VZCZCXRO4660
PP RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #3998/01 3391221
ZNR UUUUU ZZH
P 051221Z DEC 07 ZDK
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 1643
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC 0571
RUCNAFG/AFGHANISTAN COLLECTIVE
RUEHZG/NATO EU COLLECTIVE
RUEKJCS/OSD WASHINGTON DC
RUEKJCS/JOINT STAFF WASHINGTON DC
RUEKJCS/SECDEF WASHINGTON DC
RUEABND/DEA HQS WASHINGTON DC
RHMFIUU/HQ USCENTCOM MACDILL AFB FL
RHEHAAA/NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUCNDT/USMISSION USUN NEW YORK 4303

UNCLAS SECTION 01 OF 03 KABUL 003998 
 
SIPDIS 
 
DEPT FOR SCA/FO, SCA/RA, AND SCA/A(A/S BOUCHER, GASTRIGHT, DEUTSCH) 
DEPT PASS AID/ANE, OPIC 
DEPT PASS USTR FOR GERBER AND KLEIN 
DEPT PASS OPIC FORZAHNISER 
DEPT PASS TDA FOR STEIN AND GREENIP 
CENTCOM FOR CG CFC-A, CG CJTF-76, POLAD, JICENT 
NSC FOR JWOOD 
TREASURY FOR ABAUKOL, BDAHL, AND MNUGENT 
MANILA PLEASE PASS ADB/USED 
PARIS FOR OECD/ENERGY ATTACHE 
OSD FOR SHIVERS, SHINN 
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH 
TOKYO ALSO FOR AID COUNSELOR AANENSON 
 
SENSITIVE 
SIPDIS 
 
REF: KABUL 3993 
 
E.O. 12958 N/A 
TAGS: ENRG EFIN ETRD KPWR EAID PGOV AF CH
SUBJECT: AF:  Afghans to fund Uzbek power line connection to NEPS. 
 
KABUL 00003998  001.2 OF 003 
 
 
Sensitive but Unclassified 
 
¶1. (SBU) Summary.  Afghanistan's mission to Uzbekistan to 
reinvigorate negotiations for energy imports through the North East 
Power System (NEPS) project appears to have produced positive 
results.  Delegation head Deputy Minister of Energy and Water Mir 
Sediq expects to lead a follow-on mission to Tashkent in early 
January 2008 to begin negotiations on pricing.  The two sides came 
to an agreement on financing the remaining 43 kilometers of 220 kv 
power lines in Uzbekistan needed to connect the two countries' 
electrical systems.  They confirmed and exchanged technical 
information regarding the interconnection and began initial review 
of a proposed term sheet outlining terms for a power purchase 
arrangement. A contract for the construction of power lines in 
Uzbekistan is to be signed in January, with project completion 
expected in October 2008.  Should this deadline be met, 110 MW of 
power could begin to flow through the NEPS system to Kabul in early 
¶2009.  End Summary. 
 
¶2. (SBU) EmbOffs met with Deputy Minister of Energy and Water Mir 
Sediq, on December 4 to discuss his recent trip to Uzbekistan to 
negotiate for the import of Uzbek power to Afghanistan via the NEPS 
system.  This trip, a follow up to recent negotiations in Kabul 
(Reftel), consisted of a four-man delegation including Sediq, Deputy 
Minister of Finance Shahrani, the head of the Afghan Energy Company 
DABM and one other technical engineer.  Rather than fly to Tashkent, 
the delegation drove to the Surkhan substation from which Uzbek 
power will be exported.  Together with the Uzbek Deputy Minister of 
Energy, they confirmed that only a small transformer and minor 
repairs are necessary in order to increase the total export of Uzbek 
power from 40 MW (currently going to the city of Mazar-e-Sharif) to 
150 MW.  The additional 110 MW is expected to go directly south to 
the Kabul power grid, flowing over the 250 MW capacity 220 kv 
transmission line currently being built and on schedule by the 
Government of India. 
 
-------------------------- 
Discussions in Detail 
-------------------------- 
 
¶3. (SBU) Discussions regarding financing and construction of the 
necessary 43 km of 220 kv transmission line needed to link Surkhan 
with the Afghan power grid proved difficult.  Total project cost is 
estimated at USD 21 million, with USD 15 million for the 
construction of the transmission line and USD 6 million for an 
additional transformer at Surkhan to step down Uzbekistan's 500 kv 
power to 220 kv for transmission to Afghanistan.  The Afghans 
offered to foot the USD 21million bill as a "pre-payment" for their 
energy imports.  The Uzbeks, who are well aware of the importance of 
this power import for Afghanistan, did not accept the offer. 
Instead they insisted that Afghanistan pay for the project outright. 
 In return, although the 43 km of transmission line within 
Uzbekistan will technically be "owned" by Afghanistan, Uzbekenergo, 
the national electric company, will operate and maintain it.  In 
addition, Uzbekistan has already surveyed the route and will take 
care of all "right of way" issues pertaining to the project.  After 
consulting with Kabul, the Afghans were able to agree to this 
arrangement. 
 
¶4. (SBU) According to Sediq, the terrain on which the 43 km of 
transmission lines will be built is relatively flat, an initial 
survey of the route had been done by the Uzbeks and winter weather 
will not hamper construction.  The route closely follows the road 
 
KABUL 00003998  002.2 OF 003 
 
 
leading to the Uzbek-Afghan border so moving supplies to the project 
site will not be problematic.  An Uzbek firm is expected to begin 
construction after a formal contract signing in early January 2008. 
For the time being, the Uzbeks have agreed to begin the detailed 
route survey and to review the term sheets proposed by the Afghans. 
(Note: This is a product of USG consultants to the NEPS project. End 
Note.) 
 
--------------------------------- 
Cabinet Approval Imminent 
---------------------------------- 
 
¶5. (SBU) President Karzai was briefed on the outcome of his trip on 
Sunday, December 1 and agreed to support Afghan financing of the 
line according to Sediq.  Initial concurrence was obtained at this 
week's Cabinet meeting.  Sediq expects the Cabinet to approve the 
following proposals at its next meeting: 
 
 -- USD 21 million from the Afghan budget for the financing of the 
Uzbek transmission lines. 
 
 --  Designation of Sediq or other individual authorizing them to 
sign a construction contract for the transmission line and negotiate 
and agree on the term sheets, which will be the basis for signing a 
power purchase agreement with the Uzbeks, on behalf of the IRoA, 
preferably in January. 
 
------------------------------------ 
Importing more than 110 MW 
------------------------------------ 
 
¶6. (SBU) In his discussions, Sediq also learned that the Islamic 
Development Bank has agreed to fund the USD 78 million 500 kv 
transmission line within Uzbekistan from Guzar to Surkhan in 
Uzbekistan.  According to the Uzbeks, the project is underway and 
when complete will enable them to export an additional 150 MW of 
power to Afghanistan, potentially boosting the total power to Kabul 
to 260 MW.  No timeline for completion was given. 
 
¶7. (SBU) When questioned about the per kilowatt hour price 
Afghanistan expected to pay for Uzbek power, Sediq stated they 
currently pay four cents US per kw hour for the 40 MW imported to 
Mazar and that he expects to pay less for the additional 110 MW, 
since Afghanistan will be footing the bill for the transmission 
line. (Comment: Post believes this to be an unrealistic expectation, 
however any price agreed upon by the two parties will be much lower 
than the current per kilowatt hour price to generate power in Kabul. 
 End Comment.)  Pricing discussions will be taken up in January when 
Sediq expects to lead another Afghan delegation to Uzbekistan, this 
time to Tashkent in order to sign government to government 
agreements. 
 
¶8. (SBU) Comment:  Although this trip did not result in the signing 
of a power purchase agreement (PPA) between Uzbekistan and 
Afghanistan, the Afghans appear to be one step closer to realizing 
the import of 110 MW of additional power from Uzbekistan by early 
¶2009.  If indeed the construction arrangement reported by Mir Sediq 
comes to fruition, there remains only the negotiation of an amended 
power purchase agreement.  With such an agreement, the goal to 
energize at least part of the NEPS project by early 2009 could be 
met.  Post continues to monitor developments in all aspects of the 
NEPS project.  We will continue to work behind the scenes with the 
Afghans, pressing them to aggressively pursue a PPA with Uzbekistan 
 
KABUL 00003998  003.2 OF 003 
 
 
as well as Tajikistan and Turkmenistan.  End Comment. 
 
DELL