VZCZCXRO6251
RR RUEHAG RUEHAST RUEHBI RUEHCI RUEHDF RUEHIK RUEHLH RUEHLN RUEHLZ
RUEHNEH RUEHPW RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHAH #0199/01 0401243
ZNR UUUUU ZZH
R 091243Z FEB 09
FM AMEMBASSY ASHGABAT
TO RUEHC/SECSTATE WASHDC 2290
INFO RUCNCIS/CIS COLLECTIVE
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RHMFIUU/CDR USCENTCOM MACDILL AFB FL
RUEAIIA/CIA WASHDC
RHEFDIA/DIA WASHDC
RHEHNSC/NSC WASHDC
RUEKJCS/JOINT STAFF WASHDC
RUEKJCS/SECDEF WASHDC

UNCLAS SECTION 01 OF 03 ASHGABAT 000199 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR SCA/CEN, EUR/ACE, EEB 
AID/W FOR EE/EA 
 
E.O. 12958: N/A 
TAGS: PGOV PREL EAID TX
SUBJECT: TURKMENISTAN - AFGHANISTAN ELECTRICITY TALKS 
 
REF:  A. 08 ASHGABAT 469 
  ¶B. 08 ASHGABAT 957 
 
¶1.  (U) Sensitive but unclassified.  Not for public Internet. 
 
¶2.  (SBU) SUMMARY:  On February 3-5, Afghanistan's Minister of 
Energy and Water Resources Mohammad Ismail Khan led a delegation to 
Ashgabat to discuss potential increased electricity exports to 
Afghanistan.  After meeting with recently promoted Minister of 
Energy and Industry, Yarmuhammet Orazgulyev, the Joint Working Group 
developed a protocol that currently awaits Cabinet of Ministers' 
approval.  Key developments from this round of negotiations include 
recognition by Afghanistan that electricity pricing should be 
commercially based; an agreement to finalize a draft Power Purchase 
Agreement (PPA) term sheet by May 15, and Turkmenistan's commitment 
to provide an indicative kilowatt hour price range by May 31.  While 
many steps still remain, the agreement represents substantive 
progress toward increased electricity supplies by Turkmenistan to 
Afghanistan if approved by Turkmenistan's Cabinet of Ministers.  END 
SUMMARY. 
 
LITTLE ADVANCE NOTICE FOR JOINT WORKING GROUP'S THIRD ROUND 
 
¶3.  (SBU) After Afghanistan submitted a formal request for the third 
meeting of the Joint Working Group (JWG) in November 2008, USAID 
Kabul learned on January 28 that the Turkmen side had scheduled the 
next meeting for February 3.  (reftels A and B)  In a brief meeting 
on February 2, Turkmenistan's Ministry of Energy and Industry (MOEI) 
Head of Investments and Technological Projects Dortkuli Djelilov 
confirmed to USAID Country Representative and FSN that the MOEI had 
yet to receive an agenda for the meeting.  On February 2, the 
delegation, led by Afghanistan's Minister of Energy and Water 
Resources (MEW) Mohammad Ismail Khan and composed of MEW Planning 
Director Zia Gul, State Electricity Corporation (DABS) Transition 
Chief Ghulam Rabbani and DABS Chief Wahid Qayoub, arrived. 
USAID/Kabul-funded advisor Krish Krishnan provided technical support 
for the delegation. 
 
¶4.  (SBU) On February 3, the delegation met with recently promoted 
Minister of Energy and Industry, Yarmuhammet Orazgulyev, and Turkmen 
specialists from the Joint Working Group.  (NOTE: Orazgulyev played 
a key, constructive role in past JWG meetings, so required little 
time to get up to speed. END NOTE.)  Ismail Khan outlined 
Afghanistan's desire for increased electricity to two points -- 
Herat province through existing infrastructure and Kabul (via 
Mazar-i-Sharif) through planned new infrastructure. 
 
¶5.  (SBU) Orazgulyev clarified that the MOEI viewed the new 500 KV 
line as the main topic for the discussions, and acknowledged the 
need for this new line.  In order to start construction, however, 
Turkmenistan needed to address other unresolved factors, such as gas 
supply for a new generation facility, financial resources from the 
Turkmen side's commitments, and improved dispatch functions.  The 
ministry had already begun working on these technical aspects, and 
once resolved, the project must still be submitted to Cabinet of 
Ministers (CabMin) for approval.  Once these issues were solved, the 
conditions would exist to construct the new power lines.  The 
ministers agreed that the JWG would convene at 1700 on February 3 to 
begin discussions on issues prepared by the Afghan side. 
 
JOINT WORKING GROUP HAMMERS OUT DRAFT PROTOCOL 
 
¶6.  (SBU) Meeting until almost 2200 on February 3 and again during 
morning and afternoon sessions on February 4, the JWG arrived at a 
draft protocol that was sent directly to the Cabinet of Ministers 
for approval.  Key points include: 
 
-- The Afghan party prefers that the proposed commissioning date of 
the interconnection for the delivery of up to 300 MW is December 31, 
2011; 
 
-- The MOEI has reviewed the draft Terms Sheet for the Power 
Purchase Agreement (PPA), developed by the Afghanistan team and 
agreed to provide its comments within 3 months to the Afghanistan 
delegation for review and discussion; 
 
-- By June 2009, MOEI will provide the price of one kilowatt hour of 
electricity; 
 
 
ASHGABAT 00000199  002 OF 003 
 
 
-- The Afghanistan is working with its donors and agreed to provide 
a firm guarantee for payment of energy received in the form of a 
sovereign commitment from the Afghanistan potentially backed by an 
international financial institution such as the World Bank or Asian 
Development Bank guarantee, prior to the conclusion of the 
negotiations of a PPA; 
 
-- The members of the JWG shall...meet each six months beginning 
July 1, 2009 and each six months thereafter...to discuss progress 
and address potential issues in a timely manner; 
 
--Both parties agreed to the following schedule for key activities 
to finalize and sign the PPA: 
-- Negotiation and finalization of the draft PPA Term Sheet - May 
15, 2009; 
-- Preparation of draft PPA for initial discussions (draft to be 
prepared by MEW and sent to MOEI) - June 30, 2009; 
-- Comments from MOEI on draft PPA to MEW - July 31, 2009; 
-- First negotiations meeting in Ashgabat - September 2009; 
-- Revise PPA and distribute for final negotiations - October 2009; 
-- Final PPA negotiations and signing of PPA - date shall be 
determined later; and 
 
-- Taking into consideration the power export offer of Afghanistan 
party related to the direction Gorogly-Hamyap-Garkyn and to Badghyz 
province through Maruchak, Turkmenistan party agreed to review the 
technical capacities after the Afghanistan party will provide the 
power requirement for the region. 
 
¶7.  (SBU) The Turkmen side refused to accept Afghanistan's proposal 
for language accepting or acknowledging the proposed interconnection 
date of December 31, 2011, because it had not received Cabinet of 
Ministers approval for the project.  On the same grounds, it refused 
to allow a start date for construction to be referenced in the 
schedule for key activities needed to finalize the PPA. 
 
AFGHANS DEPART SATISFIED WITH DRAFT PROTOCOL'S SPECIFICS 
 
¶8.  (SBU) Upon conclusion of negotiations on the afternoon of 
February 4, the Afghan side was satisfied with the protocol's 
content according to the USAID/Kabul-funded consultant. 
Turkmenistan's lead negotiator expressed optimism that the agreement 
could be signed that night before the Afghan delegation's planned 
departure at 0600 on February 5.  At 2045 on February 4, however, 
the MOEI called USAID FSN and advised that the Cabinet of Ministers 
had not been able to clear it due to late receipt.  (Post will 
forward a cleared copy of the agreement, once it is produced.)  The 
Afghan team agreed to delay its departure until 1500 on February 5, 
but learned late that morning that the Cabinet of Ministers was 
still reviewing the document.  Rather than extend the team's stay a 
second time, Minister Ismail Khan decided to return to Afghanistan 
to await its forwarding upon approval. 
 
¶9.  (SBU) COMMENT: If approved as drafted by Turkmenistan's Cabinet 
of Ministers, the agreement represents substantive progress toward 
increased electricity supplies by Turkmenistan to Afghanistan.  The 
acknowledgement by Afghanistan that the electricity pricing should 
be commercially based is noteworthy since it allows the Turkmen side 
to proceed with commercial justifications separate from past 
humanitarian considerations.  Furthermore, the Turkmen side was much 
more frank than in past discussions when acknowledging its 
limitations to make commitments without prior Cabinet of Ministers 
approval for the project.  Dates in past protocols have been subject 
to slippage, but this document provides more detailed steps and 
concrete commitments than previous protocols, which may explain the 
Cabinet of Minister's thorough review. 
 
¶10.  (SBU) COMMENT CONTINUED:  At two separate points in the 
negotiations, MOEI staff appeared to refer to information provided 
by USAID/Turkmenistan's recent consultant on investment options for 
this project, excerpts from which were delivered just prior to the 
meeting.  First, unofficial JWG discussions related to possible 
pricing for electricity used information consistent with USAID's 
projections.  Additionally, a brief reference to future PPA 
discussions highlighted Afghanistan's lack of commitment to a fixed 
quantity of electricity in the draft term sheet.  Absent such a 
commitment, Turkmenistan cannot adequately calculate the project's 
commercial viability.  These and other issues must be addressed in 
future JWG meetings.  The Afghan side has benefited from 
 
ASHGABAT 00000199  003 OF 003 
 
 
considerable technical support in the past, and it appears that the 
Turkmen side is slowly recognizing the potential benefits it stands 
to receive from this type of support as well.  USAID will continue 
its support for both sides while playing the role of "honest broker" 
on price negotiations as the parties seek a deal that benefits both 
Afghanistan and Turkmenistan. END COMMENT. 
 
MILES