Daily Nation
Friday, October 11, 2002

Aga Khan fund brings light to Tajik province

GOUVIEUX, France: In an ambitious and innovative investment in one of the poorest regions in the world, the Aga Khan Fund for Economic Development (Akfed) and the International Finance Corporation (IFC) have joined forces to develop a new electricity generation and distribution project in a remote eastern province in Tajikistan.

The project will boost the region’s inadequate electricity supply, improve health conditions, reduce environmental degradation, and contribute towards the region’s economic recovery.

The $26 million project, established with the support of the government of Tajikistan, will enable the creation of a new energy company to generate and supply electricity in the Gorno-Badakhshan region that spans the Pamir mountains of eastern Tajikistan.

The region, poorly supplied by decaying Soviet-era hydropower plants, suffers from an electricity grid on the verge of collapse. For the past 10 years, the 250,000 residents of Gorno-Badakhshan – who face sub-freezing winter temperatures – have survived by using wood fuel for their heating and cooking needs, decimating the region’s tree cover and creating acutely high levels of indoor pollution.

The new company – Pamir Energy Company (PamirEnergy) – will complete a partly constructed Soviet-era power plant, increasing the capacity from 14 MW to 28MW, and operate another 8MW hydroelectric plant in the city of Khorog, the main town of the region, as well as several other smaller plants totalling 30 MW of installed capacity.

Electricity capacity will also be augmented by improving transmission and distribution facilities and adding a regulating structure to a nearby lake.

As part of the arrangement, PamirEnergy will take over assets currently controlled by the state utility, Bark-i-Tajik, assuming responsibility for the 30,000 electricity customers and for improving and expanding the supply.

Akfed will invest $8.2 million in equity in the new company, while the IFC – the private sector development arm of the World Bank – will invest $8 million, of which $3.5 million will be in equity and $4.5 million in debt.

The World Bank’s International Development Association (IDA) is also participating through a key concessional loan of $10 million to the Tajik government. The loan will support the project by helping to keep tariff rates within the narrow limits of what people in the region can afford. In addition, the Swedish government will provide a grant of about $5 million. It has already provided critical support to the project at its early stages with $620,000 in grants that helped pay for technical assistance and legal fees.

In 1994, the Aga Khan Development Network initiated a multi-phase rehabilitation programme for a 28 MW plant outside Khorog, bringing into operation two 7 MW turbines planned and partly installed at the end of the Soviet period.

In 1998, Akfed approached IFC about potential co-operation in expanding the electricity network. Intensive efforts led to a public-private partnership model as the best solution.

Mr Anwar Poonawala, an Akfed Director, said: "PamirEnergy is about empowerment in more ways than one...Akfed sees the partnership with the IFC, IDA and Swiss Government as a model replicable in poverty-stricken areas of other countries."

Francisco Toureilles, IFC’s Director for Power Investments, added: "The financing challenges for this project were exceptional, but so are the needs. The energy shortages in Gorno-Badakhshan substantially stifle economic activity. Without an adequate electricity supply, the people of this remote region of Tajikistan will remain mired in poverty. This project is an excellent example of how IFC and IDA can work together with the private sector, donors and governments in developing sustainable projects in poor and remote regions and help to reduce poverty and improve the quality of life of the population."

AKFED is the economic development arm of the Aga Khan Development Network (AKDN), a group of private, non-denominational development agencies seeking to improve opportunities and living conditions in specific regions of the developing world, especially Africa and Asia.

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