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EBRD to finance modernization of Tajikistan's Qairokkum HPP

25 July 2014 17:19 (UTC+04:00)
EBRD to finance modernization of Tajikistan's Qairokkum HPP

By Aynur Jafarova

The European Bank for Reconstruction and Development (EBRD) has allocated a loan worth $50 million to finance the first phase of the modernization of Tajikistan's Qairokkum Hydro Power Plant (HPP).

It is the bank's largest project in Tajikistan to date, and one of the largest in the country's energy sector, EBRD said on July 25.

Tajik Minister of Finance Abdusalom Kurbonov said the collaboration between Tajikistan and the EBRD has been developing strongly over the past few years.

"EBRD support is very important for our economic development," he noted.

Aida Sitdikova, the EBRD Director for Energy and Natural Resources in Russia and Central Asia said the upgrade of the power plant will significantly improve the supply situation, especially in the winter.

The total cost of the project is approximately $75.7 million.

The EBRD loan will be complemented by $21 million in donor funds, in particular, a $10 million loan and a $11 million grant from the Pilot Program for Climate Resilience (PPCR) under the Climate Investment Funds (CIF).

The remaining $4.7 million includes additional donor financing provided by the governments of Austria and the United Kingdom, and the EBRD's Shareholder Special Fund for consultancy services.

The modernization of the Qairokkum HPP will help reduce these shortages and improve power distribution in Sugd, the country's second largest industrial region.

The first phase of the upgrade program will increase the plant's current capacity from 126 MW to 142 MW with the installation of two new and larger turbines. This will prevent wasteful water spills and generate more electricity with the same flow of water, increasing the plant's efficiency.

The investment will also finance the installation of upgraded equipment that will raise safety levels and strengthen the plant's resilience against the impacts of climate change.

In addition, financing will be used for the ongoing restructuring of Barki Tojik, a state-owned power company responsible for generation, transmission and distribution of electricity. The funds will help to improve the operational and financial performance of the company.

The project will not only address institutional barriers to electricity tariff reform by adopting and implementing new tariff methodologies in line with international standards, but will also assist with introducing relevant legislation, a key priority for the development of the Tajik energy sector. Tariff reform is essential to improve this sector's commercial appeal.

Built in 1957, the plant is the only electricity generating facility in northern Tajikistan and supplies energy to over 500,000 homes in the Sugd region.

Tajikistan experiences chronic electricity shortages during winter months as demand for electricity exceeds supply by approximately 24 percent. These outages cause economic losses estimated at over $200 million per year or 3 percent of the country's GDP.

As Tajikistan is the most vulnerable country to climate change in the entire EBRD region, these shortages are exacerbated by climatic variability and extreme weather.

Tajikistan's extreme vulnerability to climate change impacts means that the PPCR's participation in this investment is crucial. Tajikistan's hydropower plants, which supply approximately 96 percent of the country's electricity, are highly exposed to climate risks such as glacial melting and precipitation extremes.

This is the first time that an EBRD project has been supported by the PPCR, an instrument of the CIF dedicated to helping developing countries integrate climate resilience measures into development planning and investment.

The EBRD operations in Tajikistan started in 1992 with technical cooperation, with the first investments in 1996. During this time, the EBRD has concentrated on private sector development, which accounts for over 70 percent of the Bank's investment there.

Board of Directors of EBRD has approved a new country strategy for Tajikistan which will define the Bank's activities in that country for the next three years from 2012 to 2015.

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