Q&A: Central Asia-South Asia Electricity Transmission and Trade Project (CASA-1000)

May 10, 2016



Frequently Asked Questions

1.      What is the objective of the CASA-1000 project?

The CASA-1000 project is the first step towards creating the Central Asia-South Asia Regional Electricity Market (CASAREM), leveraging Central Asia's significant energy resources to help alleviate South Asia's energy shortages on a mutually beneficial basis. CASA-1000 will put in place the contractual and institutional arrangements, and the transmission infrastructure, to facilitate the export of 1,300 megawatts (MW) of already available surplus electricity in the summer months from Kyrgyz Republic and Tajikistan to Afghanistan and Pakistan. CASA-1000 will be compatible with, and complement, other on-going or planned transmission investments in the four countries. “Open access” mechanisms will allow other interested exporters (Turkmenistan, Uzbekistan, Kazakhstan or the Russian Federation) to use any available transmission capacity, for example, in the winter months.

By enabling regional electricity trade and paving the way for other trade/transit infrastructure investments in the region, CASA-1000 will help alleviate poverty in some of the poorest parts of the world while also enhancing energy security and regional stability. Specifically, CASA-1000 will:

•       Serve as a critical first step towards realizing the potential for energy trade between Central Asia and South Asia; low capital costs (because no new power plants are required to be built for this trade) will help lower project financial risks while building confidence in CASAREM; 

•       Help establish Afghanistan as a viable transit country, enhancing the country’s growth and stability prospects; 

•       Ensure a steady source of revenues to Tajikistan and Kyrgyz Republic that can be used to alleviate acute winter energy shortages; 

•       Alleviate electricity shortages in Pakistan and Afghanistan during the peak summer season when demand is highest and help reduce the countries’ dependency on costly, polluting oil-based power generation;

•       Have the “open access” design to facilitate power supply from other countries in the region, expanding trade opportunities beyond the original summer period. 

2.      What mechanisms are in place for country coordination? 

A Ministerial level Inter-Governmental Council (IGC) supervises the design, preparation, negotiation, and implementation of the project. An IGC Secretariat manages the daily coordination of work related to project preparation and carries out the functions common to the four countries. Each country has established a dedicated group led at the Deputy Minister / Joint Secretary level. Together, this Joint Working Group (JWG) considers and discusses further actions and unresolved issues. The JWG conducts monthly videoconferences and meets face-to-face on a quarterly basis or more frequently when needed. The JWG complements its teams with the support of individual advisors (international and local) retained by each country as required.

3.      What are the infrastructure components to be constructed under the project?

The original design of the project envisaged the following:

•       A 500 kV AC line from Datka substation to “Sugd” substation (477 km) to transfer the surplus power from Kyrgyz Republic to Tajikistan, with the Tajikistan internal network transferring this power to Sangtuda;

•       A 500 kV single circuit AC line (120 km) in Tajikistan between Regar and Sangtuda substations;

•       Three converter stations: (i) a 1,300 MW AC-DC Converter Station at Sangtuda (Tajikistan); (ii) a 300 MW DC-AC Converter Station at Kabul (Afghanistan);  and (iii) a 1,300 MW DC-AC Converter Station at Peshawar (Pakistan); and

•       A High Voltage Direct Current (HVDC) line of about 117 km in Tajikistan, 562 km in Afghanistan and 71 km in Pakistan.

At the Almaty meetings of the Joint Working Group (JWG) and Intergovernmental Council (IGC) of the        CASA-1000 Project in April 2016, the results of the evaluation of the bid received for the three converter stations package were carefully reviewed. Since the single bid received was very high and the technical capability of the bidder was also a concern for all member countries, the JWG/IGC considered a modification of the original three-terminal configuration of the project outlined above and it was agreed to go for a two converter station configuration instead of three and announce a fresh tender for this package within two months. 

The revised configuration would feature two converter stations in Tajikistan and Pakistan with a separate HVDC back-to-back connection in Afghanistan on an existing 220 kV AC line between Tajikistan and Afghanistan.  The location of the HVDC terminals in Tajikistan will remain in Sangtuda, while in Pakistan it will be moved from Peshawar to Nowshera, a more secure location.  The exact location of the back-to-back station in Afghanistan is being finalized.

The modified design will allow Afghanistan to draw more power from the existing 220kV transmission line, along with other benefits. It will also help move the project forward, avoiding delays associated with the complexity of three terminal designs. All countries and financing institutions have renewed their commitment to the project.

4.      What is the estimated cost of the project?

The estimated project cost, including contingencies, taxes and interest during construction, is US$1.17 billion.  This includes the cost of the technical assistance to support project implementation and community support programs along the transmission lines corridor, as detailed below:

Total project cost: US$1,170 million

Transmission Infrastructure

US$801 million

Project Implementation Support

US$30 million

Community Support Program

US$70 million

Environmental and Social Cost

US$20 million

Contingencies

US$145 million

Taxes and IDC

US$104 million

5.      How will revenues generated by the project be managed?

According to the project design, the countries are expected to jointly select a creditworthy trustee bank (Account Bank) to manage revenues, before the commissioning of the project. The Account Bank will be located in a country not involved in the project and will be audited annually.  For both Exporter countries, a revenue management program will be agreed with the International Financial Institutions (IFIs) to ensure transparent accounting and use of funds from power exports. The export revenues will be primarily used for the uninterrupted operation of the CASA-1000 project, including timely payments to the power producers, and debt service payments, as well as to help energy efficiency programs and other measures to deal with the winter energy shortages in Tajikistan and Kyrgyz Republic. 

6.      Who is financing the project?

The project has seven financiers: the World Bank (through the International Development Association, IDA); the European Investment Bank (EIB); the Afghanistan Reconstruction Trust Fund (ARTF); the Islamic Development Bank (IsDB); the United States Government; the UK Department for International Development (DFID); and the European Bank for Reconstruction and Development (EBRD). The United States Government and DFID contributions are channeled through a World Bank-administered Multi-Donor Trust Fund to consolidate funding support from bilateral donors who have expressed interest in supporting the project. Currently, there is a small financing gap for Pakistan and Kyrgyz Republic that may be filled by additional financing from the World Bank once the final costs have been established after receipt of the bid prices.

7.      Who will own and operate the transmission lines?

The transmission utility of each country will own the assets located in their respective country. The four countries will select an international company to operate and maintain the high voltage DC system for cross-country coordination on the dispatch of power, metering, technical faults, etc. The national transmission companies will operate and maintain the AC facilities in their respective territories.

8.      Is any new power generation infrastructure needed to support the project? 

No, the necessary power generation infrastructure is already in place. An update to the original feasibility report in February 2011 showed that for the 20-year study horizon (2016-35) both Kyrgyz Republic and Tajikistan will continue to have sufficient summer-time (defined as May 1 to September 30) hydropower surpluses to export to South Asia without adding new power generation capacity. 

Tajikistan is currently spilling a lot of water in the summer without generating any electricity, as the inflows are much larger than the domestic demand and current exports. Sufficient quantities of surplus hydropower are available during the summer months to meet the export commitments made under the project, without adding any new power generation to the system.

9.      How will variations in the available energy surplus be handled?

The exporting countries’ power generation is dependent on hydropower resources. The hydrology varies every year depending on the level of glacial melt and rain. The available summer surpluses in the exporting countries will depend on the hydrology of river flows in that year and the domestic demand for power. During a year, for example, when water inflow and storage are lower than expected, the available summer surplus after meeting domestic electricity demand would reduce. As an example, Kyrgyz Republic faces a low water scenario once in a five-year period. The average exports by Kyrgyz Republic over the last 25 years have been close to 2,500 gigawatt-hours (GWh) per year, while the CASA-1000 exports will be much less than these historical average exports.  

The countries have committed to meeting the downstream water commitments and ensuring that the project commitments do not affect domestic supply. The project’s commercial framework, negotiated between the exporting and importing countries governing the supply of electricity, is designed to suit this variability in the export quantities. The legal commitments are based on average export quantities over each 5-year block, thereby allowing for some variability each year. Additional energy can be supplied during extreme wet years.

The summer water flows also align well with the downstream demand of water for agriculture usage. 

10.  Will exporting power affect the winter energy situation in Tajikistan and Kyrgyz Republic?

No, the sale of electricity would only be from surplus summer generation during the months from May 1 to September 30. This surplus summer hydropower is otherwise wasted; its export will not affect winter generation or make shortages worse. The project will help alleviate winter shortages because the revenues from exports are expected to be invested in activities that mitigate the shortages. Because the project will allow open access, Tajikistan and Kyrgyz Republic may also import winter electricity through the line. 

11.  Will there be open access to the transmission line?

Yes, the agreements reached include open access to the transmission infrastructure to attract sale of power from other Central Asian countries and Russia, when CASA-1000 power is not flowing through the system (i.e. from October 1 to April 30). The infrastructure can handle power flows in both directions, so all countries are potentially able to import power when it is available from power sources connected to the system.

12.  How will the security risks be managed?

Security is a key issue for the project, both during construction and operation. Security issues relate primarily to landmines, sabotage and theft of equipment. All country governments have agreed to provide adequate security to contractor’s personnel and goods. Each country has prepared a Security Management Plan for both the construction and operation phases of the line in their respective areas of ownership. Provision has been kept for payment for any work related to landmines or any additional specific security arrangement to be made by contractors. The community support programs being developed for local communities living near the line for the whole CASA-1000 Project corridor will serve as an incentive for communities to preserve its safe operation. In case of any damage to the line, measures are designed to limit outages. 

13.  What is the status of the commercial agreements?

The following agreements have been signed and concluded:

•               Master Agreement between the designated Parties from all four countries;

•               Five Power Purchase Agreements between exporters and importers, including one between Afghanistan and Pakistan for on-sale of additional surplus power not utilized by Afghanistan;

•               Coordination Agreement between Kyrgyz Republic and Tajikistan; and

•               Host Government Agreement (HGA) between the governments and the implementing entities in Afghanistan, Tajikistan and Pakistan.

The Kyrgyz Republic HGA has a deadline of July 7, 2016 as per the Master Agreement given the lengthy ratification process in the country.

14.  What is the status of the guarantees?

The credit enhancement package negotiated by the countries envisages Government Guarantees backed by IFI guarantees.

•               Afghanistan, Pakistan and Tajikistan have issued Government Guarantees. The Kyrgyz Republic guarantee is due by July 7, 2016 as per the Master Agreement;

•               The Bank has received formal requests from the four countries for IFI guarantees to cover US$40m risk for two importers and the same for two exporters; this requires additional IDA contributions at 25% of guaranteed coverage required from each country. 

15.  What is the status of major procurements?

An international competitive bidding process has been launched for the major packages: (a) HVDC converter stations, including three-year O&M services; (b) owner’s engineers; (c) Afghan transmission line (longest segment of the project); and (d) AC and DC lines in Kyrgyz Republic, Tajikistan, and Pakistan. The International Finance Corporation (IFC) is providing advisory services to the countries on these packages.

16.  What is the project implementation period?

The construction of the project will take about three years from the date of the contracting of the HVDC Converter Station package (expected in Q2 of calendar year 2017). Other activities will be implemented in parallel.

17.  What are the project’s potential environmental and social impacts?

The 2010 Environment and Social Impact Assessment (ESIA) concluded that the project’s potential environmental and social impacts could be mitigated by the implementation of the Environmental and Social Management Plan (ESMP). This was supported by another Regional Environmental Assessment (REA) completed in late 2013.

The ESIA found that most of the right of way (RoW) was arid, poorly vegetated and supported low biodiversity.  Less than 10 percent of the RoW in Kyrgyz Republic and Tajikistan is farmland. There are three important bird areas in Tajikistan and Afghanistan (Imam Sahib, Salang Kotal and Jalalabad Valley) where special bird protection measures may have to be implemented.

No permanent land acquisition is expected. However, the area of land to be acquired and the number of people affected will not be known until final route selection is made. The project has prepared a Land Acquisition and Resettlement Framework, which will guide the preparation of the Land Acquisition and Resettlement Plan once the final routing/alignment of the transmission lines and exact coordinates of the converter stations, other footings for transmission towers and other related infrastructure have been defined.

The countries are currently preparing country specific ESIAs to define the specific impacts and mitigation measures to be implemented in each country.

18.  How is the project assisting communities along the transmission line?

The project envisages to finance Community Support Programs. These Programs will cover more than 600 communities along the transmission line. A benefit sharing scoping study has been carried out in each country to understand the needs and priorities of local communities. Financing of US$40 million has been approved for Afghanistan, where the longest length of the HVDC line will pass. It is envisaged that US$30 million support will be provided to the other three countries, for which US$19 million funding has already been secured.  



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