1. The Strategic Framework for the Central Asian Regional Economic Cooperation (CAREC) Program 2011-2020 (CAREC Strategy 2020) identifies energy as an operation priority with the vision of achieving (i) energy security through balanced development of the region's energy infrastructure and institutions; (ii) stronger integration of region's energy markets to make available adequate volumes of commercial energy in a reliable, affordable, financially sustainable and environmentally sound manner; and (iii) economic growth through energy trade. In 2012, the CAREC Energy Work Plan (EWP) 2013-2015 was adopted to ensure effective and timely achievement of the strategic objectives as laid out in the CAREC Strategy 2020. The EWP has six actionable elements to implement sector operational priorities, one of which is mobilizing funds for building energy assets (Element 4).
2. The CAREC Power Sector Financing Roadmap, to be prepared under the technical assistance (TA), will assess the capacity and willingness of CAREC countries to finance power infrastructure development from their own resources, and examine other potential sources of financing, for both national and cross-border projects . The legal and regulatory framework in the region that may impede upon cross-border projects will be reviewed. In particular, the TA will identify power projects with public-private-partnership (PPP) potential, and will highlight measures for stimulating private sector interest in the CAREC region's power sector. In addition, the TA will also review the energy strategy in the CAREC Strategy 2020 and aid in the implementation of Element 6 (Capacity Building and Knowledge Management) activities under the EWP 2013-2015. The concept paper was approved on 20 March 2014.
|Project Rationale and Linkage to Country/Regional Strategy
3. All CAREC countries have substantial investment needs for power sector development, as indicated by their national development plans and recent studies. According to the 2012 Power Sector Regional Master Plan involving four CAREC countries (Kazakhstan, Kyrgyz Republic, Tajikistan, and Uzbekistan) and completed in October 2012 through ADB technical assistance, an investment of about $36 billion is required over a 10-year period (2013-2022) for the rehabilitation and expansion of power infrastructure in these countries alone. The 10-year plan includes $32.8 billion of investment in generation and $3.2 billion of investment in the 500-kV and 220-kV transmission systems. The recently completed Afghanistan Power Sector Master Plan and the National Power System Expansion Plan for Pakistan, contain similarly challenging investment projections for both countries. For example, the Afghanistan Power Sector Master Plan has established a total investment requirement of $10.1 billion, including $7.3 billion for power generation and $2.8 billion for power transmission in the country.
4. The power sector financing requirements of the CAREC countries will be beyond the reach of some of these countries and will stretch the financial resources of others. Given the significant financing requirement of the region, the limited financing coming from the public sector for power infrastructure projects, there are urgent need to explore other possible sources of financing, including private sector funds. The same sentiment was highlighted in the CAREC EWP, 2013-2015, thus the identification by the ESCC of the necessity of this technical assistance to assess the capacity and willingness of these countries to finance power infrastructure development from their own resources, and examine other potential sources of financing, for both national and cross-border projects. In particular, the RETA will identify power projects with public-private partnership (PPP) potential, and will highlight measures for stimulating private sector interest in the CAREC region's power sector. Given the lack of an available financing roadmap and the capacity to develop such a roadmap, the TA will assist the CAREC countries to develop a power sector financing roadmap which will identify specific requirements for accessing funds, appropriate sustainable financing approaches and modalities for national as well as regional power infrastructure development within CAREC countries.
5. The overall energy strategy embedded in the CAREC Strategy 2020 would also need to be reviewed to consider current and prospective demands as well as emerging issues in the region. The TA will also aid in bridging the capacity gap in CAREC countries and provide for the implementation of capacity building programs.