World Bank says Tajik Rogun power plant financing off the table

DUSHANBE (Reuters) - Tajikistan has chosen not to borrow from the World Bank to finance the construction of the Rogun hydroelectric power plant, a bank executive told Reuters.

The former Soviet republic issued its debut $500 million Eurobond last year to raise money for the $3.9 billion megaproject, but it remains unclear where further funding will come from.

Cyrill Muller, World Bank vice president for Europe and Central Asia, said in an interview on the sidelines of a water management conference in Dushanbe that the bank would instead focus on upgrading another major Tajik hydro plant.

“The reason for us not financing Rogun is that the government had a number of choices on how to proceed with Rogun and they... wanted to accelerate the process and it was felt that the World Bank would be more helpful supporting other investments in the energy sector,” he said.

“In cooperation with the government we decided to finance the refurbishing of the Nurek power plant and that will be our major investment in the energy sector at this stage.”

Mountainous Tajikistan, one of the poorest ex-Soviet nations, believes it ranks eighth in the world with regards to hydroelectric power potential, but the Central Asian country currently utilizes less than five percent of that.

The Dushanbe government has hired Italy’s Salini Impregilo to build the world’s tallest dam on the Vakhsh River which will power six turbines, eliminating domestic energy shortages and enabling exports of electric power to countries such as Pakistan and Afghanistan.

It plans to launch the first turbine in December and start making cash from power sales to finance further construction. But the project may require additional financing before it starts paying for itself.

Tajikistan indicated in February it could issue more bonds to fund Rogun and the absence of World Bank financing makes such borrowing more likely.

At the same time, Muller said, improved relations between Tajikistan and its neighbor Uzbekistan - which had previously flatly objected to the dam construction - create good prospects for power exports.

The Nurek power plant whose refurbishment the bank has agreed to partly finance with a soft $225.7 million loan, produces three-fourths of Tajikistan’s power.

Reporting by Nazarali Pirnazarov; Writing by Olzhas Auyezov; Editing by Mark Potter