World Bank Group Invests in Energy Trade between Tajikistan and South Asia
March 27, 2014
Building new transmission infrastructure and fostering regional cooperation among four countries
WASHINGTON, March 27, 2014—The World Bank Group’s Board of Directors today approved US$ 526.5 million in grant and credit financing for the Central Asia South Asia Electricity Transmission and Trade Project (CASA-1000) for four countries: Afghanistan, Kyrgyz Republic, Pakistan, and Tajikistan.
CASA-1000 will build more than 1,200 kilometers of electricity transmission lines and associated sub-stations to transmit excess summer hydropower energy from existing power generation stations in Tajikistan and the Kyrgyz Republic to Pakistan and Afghanistan. The project will finance the engineering design, construction, and commissioning of transmission lines and three new converter stations. The power generation stations that provide the energy to be traded over CASA-1000, including Toktogul in Kyrgyz Republic and Nurek in Tajikistan, are already in place – and in Tajikistan currently “spill” or waste the hydropower energy during summer months.
This transmission infrastructure project will put in place the commercial and institutional arrangements as well as the infrastructure required for 1,300 megawatts (MW) of sustainable electricity trade. The total project cost is estimated at US$ 1.17 billion, and several other development partners will provide financing for CASA-1000, including the Islamic Development Bank and United States Agency for International Development.
In addition to the infrastructure investments, the World Bank Group will also provide country-specific community support programs through a Multi-Donor Trust Fund and the Afghanistan Reconstruction Trust Fund. These programs will help improve livelihoods in communities living along the project corridor and facilitate revenue-sharing. An Inter-Governmental Council has been established to supervise the design and implementation of these programs.
“These four countries are demonstrating strong regional cooperation by addressing their energy challenges together,” said Sri Mulyani Indrawati, World Bank Managing Director and Chief Operating Officer. “CASA-1000 is a transformational project that will give a much-needed boost to energy security, improved connectivity and trade across two regions at a critical time.”
Nearly 400 million people in South Asia lack reliable access to electricity. Businesses cite energy shortages as one of the most binding constraints to their operation, expansion, and job creation. Both Afghanistan and Pakistan rely heavily on oil for power generation. Cleaner and affordable electricity imports from Central Asia will enable improved service, reduce shortages over the critical summer period, and lessen the financial pressure of fuel imports.
The Kyrgyz Republic and Tajikistan have abundant hydropower, but power generation capacity exceeds national needs during the summer and is insufficient during the winter. Exporting surplus electricity during the summer will help the two countries generate the revenues they need for priority energy sector investments, particularly to cover energy shortages during the winter. The sale of Tajik electricity through CASA-1000 will come exclusively from existing surplus generation from May to September in order to maintain the seasonal pattern of water flows and winter power generation.
The commercial and operating framework for CASA-1000 is specifically based on “open access” principles which will allow additional energy supplying countries to connect with wider regional transmission networks. CASA-1000 will enable the development of the Central Asia South Asia Regional Electricity Market (CASAREM) – a long-term plan for regional energy trade.
“There is too little trade among these regions today and opportunities are being missed. CASA-1000 is just one of several important regional energy initiatives that can help strengthen economic ties while improving the energy situation,” said Philippe Le Houérou, Vice President for South Asia.
Of the total project financing, Afghanistan will receive US$ 316.5 million in the form of an IDA grant; Pakistan will receive $120 million in IDA credit; Kyrgyz Republic will receive $45 million in IDA grant and credit; and Tajikistan will receive $45 million in grant financing.
“CASA-1000 can help improve performance in the transportation, telecommunications, and industrial sectors – all of which are critical elements of a functioning economy and all of which depend on electricity,” said Laura Tuck, World Bank Vice President for Europe and Central Asia. “Improvements in the transparency of revenue management will be implemented by the Central Asian countries, demonstrating their commitment to improving the performance of their energy sectors.”
Of the total World Bank financing for CASA-1000, Tajikistan will receive $45 million in grant financing. The Government of Tajikistan has allocated US$15 million from its own budgetary resources to support construction costs. The project will support construction of 475 km of 500kV HVAC transmission lines to carry power from Kyrgyz Republic to Tajikistan at Khujand and a 1300 MW HVDC converter in Tajikistan. The project will also provide critical institutional and technical support to the Open Joint Stock Holding Company Barki Tojik, the implementing agency in Tajikistan. In addition to the benefits of regional electricity trade, revenues from power sales will provide a new stream of resources for Tajikistan to invest in energy solutions, including measures to alleviate the winter energy deficit. The Bank will continue supporting financial management and accountability of the energy sector in Tajikistan under the CASA-1000 project.
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