Uzbekistan's economic development has long been constrained by its weak power infrastructure. The recent signing of the Navoi-Yoshlik 500kV power transmission project between China Energy Engineering Corporation (CEEC) and Uzbekistan's National Electric Grid Company (NEGU) presents a Chinese solution to this bottleneck, marking a significant milestone in bilateral energy cooperation and showcasing China's innovation in international engineering contracting models.
Project Overview: A Critical Step in Grid Modernization
The Navoi-Yoshlik project involves constructing a 400-kilometer 500kV transmission line, building a new 500kV substation, and expanding existing substations at both ends. Spanning five key regions—Navoi, Samarkand, Jizzakh, Syrdarya, and Tashkent—the project will significantly enhance power transmission capacity and grid stability in central Uzbekistan, providing robust energy support for local economic development.
The EPC+F Model: Integrating Financing with Engineering
The project adopts the innovative "EPC+F" (Engineering, Procurement, Construction plus Financing) model, which combines traditional EPC services with financing solutions. Under this arrangement, the contractor manages the entire project lifecycle while assisting with financing closure, creating a "finance-driven EPC" approach particularly suitable for capital-intensive infrastructure projects in power, municipal, and transportation sectors.
Key operational mechanisms of the EPC+F model include:
- Clear role division: The client defines technical standards while the contractor (e.g., CEEC) oversees design, procurement, and construction, with Chinese financial institutions providing loan or guarantee support.
- Financial closure as core: Funds are disbursed according to project milestones after financial closure, with payments made directly to project accounts to mitigate execution and settlement risks.
- Flexible contracts: Lump-sum or turnkey contracts are combined with deferred payments, guarantees, and insurance to protect stakeholders. In some cases, contractors may only provide financing assistance while the client retains financing responsibility.
- Regulatory compliance: The model maintains clear boundaries from BT (Build-Transfer) arrangements to avoid creating government implicit debt, with funding sources and budget allocations strictly complying with regulations.
Advantages and Risk Management
The EPC+F model offers multiple benefits:
- For clients: Alleviates fiscal pressure, accelerates project timelines, and delivers operational-ready facilities—particularly valuable for developing nations.
- For contractors and financiers: Secures cash flow through financial closure, reduces coordination costs, and promotes the export of Chinese technologies, standards, and equipment.
- For host countries: Stimulates local employment, industrial upgrading, and infrastructure modernization while improving living standards.
However, the model carries inherent risks requiring careful management:
- Financing costs: Interest rate fluctuations necessitate optimal financing solutions.
- Currency risks: Multi-currency settlements may impact returns, requiring hedging instruments like forward contracts.
- Guarantee structures: Requires careful design to protect stakeholder interests.
Risk mitigation strategies include political risk insurance, completion guarantees, performance bonds, and clear specifications for operational responsibilities and quality assurance.
Conclusion: A Blueprint for Global Infrastructure Development
The Navoi-Yoshlik project exemplifies China's successful application of the EPC+F model, offering Uzbekistan critical support for grid modernization while providing a reference for infrastructure development in other emerging economies. As the Belt and Road Initiative progresses, Chinese enterprises continue to leverage their integrated advantages in financing, technology, and engineering to contribute to global infrastructure advancement.