Economic growth and AI to sharply increase electricity demand in Uzbekistan — Franklin Templeton

Economic expansion and the rise of artificial intelligence are poised to significantly boost Uzbekistan's electricity demand, according to Marius Dan, CEO for Central Asia at Templeton Global Investments, a specialized investment division within Franklin Templeton. Dan emphasized that attracting international capital to the nation's energy sector and ensuring timely investments in power generation and grids necessitates tariff liberalization, the full implementation of regulated asset base (RAB) regulation, and a clearer legislative framework.

Franklin Templeton oversees Uzbekistan’s National Investment Fund (UzNIF), which holds stakes in five energy companies: Uzbekhydroenergo (40%), National Power Grid of Uzbekistan (40%), Regional Electric Networks (40%), Thermal Power Plants (25%), and Hududgazta’minot (40%).

Speaking at the Silk Road Finance & Technology Forum in Tashkent on August 24, Dan highlighted that the growth of AI, the digital economy, and the population would exert increasing pressure on Uzbekistan’s energy infrastructure. He stated, "Ultimately, all of this will run on electricity. As the National Investment Fund, we have assets in the energy sector and want to make sure our companies are ready for this. That means significant capital investment in distribution networks, generation, transmission and transport infrastructure."

According to Dan, a key priority for the fund is preparing its portfolio companies to secure funding on international markets to finance these investments. He underscored the necessity of regulatory reforms in the energy sector, including the liberalization of electricity tariffs and the complete adoption of the RAB methodology for transmission and distribution networks. This, he explained, would provide energy companies with sufficient incentives to continue investing in infrastructure. Dan noted that the need for investment is becoming more urgent amidst economic and population growth and ongoing digitalization.

When asked about the energy system's ability to adapt to rising demand while simultaneously increasing capital investment and reforming tariffs and regulation, Dan indicated that much would depend on the government's speed in advancing legislative reforms. He remarked, "There is a lot to be done, and much also depends on the government’s willingness to accelerate the adoption of the necessary legislative framework that will create incentives for these companies."

Dan observed that private capital has already been drawn to Uzbekistan’s energy sector through power purchase agreements (PPAs). However, state-owned energy companies also need to enhance their attractiveness to investors and improve their capacity to raise financing. He stated, "Steps have already been taken this year, particularly with the initial implementation of the RAB mechanism, but significantly more clarity should be provided by the end of this year — at least that is what we hope for from the fund’s perspective. This will determine how much capital these companies can raise and subsequently invest in the networks to meet growing demand on time." Dan added, "The last thing we want is to face an electricity shortage or problems with its transmission and distribution."

In May, Uzbekistan’s Ministry of Economy and Finance announced plans to introduce the RAB methodology for calculating electricity and gas tariffs. Under this system, tariffs are determined not only by a company’s current costs but also by the value of its regulated assets, such as networks, equipment, substations, and gas pipelines. The ministry projected that this new methodology would increase the price of electricity generation by approximately 9%, transmission costs by 30%, electricity distribution costs by around 10%, and natural gas distribution costs by about 23%. These figures pertain to individual stages of the supply chain and not directly to household tariffs.

It is anticipated that some costs of electricity and gas generation, transmission, and distribution that exceed tariffs set for end consumers will be covered by the state budget. For a company managing regional electricity networks, RAB regulation could offer a mechanism for recovering investments through the tariff system. Investments in network repairs, new transformers, digital metering, loss reduction, and improved supply reliability could be included in the regulated asset base if deemed justified and effective by the regulator. The company could then receive a regulated return on those investments, potentially through WACC, which the Ministry of Economy and Finance has indicated could be set at 14-16% after tax, depending on the company.

In October 2025, Igor Alekseev, managing director and partner at Boston Consulting Group (BCG), stated that the introduction of tariffs based on the RAB methodology is planned for 2027-2028.