World Bank agrees Afghanistan CASA-1000 power project restart amid neighbouring nations’ “stranded asset” fears

World Bank agrees Afghanistan CASA-1000 power project restart amid neighbouring nations’ “stranded asset” fears
Though solar and other electricity generation projects are increasingly common in Afghanistan, the country still has a severe power deficit. / USAirForce/Airman1stClass Nadine Y. Ba, pub domain
By bne IntelliNews February 25, 2024

The World Bank said on February 23 that it has agreed to restart the Central Asia-South Asia Electricity Transmission and Trade Project (CASA-1000) in Afghanistan amid concerns among the other participating countries—Kyrgyzstan, Tajikistan and Pakistan—that they risk $1bn of stranded assets.

However, it added that the resumption would only take place within a ring-fenced structure that would ensure all construction payments and future revenue are managed outside of Afghanistan and do not involve interim Taliban administration systems. The structure would also mean a strengthened commitment to the use of international consultants to supervise progress and third-party monitoring to verify progress and certify contractor invoices, it said.

The $1.2bn CASA-1000 regional power project is designed to interconnect the power grids of the four participating countries, allowing for hydro power-generated electricity to be exported from the two Central Asian states to Afghanistan and to Pakistan via Afghanistan.

The project was approved by the World Bank board in March 2014 with financing from the International Development Association (IDA), but in Afghanistan it was paused, with all implementation activities stopped, in the wake of the return to power of the Taliban in August 2021 after the exit of the US and allies.

Before the project was paused, about 18% of the towers for the Afghanistan portion of the CASA transmission line had been erected and about 95% of the materials and equipment needed to complete the project in the country had been supplied, according to the World Bank.

Despite the Afghanistan pause, the Kyrgyz Republic, Tajikistan and Pakistan continued with the implementation of CASA-1000 and construction activities are nearly complete in all three countries, it added.

The World Bank added in a statement: “The completion of the Afghanistan portion is critical as it is the key inter-linking country for the CASA-1000 transmission line. The work in the three other countries is nearly complete and they have started to repay loans to the World Bank and other financiers. If the CASA-1000 project is not completed and operationalized, there will be significant economic and financial losses for the Kyrgyz Republic, Pakistan and Tajikistan – most notably a $1 billion worth of stranded assets.”

CASA countries, the World Bank observed, have explored options to bring in private financing to cover the costs of completing project activities in Afghanistan. “As no investors or banks expressed interest, the countries have asked the World Bank to resume the project in Afghanistan by continuing its original IDA financing to complete the project. The World Bank has therefore decided to resume CASA-1000 in a ring-fenced manner,” it added.

The ring-fenced resumption, said the World Bank, would be in two phases: construction, expected to take three years, and operations after that. In both phases all payments would remain off-budget outside of Taliban administration control and offshore, while the construction phase would use existing contractual arrangements, with firms paid outside of Afghanistan, using existing IDA16 financing, it also stated.

The existing $110mn uncommitted balance in the project that was paused in 2021 will be used to resume the project, the World Bank noted, adding that no new IDA resources are proposed or anticipated for the completion of project activities in Afghanistan.

Its statement concluded: “During the project construction phase, the World Bank will make payments directly to the offshore accounts of international contractors and consultants, based on verification of invoices by the independent monitoring agency.

“For the operations phase, Offshore Account Bank (Abu Dhabi) arrangements are in place to ensure that payments and revenue are ring-fenced offshore as per commercial contractual agreements with requirements for no objection for use for specified purposes, including purchase of electricity from Tajikistan and Kyrgyz Republic under the CASA-1000 and other existing power purchase agreements.”