In Debt Dispute with Tajikistan, Russian-Controlled Hydropower Plant Threatens Shutdown
David Trilling Dec 10, 2013
Just as Tajikistan’s annual winter energy crisis begins, the country’s second-largest hydropower dam may be forced to shut operations due to what the Russian-controlled company that owns the dam calls unfair treatment by authorities.
Tajikistan’s state electricity-distributing monopoly, Barqi Tojik, has been refusing to pay the company, Sangtuda-1, for its power. This seems to have left Sangtuda-1 short on cash to pay its taxes, so the state tax committee has frozen the company’s accounts in Tajikistan, the company says.
The story of the Sangtuda-1 hydroelectric power plant, which produces about 15 percent of Tajikistan’s electricity, is a cautionary tale for foreign investors and for anyone hoping the country's troubled electricity sector can be reformed. Ever since Russia pumped in about half a billion dollars and opened the 670MW facility in mid-2009, it’s found Barqi Tojik unable to pay. In a December 4 statement, the Sangtuda-1 company, which is 75 percent owned by the Russian government, said it may be “paralyzed” and will have to shut down in a few days – that is, this week. (Sangtuda-2 is a smaller plant being built by Iran, which is years behind schedule.)
The dispute is unlikely to help Tajikistan’s campaign to attract investment to build the tallest hydropower dam in the world, Rogun.
Part of the problem is the low cost of electricity, which amounts to a state subsidy the state cannot afford. “At 2.25 cents/kWh, Tajikistan’s current electricity tariffs are amongst the lowest in the world,” said a World Bank study last year that called for at least a 50 percent price increase “as soon as possible.” Low tariffs create additional stress on limited and aging infrastructure: “Demand for electricity is unusually high in Tajikistan because electricity prices are low and there are limited options for heating.” Seventy percent of the population experiences “extensive” annual blackouts, according to the World Bank. Eighty percent of companies say an unreliable power supply is a “major obstacle to doing business.”
The government resists raising prices, however, possibly fearing public anger.
Moreover, the TALCO aluminum smelter, which uses about 40 percent of Tajikistan’s electricity, enjoys subsidized rates averaging 1.8 cents/kWh. (TALCO is highly opaque and the profits are believed routed offshore to enrich senior government officials.)
A Barqi Tojik spokesman refused to speak to EurasiaNet.org. But Asia-Plus spoke to the Energy Ministry, which says it is negotiating with Barqi Tojik to pay off part of the debt so Sangtuda-1 can pay its taxes. "By no means will the hydropower plant stop. We will not let this happen. We intend to help Barqi Tojik resolve its financial problems. Regarding the tax committee, it has the right to implement such sanctions against taxpayers who do not fulfill their tax obligations," an Energy Ministry official told Asia-Plus.
Sangtuda-1 has proposed a tax write-off to compensate for some of Barqi Tojik’s delinquent payments, but the head of the tax committee isn’t interested. "Regardless of the fact that the hydropower plant is a strategic object, for the committee it is an ordinary tax payer. Because Barqi Tojik is a monopolist and the single buyer of electricity, several times we have given Sangtuda-1’s management extra time, but they didn’t pay,” Rustam Soliev, head of the tax committee, told Radio Ozodi on December 6.
Even if the conflict is resolved and operations at the plant continue uninterrupted, the episode demonstrates how the state's double-dealing and mismanagement is as much a danger to Tajikistan’s dilapidated energy system as is its aging equipment.