World Bank Group supports private sector investments in Afghanistan energy sector

KABUL (TCA) — World Bank Group Boards of Executive Directors on October 10 approved a financing package of $98.8 million consisting of guarantees, a loan, and swaps to support two gas-to-power energy projects in Afghanistan. The projects aim to increase the amount of domestically generated electricity while leveraging private financing for the country’s energy sector.

The financing package supporting the Sheberghan-Gas-to-Power Project entails a $12.8 million guarantee from the International Development Association (IDA), the World Bank Group’s fund for poorest countries.

The financing package supporting the Mazar-e-Sharif Gas-to-Power Project includes:

– A $12 million guarantee from IDA to backstop the ongoing payment obligation of Afghanistan’s power utility, Da Afghanistan Breshna Sherkat (DABS).
– A $23.8 million senior loan and $1.5 million in client risk-management swap from the International Finance Corporation (IFC). IFC will also be mobilizing $43.8 million in parallel loans for the project as mandated lead arranger.
– Political risk insurance amounting to $48.7 million from the Multilateral Investment Guarantee Agency (MIGA), provided to two private shareholders and a senior lender. The guarantees will provide protection against the risks of breach of contract, expropriation, transfer restriction and currency inconvertibility, and war and civil disturbance for up to 15 years.

“Afghanistan’s energy needs are enormous, and the new package will support a great step forward for the country’s development. Investing in the energy sector is key for the country to achieve its full growth potential,” said Henry Kerali, World Bank Country Director for Afghanistan. “Diversifying sources of electricity supply can help more Afghans benefit from reliable grid connections, improve employment generation and economic growth of the country, and reduce poverty. The World Bank Group stands with the Government of Afghanistan throughout the implementation of the projects to ensure their timely and effective completion.”

The Sheberghan Gas-to-Power Project will support the construction and operation of a greenfield 40 MW gas-to-power plant utilizing indigenous gas from the nearby Sheberghan gas fields in northwestern Afghanistan. The project will be implemented by the privately owned Bayat Power Electricity Services Distributor Company, which was established by Bayat Group. The new plant is expected to generate about 300 GWh of electricity annually, which will contribute considerably to increasing overall domestic energy generation. Primary beneficiaries of the project will be households and enterprises connected to the grid segment that will be served by the new power plant in Balkh, Jawzjan, Faryarb, Sar-e-Pul and other parts of the provinces in northern Afghanistan.

The Mazar-e-Sharif Gas-to-Power Project is a greenfield 58.6MW reciprocating engine power plant also utilizing gas from the Sheberghan gas fields. The plant is expected to generate about 404 GWh of electricity annually, accounting for the equivalent of nearly 28 percent of the country’s 2019 domestic power generation and 6 percent of total electricity supplied to Afghanistan in 2019. The project will be implemented by Afghan Power Plant Company, which was established by Ghazanfar Group, an Afghan conglomerate with operations in energy, transportation, construction and banking sectors. Project beneficiaries will be electricity consumers supplied by the grid segment into which the new power plant will feed. This includes Kabul, Mazar-e-Sharif, and Jalalabad. This project has been developed with support from the World Bank, IFC and MIGA to deliver a replicable public private partnership structure to attract long-term private investment for Afghanistan’s infrastructure, the World Bank said.

Avatar

Times of Central Asia