Trans-Asia Gas Pipeline (Hong Kong) Company Limited reschedules $300 million loan — via grace period and maturity extensions — for Line D of the Central Asia-China Gas Pipeline Project (Linked to Record ID#39955)

Project narrative

On March 4, 2014, Trans-Asia Gas Pipeline Company Limited (中塔天然氣管道有限公司) — a subsidiary of China National Petroleum Corporation (CNPC) — signed an agreement with Tajiktransgaz (a Tajik state-owned company) to jointly establish a special purpose vehicle natural gas pipeline company called Trans-Tajik Gas Pipeline Company Ltd (TTGP or 中塔天然气管道公司). The purpose of the TTGP, which is jointly owned by Trans-Asia Gas Pipeline Company Limited (50% equity stake) and Open Joint Stock Company (OJSC) Tajiktransgaz (50% equity stake), is to manage the financing, construction, and operation of Line D of the Central Asia-China Gas Pipeline. Trans-Tajik Gas Pipeline Company Ltd was established with a $300 million equity investment from Trans-Asia Gas Pipeline Company Limited (captured via Record ID#70616) and a $300 million equity investment from Tajiktransgaz, which was in turn financed with a $300 million loan from Trans-Asia Gas Pipeline (Hong Kong) Company Limited (captured via Record ID#39955). On September 13, 2014, Trans-Asia Gas Pipeline (Hong Kong) Company Limited and OJSC Tajiktransgaz [Открытым акционерным обществом "Таджиктрансгаз"] signed a $300 million loan agreement [№ZYHK-2014-RZBX]. The loan originally carried the following borrowing terms: a 24.8-year maturity (final maturity date: June 30, 2039), a 5.8-year grace period (first interest payment: June 30, 2020), and a 2.7% interest rate. The Government of Tajikistan did not issue a sovereign guarantee in support of the loan. However, the loan was collateralized against OJSC Tajiktransgaz’s 50% equity stake in TTGP (through a share pledge agreement that was signed by Trans-Asia Gas Pipeline (Hong Kong) Company Limited and OJSC Tajiktransgaz on September 13, 2014). According to the President of Tajiktransgaz, Saidakhmad Shamsiddinzoda, the Government of Tajikistan originally expected to receive $1.2 billion in transit fees from the pipeline over its first 32 years of operation (approximately $33 million per year), which would facilitate loan repayment. Tajiktransgaz was also expected to receive approximately $2.5 billion over the same time period (approximately $78 million per year). In May 2019, Trans-Asia Gas Pipeline (Hong Kong) Company Limited and OJSC Tajiktransgaz signed a debt rescheduling agreement, which extended the $300 million loan’s grace period by 6 additional years (from 5.8 to 11.8 years) and its maturity by 6 additional years from 24.8 to 30.8 years. The first amendment to the September 13, 2014 loan agreement [ID#№ZYHK-2014-RZBX-01] between the lender and the borrower (a) reset the loan’s first interest payment date from June 30, 2020 to June 30, 2026, (b) reset the loan’s final maturity date from June 30, 2039 to June 30, 2045, and (c) extended the end date of the loan’s availability period from December 31, 2015 to December 31, 2022 (when the pipeline was expected to be commissioned). The route of the Line D segment of the Central Asia-China Gas Pipeline was designed to run across five countries, from the border of Turkmenistan through the territories of Uzbekistan, Tajikistan, and Kyrgyzstan, and China. It was planned to originate at the Galkynysh gas field in Turkmenistan. In Tajikistan, the gas pipeline will run for 391 km through Tursunzoda, Shahrinav, Hisor, Roudaki, Vahdat, Fayzobod, Nourobod, Rasht, and Lakhsh (formerly Jirgatol) to Kyrgyzstan’s border. It was expected to then go through Kyrgyzstan, crossing into China near the village of Irkeshtam on the Kyrgyzstan-China border. Line D was planned to be 966 km long with the capacity to transport 30 billion cubic meters of natural gas (bcm) per year. The Government of Tajikistan allocated more than 9,500 hectares of land for 49 years for the pipeline. The Trans-Tajik Gas Pipeline Company Limited paid the Government of Tajikistan 415,000 somoni ($44,000) for the use of the land. According to the Tajik Ministry of Energy and Water Resources, the project scope also included the construction of 42 mountain tunnels with a total length of 63.3 km. In total, the project was expected to employ 3000 Tajik citizens. China Road and Bridge Corporation (CRBC) was the contractor responsible for project implementation. Line D construction began on September 13, 2014. It was originally expected that Line D would be fully operational by January 2020. However, the project was temporarily halted in March 2017. Work resumed on the Tajik section of the pipeline in January 2018. Then, on January 5, 2020, the first tunnel project and mountain-crossing effort was completed by CRBC. The pipeline was originally expected to be commissioned by 2020, but this date was later pushed out to December 31, 2022. The Trans-Asia Gas Pipeline (Hong Kong) Company Limited loan for Line D of the Central Asia-China Gas Pipeline Project has raised concerns about hidden public debt in Tajikistan. In August 2021, the Eurasian Development Bank released a report that said 'We believe that the Tajiktransgaz loan agreement with [Trans-Asia Gas Pipeline (Hong Kong) Company Limited] on the construction of a gas pipeline may […] threaten the country’s fiscal position. First, the project is currently stalled, and second, Tajiktransgaz is a state-owned company, which implies that these obligations may be contingent liabilities for the Tajik government. The total debt obligations [associated with the project] amount to 4% of GDP.' Two months earlier, on June 2, 2021, TTGP held a board meeting. The chairman of the board, Jin Qingguo, referenced possible interest payment relief (i.e., an additional debt rescheduling beyond the maturity and grace period extensions that were provided in 2019) for Tajiktransgaz, one of the shareholders of TTGP. Then, on February 1, 2024, Tajik Minister of Energy and Water Resources Daler Juma announced at a press conference that the construction of the Central Asia-China Gas Pipeline was being delayed due to pricing disagreements among the countries (China, Kyrgyz Republic, Tajikistan, Uzbekistan, and Turkmenistan) participating in the project. He clarified that Tajikistan had resolved all issues related to the proposed pipeline and that pricing disagreements arose among other countries involved in the project.