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Viewing cable 08KABUL1581, Afghan-Tajik Electric Power PPA Negotiations Short

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Reference ID Created Released Classification Origin
08KABUL1581 2008-06-25 10:50 2011-08-24 01:00 UNCLASSIFIED Embassy Kabul
VZCZCXRO2685
PP RUEHIK RUEHPOD RUEHPW RUEHYG
DE RUEHBUL #1581/01 1771050
ZNR UUUUU ZZH
P 251050Z JUN 08
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 4491
INFO 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
UNCLAS SECTION 01 OF 02 KABUL 001581 
 
DEPT FOR SCA/RA, SCA/A, EEB, EEB/ESC/IEC (GRIFFIN) 
DEPT PASS AID/ANE 
DEPT PASS USTR FOR LILIENFELD AND KLEIN 
DEPT PASS OPIC FOR ZAHNISER 
DEPT PASS TDA FOR STEIN AND GREENIP 
CENTCOM FOR CG CSTC-A, CG CJTF-101, POLAD, JICENT 
NSC FOR JWOOD 
TREASURY FOR ABAUKOL, BDAHL, AND MNUGENT 
MANILA PLEASE PASS ADB/USED 
PARIS FOR USOECD/ENERGY ATTACHE 
OSD FOR SHIVERS, SHINN 
USAID FOR WARD 
COMMERCE FOR DEES, CHOPPIN, AND FONOVICH 
 
SIPDIS 
 
E.O. 12958 N/A 
TAGS: ENRG EFIN ETRD KPWR EAID PGOV AF
SUBJECT: Afghan-Tajik Electric Power PPA Negotiations Short 
Circuited. 
 
1. (SBU) Summary:  Unexpectedly, when the Afghan Minister of Energy 
and Water Ismail Khan arrived in Dushanbe June 20 to sign the 
Afghan-Tajik Power Purchase Agreement (PPA), a component part of 
Afghanistan's North East Power System (NEPS) project, he insisted on 
a lower electricity purchase price than had previously been 
discussed.  Both sides were unable to agree on a price and 
discussions were discontinued.  Despite this setback, the Afghans 
believe the Tajiks remain committed to the conclusion of a PPA.  The 
Embassy will urge the Afghans to reschedule a new negotiating 
session soon to finalize a price and sign the PPA.  End Summary. 
 
2. (SBU) On June 18, an Afghan negotiating team lead by Advisor to 
the Minister of Energy and Water (MEW) Ghulam Rabbani, traveled to 
Dushanbe, Tajikistan for "final" PPA negotiations.  All technical 
issues arising from the last negotiating session in April 2008 were 
resolved on June 18 and 19.  MEW Minister Khan arrived in Dushanbe 
on June 20, to finalize the energy import price and sign the PPA 
contract with the Tajik Minister of Energy. 
 
3. (SBU) Prior to June 20, the Afghans had seemingly accepted the 
Tajiks' electricity price offer of USD 0.035 (3.5 cents) per 
kilowatt hour starting from May 2010 (the start of the summer 
hydropower season) with an annual two percent increase over the 5 
years of the PPA's duration.  This price would reflect the current 
cost of power generated at the Sangtuda power plant and builds in 
the cost of construction of new transmission lines from Tajikistan 
to the Afghan border.  On June 8, USAID's contractors advising MEW 
on this PPA included this 3.5 cent price in a revised English PPA 
draft that was submitted to DABM, the Afghan power utility, for 
distribution to President Karzai and his Cabinet. 
 
4. (SBU) Upon Minister Khan's arrival in Dushanbe the morning of 
June 20, the only outstanding item of discussion was the final 
energy price in the PPA.  Unexpectedly, Minister Khan insisted that 
the price should be reduced from 3.5 cents per kilowatt hour to USD 
0.02 (2 cents).  Under a long-standing agreement with Afghanistan, 
the Tajik utility charges two cents per kilowatt hour for the 
minimal amount of electricity it export to the Kunduz region in 
northern Afghanistan.  (However, this arrangement is rather casual, 
as illustrated during the 2007-2008 winter when, due to their own 
power shortage, the Tajiks suspended power export to Kunduz on 
several occasions.)  Despite several hours of negotiations in which 
a variety of alternatives were presented, the parties concluded that 
the PPA could not be signed as planned and the press conference 
called to publicized the signing ceremony was cancelled.  Minister 
Khan returned to Kabul the next day. 
 
5. (SBU) Comment:  The Afghans believe the Tajiks are still 
interested in concluding a PPA.  Tajikistan has several 
energy-related projects requiring international financing and a 
20-year PPA with Afghanistan illustrates their commitment to finding 
paying clients for their power.  Tajikistan's leaders, including its 
President, have publicly committed to this deal. 
 
6. (SBU) Of the potential power exporters to Afghanistan, 
Tajikistan, Uzbekistan and Turkmenistan, the Tajiks have been the 
friendliest and most accommodating of the three.  Delaying a 
successful conclusion of these talks may weaken Afghanistan's 
negotiating position with Uzbekistan and Turkmenistan by implying 
that Afghanistan is an unreliable partner.  USAID consultants, who 
have been an integral part of the negotiations' success prior to 
June 20, have begun working on a variety of projections and pricing 
alternatives.  These will be presented to MEW Minister Khan and his 
negotiating team shortly.  The Embassy is reaching out to the 
Ministry of Energy and Water and the Ministry of Economy to 
underscore this reliability point as well as to urge a return to the 
negotiating table as soon as possible.  End Comment. 
 
KABUL 00001581  002 OF 002 
 
 
 
WOOD