China Eximbank provides $267.2 million buyer's credit loan for 500 kV North-South Power Transmission Line Project (Linked to Record ID#39984, #70910)

Project narrative

In March 2006, the Government of Tajikistan and the Export-Import Bank of China signed an MoU for various projects proposed by the Government of Tajikistan. Then, on December 21, 2006, the Export-Import Bank of China signed a $267,219,451.35 buyer’s credit loan [BLA06016] agreement with the Ministry of Finance of the Republic of Tajikistan for the 500 kV North-South Power Transmission Line Project. The loan carried the following borrowing terms: a 20-year maturity, a 5-year grace period, a 2% interest rate, a 1% penalty (default) interest rate, a 0.2% commitment fee, and a 0.2% ($562,210) management fee. The borrower was expected to use the proceeds of the PBC to finance 95% of the cost of a $281,283,633 commercial contract [ID#TOJSC/TBEA-2006/002] between Open Joint Stock Holding Company (OHSHC) “Barqi Tojik” -- a state-owned enterprise in Tajikistan responsible for the generation, transmission, and distribution of electricity and thermal energy -- and TBEA, which was signed on April 19, 2006 and amended on May 19, 2006. The Government of Tajikistan used the proceeds of the PBC to on-lend (through subsidiary loan agreement (No. BLA06015, #6015) to Open Joint Stock Holding Company (OHSHC) “Barqi Tojik” -- a state-owned enterprise in Tajikistan responsible for the generation, transmission, and distribution of electricity and thermal energy -- at a 3% interest rate between December 21, 2006 and June 21, 2026. The loan's amount outstanding was TJS 2,104,674,000 as of December 31, 2016, TJS 2,356,608,000 as of December 31, 2017, TJS 2,519,773,000 as of December 31, 2018, TJS 2,588,608,000 as of December 31, 2019, and TJS 2,975,163,000 as of December 31, 2020. The purpose of the project was to construct a 500 kV electricity transmission line that would connect the northern Sughd region to the national grid. The project also expected to facilitate the effective dispatching of electricity between Dushanbe and Khujand, completely solve the problem of power shortage in the south during the dry season in winter, build a transmission channel for the implementation of the Tajik Hydropower Strategy, improve the safety, stability, and reliability of the power grid, and reduce the loss of electricity through transmission from 14% to 3.2%. TBEA Co., Ltd. was the contractor responsible for project implementation. Construction began on September 16, 2006 and the North-South transmission line has been operational since November 29, 2009. Construction of the 325 km, 500 kV south–north power transmission line reportedly enabled Tajikistan to become independent of the Uzbek power transmission network and to distribute electricity throughout the country. There are some indications that the China Eximbank loan for the 500 kV North-South Power Transmission Line Project may have underperformed vis-a-vis the original expectations of the lender. According to a 2021 IMF report, ‘[OHSHC “Barqi Tojik”] has significant arrears to the government on [foreign exchange] denominated loans. The government on-lends concessional [foreign exchange] loans […] from multilateral and bilateral agencies to [OHSHC “Barqi Tojik”] on non-concessional terms. These loans are denominated in [foreign exchange] and are intended to develop the energy infrastructure. However, these debts are not serviced fully, resulting in [foreign exchange] arrears to the government.’ A 2021 report by the International Energy Agency (IEA) elaborated on this point, explaining that ‘[a] high rate of uncollected payments for electricity use due to illegal connections, power theft and outdated metering infrastructure contribute to the worsening financial health of Barki Tojik.’ Then, in March 2023, the IMF published a report, which noted that ‘[I]n 2021 the SOE sector […] kept accumulating debt service losses, where within a year the amount of debt overdue payments […] increased from TJS 14 billion to TJS 17 billion (17.1 percent of GDP). Some 93 percent of accumulated overdue debt belongs to [OHSHC “Barqi Tojik”].’