Russia to resume work on the Rogun Hydroelectric Power Plant
It appears Russia may resume construction of the Rogun Hydroelectric Power Plant, following requests by Tajik authorities. Further, Inter RAO EES is to be put in charge of the Russian section of the project, valued at $3 billion. The share of ownership of the plant to be turned over to Russia has not been revealed, however, observers believe that Russia will insist on a controlling interest.
Russia and Tajikistan recently resumed negotiations over completion of the Rogun Hydroelectric Power Plant. In a letter from Tajik Prime Minister, Akil Akilov, to his Russian counterpart, Vladimir Putin, plans were outlined for the creation of a financial consortium for completion of construction of the power plant. It is believed that the World Bank is to be included in the consortium and Tajikistan invited Russia to also join. No details were reelased, but sources in the Foreign Ministry have implied that Inter RAO EES is to be put in charge of the project. Inter RAO EES has declined comment on such an agreement.
Construction of the Rogun Hydroelectric Power Plant began in the Tajik Soviet period. This hydroelectric power plant was to become the largest in Central Asia with six hydroelectric generating units generating 3.6 gigawatt. Russian Aluminium decided to join the project four years ago when Oleg Deripaska's company was supposed to join in paying the construction bill, along with Tajikistan, in return for 51% interest in the project. However, Tajikistan cancelled the treaty last summer, claiming failure on Russian Aluminium's part to finance the project. Russian Aluminium, however, countered that it had sponsored the technical and economic assessments. Speaking on behalf of the RAO Unified Energy Systems, its head, Anatoly Chubais, denied rumors that Russia wanted to leave the project. This April, the government of Tajikistan founded a joint-stock company for completion of construction with available capital of 116 million somoni, or $33.85 million. Annual state investments in the project, after 2009, are expected to exceed $79 million.
The Russian Foreign Ministry has further confirmed existence of the letter from the Tajiks. "Unfortunately, the letter does not say a word about the terms of participation. We'd like to know on what terms we will be investing Russian money in the project to forestall the necessity to await its return for decades afterwards," a Foreign Ministry official said. "As for the consortium, not a single foreign country has volunteered to join, to the best of our knowledge. Sure, the World Bank promotes the matter as best it can but it is not the World Bank that will be investing $2 billion in the project." In the meantime, World Bank officials declined to comment.
Sources in the Foreign Ministry say that Moscow hopes to sign a bilateral agreement on the hydroelectric power plant with Tajikistan and added that the draft accord was forwarded to Tajik authorities last December. However, they refuse to give details of discussions with the Tajiks.
Also, contrary to the outward appearance of the Tajiks, everything is not very simple regarding the project. Vladimir Yasinsky of the Eurasian Bank of Development (one of the potential participants in the project) claims that it was the 30 year period for recouping their investment that prevented Russian Aluminium from participating. On the other hand, this does not make the project unprofitable. "Economically speaking, the project is complicated but promising, made so by energy prices," Yasinsky said. Making money on the Rogun Hydroelectric Power Plant requires a guaranteed market amounting to 13 billion kilowatts per annum. "No such market exists at this point, due to the lack of power lines. Their construction in the southern direction - towards Pakistan, India, and Afghanistan - is required," Yasinsky explained.
Vyacheslav Kravchenko (Department of Structural Reforms of the Russian Energy Ministry) called the Rogun project interesting from both the political and economic stand point. A source close to the negotiations, however, said that "having only 25% is not what I'd call an interesting option, because the owner of only 25% will have no clout." The official assumed that Russia would drive a hard bargain, demanding control over the Rogun Hydroelectric Power Plant from the government of Tajikistan.
Kommersant, No 97, June 6, 2008, p. 14