Page 43 - BNE_magazine_11_2019

bne November 2019 Eurasia I 43
the Eurobond off, as Tajikistan has the lowest power tariffs in all Central Asia and there is only one industrial customer in the country that demands a lot of power – the Talco aluminium plant. The other countries of Central Asia also don't pay much for power, but the Afghan and Pakistan markets would pay more, if the power from the dam can be hooked into their power grids.
Despite all the problems the president is determined to build the dam come what may, although he admits it is already “underfunded.”
Power cuts leave Tajikistan in the dark
Tajikistan is suffering from a chronic shortage of energy and the winter blackouts affect seven out of 10 Tajiks each year. The sporadic supplies of
gas mean residents abandoning their kitchens and building wood- or dung- fired traditional kazan ovens in the playgrounds of residential blocks as well as ripping out radiators from their apartments and selling them for scrap metal, as there is never any hot water in them in the winter.
Tajikistan used to produce a small amount of gas in Soviet days. It peaked at around 500mn cubic metres a year
in 1990, against the 2bn cubic metres
it consumed then, mostly supplied by Uzbekistan. But today Uzbekistan is itself short of gas and any surplus is sold to China. Uzbekistan stopped deliveries to Tajikistan completely in 2012, although there was a resumption of tiny amounts to industrial clients in April as relations improved. Tajikistan’s own gas production has completely collapsed to a mere 4 mcm per year.
The only energy Tajikistan produces domestically is hydropower, but the main river these stations rely on is the Vakhsh (which means “wild”). It flows 30 times faster in the summer, as the snow in the mountains melts, than it does in the frozen winters. The upshot is that about 70% of the population suffer from acute power shortages every winter.
Rogun would solve these problems by creating a reservoir so large that it would not only smooth out the supply of power
over the year, it would also produce a reserve of water that can even out the flows over several years.
The first studies on the dam were conducted in 1967. Construction was finally begun in 1976 and continued until 1993, when a flood destroyed the dam, after which the project was abandoned. However, by that time 21km of tunnels had been completed, the underground halls for turbines had been 70% finished, the transformer hall was 80% ready and two turbines had been built. They are currently producing power.
The dam was destroyed in 1993 because the tunnels that were supposed to relieve the pressure were not finished. Rock
and debris filled the overflow tunnels, which collapsed and caused the water in the reservoir to build up and flow over the top of the damn, sweeping it away. According to flooding studies made since, the chances of this happening again, now the tunnels have been properly lined, is equivalent to a once- in-10,000-years event.
Default or refinancing on the cards?
The government has spent all the money raised from its Eurobond issue on the dam. What worries the international financial institutions (IFIs) and investors is that Rogun is consuming so much of the state’s resources that the latter will be unable to meet its obligations and will default on its first ever international bond.
“The SCD finds that under the status quo approach, the pursuit of the continued borrowing for the Rogun HPP could
has released little information for the benefit of bondholders. At the last count at the end of the first quarter of this year the government said total external debt was $2.7bn.
Even when completed the Tajik domestic power business will never generate enough money to pay off the Eurobond. The prices of power in Tajikistan are
just too low. And efforts to improve payment discipline have often backfired, with inspectors reading meters often generating more fraud than they uncover, the domestic power operator reports. Tajikistan will have to export power to earn enough money.
BT, the integrated national energy company, is loss-making and deeply in debt. The residential tariff is Tajik soum (TJS) 0.23/kWh and Talco, the largest consumer of power in the country,
pays even less (TJS0.072 in summer
and TJS0.118 in winter). These are the lowest tariffs in the region and owing to the widespread poverty in the country there is little room to increase the tariffs.
Currently Tajikistan doesn't earn much from exports and lives almost entirely
on remittances sent home by workers in other countries – mostly Russia – to cover its negative trade balance. This source of hard currency is also where the money will come from to cover the bond payments.
All the rubles sent back to Tajikistan from Russia, which accounts for 80% of the transfers by value, are mandatorily converted to Tajik soum on arrival; however, dollars and euros do not have
“Despite all the problems the president is determined to build the dam come what may, although he admits it is already “underfunded””
risk debt sustainability and threaten the country’s economic and social stability,” the World Bank wrote in the Systematic Country Diagnostics report of May 2018.
The government’s external debt burden is not that high at 51.4% of GDP, but it
to be converted. The national bank uses the rubles to buy dollars on the open market in Moscow and so build up some hard currency reserves. According to the Central Bank of Russia (CBR), Tajiks sent a total of $2.5bn back home in the 12 months up to the end of September.
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