VZCZCXRO7399
RR RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #3186/01 2830646
ZNR UUUUU ZZH
R 100646Z OCT 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC 2026
INFO RUCNAFG/AFGHANISTAN COLLECTIVE

UNCLAS SECTION 01 OF 02 KABUL 003186 
 
SENSITIVE 
SIPDIS 
 
DEPT PASS AID/ANE; AID/EGAT 
 
E.O. 12958 N/A 
TAGS: EAID ENRG EINV PGOV AF
SUBJECT: Progress in Electricity Sector Commercialization 
 
REF: Kabul 2852 
 
¶1. (SBU) Summary: In a very positive development, the 
Ministers of Energy and Water, Economy, Finance, and Urban 
Development, accompanied by Ambassador Wayne and USAID 
Director Frej, held a signing ceremony on September 30, 2009 
to liquidate the state-run power utility Da Afghanistan 
Breshna Mosesa (DABM) and fully establish the new national 
electricity utility Da Afghanistan Breshna Sherkat (DABS). 
Ambassador E. Anthony Wayne and representatives of other 
international donors sat at the dais with the ministers for 
the ceremony.  The move is a significant breakthrough in 
Afghan government and donor efforts to modernize and begin to 
commercialize the national electricity sector.  It also came a 
week before a deadline which would have dissolved DABS if the 
transfer had not taken place Q- and followed strong lobbying 
by the U.S. Embassy and other donors.  The Afghan governmentQs 
decision to set up the new utility also supports efforts to 
meet public enterprise reform and electricity sector subsidy 
elimination targets established in the IMF-sponsored 
QComprehensive AgreementQ and other Afghan government 
commitments.  End summary. 
 
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Establishment of the New Utility, DABS 
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¶2. (SBU) The performance of the old government-owned national 
electricity utility, Da Afghanistan Breshna Mosesa (DABM), was 
poor (ref).  Electricity losses were high, there were 
extensive instances of customers not paying their bills -Q and 
reports of personnel skimming off money coming into DABM, and 
past donor efforts to improve the situation were unsuccessful. 
Under a Presidential Order signed November 2, 2006, the Afghan 
government became committed to liquidating DABM and 
establishing a new corporatized public electricity utility, Da 
Afghanistan Breshna Sherkat (DABS). 
 
¶3. (SBU) Elimination of the growing energy subsidies is an 
important objective.  Afghan officials are well aware that 
neighboring Pakistan has not been able to make the same bold 
step of commercializing its electricity distribution sector, 
and  energy subsidies now consume a significant share of 
PakistanQs national budget, reducing fiscal space for critical 
health, education and other priority expenditures.  The GIROA 
decision to proceed with establishing DABS indicates a clear 
commitment to dealing with this problem thus promoting greater 
social and economic stability. 
 
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Coordinated Donor Engagement 
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¶4. (SBU) The U.S., World Bank, Asian Development Bank, and 
other donors actively pushed for the reform.  During a July 26 
meeting of energy sector donors, USAID advocated for a uniform 
message on the importance of DABS to the Government of 
Afghanistan and particularly to two key shareholders: Finance 
Minister Omar Zakhilwal and Energy and Water Minister Ismail 
Khan.  In late September, Ambassador Eikenberry advocated for 
DABS with President Karzai, Ambassador Wayne conferred with 
Minister Zakhilwal on moving ahead, and a follow up meeting 
with Minister Khan was held with Ambassador Wayne and USAID 
Mission Director Frej (septel). 
 
¶5. (U) Bolstered by the international donor community, the 
Ministry of Finance announced that DABM would be officially 
transferred to DABS.  The Ministers of Finance, Energy and 
Water, Economy and Urban Development signed the agreement in a 
public ceremony on September 30, 2009.  Ambassador Wayne made 
remarks during the ceremony along with Minister Zakhilwal, 
Minister Khan, and Minister of Economy Shams, who serves as 
the Chief Executive Office for DABS. 
 
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Help from International Donors 
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¶6. (U) The DABS has a competent senior management team and 
approximately 90 staff, a forward-looking business plan for 
the current fiscal year, and the commitment of support from 
the World Bank, ADB, and USAID to help the process of 
transition. 
 
¶7. (U) USAID's program includes an advisory contract to 
provide planning and management support to DABS and two 
additional years of support beginning in November 2009. 
Additional USAID capacity building resources to support DABS 
are also available. 
 
 
KABUL 00003186  002 OF 002 
 
 
¶8. (U) USAID support of DABS focuses on Kabul to introduce new 
metering, billing, and collection systems, and new management 
practices and systems to improve commercial performance and 
reduce high electricity losses.  Improved cost recovery 
systems will enable DABS to improve the quality of electricity 
supply, pay operating costs, and to provide incentives for 
staff.  The program does not require rate increases in the 
near future.  With improved commercial performance and 
service, DABSQs Kabul division should achieve cost recovery 
over a period of 3 to 4 years. Customers will benefit from 
increased availability, reliability, and safety of power 
supplies.  There will also be a strengthened social compact 
with the utility in which customers expect to pay and demand a 
corresponding level of service.  Additional USAID support will 
begin this month to promote commercialization in Kandahar and 
will work to identify key hardware and management requirements 
that will result in improved electricity service in this 
volatile area. 
 
Eikenberry