DUSHANBE, September 5, 2014, Asia-Plus — The World Bank’s report,
Key Issues for Consideration on the Proposed Roghun Hydropower Project
, says that both the Government of Tajikistan and the national power company, Barqi Tojik, would need strong sector and economic management capacity to attract international partners for a large hydro project.
According to the report, international experience demonstrates the importance of transparency and financial soundness of the power sector in order to successfully undertake large scale projects such as Roghun. At present, Tajikistan’s energy sector does not meet generally expected levels of institutional capacity and financial viability.
Barqi Tojik reportedly generates large quasi-fiscal deficits ($150 million or 2 percent in 2013) because of chronic loss-making tariffs, poor payment collection, and high electricity losses. Hence, Barqi Tajik is neither able to properly rehabilitate and maintain current sector assets nor invest in new energy infrastructure. Barqi Tojik is accumulating large arrears (accounts payable equivalent to 17 percent of GDP), including tax arrears, delayed repayment of loans from the Ministry of Finance, and delayed payments to independent power producers and other creditors. As a result it is currently not likely to be credible as a power purchaser from any new large hydro project.
The report notes that current average electricity tariffs of around 2 US cents/kWh are a fraction of long run marginal costs and among the lowest in the world. Tariff increases combined with an effective mechanism to protect poor consumers, improved collection rates, and a credible long-term tariff adjustment mechanism would be essential to attract any large power sector investments.
Barqi Tojik’s 2013 cash collection was about 60 percent of billings (76 percent including non-cash collection) compared to 95 percent for a well-performing utility and technical losses currently represent 18 percent of electricity generated.
Poor transparency and accountability in the sector, together with a lack of commercial and financial management skills, further undermine Barqi Tojik’s performance and credibility. While there has been some progress on financial reporting, Barqi Tojik does not currently possess the capacity necessary to build credibility among its customers and potential commercial partners, the report says.
