This summary covers (i) equity investments by the Project Sponsors and (ii) non-shareholder loans and future interests by Deutsche Investitions- und Entwicklungsgesellschaft mbH (DEG) of Germany into Afghanistan Power Plant Limited (the project enterprise). MIGA has been requested to provide 15-year guarantees to the Project Sponsors and DEG for up to US$49.5 million in total against the risks of breach of contract, expropriation, transfer restriction and currency inconvertibility and war & civil disturbance. It has been proposed that MIGA will share the exposure risk by utilizing the MIGA Guarantee Facility (MGF) under IDA Private Sector Window (PSW).
The project involves the development, design, construction, operation and maintenance of a 58.56MW greenfield natural gas-fired reciprocating engine power plant and its associated facilities which include an access road and overhead transmission line. The project will be located in an industrial site approximately 20km west of the Northern Afghan city of Mazar-e-Sharif. Energy produced from the power plant will be sold to Da Afghanistan Breshna Sherkat (DABS), the national power utility in Afghanistan, under a 20-year Power Purchase Agreement. Gas will be supplied to the project enterprise by GoIRA, acting through Afghan Gas Enterprise (AGE) and Afghanistan Ministry of Mines and Petroleum (MoMP), under a Gas Supply Agreement.
Environmental Categorization
The project is a Category B under MIGA’s Policy on Environmental and Social Sustainability. This is a joint project with International Finance Corporation (IFC); in accordance with MIGA AIP, the MIGA disclosure is linked to IFC disclosure. Click here to view the Environmental and Social Review Summary prepared by the IFC for their proposed support to the project.
Development Impact
The project will contribute to reducing the energy gap in Afghanistan by increasing the domestic supply of power by approximately 30%, harnessing indigenous natural gas resources and diversifying away from energy imports, thus enhancing energy security. The project will improve the quality of electricity for grid-connected households and businesses, who currently experience significant daily power interruptions, as well as provide electricity for new connections. The ramp-up in installed capacity will support an enabling environment for private sector development. The project, one of the first IPPs in Afghanistan, could demonstrate the viability of private sector participation in the energy sector, encouraging other potential investors to enter this largely untapped market. The bankable PPP structure and project documents are likely to set industry standards.
