China Eximbank provides $35 million preferential buyer’s credit for 220 kV Khujand-Ayni Power Transmission Line Project

Project narrative

On November 25, 2010, the Ministry of Finance of the Republic of Tajikistan and the Export-Import Bank of China signed a $35,055,003 preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK PBC NO. (2010) 024 TOTAL NO. (131)] for the 220 V Khujand-Ayni Power Transmission Line Project. The loan carried the following borrowing terms: a 20-year maturity, a 5-year grace period, and a 2% interest rate. The borrower was expected to use the proceeds of the loan to partially finance s $36.9 million commercial contract between OHSHC “Barqi Tojik” -- a state-owned enterprise in Tajikistan that is responsible for the generation, transmission and distribution of electricity and thermal energy -- and TBEA Co., Ltd. The loan's amount outstanding was TJS 276,100,000 as of December 31, 2016, TJS 309,150,000 as of December 31, 2017, TJS 330,555,000 as of December 31, 2018, TJS 339,585,000 as of December 31, 2019, and TJS 396,120,000 as of December 31, 2020. The Government of Tajikistan used the proceeds of loan to on-lend to OHSHC “Barqi Tojik” [through a subsidiary loan agreement -- No. 2010 (024) TOTAL (170) – 029 B]) at a 3% interest rate between December 15, 2010 and September 21, 2031. The 220kV Khujand-Ayni Power Transmission Line Project involved the construction of the Ayni and Shakhristan substations and the construction of a 118km, 220kV power transmission line from Khujand to Ayni that connects the Zarafshon Valley to the unified power system through the 500kV South-North power grid. TBEA Co., Ltd. was the contractor responsible for project implementation. Construction began on July 8, 2010. The power transmission line was expected to be finished by the 20th anniversary of Tajikistan’s independence, on September 9, 2011 and the transmission line was inaugurated and put into operation on September 26, 2011. The Government of Tajikistan issued a project completion certificate on December 29, 2012. There are some indications that the China Eximbank loan for the 220 kV Khujand-Ayni 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”].’