China Eximbank provides $55.2 million buyer's credit loan for 220 kV Lolazor-Khatlon Transmission Line Project (Linked to Record ID#39644, #70910)

Project narrative

In March 2006, the Government of Tajikistan and the Export-Import Bank of China signed a MoU for projects proposed by the Government of Tajikistan. Then, on December 16, 2006, the Export-Import Bank of China (China Eximbank) signed a $55,227,590 buyer’s credit loan agreement [ID#BLA06016)] with the Ministry of Finance of the Government of Tajikistan for the 220 kV Lolazor-Khatlon Transmission Line Project. The loan carried the following borrowing terms: a maturity of 20 years, a grace period of 5 years, an interest rate of 2%, a penalty (default) interest rate of 1%, a 0.2% commitment fee, and a 0.2% ($562,210) management fee. The Government of Tajikistan used the proceeds of the loan to on-lend (through subsidiary loan agreement No. BLA06016) 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 16, 2006 and June 21, 2026. OHSHC “Barqi Tojik” was expected to use the loan proceeds to finance 95% of the cost of a $58,134,305 commercial contract [TOJSC/TBEA-2006/00I] with TBEA Co., Ltd., which was signed on April 19, 2004 and amended on May 9, 2006. The Government of Tajikistan was expected to provide the remaining 5% ($2.9 million) of the commercial contract cost. The loan's amount outstanding was TJS 434,984,000 as of December 31, 2016, TJS 487,052,000 as of December 31, 2017, TJS 520,774,000 as of December 31, 2018, TJS 535,001,000 as of December 31, 2019, and TJS 624,072,000 as of December 31, 2020. The purpose of the project was to construct a 90 km, 220 kV electricity transmission line between Dangara and Kulab. This would connect the southern region to the national grid. The new power transmission line would improve the power supply in the south of the Khatlon region, and create a more stable power supply. The Lolazor-Khatlon line had a capacity of approximately 4 billion kWh of electricity a year. The project was to provide the Khatlon region with electricity from the Sangtuda 1 and 2 hydroelectric power plants, and allow for the export of electricity to Afghanistan. TBEA Co., Ltd. was the contractor responsible for project implementation. The project was launched in May 2006. The transmission line was planned to be commissioned by the end of December 2007, but the inclusion of the construction of an additional internal 110 kV transmission line from the Khatlon substation to the Bokhtar substation postponed the start date. The Lolazor-Khatlon transmission line was commissioned on June 25, 2008. There are some indications that the China Eximbank loan for the 220 kV Lolazor-Khatlon 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”].’