Cablegate: President Karzai Inaugurates Usaid-Funded Kabul Diesel

VZCZCXRO7076
PP RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #2670/01 2451449
ZNR UUUUU ZZH
P 021449Z SEP 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 1301
INFO RUCNAFG/AFGHANISTAN COLLECTIVE

UNCLAS SECTION 01 OF 02 KABUL 002670

SIPDIS

E.O. 12958 N/A
TAGS: EAID ENRG ECON SENV EINV PREL AF
SUBJECT: President Karzai Inaugurates USAID-funded Kabul Diesel
ower Plant

REF: Kabul 2363

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Summary
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1. (U) President Karzai and Energy and Water Minister Ismail Khan
presided over the inauguration of the first phase of Kabul's
USAID-financed 105 Megawatt (MW) diesel-fired power plant near Kabul
on August 5. President Karzai thanked Ambassador Eikenberry, USAID
Director Frej, and the U.S. people for the US$ 300 million plant
that, will provide backup power to more than half a million Kabul
residents during winter peak use once completed in December 2009.
Looking ahead, the Afghan government seeks to diversify their energy
matrix to exploit Afghanistan vast hydro and hydrocarbon potential.
End summary.

2. (U) The Kabul 105MW "Tarakhil" high-efficiency diesel-fired power
plant will provide power to more than half a million Afghans when
the project is completed later this year. Construction of the US$
300 million USAID-funded project began in 2007, and the initial
phase of the project (powered up on August 5) will provide 35MW of
power to over 200,000 residents of Kabul. When complete, the plant
will include 18 diesel engines, each providing approximately 6.3MW.
The first six engines have been installed, and the remaining 12
engines are scheduled to become operational by December 2009, in
time to provide energy through winter's high-demand. The plant will
provide an estimated 150 permanent Afghan jobs (including a number
of skilled technical positions); at peak construction, the project
employed 500 Afghans.

3. (U) The televised dedication ceremony featured speeches by
President Karzai, Energy and Water Minister Ismail Khan, and
Ambassador Eikenberry. President Karzai thanked the Ambassador and
the people of the United States for their "investment in
Afghanistan." In his response, the Ambassador reminded his audience
of the situation eight years ago, when there was "darkness across
Kabul and Afghanistan...darkness from political oppression,
intolerance and isolation--and a literal darkness due to the absence
of critical infrastructure--including electricity." By contrast, he
continued, Afghanistan is now in the process of its first Afghan-led
elections, and the U.S. people are proud of their contributions to
Afghanistan's development future through projects like Tarakhil.

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The Way Forward for Tarakhil
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3. (U) USAID's prime contractor, Louis Berger/Black & Veatch Joint
Venture (LBG/B&V), is committed to a December 2009 deadline to
complete the entire plant. A variety of subcontracts still require
approval, and USAID must also modify the contract budget to reflect
actual (higher than expected) spending trends.

4. (U) An important component of the project involves training
Afghans to operate the plant. An initial group of thirteen utility
staff are currently being trained in plant operations and
maintenance through April of next year, with another twenty-seven to
be added to the course over time. In addition, utility staff will
be trained in sub-station management and engine maintenance. When
the USAID contract ends in April 2010, the electrical utility will
likely hire these staff.

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Comment
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5. (SBU) According to the most recent estimates, Afghanistan has an
installed grid-connected capacity of almost 700MW, of which 400MW
are operating. Only twenty percent of the population has access to
grid-supplied public power, however, and often only on certain days
for a limited number of hours. Although Kabul has only fifteen
percent of Afghanistan's population, it accounts for over forty
percent of the country's 1.6 million MWh of electricity consumption.
Isolated diesel generation (from private generators) has increased
dramatically since 2002 and will continue to play a large role in
power supplies, especially in rural areas. Diesel generators are
among the most costly sources of electricity at over forty cents per
KWh (by comparison, imported power and existing hydro dams provide
power at less than ten cents per KWh.)

6. (SBU) Intended primarily as back-up during peak-use times,
Tarakhil's electricity production falls in the middle of this price
range at an estimated 26 cents per KWh. Kabul electricity users do
not pay this price, however, because the GIRoA subsidizes
electricity from the grid. The government's inability to charge
grid users based on level of use creates an additional de-facto
subsidy through illicit consumption (in Kabul, the electricity
utility DABS is only able to charge for about 50 percent of
commercial and residential use and only 60 percent of government
use.) For these reasons, the energy sector is currently a major
drain on government resources. Illicit or unmetered use also

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encourages inefficiency because users do not pay the real price for
what they use. The GIRoA has agreed to phase out electricity
subsidies over the next five years, and USAID is working with the
Ministry of Energy and Water to commercialize the electricity sector
to increase efficiency and decrease the sector's drain on government
coffers.

7. (SBU) Diesel power plants are relatively costly and dependent on
imported fuel supplies and so potentially vulnerable to insurgent
sabotage. To diversify its energy sources and expand national
energy production in line with the Afghan National Development
Strategy, the Inter-Ministerial Commission for Energy (ICE) and
international donor community are investigating "homemade" energy
sources such as hydro, hydrocarbons, and renewables (wind, solar,
and micro-hydro). Afghanistan's northern gas fields in Jawzjan
province have attracted interest from large international investors,
and the Aynak copper mine contract requires China Metallurgical to
build a 400MW coal-fired power plant to support the mine (and to
provide 200MW to the Afghan national grid). Moreover, the GIRoA is
intent on harnessing Afghanistan's hydropower (septel).
Diversification will improve Afghanistan's power situation but also
require increased donor participation to build Afghan capacity. End
comment.

Eikenberry

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