TAJIKISTAN: UPDATE ON POWER PROJECTS

UNCLAS SECTION 01 OF 02 DUSHANBE 000474

SENSITIVE
SIPDIS

DEPT FOR SCA/CEN
ASHGABAT PASS BOUCHER

E.O. 12958: N/A
TAGS: ENRG ECON PREL PGOV TI
SUBJECT: TAJIKISTAN: UPDATE ON POWER PROJECTS

DUSHANBE 00000474 001.2 OF 002



1. (U) Summary: The power situation in Tajikistan has eased
since the winter crunch. Water levels at the Nurek hydropower
station remain low, although this spring's abundant rains may
help. The fourth and final generator of Russian-built
Sangtuda-1 is expected to go online in mid-May. Iranian-built
Sangtuda-2 is not expected to be completed until the 2010 or

2011. The government's priority remains the enormous Roghun
project, although no firm schedule for completion is in sight.
There are several plans to build new transmission plans to link
Tajikistan with regional energy partners. The largest of these
may be endangered by reduced donor funding due to the financial
crisis. End summary.

Nurek
--------------


2. (U) The Nurek hydropower station continues to be the mainstay
of Tajikistan's domestic energy production, accounting for
three-quarters of the country's 4,700 Megawatt (MW) capacity.
Due to last year's drought, for the first time in Nurek's
37-year history its reservoir did not fill to capacity, which
meant less energy for the lean winter months. While this
spring's rainy weather has been a good omen for both agriculture
and energy, the Nurek reservoir has so far risen only 1.2 meters
over its low point and is almost 53 meters below full. The
major project this year for Nurek is a $54.77 million upgrade,
financed by the Asian Development Bank, of the station's aging
electrical switch yard, which is located on subsiding ground.

Sangtuda-1
--------------


3. (U) The Sangtuda-1 hydropower station, financed and built by
Russian energy giant RAO UES, is scheduled for completion on May
15, when Presidents Rahmon and Medvedev will attend an official
opening ceremony. Already, three of the station's four
generators are operating. Once the fourth is completed,
Sangtuda-1 is expected to generate 670 MW of electricity. Last
winter, the partially-completed Sangtuda-1 was able to pick up
some of the slack from underperforming Nurek. Russia retains a
75% share in the power station.


4. (U) On March 27, Sangtuda-1 became the subject of some
controversy when workers declared a one-day strike to demand
four months of back wages. Managers at Sangtuda said they could
not pay the wages because Tajikistan's state-held power company
Barqi Tojik had yet to pay a $10 million debt to the power
station. A week later Barqi Tojik announced that it was paying
2 million somoni ($520,000) to Sangtuda, part of which was to be
used to pay worker salaries.

Sangtuda-2
--------------


5. (U) The Sangtuda-2 hydropower station, located 25 kilometers
from Sangtuda-1, is being built by the Iranian firm Sangob, with
major financing from the Iranian government. It was initially
slated to be online by 2011, but Tajik authorities have asked
the Iranians to complete it a year earlier. Construction on the
station, which will contain two generators, began in February

2006. The estimated cost of constructing Sangtuda-2 is $220
million, including a $180 million preferential loan from Iran
(ten years at 5% annual interest) and $40 million in Tajik
government financing. As of March 2009 about $90 million had
been spent on construction.

Roghun
--------------


6. (U) Tajikistan's largest energy project under construction
remains the Roghun hydropower station, situated upstream from
Nurek, which is expected to generate 3,600 MW, almost doubling
the country's current capacity. Roghun is under the supervision
of the Presidential Administration rather than the Ministry of
Energy and Industry. The project was launched in the 1970s, but
lay idle for many years due to lack of financing and civil
strife. Construction restarted last year, and the government
expects to begin raising the dam in late 2009. It has earmarked
$150 million for the project this year. The first two
generating units of the station are supposed to begin operations
in three or four years, theoretically providing revenue to pay
for further construction of the dam.


7. (U) Uzbekistan has strongly opposed construction of Roghun,
saying it will reduce downstream water supplies; Tajikistan
presses ahead with the project regardless. The World Bank is
funding a feasibility study of Roghun which will take into
account the water needs of downstream countries. Recently the

DUSHANBE 00000474 002.2 OF 002


UNDP representative in Dushanbe, and the EU's Special
Representative for Central Asia have called for more attention
to small and medium hydropower projects, saying Roghun is too
expensive, too large, and too controversial to be built any time
soon, and Tajikistan needs more practical ways to escape its
chronic energy crisis.

Transmission Lines
--------------


8. (U) Key to Tajikistan's energy future is not just increasing
its generation capacity, but augmenting its ability to offset
seasonal energy imbalances by trading power with neighboring
countries. In November 2007 the Central Asia/South Asia
Regional Electricity Market (CASAREM) agreement was signed to
implement a $500 million power transmission line connecting
Central Asia with South Asia. In its first stage, the so-called
CASA-1000 project would transfer around 1,300 MW of electricity
from Tajikistan and Kyrgyzstan to Pakistan and Afghanistan.
CASAREM, the secretariat of which is based in Kabul, was
supposed to receive 40% of its funding from the World Bank, 40%
from the Asian Development Bank (ADB),and 20% from the Islamic
Development Bank (IDB). In February of 2009, however, the ADB
notified the Tajik Government that it was suspending its
contribution to the project due to a decline in available
funding brought on by the world financial crisis. The World
Bank and the IDB have not yet revealed their plans. The ADB
says it is ready to resume negotiations on CASA-1000, provided
that the Tajik government is prepared to discuss prioritizing
the project with the other partners -- Afghanistan, Pakistan,
and Kyrgyzstan.


9. (U) There are other, smaller transmission projects in the
works. In August 2008, under the Power Purchase Agreement
signed between Tajikistan and Afghanistan, electricity will be
transmitted from Sangtuda-1 to Pul-e Khumri in Afghanistan, via
a 220 kV line. The ADB is funding construction of this project
with a $50 million loan. Construction of the 120-kilometer line
is supposed to start this autumn and finish in spring 2010. In
addition, the Iranian government is funding a feasibility study
for a 500 kV line from Sangtuda to Kunduz, Mazar-i-Sharif,
Herat, and Meshhed.


10. (SBU) Comment: Tajikistan is still a considerable distance
from solving its chronic seasonal energy shortages. The
government remains fixated on big-ticket construction programs,
particularly the extravagant Roghun project. In fact, however,
Tajikistan may be better served by focusing on expanding its
regional energy trading. In that way, it can use its already
appreciable summer power surplus to trade for much needed
electricity in the winter. End comment.
JACOBSON