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 Country Director Henry Kerali said: “Afghanistan’s energy needs are enormous and the new package will represent a great step forward for the country’s development…
“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 official added the World Bank Group stood with the government of Afghanistan throughout the implementation of the projects to ensure their timely and effective completion.
A statement from the World Bank country office said the $98.8m financing package would support Shiberghan and Mazar-i-Sharif gas-to-power projects
The package supporting the Shiberghan project features a $12.8m guarantee from the International Development Association (IDA), a World Bank Group fund, while the rest is for the Mazar-i-Sharif project.
The package for the Mazar-i-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.
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.
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.
