Afghanistan: Energy Supply Improvement Investment Program (Formerly Multitranche Financing Facility II: Energy Development 2014-2023)

Sovereign Project | 47282-001

Summary

The $570-million MFF1 to assist the government in developing the energy infrastructure, improving operational efficiency and increase electrification rate, was approved in 2008. MFF1 is nearing completion with all projects under implementation. While MFF1 faced start-up challenges, progress has improved with all contracts under tranches 1, 2 and 3 either awarded or to be awarded by Q4 2013. Contracts under tranche 4 are expected to be awarded in Q1 2014. President's approval for the final tranche 5 will be requested in October 2013. Compliance with grant covenants and undertakings is satisfactory.

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Project Name Energy Supply Improvement Investment Program (Formerly Multitranche Financing Facility II: Energy Development 2014-2023)
Project Number 47282-001
Country Afghanistan
Project Status Proposed
Project Type / Modality of Assistance Grant
Source of Funding / Amount
MFF Facility Concept: Multitranche Financing Facility II: Energy Development 2014-2023
Asian Development Fund US$ 750.00 million
Afghanistan Infrastructure Trust Fund US$ 110.00 million
Strategic Agendas Inclusive economic growth
Regional integration
Drivers of Change Partnerships
Sector / Subsector Energy - Energy sector development and institutional reform
Gender Equity and Mainstreaming No gender elements
Description

The $570-million MFF1 to assist the government in developing the energy infrastructure, improving operational efficiency and increase electrification rate, was approved in 2008. MFF1 is nearing completion with all projects under implementation. While MFF1 faced start-up challenges, progress has improved with all contracts under tranches 1, 2 and 3 either awarded or to be awarded by Q4 2013. Contracts under tranche 4 are expected to be awarded in Q1 2014. President's approval for the final tranche 5 will be requested in October 2013. Compliance with grant covenants and undertakings is satisfactory.

The impact is that Afghanistan will be a energy secured while delivering quality electricity supply to the majority of the population. The outcome will be a reliable year-round electricity supply available to a majority of the population. The physical outputs will be (i) a 500- kilovolt (kV) connection with Turkmenistan; (ii) a 220-kV connection of North East Power System and South East Power System, and priority distribution expansions; (iii) rehabilitation of Sheberghan gas wells; and (iv) renewable energy supply to off-grid customers. A tentative output is a thermal power plant. The non-physical outputs will be DABS' improved capacity building in planning, organizational strengthening, and utility commercialization; and improved capacity building of MEW and MOMP in regulatory functions and preparation of feasibility studies for the Baghdara and Sarobi hydropower plants.

Project Rationale and Linkage to Country/Regional Strategy

The proposed Afghanistan energy sector multitranche financing facility (MFF) will finance an investment program in the power and gas subsectors. In the power subsector, generation (conventional and renewable), transmission (domestic and regional), and distribution (on and off grid) projects are proposed; while well rehabilitations are proposed in the gas subsector. A project preparatory technical assistance (TA) will conduct due diligence for the MFF and tranche 1. The investment program will increase electricity supply and access to electricity and increase gas supply for electricity production and industrial uses.

Strategic Context. Afghanistan is a net energy and electricity importer. While renewable energy and fossil fuel resources exist, these are still to be developed. Electricity is a growing portion of total energy consumption with connection rates having increased from 7% in 2003 to 28% in 2011 when demand was 670 megawatts (MW) and electric consumption was 3,400 gigawatt-hours (GWh). Domestic generation capacity is 470 MW 250 MW hydropower and 220-MW thermal power with energy production (mainly hydropower) in the range 800 1,000 GWh per year since 2000. Growing demand has been met by electricity imports which represented 73% of total supply in 2011. By 2032, demand is forecast to reach 3,500 MW and electric consumption at 18,400 GWh. Meeting this demand requires all viable import and domestic sources to be developed.

Today, Afghanistan imports electricity from Iran, Tajikistan, Turkmenistan, and Uzbekistan. Afghanistan electricity system is not synchronized with any neighboring system which, apart from Iran and Turkmenistan, are themselves not synchronized with each other. This poses operational challenges for Afghanistan who is required to split its system into 10 electric islands thereby increasing costs and reducing reliability of supply. Development of a unified Afghanistan grid is planned with asynchronous interconnection with neighboring countries to be achieved through high-voltage direct-current back-to-back convertor stations. A unified grid will allow Afghanistan to benefit from being an electricity transit country between energy-rich Central Asia and energy-poor South Asia, and be an anchor country of the regional Turkmenistan-Uzbekistan-Tajikistan-Afghanistan-Pakistan (TUTAP) interconnection concept.

Investment Program. Afghanistan Power Sector Master Plan (the Master Plan) identifies the need to construct new gas, coal and hydro power plants and sets out a program of investments. Gas and coal power plants are being developed by the private sector and development partners are assisting in rehabilitating existing and constructing new hydro plants. While domestic projects will eventually reduce dependency on imports, in the medium term, they will not meet forecasted demand meaning high reliance on imports will continue. Afghanistan's strategy is to prioritize imports while supporting development of domestic generation.

Impact Afghanistan is a net exporter of electricity while delivering quality supply to its population.
Outcome Reliable year-round electricity supply available to majority of Afghanistan population.
Outputs

Physical:

500-kV connection with Turkmenistan and associated 270-kV expansion

Physical

220-kV connection of NEPS and SEPS, and associated distribution expansion

Rehabilitation of Sheberghan gas wells and renewable energy supply to off-grid customers

New thermal power plant (tentative)

Non-Physical:

Improved capacity of DABS in planning, organizational strengthening, and utility commercialization; and of MEW and MOMP in regulatory functions.

Hydropower plant feasibility studies

Geographical Location North, East and Western part of Afghanistan
Summary of Environmental and Social Aspects
Environmental Aspects The project will be classified category B for environment. EA will prepare an initial environmental examination (IIE) report, including an environmental management plan (EMP) in accordance with ADB's Safeguard Policy Statement (2009). The environmental impacts anticipated during the construction are envisaged to be site-specific and temporary and can be mitigated through implementation of the EMP. Potential environmental impacts of the project during operations include fragmentation of the bird habitats and the electrocution or injury of birds through collision and contact with wires. The EMP mitigation measures will be developed after thorough consultations and careful routing of the transmission line to be undertaken during detailed design, specially designed poles, conductors, and insulators; and the provision of bird diverters. The draft initial environmental examination report will be disclosed on the ADB's website by Q3 2015. The current security situation along the line route has made it difficult to consult effectively with communities. The public consultations will be conducted and the IIE and EMP updated prior to construction. Implementation of the EMP will be reported through environmental monitoring reports, which will be submitted to ADB semiannually. Environmental specialists of the implementation consultant will provide additional support to the PMO.
Involuntary Resettlement

The project is category B for involuntary resettlement. Based on the preliminary project design, a land acquisition and resettlement plan (LARP) will be prepared in close consultation with affected households and will be disclosed on ADB's website during Q3 2015, in accordance with ADB's Safeguard Policy Statement. A detailed socioeconomic survey will be accird out in Q2 2015. Once the contractor completes the detailed design, DABS will update the LARP and submit it to ADB for approval. No civil works will start until the LARP is fully implemented by DABS. The transmission line will run mainly through government land along the existing 220-kV transmission line. The substation site is owned by the government.

Implementation of the LARP will be monitored semiannually and a report will be submitted to ADB. The report will include the number of affected households that have been paid compensation, the amount paid, and the locations where compensation was completed and structures demolished, if any.

Indigenous Peoples The project is category C for indigenous peoples. The field social survey found that no ethnic minority, as defined by ADB's Safeguard Policy Statement (2009), will be involved in or affected by the project.
Stakeholder Communication, Participation, and Consultation
During Project Design Project design, implementation and supervision consultants will undertake comprehensive analysis and stakeholders consultations (in accordance with ADB's Social Safeguard Policy) to factor in all land acquisition, resettlement and environmental considerations into projects design.
During Project Implementation Consultation and information sharing with local communities will be made. Necessary social safeguards and environmental analyses will be undertaken and updated once the desgn work is initiated for sub-projects. Relevant documentation will be approved by ADB experts before contractor could be mobilized to begin construction activities at project sites.
Responsible ADB Officer Asad Aleem
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Energy Division, CWRD
Executing Agencies
Da Afghanistan Breshna SherkatChaman Houzouri,Kabul,Islamic Republic
of Afghanistan
Ministry of Mines_and PetroleumPashtonistan Watt,Kabul, Islamic
Republic of Afghanistan
Timetable
Concept Clearance 19 Nov 2013
Fact Finding 31 Aug 2015 to 04 Sep 2015
MRM 28 Sep 2015
Approval 27 Nov 2015
Last Review Mission -
Last PDS Update 18 Mar 2015

Safeguard Documents

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