Tajikistan: Rogun dam budget spiral to make authorities sweat

Tajikistan’s existential project to build the colossal 335-metre-high Rogun hydropower dam is proceeding apace, but costs are spiralling, and to a level that is making it hard to see where the government is going to find the funds needed to finish the work.

To complicate matters for Dushanbe, this is happening against the backdrop of calls from environmental watchdogs for international development lenders to pause the allocation of any future Rogun funds to Tajikistan pending a fresh assessment of the project.

The extent of the budget overshoot is striking.

In a press conference on February 16, Finance Minister Faiziddin Kahhorzoda revealed that the government spent 5.2bn somoni ($475mn) on construction work at Rogun in 2023. That was 2.7bn somoni more than had been planned, he said.

The projected government spend for this year, meanwhile, is 5bn somoni. It is projected that 2.2bn somoni can be solicited from foreign-based parties, Kahhorzoda said.

When work on Rogun, a project that was in its origins the brainchild of Soviet engineers, resumed in earnest in 2008, the estimate for the overall cost stood at $3bn.

This climbed upward through the years.

In 2016, officials threw around the figure of $3.9bn. In mid-2022, the Energy Ministry announced $5bn would be needed for full project implementation. 

On February 1, Energy Minister Daler Juma offered a new forecast: $6.2bn. That is high, although admittedly quite a bit short of the $8bn prognostication he volunteered in an interview given to Reuters news agency in June 2022. 

While the budget balloons, the timetable is sliding.

Once completed, Rogun will be fitted with six 600-megawatt turbines, amounting to a total installed capacity of 3,600 megawatts. As Milan-based WeBuild (formerly Salini Impregilo), which has been contracted to implement the project, has claimed on its website, that is “the equivalent of three nuclear power plants.”

The first generating units were put into operation in November 2018 and September 2019 to much clamour, but there has been limited progress since then. 

State media accentuates the upside. It cites energy officials as saying that while insufficient water pressure is causing delays, the generating units in place have to date produced around 7bn kilowatt-hours of electricity. They furthermore value that volume of electricity at 1.5bn somoni ($137mn).

Current annual electricity production in Tajikistan, much of which is accounted for by the Soviet-vintage Nurek hydropower plant, is around 17bn kilowatt-hours.

Putting all this together, it implies that Rogun has, since the first generating unit began working, likely contributed to well under one-tenth of Tajikistan’s electricity output. 

In 2019, managers of Rogun hydroelectric plant reportedly predicted — possibly speaking in the spirit of hope rather than pragmatism — that a third generating unit would be installed within another two years. All six units were to be operational by 2026, according to their timetable. 

That was before COVID-19, however. The pandemic caused a major slowdown on work at Rogun and on other economic activity in the country. 

Another deadline is now in place.

“We intend to put the third unit of the Rogun hydroelectric power station into operation in 2025,” President Emomali Rahmon said in an address to the nation in December.

He noted in his speech that the project was employing 15,000 labourers and technicians.

When Rahmon speaks of Rogun in his speeches, he couches the project in talk of a “bright future” awaiting the country, saying that it should serve as a “source of pride” for every Tajik citizen.

A more sober reality is that Rogun is part of the race against time to keep the country’s economy afloat.

Despite the additional productive capacity added by Rogun, the population still has to endure annual rationing of electricity.

When the temperature sinks below a certain level, output from the Nurek hydropower plant grinds to a near-halt. Under the annually imposed economy regime due to end in March, as is customary, households outside the country’s largest urban centres endure blackouts from 8am to 5pm and then from 10pm to 5am.

Meanwhile, the rate of population growth means that demand for electricity will continue surging. 

The World Bank in 2022 estimated that Tajikistan had the “youngest and fastest growing population in the Europe and Central Asia region.”

“Children under six years old comprise 17 percent of Tajikistan’s population, while roughly one of every three people is under 15 years of age,” it said at the time.

State statisticians have said that the current population of Tajikistan is just a whisker over 10.1mn. Fresh figures from last week, based on birth and death data, showed a population increase of 200,000 in 2023. That represents a 2% rise.

Getting a clear and reliable idea of how much has been spent on Rogun over the past 16 years is tricky. Juma, the energy minister, threw out the figure of $3bn in 2022. 

Dushanbe-based news outlet Asia-Plus cracked some numbers to come up with an updated estimate earlier this month and arrived at around 40bn somoni, or $4bn.

Considering current projections, which Juma says were calculated with the assistance of international consultants, that leaves $2.2bn to go.

Tajikistan makes no secret of the fact that it is hoping for white knight investors to swoop in and provide the cash needed to get it over the line. 

But its efforts to get foreign funding so far have exposed it to considerable debt-servicing expenditure. 

In September 2017, the National Bank issued $500mn worth of eurobonds on the international market. That venture means Tajikistan is on the hook for around $850mn to be paid to investors by 2027.

Important chunks are arriving from here and there, though.

In December, the state-backed Saudi Fund for Development announced it was under a development loan agreement with Tajikistan contributing $100mn to fund the Rogun project.

A few months earlier, in May, China-dominated development lender Asian Infrastructure Investment Bank (AIIB) reportedly — according to President Rahmon’s office — pledged to extend a soft $500mn loan to Dushanbe for the same purpose. Talk on this particular commitment has gone a little quiet since then.

Back in 2022, a representative for the European Union’s investment arm, the European Investment Bank (EIB), told Reuters that it was exploring becoming “the largest investor” in Rogun. That conversation too has withered for reasons unreported.

Environmental concerns are another factor.

Last month, a coalition of nongovernmental groups — Rivers without Boundaries, the NGO Forum on Asian Development Banks and the Bankwatch Network — issued a collective appeal to development banks to demand public discussions on an updated environmental assessment of Rogun before parting with any funds. The World Bank-backed environmental impact assessment conducted in 2014 is now woefully out of date, the coalition argued in its statement.

“Over the last 10 years we accumulated new knowledge about the dynamics of climate change, new factors of impact on the hydrological regime of the Vakhsh River and the entire Amu Darya basin,” Evgeny Simonov, international coordinator for Rivers without Boundaries, was cited as saying. “Even the most superficial analysis shows that potential transboundary impacts of the [Rogun] hydropower plant are enormous, and their consideration in the new environmental assessment … is practically non-existent.”

This article first appeared on Eurasianet here.