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Tajikistan Power Market Overview


Fitch Solutions Sector Intelligence  

 

    THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

    Tajikistan Power Market Overview

    • 25 May 2022
    • Tajikistan
    • Power
    Regulation And Competition

    The state remains a dominant player in electricity markets across the Central Asian region. Tajikistan is no exception. Generation, transmission and distribution are controlled by one state-owned actor - Barki Tojik. This makes for inefficient running of assets that were mostly put in place decades prior to the Soviet collapse, with rehabilitation of power plants and transmission and distribution networks sorely needed, but funding remaining a pertinent challenge.

    The Ministry of Energy (MEI) manages the electricity sector in Tajikistan. Furthermore, the state-owned company Barki Tojik is responsible for generation, transmission and distribution of electricity in Tajikistan. Given the country's monopolised power sector, inefficient running of the sector remains a problem in Tajikistan. Furthermore, Barki Tojik tends to provide electricity to end-users that is lower than the cost recovery level. Coupled with a lack of private investor interest, this has meant that Tajikistan has struggled to fund much needed investment in its decrepit infrastructure.

    With limited prospects for stimulating generation revenues due to low electricity tariffs, Tajikistan is heavily dependent on donor resources like the World Bank, Asian Development Bank and the European Bank for Reconstruction and Development to invest in the power system. This includes the rehabilitation of facilities such as the Nurek hydropower dam, as well as the Qairokkum hydropower plant.

    We highlight that energy intensity per unit of GDP in the country is more than twice the world average and three times that of the average in developed countries. This has also created particular issues during winter months, when hydropower generation declines due to falling water levels. Given that gas supplies in the countries dried up after Uzbekistan halted exports in 2012, gas heating has in large part been replaced with inefficient electrified heating. Given that hydropower (which makes up close to 95% of the domestic energy mix) generates power at a lower capacity during the winter, Tajikistan has suffered severe electricity shortages in the past.

    The electricity sector is defined by legislation put into force since the year 2000. Some of this legislation includes:

    • The 'Law On Energy' (2000) outlined that the energy sector will be allowed to function under different kinds of ownership. That said, government agencies or companies affiliated with the government run the sector, including setting tariffs, determining policies, and offering private investors concessions.
    • The 'Law On Privatisation of State Property' (amended as late as 2009) stipulates that the 3,000MW Nurek hydropower plant (Tajikistan's largest) and Tajik Aluminium Company are not to be privatised.
    Pricing

    Electricity tariffs in Tajikistan are set very low and mostly below the level needed for Barki Tojik to make a return on investment, preventing a cash flow that would allow for investment in new capacity or rehabilitation of ageing capacity. According to the World Bank, the average weighted billed tariff ran at about a 25% discount to the cost of supply earlier this decade.

    Illustrating the challenge for Barki Tojik to raise sufficient cash for investment, preferential electricity tariffs are provided for the military, pensioners and various other end-consumers. Collection of money for electricity is another key issue for Barki Tojik - with only 10% of farmers reportedly paying for the electricity they have consumed in the past. Reportedly, Given that Barki Tojik is heavily indebted due to these loss-making practices, the Tajikistani electricity grid is in dire need of investment in order to curb electricity losses.

    This has created substantial arrears, which includes tax, loans from the government and delayed payments to private power generators and other creditors. This, in turn, fails to create a setting in which investors are willing to invest, and we are therefore not optimistic on the country delivering on its Roghun hydropower megaproject.

    Current prices for 1 kWh of electricity in Tajikistan are 22.66 diram for residential customers, 55.14 diram for industrial and non-industrial customers, and 22.66 diram for federally funded institutions, including public utilities and sports complexes.

    Sustainable Energy Policies

    The country's Sustainable Energy for All framework sets out the following objectives to be reached by 2030:

    • Access to energy: ensure access to regular and reliable electricity to 5.6 million people, living in rural areas of Tajikistan.\
    • Energy efficiency: reduce energy losses up to 10% in power grids and up to 20% in thermal grids, as well as increase the efficiency of energy use in all economic sectors, irrigation systems and final users up to 20% against the baseline;
    • Renewable energy sources: increase energy production from renewable energy sources up to 20% against the baseline (year 2010) which corresponds to 10% share of RES in total electricity balance; to increase indigenous energy sources in energy sector from 59.3% in 2010 to 80% in 2030.
    This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings.

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