ADB Project to Bring Electricity to Poor in Rural Towns of Afghanistan

MANILA, PHILIPPINES - ADB today approved a US$50 million loan and grant assistance package for a power supply improvement project that will help improve the living conditions of about 1.2 million poor people in rural Afghanistan.

A highly concessional $26.5 million loan will finance the construction of 206 kilometers of a 110kV transmission network, while a $23.5 million grant will finance the construction and rehabilitation of associated substations and low-voltage distribution systems.

The project will cover 11 rural towns - Breshna Kot, Imam Sahib, Jalalabad, Khan Abad, Mehtarlam, Muhammad Agha, Puli Alam, Qarghayi, Sarepul, Surobi, and Taluqan - as well as adjacent rural areas in the northern, eastern, and southern provinces of Afghanistan.

More than 90,000 households, most of whom are poor, will be connected to the grid once the project is completed. The project will also offer about 18,000 electricity connection kits with affordable and flexible payment options.

"Access to electricity is essential for economic growth," says Sohail Hasnie, an ADB Senior Energy Specialist. "It will also help improve learning opportunities for children, allow home-based businesses to expand into small-scale commercial or industrial operations, and result in net savings to customers as electricity is cheaper than kerosene and fuelwood."

Years of conflict have severely damaged Afghanistan's power generation, transmission, and distribution systems, leaving most of the country's 28 million people with no access to reliable, modern forms of energy such as electricity, gas, and liquid fuels.

Only about 9% of the country has access to electricity. The country has no national transmission grid, and the overall condition of lines is very poor. Distribution systems are stretched beyond their technical and economic lives, and substations and low-voltage distribution networks have been either destroyed or are overloaded.

The project's components are the most critical ones in the Government's power master plan. The project also complements an earlier ADB project that is rehabilitating and reconstructing damaged transmission lines and substations in the north for importing power from neighboring countries.

A $750,000 technical assistance grant accompanies the project to strengthen project management, planning, design, implementation, and operation and maintenance of the Ministry of Energy and Water, the executing agency for the project.

As Afghanistan one of the poorest post-conflict countries in the Asia and Pacific region, Afghanistan is eligible for grants from ADB's concessional Asian Development Fund. ADB's loan and grant, both from ADF, will therefore finance the entire project cost of $50 million.

Special terms will also be applied to the loan. It carries a 40-year term, including a 10-year grace period with 1% interest charge throughout the term, to be capitalized during the grace period and charged to the loan account.

The project is due for completion in June 2008.