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Project Concept Note I. Project Details Project Name Nurek HPP

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Project Concept Note I. Project Details Project Name Nurek HPP Project Concept Note I. Project Details Project Name Nurek HPP Rehabilitation (Phase 1). Component: Rehabilitation of three generating units, key infrastructure components of the plant, and replacement of six autotransformers. Subcomponent: Replacement of six autotransformers. Sector Power sector (hydropower) Project type Financing the purchase, supply, installation, and commissioning of six single- phase 500 kV / 220 kV autotransformers to replace the autotransformers installed at the HPP transformer substation that have reached the end of their service life and are in an unsatisfactory technical condition. Countries, in which the Republic of Tajikistan Project is to be implemented Investment Project location Republic of Tajikistan, Khatlon oblast, 70 km to the South-East of the city of and place of registration Dushanbe, close to the town of Nurek, on the Vakhsh River. Project summary Nurek HPP is the largest hydroelectric power plant in the Republic of description Tajikistan and in Central Asia, which supplies more than 70 % of all the electricity generated in the country and makes part of the Vakhsh HPP Cascade. The HPP installed capacity is 3,000 MW (8 hydroelectric units 335 MW each and 1 hydroelectric unit of 320 MW). The HPP was put into operation in 1972, the last unit was put into operation in 1979. At present, the HPP can potentially generate only 77 % of its design capacity due to its equipment obsolescence and lack of necessary maintenance. The capacity of its reservoir is 10.5 km3 (the working storage is 4.5 km3), its surface area is 98 km2, its length is about 70 km. The height of the dam is 300 m (until 2013, it used to be the highest dam in the world). The average annual power generation was over 10,223 million kWh per annum in 2014- 2016. The Nurek HPP Rehabilitation is conditionally divided into 2 phases: Phase 1 includes 3 components (US $350 million): • Component 1: Rehabilitation of three generating units, key infrastructure components of the plant, and replacement of six autotransformers. • Component 2: Enhancement of dam safety. • Component 3: Technical assistance from the IDA and the AIIB. Phase 2 (US $350 million) covers the finalisation of the Nurek HPP rehabilitation and involves the purchase of plant equipment to replace 6 hydropower units and rehabilitate 5 transformers (US $300 million), as well as the payment of project management fees and the costs of engaging an expert group, the development of an environmental management plan (EMP), technical assistance and contingencies (US $50 million). The detailed structure of Phase 2 will be developed in 2017-2018. Phase 1 is to be financed by the International Development Association (IDA, World Bank Group), the Asian Infrastructure Investment Bank (AIIB), and the EFSD. Project objectives The HPP rehabilitation through replacement of its physically and morally obsolete equipment. Project implementation • Improved HPP reliability and safety and, thus, uninterrupted power outcomes supply to domestic consumers, especially in winter, and to external markets (in summer); • Lower operation and repair costs; and 1 • HPP capacity recovery. Degree of Project • The World Bank, in cooperation with Tractebel Engineering, an preparation independent consultancy firm, reviewed the Project feasibility study and prepared a report (August 2016). It also made studies, held public hearings, and prepared the final Environmental and Social Impact Assessment Report (January 2017) and the Sedimentation Study Report (February 2016). • At the stage of the Project preparation, the Asian Infrastructure Investment Bank was mobilised to co-finance the project. • Barki Tojik OJSHC hosts the Project Implementation Unit. • The Resolution of the Government “On Approving the Conceptual Framework of the New Electricity Tariff Policies in the Republic of Tajikistan” (Instruction of the RT President No. RP-594 of 6 October 2015) has been drafted and is currently routed for approval. • An Action Plan of the End Recipient Financial Rehabilitation has been drafted and sent for approval. Project financing structure The total cost of the Nurek HPP Rehabilitation is estimated at US $700 million, of which US $350 million is the co-financing of Phase 1, where: Component 1 is US $210 million (sources of financing: IDA, EDB); Component 2 is US $30 million (sources of financing: IDA, AIIB); and Component 3 is US $10 million (sources of financing: IDA, AIIB). Requested EFSD financing limit: US $40 million; Currency of financing: US $; Type of financing: an investment loan; Objective of EFSD financing: to replace six single-phase 500 kV / 220 kV autotransformers; Total investment loan maturity, including the grace period: 20 years; Grace period for principal repayment: 8 years; The principal debt will be repaid in line with a schedule to be developed if the Project is approved. The investment loan Recipient will ensure the EFSD Project co-financing of at least US $10 million or less than 20 % of the Project cost, which makes US $50 million. The Recipient will provide the co- financing in the form of exemptions from taxes, duties, and other mandatory payments under contracts financed with the proceeds of the EFSD investment loan. The project implementation arrangement is presented in Annex No. 2 to this Concept Note State support of the Project The National Development Strategy of the Republic of Tajikistan for 2016- 2030 envisages the development of the energy sector as a priority strategic objective. Based on its Resolution No. 417 of 10 January 2016, the Government of the Republic of Tajikistan raised the electricity tariffs starting from 11 January 2016. Based on its Resolution No. 42 of 25 January 2017, the Government of the Republic of Tajikistan reduced the debt of Barki Tojik OJSHC to Sangtudin HPP-1 OJSC by TJS 12.5 million by transferring this amount to the authorised fund of Barki Tojik OJSHC as a founder. Therefore, the balance as at the beginning of 2017 amounted to TJS 654.27 million, with TJS 134.68 million billed, and TJS 64.72 million paid, and the stock outstanding as at 1 April 2017 was TJS 724.22 million (in Q1 2017, it increased by TJS 69.94 million). Estimated financial and The estimated indicators are to be updated after the terms of the loan are economic indicators of the defined. Project 2 Project environment impact In accordance with the findings of the final Environmental and Social Impact Assessment Report (August 2016), prepared by Tractebel Engineering, the Nurek HPP Rehabilitation Project will have no impact on the environment, the local communities, or the riparian states (Afghanistan, Uzbekistan, and Turkmenistan) as the Project does not entail significant changes in the mode of operation of the existing HPP and is associated exclusively with the rehabilitation (reconstruction) and modernisation of the existing HPP equipment and infrastructure. The World Bank disseminated official letters to notify the riparian states of the Project implementation. No objections have been received. Sources of debt repayment Proceeds from electricity sales. Expected security The loan is provided to the Government of the Republic of Tajikistan under an international agreement. The Republic of Tajikistan has got no arrears associated with its external public debt repayment and service. Project Company Open joint-stock holding company “Barki Tojik” (Barki Tojik OJSHC). Supplier selection plans At Project implementation. Sales plans Electricity generation and sales in the domestic and external markets. II. Project Company Details Project Company Open joint-stock holding company “Barki Tojik”, established and operating under the legislation of the Republic of Tajikistan. Barki Tojik OJSHC was established through reregistration of Barki Tojik SJSHC under Resolution of the RT Government No. 492 of 3 November 2001. Reregistration of the legal entity – registered with the Ministry of Justice of the Republic of Tajikistan on 27 November 2008 under No. 001-5563 (reregistered with the tax authorities on 19 April 2010). Registered office: 64 Ismoili Somoni Str., city of Dushanbe, 734026, Republic of Tajikistan. The Government of the Republic of Tajikistan is the only shareholder of the company (100 % stake). Additional details on the Project Company are presented in Annex No. 1 to this Concept Note. Project contacts Akhliddin Nuriddinzoda, Head of the Public Debt and Public Investment Mobilisation General Directorate, Ministry of Finance of the Republic of Tajikistan; Mirzo Ibrokhim Ismoilzoda, Chairman, Barki Tojik OJSHC; Ubaidullo Nazarovich Habibov, Head, Project Implementation Unit “Reduction of Energy Losses”, Barki Tojik OJSHC. Minister of Finance of the Republic of Tajikistan Abdusalom Karim Qurboniyon The document asserting the authority: Decree of the President of the Republic of Tajikistan No. 86 of 29 November 2013. 3 Annex No. 1 to the Concept Note of the Nurek HPP Rehabilitation Project (Phase 1). Component: Rehabilitation of three generating units, key infrastructure components of the plant, and replacement of six autotransformers. Subcomponent: Replacement of six autotransformers Overview of Project Company Open joint-stock holding company “Barki Tojik” (Barki Tojik OJSHC, the Project Company) is the successor of sate company “Tajikenergo”, which was founded in 1936. Barki Tojik OJSHC was established through reregistration of Barki Tojik SJSHC under Resolution of the Government of the Republic of Tajikistan No. 492 of 3 November 2001 (registered with the Ministry of Justice of
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