World Bank offers financing package to power projects in Afghanistan

11 October 2019 (Last Updated October 11th, 2019 12:13)

World Bank Group has approved a $98.8m financing package, comprising a mix of guarantees, a loan, and swaps, for two gas-to-power energy projects in Afghanistan.

World Bank offers financing package to power projects in Afghanistan
The World Bank Group headquarters building in Washington, D.C. Credit: Shiny Things/Wikipedia.

The World Bank Group has approved a $98.8m financing package, comprising a mix of guarantees, a loan, and swaps, for two gas-to-power energy projects in Afghanistan.

The financing is aimed at increasing domestically generated electricity through the gas-to-power energy projects, whilst leveraging private financing for the energy sector in the country.

World Bank Afghanistan country director Henry Kerali said: “Afghanistan’s energy needs are enormous, and the new package will support a great step forward for the country’s development. Investing in the energy sector is key for the country to achieve its full growth potential.

“Diversifying sources of electricity supply can help more Afghans benefit from reliable grid connections, improve employment generation and economic growth of the country, and reduce poverty. The World Bank Group stands with the Government of Afghanistan throughout the implementation of the projects to ensure their timely and effective completion.”

The $98.8m financing package will support Sheberghan and Mazar-e-Sharif Gas-to-Power Projects

The financing package supporting the Sheberghan project features a $12.8m guarantee from the International Development Association (IDA), a World Bank Group fund, while the rest is for the Mazar-e-Sharif project.

The package for Mazar-e-Sharif project includes a $12m guarantee from IDA to backstop the ongoing payment obligation of Da Afghanistan Breshna Sherkat (DABS), and a $23.8m senior loan

The project also includes $1.5m in client risk-management swap from the International Finance Corporation (IFC), which will mobilise $43.8m in parallel loans for the project as mandated lead arranger.

In addition, Multilateral Investment Guarantee Agency (MIGA) is providing $48.7m political risk insurance for the two private shareholders and a senior lender.

The guarantees are expected to provide protection against the risks of breach of contract, expropriation, transfer restriction and currency inconvertibility, and war and civil disturbance for a period of up to 15 years.

Furthermore, the investments by IFC and political risk guarantees from MIGA will be partly covered by the IDA Private Sector Window’s (PSW) Risk Mitigation Facility and the MIGA Guarantee Facility, respectively.