ADB Approves $415 Million Grant to Support Afghanistan's Energy Security | Asian Development Bank

ADB Approves $415 Million Grant to Support Afghanistan's Energy Security

News from Country Offices | 6 December 2016

KABUL, AFGHANISTAN (6 December 2016) — The Asian Development Bank (ADB) has approved a $415 million grant to boost Afghanistan’s energy supply and strengthen the country’s cross-border trade in energy. 

“Insufficient energy supplies constrain growth and income opportunities that can fuel ethnic and regional tensions, as well as insecurity,” said Asad Aleem, Senior Energy Specialist in ADB’s Afghanistan Resident Mission. “This assistance will support the government’s $10.1 billion national energy supply program, which aims to expand power supply to boost economic growth and cut poverty.”

Afghanistan has seen energy demand grow by almost twice its economic growth rate from 2005 to 2012, with the country sourcing around 80% of its total supplies from neighboring countries. Reliance on energy imports, the small size of the domestic market, limitations in transmission and distribution networks, and governance and financing weaknesses leave energy security highly vulnerable. The national grid is also not synchronized with the systems of the four countries — Iran, Tajikistan, Turkmenistan, and Uzbekistan — from which Afghanistan imports power, resulting in higher costs and reduced reliability of supply.

The project will finance the new 500-megawatt back-to-back converter station — a critical step towards expanded power imports — at Dashte Alwan to connect a new 500-kilovolt interconnection line with Turkmenistan with another 500-kilovot line stretching to Kabul. The converter will allow Turkmen power into the Afghan grid under the 10-year power purchase and sales agreement signed in November 2015 between the two countries. In addition, it will construct a 180-kilometer 220-kilovot transmission line from Doshi to Bamyan to expand the grid to at least 8 additional provinces, distribute power to nearly 150,000 people, and provide redundancy to the existing transmission network.

The assistance comprises $188.23 million from the Asian Development Fund, $1 million from the People’s Republic of China Regional Cooperation and Poverty Reduction Fund, and $225.77 million cofinancing from the Afghanistan Infrastructure Trust Fund (AITF), which will be administered by ADB. 

ADB’s is Afghanistan’s largest development partner in the energy sector with cumulative grant assistance of nearly $2.2 billion all of which is on budget with the government. Its support is crucial given the government’s limited resources and the constraints on private investment. The program is supporting targets of the government’s national energy supply program, which include increasing the country’s electrification rate from 30% to 83% and lifting the share of domestic generation from 20% to 67% by 2030.

ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth, and regional integration. Established in 1966, ADB in December 2016 will mark 50 years of development partnership in the region. It is owned by 67 members—48 from the region. In 2015, ADB assistance totaled $27.2 billion, including cofinancing of $10.7 billion.