be particularly appropriate. Payments can be linked to milestones such as confirmation of land rights, grid connection, commencement of construction, commissioning and the first settlement payment.

Practical M&A Checklist for Investors
Before acquiring a renewable energy project in Kazakhstan, the buyer should be able to answer the following questions:

• Does the target validly control the land and other property rights required for the full project lifecycle?
• Is the auction award valid and have all post-auction obligations been satisfied?
• Is the PPA valid, in force and capable of continuing after closing?
• Has the project been properly included in the applicable renewable energy facilities location plan?
• Are the applicable auction price and indexation mechanisms correctly reflected in the project’s financial model?
• Does the project have a valid and sufficient grid connection position, including technical specifications and the relevant connection arrangements?
• Can the project meet all construction and commissioning milestones?
• Are all material permits and environmental approvals in place and compliant?
• Will the proposed transaction trigger change-of-control, antimonopoly, strategic-object, lender or governmental approvals?
• Are the project’s financing arrangements consistent with the proposed acquisition?
• Are there unresolved disputes, claims or regulatory breaches that could affect project value?
• Have all material diligence findings been reflected in the SPA through conditions precedent, warranties, indemnities, price mechanisms or covenants?

Conclusion

Kazakhstan offers significant opportunities for renewable energy investment, particularly in wind and solar power. The market is also moving toward larger and more complex projects involving energy storage, hybrid models, strategic investors and, in some cases, intergovernmental cooperation.

For investors, however, the key question is not simply whether a renewable energy project has a PPA or has won an auction. The more important question is whether the project company can preserve and monetise the legal and regulatory rights underpinning that PPA throughout the intended investment period.

The most material risks commonly arise from incomplete land rights, grid connection uncertainty, change-of-control restrictions, lender consent requirements, strategic-object issues, environmental or construction non-compliance and unresolved disputes. These risks should be identified at an early stage and translated into an appropriate transaction strategy.

A well-structured legal due diligence process should therefore do more than describe the project. It should determine whether the rights supporting the project’s valuation are valid, transferable, enforceable and capable of supporting the buyer’s investment case—and then convert that analysis into practical protections in the transaction documents.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.