China Eximbank provides $386 million preferential buyer’s credit for Bishkek Thermal Power Plant Modernization Project

On September 11, 2013, China Eximbank and the Government of Kyrgyz Republic’s Ministry of Finance signed a $386,000,000 preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2013) 38 TOTAL NO. (282)] for the Bishkek Thermal Power Plant Modernization Project. The loan carried the following borrowing terms: a 20 year maturity, an 11 year grace period, a 2% interest rate, a 0% default (penalty) interest rate, a 0.25% commitment fee, and a 0.18% management fee. The proceeds from this loan were to be used to finance a $386,000,000 commercial contract (number D-166-21/322) between the Joint Stock Company (JSC) “Electric Power Plants of Kyrgyzstan” and Tebian Electric Apparatus Stock Co., Ltd. (TBEA). According to the Government of the Kyrgyz Republic’s Aid Management Platform (AMP), the first loan disbursement (of $115,800,000) took place on December 31, 2014. The same source notes that, as of 2014, the loan disbursement rate was 30% ($115,800,000 out of $386,000,000). According to internal data that the Kyrgyz Ministry of Finance shared with AidData in July 2022, this loan achieved a disbursement rate of 100% as of December 31, 2021 and its amount outstanding was $389,924,333.33 as of December 31, 2021. The project sought to install two turbines (units 12 and 13) with a capacity of 150 megawatts at the Bishkek Thermal Power Plant (TPP). As a result, the capacity of Bishkek TPP was expected to increase by 125 megawatts. Prior to project completion, the annual output of electricity at the TPP was one billion kWh. After its modernization through the China Eximbank-financed project, the production of the TPP was expected to reach 1.8 billion kWh. Heat production was also expected to increase from two million gigacalories to three million gigacalories per year. TBEA was the contractor responsible for implementation. Project implementation commenced on April 26, 2014 and the project was completed on August 30, 2017. However, the Bishkek Therman Power Plant Modernization Project was plagued by controversy. Major failures occurred within 5 months of the power plant being put into operation. Some boilers collapsed, causing power outages and stopping heating. In 2015, the Chamber of Audits, a state body tasked with overseeing government spending, issued a report questioning why the TBEA contract was not put out to tender when other companies were interested in bidding. Auditors also found that no technical feasibility study was undertaken to evaluate the needs and costs of the project. Nurlan Omurkul, who was chief of the Bishkek TPP, said that he had harbored strong doubts about hiring a company with no track record of building power stations, but that he had been badgered by senior Kyrgyz officials to endorse a decision that he said had obviously already been made. He told the New York Times that ‘I’ve worked my whole life in power and heating plants and knew all along that the Chinese price of $386 million was too expensive.’ Another Chinese company, China Machinery Engineering Corporation, offered a lower bid, $356 million, according to a parliamentary commission. But the Chinese Embassy reportedly insisted that its offer be dismissed. Eventually, the country’s former Prime Minister (Jantoro Satybaldiev), former mayor of Bishkek (Kubanychbek Kulmatov), and former Energy Minister (Osmonbek Artykbaev) were arrested on corruption charges and accused of using their positions to lobby for the interests of a Chinese company (TBEA) in the selection process of the contractor for the project. Prosecutors in the case claimed that rigged bidding and inflated pricing would cost the Government of the Kyrgyz Republic as much as $111,252,797. There are also some indications that the preferential buyer's credit for the Bishkek Thermal Power Plant Modernization Project financially underperformed vis-a-vis the original expectations of the lender. On or around July 1, 2021, China Eximbank and the Government of the Kyrgyz Republic signed a debt suspension agreement [No. DSSI2021PHASE2-029]. Under the terms of the agreement (captured via Project ID#96102), the lender agreed to suspend principal and interest payments due between July 1, 2021 and December 31, 2021 under the preferential buyer's credit agreement for the Bishkek Thermal Power Plant Modernization Project.

Additional details

1. The Bishkek TPP is also known as the Bishkek Combined Heat and Power Plant (CHP). The Chinese project title is 比什凯克热电厂改造项. 2. The project identification number in the Government of the Kyrgyz Republic’s Aid Management Platform (AMP) is 8718835320. 3. The China Eximbank (PBC) loan agreement can be accessed in its entirety via https://www.documentcloud.org/documents/20488734-kgz_2013_423. 4. The July 2021 debt suspension agreement [No. DSSI2021PHASE2-028] can be accessed in its entirety via https://www.dropbox.com/s/huwa695j3w9hwig/DSSI%20Agreement%20for%20Kyrgyz%20Republic.pdf?dl=0. 5. A detailed loan repayment reschedule (that the Kyrgyz Ministry of Finance shared with AidData in July 2022) can be accessed via https://www.dropbox.com/s/xg0cmomv0qk7cbj/Repayments.xlsx?dl=0. The schedule reflects actual repayments through December 31, 2021 and planned/scheduled repayments after December 31, 2021. Note also that (a) China Eximbank granted the Government of Kyrgyz Republic a a deferral of payments for the period from August 2021 to December 2021, and (b) the deferred principal and interest amounts are included in the main body of the debt and the repayment amounts of the deferrals (with additional accrued interest for granting a deferment) are already included in the repayment schedule.

Number of official sources

18

Number of total sources

45