China Eximbank provides $35 million preferential buyer's credit for Regar Substation Reconstruction Project (Linked to Record ID#40481, #40479, #72802, #69997)

Project narrative

On May 20, 2013, the Export-Import Bank of China (China Eximbank) signed a $35,043,318.80 preferential buyer's credit (PBC) agreement with the Ministry of Finance of the Republic of Tajikistan for the Regar Substation Reconstruction Project. The PBC (loan) agreement was ratified by the Tajik parliament in June 2013. The loan carried the following borrowing terms: a maturity of 20 years, a grace period of 9 years, an interest rate of 2%, a 0.2% commitment fee, and a 0.2% ($70,086.60) management fee. The borrower was expected to use the proceeds of the loan to finance 95% of the cost of a $36.9 million commercial contract [ID# TBEA/RT2012-002] 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 Co., Ltd., which was signed on September 25, 2012. The Government of Tajikistan was responsible for covering the remaining 5% ($1.8 million) of the commercial contract cost. The Government of Tajikistan used the proceeds of the PBC to on-lend — through subsidiary loan agreement Subsidiary Agreement No. TAJ-2013(22) TOTAL No.(266) BT-025, dated July 31, 2011 — to Open Joint Stock Holding Company (OHSHC) “Barqi Tojik” at a 6% interest rate between July 31, 2013 and November 21, 2033. The loan's amount outstanding was TJS 276,008,000 as of December 31, 2016, TJS 309,047,000 as of December 31, 2017, TJS 330,444,000 as of December 31, 2018, TJS 339,472,000 as of December 31, 2019, and TJS 395,990,000 as of December 31, 2020. The project involved the reconstruction of Regar substation, which is located near the city of Tursunzoda about 50km west of Dushanbe. TBEA Co., Ltd. was the contractor responsible for project implementation. Construction began on November 22, 2012. The substation was put into operation on June 1, 2016. There are some indications that the China Eximbank loan for the Regar Substation Reconstruction 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”].’