Page 42 - BNE_magazine_11_2019

42 I Eurasia bne November 2019
Tajikistan spent all the proceeds from its first ever eurobond on the giant Rogun hydropower dam. It is still consuming a quarter of the budget each year.
Tajikistan’s massive Rogun hydropower
dam: a blessing or a curse?
bne IntelliNews
Tajikistan, Central Asia's poorest nation, is in danger of defaulting on its first ever Eurobond as
the construction of the giant Rogun hydropower dam gobbles up scarce resources.
Most of the proceeds of the $500mn Eurobond issued in September 2017 have been invested in the enormous dam, but as that cash runs out the state is still spending a quarter of its entire budget on the construction. Investors are getting the butterflies, worried that the government won’t be able to service its debt. The World Bank was against the project from the start, but with two turbines already operational it doesn't seem like the government is going to give up on the full scope of the ambitious project.
Conceived in Soviet times, the construc- tion of Rogun is a potential game-changer
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for the country. Building work resumed
a few years ago and the first turbines went into operation in November 2018. But the dam is far from finished and if
it is completed not only will it solve all Tajikistan’s power problems, it could earn the economy significant revenue from power exports to neighbours, including Pakistan and Afghanistan.
The problem is that the dam is huge – it was originally designed to be the tallest in the world at 335 metres but it is not clear the present design aims for quite
so high. However, it is so big that the World Bank says the country simply can’t afford to build it and has refused to fund it. But that hasn't stopped President Emomali Rahmon from going ahead.
“There is no other country in the region in which tradable sovereign debt would be exclusively a funding vehicle for just
one piece of infrastructure. We believe that the scale of the Rogun HPP project is, in the context of Tajikistan, so significant that it dwarfs the importance of ‘tradition- al’ macro and sovereign credit metrics,” Petr Grishin, an economist at VTB Capital (VTBC), wrote in a report on Rogun.
As a dam, Rogun has many advantages. It would help improve Tajikistan’s electricity balance, including in winter; it would alleviate the regional shortage of ‘hot reserve’ that can meet fluctuations in demand quickly; it would stabilise river flows by creating the first multi-year regulation reservoir; it would postpone sedimentation and improve the firm generation capacity of Nurek and other downstream hydro power plants (HPPs).
From a market point of view the dam has a lot of problems. It won’t make enough money from the domestic market to pay