Public-Private Partnership Stories Afghanistan: Mazar IPP Three decades of conflict have left Afghanistan’s power system battered. More than half of the population has no access to electricity and those connected to the grid suffer from frequent, lengthy power blackouts. Expensive generation is prevalent, and the country has entrenched poverty and stifled economic growth. The Ghazanfar Group, a leading private conglomerate, will build and operate a 50-megawatt gas- fired power plant, known as the Mazar Independent Power Project (IPP). The plant will be located near Mazar-e-Sharif, Afghanistan’s fourth largest city and a growing industrial hub. Once operational, it is expected to supply electricity to around one million people, boost the country’s This series provides an overview of public-private partnership stories domestic power supply, and reduce dependence on imported power. The project will also result in various infrastructure sectors, in the creation of almost 200 direct and many more indirect jobs. where IFC was the lead advisor. IFC played a key role in making the deal possible, bringing in complementary skills across the World IFC Bank Group to ensure delivery on the project. IFC’s Transaction Advisory Services engaged early Public-Private Partnerships 2121 Pennsylvania Ave. NW with a private sector partner, the Ghazanfar Group, and the Government of Afghanistan (GoA) on Washington D.C. 20433 legal, financial, and technical issues leading to bankable project documentation. IFC’s Investment ifc.org/ppp Infrastructure team acted as the lead arranger, working to provide debt financing for its own account and mobilize debt financing from other development finance institutions. Working closely with IFC, the World Bank provided advice to the GoA, including regulatory matters and ancillary infrastructure. BACKGROUND The project documents developed for this project were signed Afghanistan imports almost 80% of its power supply, largely in January 2018 and are expected to serve as a template for the based on short-term contracts from its Central Asian neighbors. GoA. Home to more than 35 million people and a growing population, MAXIMIZING FINANCE FOR DEVELOPMENT the GoA is focused on decreasing reliance on imported fuels and increasing electricity to meet demand by developing its own IFC’s Transaction Advisory Services and Investment teams power generation sources. collaborated to provide upstream structuring services to develop a bankable transaction structure and documentation As mandated by the Ghazanfar Group to help structure an IPP for the project. IFC Investment is evaluating the transaction for under a public-private partnership model, IFC’s Transaction participation in project loan and for mobilization of funding Advisory Services and Investment Infrastructure teams engaged through other financial institutions as well as exploring the use with the GoA and the Ghazanfar Group on legal, financial, and of Blended Finance and/or the Private Sector Window (PSW) technical issues. IFC also worked with the GoA and the as additional tools to crowd in financing. Ghazanfar Group to structure a balanced bankable framework. In addition to advising the GoA on regulatory matters and The Mazar IPP project will be the country’s first independent providing technical support on gas supply infrastructure, the power plant funded entirely by the private sector, and the first IDA is expected to provide an IDA payment guarantee to Afghan to use domestically produced natural gas—a clean-burning and power utility DABS. MIGA is also exploring providing cover for affordable fuel source. the equity provider and debt syndicate. IFC’S ROLE Together, the World Bank Group and the GoA are connecting IFC leveraged both its advisory and investment teams to Afghans to reliable power. support the GoA and the Ghazanfar Group in structuring the project agreements, assisting in negotiations, and mobilize debt financing from other development finance institutions. The EXPECTED POST-TENDER RESULTS proposed investment, advisory interventions, and guarantees, will support the government’s strategy to open the IPP market • Increase access to stable, domestic electricity in Afghanistan. for over one million Afghans. • Improve energy security and reduce reliance IFC’s upstream work to develop the bankable project on other countries for electricity imports. agreements can be leverage and serve as a template for future IPPs in the country. • Private sector participation in the electricity generation sector for the first time. TRANSACTION STRUCTURE • Demonstrate the viability of a well-structured The project will involve the development, construction, transaction to unlock additional IPPs to help operation and maintenance of a 50MW green-field, indigenous close the energy deficit. gas-based power plant. The Project Sponsor, Ghazanfar Group, will be investing in the project through a newly created SPV: the Afghan Power Plant Company Ltd. It will sell the electricity over the next 20 years to Da Afghanistan Breshna Sherkat (DABS), the country’s national utility company, which operates and manages power generation, imports, transmission, and distribution throughout Afghanistan. Over the concession term, gas will be supplied by Afghan Gas Enterprise. The GoA will be backstopping the power purchaser and gas supplier obligations through an Implementation Agreement and Guarantee Agreement.