Afghanistan: Energy Sector Development Investment Program – Tranche 2

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At program preparation, Afghanistan had one of the lowest electrification levels and per capita electricity consumption in the world. In 2008, only about 9% of the population had access to intermittent public electricity, and per capita electricity consumption was as low as 21 kilowatt hours (kWh) per year. Cities such as Kabul received electricity only 2–3 hours a day.

To address the situation, the government in November 2008 entered into a financing framework agreement with the Asian Development Bank (ADB) for a multitranche financing facility (MFF) not exceeding $570 million to support the Energy Sector Development Investment Program.  The next month, ADB approved a $164 million loan and a $12 million grant from the ADB-administered Japan Fund for Poverty Reduction for tranche 1 of the MFF.

Tranche 1 financed the following subprojects: (i) North East Power System (NEPS) transmission line installation from Kunduz to Taloqan; (ii) NEPS distribution networks rehabilitation in Kunduz and Baghlan; (iii) NEPS system operation and maintenance; (iv) development of an off-grid small hydropower plant in Baharak, Badakhshan; (v) rehabilitation of wells at the Sheberghan gas field; (vi) preparation of feasibility studies for subsequent tranches; and (vii) establishment and operation of a project management  office (PMO) at the Afghanistan Electricity Corporation (DABS), the program executing agency (EA).

Tranche 2, the focus of this report, was approved by ADB for a $81.5 million loan in December 2009.  Focusing on connecting southwest Kabul to the NEPS, the tranche 2 project was part of a least-cost expansion program for electricity transmission and distribution to Afghan cities. At approval, it included physical and nonphysical components under three planned outputs: (i) transmission coverage expanded from Chimtala to southwest Kabul, (ii) Kabul distribution network in Dasht-e-Barchi (southwest Kabul) developed, and (iii) improved system planning and project management capacities in DABS. 

Output 3 was not implemented at DABS’ request due to the cost overruns of the physical components; but this did not adversely affect the project as EA capacity building was taken up by other development partners. The completion dates envisaged at appraisal for most of the subprojects were pushed back because of delays in procurement, land acquisition and resettlement, and security issues. At completion, the project achieved, albeit with delays, its system capacity targets, but missed its household connection target.  From 400 megawatts (MW) in 2010, grid connected supply rose to 1,450 MW in 2017. Due to budget constraints and low demand, only 23,060 household new connections were installed.

While the project fell short of achieving its expected outcome of expanded power sector services and stable power supply in Kabul, it nevertheless succeeded in providing Dasht-e-Barchi low cost and reliable electricity.  It was able to replace expensive diesel-generated electricity costing about $0.55 per kWh with grid-connected electricity costing $0.10 per kWh. The lower cost and increased reliability of electricity supply have accelerated industrial and commercial development by lowering the cost of business. It has also reduced poverty by creating employment and accelerating social development, and improved the environment by reducing greenhouse gas emissions.

The PMO established under tranche 1 assisted DABs in carrying out the project.

Project Information
Project Name: 
Energy Sector Development Investment Program – Tranche 2
Report Date: 
August, 2020
Main Sector: 
Project Number: 
Report Type: 
Goal 8: Decent Work and Economic Growth
Goal 9: Industry, Innovation, and Infrastructure
Loan Number: 
Source of Funding: 
Date Approved: 
3 December 2009
Report Rating: