Black & Veatch’s White Elephant in Kabul

Black & Veatch’s White Elephant in Kabul

IPS-Inter Press Service
11/19/2009
By Pratap Chatterjee

KABUL – In a secluded valley a few miles from Kabul’s international airport, Caterpillar turbines custom-built in Germany and giant transformers flown in from Mexico hum away at a brand-new power plant.

If all goes as planned, one engineer sitting at a single computer with four flat screens will be able to run the state-of-the-art diesel facility built by Black & Veatch of Kansas.

Some 285 million dollars in U.S. taxpayer funds have flowed into this power plant outside Tarakhil village. Afghan President Hamid Karzai supported the project, convinced that it could help him win the 2009 presidential election.

In August, two weeks before the vote, at an opening ceremony for the unfinished plant, Karzai stood beside Karl Eikenberry, the current U.S. ambassador, who told the assembled media: “I would ask the citizens of Kabul when you turn on your lights at night, remember that the United States of America stands with you – optimistic of our combined prospects for success, and confident in you and our mission.”

But much, so far, has not gone according to plan. The 280-million-dollar a year cost to run the power plant full tilt is more than a third of total tax revenues for the entire country; the plant would supply electricity to less than two percent of the population; and the plant’s cost – already more than 300 million dollars – is roughly three times that of any similar plant in the region.

Power Plans for the Capital

Two major projects have been in the works for a while to provide power to the capital: a 35-million-dollar project to build a 220 kilovolt power line from Uzbekistan over the Hindu Kush mountains, and a second 28-million-dollar power line from Tajikistan. Each is expected to supply 300 megawatts to Kabul.

Engineers from KEC, an Indian company, have been hard at work since October 2005 on the Uzbek project with money from the Indian government, the Asian Development Bank, and the World Bank. The Tajik project was awarded in November 2008 with funding from the Asian Development Bank and OPEC Fund for International Development.

But, engineering difficulties and cost aside, U.S. officials were worried that there was no political guarantee that either project would work. Tajikistan was a failed state, and the Uzbeks, who kicked U.S. troops out of their country in July 2005, were seen as an unreliable political partner to the U.S.-backed Karzai regime.

In April 2006, shortly before he left Afghanistan, U.S. ambassador Ronald Neumann dreamed up an alternative to the Central Asian transmission lines.

According to former finance minister Anwar-ul-Haq Ahadi, Neumann asked USAID to offer the Karzai government a 100 megawatt diesel plant. Budgeted at 120 million dollars, it would be able to supply 500,000 people with basic electricity. And if completed in just over two years, before the 2009 elections, it would also allow Karzai, whose political star was already fading fast, to claim that he had provided electricity to Kabul.

Karzai readily agreed and instructed the nervous ministry of finance to approve the scheme in early 2007, and add 20 million dollars of Afghan money to the U.S. contribution.

Price Escalates

In July 2007, the agency issued a contract to a joint venture of Louis Berger of New Jersey and Black & Veatch of Kansas to build a 105 megawatt power plant with the latter company in the lead. The approved price tag was 257.8 million dollars, more than twice what USAID had initially told the Karzai government the project would cost.

Numerous power experts from around the region said that the price was far too high. Bikash Pal, an engineering expert from Imperial College in London, who has been involved with similar projects in India and Iraq, said that the rough price for building a 100 megawatt plant should be 100 million dollars.

The cost escalation “was because [USAID] wanted to do this in the shortest possible time,” says Wali Ahmed Shairzay, the deputy minister of energy and water with responsibility for electricity production. “It became very uneconomical.”

Even at the inflated price tag, the original December 2008 deadline became an impossible target. Ironically, the Indian engineers at KEC finished work on the Uzbek power line months before the Americans were able to turn on just one block of the Tarakhil plant. By January 2009, cheap power was flowing from the north down to Kabul at six cents a kilowatt hour.

By contrast, USAID estimated Tarakhil’s electricity at 22 cents a kilowatt hour. Under the agreement signed with the Karzai government, Kabul is solely responsible for fuel and maintenance costs.

Afghan government bureaucrats have registered anger and dismay. “The contractor was lying to USAID. They were lying to the Afghan government. They were lying to everybody,” says Shairzai. “We were called into the president’s office many times to solve this problem” of getting electricity to Kabul.

One of the biggest problems with Tarakhil is that Afghanistan simply does not have the cash to pay the fuel that will be imported from Turkmenistan.

Jack Whippen, the head of Black & Veatch’s operations in Afghanistan, estimates that if diesel stays at 80 cents a litre, it will cost 96 million dollars to supply and 12 million dollars to operate the Tarakhil plant at 55 percent capacity.

Extrapolating to full capacity brings the operational costs closer to 200 million dollars. If the price of diesel goes up by just 25 percent to a dollar a liter, a back-of-the-envelope calculation puts the cost at 280 million dollars a year for full production. By comparison, Afghanistan’s total tax revenue for 2008 was 800 million dollars.

Asked if he could justify spending this kind of money, Mohammed Khan, a member of the Afghan parliament and chair of the energy committee, answered: “No. Not unless we have an emergency.” Khan, a Karzai supporter and trained electrical engineer, worked in the Kabul Electricity Department for many years.

Ongoing Inspections and Investigations

Two weeks before the election, U.S. Ambassador Eikenberry and President Karzai opened the plant – still only a third complete – to great fanfare. Twelve days later, a team of inspectors from the Special Inspector General for Afghanistan Reconstruction (SIGAR) in Arlington, Virginia, arrived to determine why costs were so high and whether operations were sustainable.

SIGAR spokesperson Susan Phalen confirmed that the agency had “intense concerns” about the plant and that a report would be published on Nov. 30, but refused to speculate on the findings. “SIGAR’s policy is that we do not discuss inspections that are currently underway,” she wrote in an email response.

Veteran political observers including Ramzan Bashardosht, former Afghan minister of planning under Karzai, say that the problems at Tarakhil are in no way unusual, and point to a series of similar project failures in the past. “The problem is that these contractors are here to make money for themselves not to help us,” says Bashardosht. “We have to break up this political and economic mafia if we want to develop.”

Pratap Chatterjee is a senior editor at CorpWatch. This article was produced in partnership with CorpWatch.

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