China Eximbank provides $26.4 million preferential buyer’s credit for Unified Power System in Northern Tajikistan Project

Project narrative

On July 20, 2011, the Export-Import Bank of China (China Eximbank) signed a $26,463,789 preferential buyer’s credit (PBC) agreement with the Ministry of Finance of the Republic of Tajikistan for the Unified Power System in Northern Tajikistan Project. This loan carried the following borrowing terms: a 19.9-year maturity, a grace period of 7.4 years, and a 2% interest rate. The borrower was expected to use the proceeds of the loan to finance 95% of the cost of a $27,857,000 commercial contract [ID# 2010 (ТВЕА)-06 (РТ)-ро] 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 December 28, 2010. The Government of Tajikistan was responsible for paying the remaining 5% (approximately $1.4 million). The Government of Tajikistan used the proceeds of the loan to on-lend — through subsidiary loan agreement No. 2011(19) TOTAL (170) – 030 BT, dated July 20, 2011 — to Open Joint Stock Holding Company (OHSHC) “Barqi Tojik” at a 3% interest rate between July 20, 2011 and March 21, 2031. The loan's amount outstanding was TJS 208,434,000 as of December 31, 2016, TJS 233,384,000 as of December 31, 2017, TJS 249,543,000 as of December 31, 2018, TJS 256,360,000 as of December 31, 2019, and TJS 299,041,000 as of December 31, 2020. The purpose of the project was to construct a new substation, Sughd-500, because the operating substation, Khujand-500, was not able to ensure regular electricity supplies to northern Tajikistan through the Chinese Government-financed 550 kV South-North power transmission line (captured via Record ID#39644 and #70910). Construction of the Sughd-500 substation was also meant to promote the implementation of the Central Asia South Asia Electricity Trade and Transmission Project (CASA 1000), which aimed to establish the necessary transmission and trading infrastructure and systems to enable a trade of surplus electricity from Tajikistan and Kyrgyzstan to Afghanistan and Pakistan. TBEA Co., Ltd. was responsible for implementation. Project implementation was originally scheduled to begin in October 2011 and reach completion by the end of 2011. However, construction ultimately commenced in February 2011 and concluded in August 2011. The completed project was not accepted by the Government of Tajikistan until March 15, 2013 (and approved by the Government of Tajikistan on October 4, 2013). There are some indications that the China Eximbank loan for the Unified Power System in Northern Tajikistan 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”].’