China Eximbank provides $178.9 million preferential buyer’s credit for Phase 2 of the 400MW Dushanbe CHP-2 Construction Project (Linked to Record ID#46211, #54106, #71101, #91801)

China Eximbank provides $178.9 million preferential buyer’s credit for Phase 2 of the 400MW Dushanbe CHP-2 Construction Project On July 4, 2009, the Export-Import Bank of China (China Eximbank) and China Development Bank (CDB) signed $30 million loan agreement with the Ministry of Energy and Industry of Tajikistan for Phase 1 of the 400MW Dushanbe CHP-2 Construction Project.

Record ID#54106 captures the $15 million contribution from China Eximbank and Record ID#71101 captures the $15 million contribution from CDB.

Then, in 2012, TBEA Dushanbe Mining Company LLC (特变电工杜尚别矿业有限 or 特变电工杜尚别矿业有限公司 or ТВЕА Душанбе горная промышленность) — a special purpose vehicle and wholly-owned subsidiary of TBEA — signed a $179 million loan agreement with China Eximbank for the Phase 1 of the 400MW Dushanbe CHP-2 Construction Project (captured via Record ID#91801).

However, it is known that the loan was part of a trilateral ‘resources-for-infrastructure’ agreement between the Tajik Ministry of Energy, TBEA, and TBEA Dushanbe Mining Company LLC.

Under the terms of the ‘resources-for-infrastructure’ agreement, TBEA Dushanbe Mining Company LLC agreed to ‘front’ $179 million for the construction of Phase 1 by borrowing directly from China Eximbank, and, in turn, the Tajik Government agreed to grant TBEA exclusive rights to explore and develop gold deposits at the Eastern Duoba mine and the Upper Kumarg mine (until TBEA could recoup its investment).

The Tajik Government also reportedly agreed to give TBEA the rights to further mining deposits (at an unidentified location) if the profit made from the gold deposits at the Eastern Duoba mine and the Upper Kumarg mine did not cover the cost of Phase 1 of the 400MW Dushanbe CHP-2 Construction Project.

Also, as part of the ‘resources-for-infrastructure’ agreement, TBEA was reportedly exempted from paying customs duties and value added tax (VAT) on imported equipment necessary for exploration and development of the deposits. The tax and customs exemptions were scheduled to cease once TBEA recouped its initial costs.

However, the agreement allowed TBEA to continue to mine the gold deposits for profit after the expiration of the exemptions.

Then, on November 7, 2014, the the Government of Tajikistan and the Export-Import Bank of China signed two loan agreements — a RMB 929,977,078 government concessional loan (GCL) agreement [CHINA EXIMBANK GCL NO. (2014) 30 TOTAL NO. (553)] and a $178,969,220 preferential buyer’s credit (PBC) [CHINA EXIMBANK PBC NO. (2014) 40 TOTAL NO. (34)] for Phase 2 of the 400MW Dushanbe CHP-2 Construction Project.

The GCL is captured via Record ID#46211 and the PBC is captured via Record ID#71137. Both of these loans were ratified by the Tajik Parliament on January 14, 2015.

The Government of Tajikistan contributed $17,443,400 of counterpart financing.

In total, the Ministry of Finance of the Republic of Tajikistan contracted $331,058,220 of China Eximbank debt for Phase 2 of the 400MW Dushanbe CHP-2 Construction Project.

The Government of Tajikistan used the proceeds of the GCL and the PBC to on-lend to Open Joint Stock Holding Company (OHSHC) “Barqi Tojik”.

OHSHC “Barqi Tojik” was a state-owned enterprise in Tajikistan responsible for the generation, transmission, and distribution of electricity and thermal energy.

The subsidiary GCL agreement (#TАJ 2014-028-2) was signed between Ministry of Finance of the Republic of Tajikistan and OHSHC “Barqi Tojik” on December 18, 2014. It carried an interest rate of 5% and a maturity of 25-years. Its final maturity date was set to August 21, 2039.

The subsidiary PBC agreement (#TАJ 2014-028-1) was also signed between Ministry of Finance of the Republic of Tajikistan and OHSHC “Barqi Tojik” on December 18, 2014 and it carried an interest rate of 5% and a maturity of 20-years. Its final maturity date was set to June 21, 2034.

The PBC’s amount outstanding was TJS 808,004,000 as of December 31, 2016, TJS 1,343,913,000 as of December 31, 2017, TJS 1,436,962,000 as of December 31, 2018, TJS 1,476,217,000 as of December 31, 2019, and TJS 2,022,352,000 as of December 31, 2020.

The GCL’s amount outstanding was TJS 1,054,408,000 as of December 31, 2016, TJS 1,259,654,000 as of December 31, 2017, TJS 1,274,255,000 as of December 31, 2018, TJS 1,288,762,000 as of December 31, 2019, and TJS 1,610,069,000 as of December 31, 2020.

Dushanbe 2 is a combined heat and power plant (CHP) — also known as the Dushanbe-2 Thermal Power Plant (TPS-2) — that provides heat and electricity for the residents of Dushanbe. It only operates in the winter. The 400MW Dushanbe CHP-2 Construction Project was designed and implemented in two phases.

The power plant was to be fueled by coal, with the potential to switch to gas.

Phase 1 (mainly constructed between 2012-2014) installed a capacity of 100 MW, while Phase 2 (constructed between 2014-2016) installed an additional capacity of 300 MW. TBEA was the general contractor responsible for implementation of both phases. Henan No 1 Thermal Power Construction Company was also involved in the implementation of Phase 1.

Inner Mongolia Electric Power Survey and Design Institute Co., Ltd. was the contractor responsible for the design for Phase 2. Hydro Electric Power System Engineering Company was also involved in the implementation of Phase 2.

Phase 1 was originally scheduled to be completed and put into production before the celebration of the 20th anniversary of Tajik independence in 2011 (on September 9, 2011), and the second phase was scheduled to be completed in 2013. A formal groundbreaking ceremony for Phase 1 took place on September 8, 2009.

However, construction did not begin until November 2012.

Phase 1 was completed on September 13, 2014 and the first two (50MW) power generation units were put into operation on November 10, 2014. Phase 2 began on May 14, 2015 and was completed on December 8, 2016.

According to President of Tajikistan Emomali Rahmon as relayed by TBEA, the power plant generates 9.6 million kWh power per day and 235 trillion Kcal heat, and it provides nearly 700 stable jobs to Tajiks.

The electricity generated from the power plant is sold to Barki Tojik Open Stock Holding Power under a power purchase agreement.

Through this project, 150 Tajik technicians went to China for training, and about 100 Tajik operators received professional know-how from Chinese experts.

According to Xinhua, the completed power plant met 60 percent of the power demand and restarted the provision of central heating to more than 700,000 Dushanbe residents after 15-years of suspension.

The completion of the power plant was declared to be a solution to Tajikistan's long-existing issue of power shortages during the winter. However, it appears that the project’s second phase has encountered revenue generation and loan repayment problems.

In 2018, the Government of Tajikistan reportedly granted a gold mining license to TBEA as ‘remuneration’ for Phase 2.

Media reports indicate that TBEA agreed to work on the gold deposits as long as it takes to recoup the costs that it incurred during the construction of Phase 2.

Several years later, in November 2021, TBEA Dushanbe Mining Company LLC reported that it had completed half of the work on the construction of the gold processing plant and ancillary facilities in Ayni district of the northern province of Sughd, Tajikistan.

The purpose of these facilities is to support the development of the Kumarghi Bolo (Upper Kumargh) and Duobai Sharqi (Eastern Duoba) gold deposits. TBEA Dushanbe Mining Company LLC completed geological exploration works on the Upper Kumarg gold mine in October 2016.

There are also some indications that the China Eximbank loans for Phase 2 of the 400MW Dushanbe CHP-2 Construction 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”].’