DUSHANBE, July 25, 2014, Asia-Plus -- The European Bank for Reconstruction and Development (EBRD) Dushanbe Resident Office notes that in its largest project in Tajikistan to date, and one of the largest in the country’s energy sector, the Bank is providing a US$50 million loan to fund the first phase of the modernization of the Qairoqqum hydropower plant.

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

The total cost of the project is approximately US$ 75.7 million.  The EBRD loan will be complemented by US$ 21 million in donor funds – a US$ 10 million loan and a US$ 11 million grant – from the Pilot Program for Climate Resilience (PPCR) under the Climate Investment Funds (CIF).  The remaining US$ 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.

Tajikistan experiences chronic electricity shortages during winter months as demand for electricity exceeds supply by approximately 24 per cent.  These outages cause economic losses estimated at over US$ 200 million per year or 3 per cent 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.  The modernization of the Qairoqqum power plant will help reduce these shortages and improve power distribution in Sughd, the country’s second largest industrial region.

The first phase of the upgrade program will increase the plant’s current capacity from 126MW to 142MW 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 Barqi 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.

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 per cent 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.

Since the beginning of its operations in Tajikistan, the EBRD has invested close to US$ 400 million in the country’s economy.