The government of Afghanistan has signed an accord for Ghazanfar Group to develop the country’s first gas-fired power plant Mazar-e-Sharif. The 50-megawatt facility will be realised on a build, own, and operate (BOO) basis – all electricity will sold to the national power grid on a 20-year power purchase agreement (PPA).
No start-up date has been set as yet, but once completed the plant will project will mark the first time a power plant in Afghanistan is fully financed, designed, built and operated by the private sector.
Expected to boost Afghanistan’s power generation capacity by 30%, from very low levels, the plant is meant to serve the electricity needs of up to one million Afghans. It will also help avert frequent power shortfalls resulting from years of conflict and under-investment in infrastructure. The Afghan state-run power grid operator last year imported nearly 80% of electricity demand. The average Afghan uses only 176 kWh of power annually, a number among the lowest in the world and about 40% of that in neighbouring countries.
Paving the way for private investment
As the first private power project, the Mazar-e-Sharif plant is meant to set a good example for private investment in the power sector of the war-torn country. According to Ghazanfar Group CEO Ismail Ghazanfar, “it will help build investor confidence to attract greater private capital and expertise for the development of Afghanistan.”
The International Finance Corporation (IFC), part of the Word Bank Group, has played a key part in developing the agreement for Afghanistan’s first private power plant project. The 50 MW plant will also be the first private power project to utilize domestically produced natural gas.
"In many conflict-affected states, governments do not have the resources to complete major infrastructure projects themselves," said Mouayed Makhlouf, IFC Regional Director for Middle East and North Africa. "But the private sector can help. With their expertise and financial know-how, private firms can help bolster power supplies, improve sanitation, and build transport networks. Today's agreement is a milestone for Afghanistan and will pave the way for investments in the country's infrastructure."