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FIRST PHASE OF THE

CENTRAL ASIA SOUTH ASIA REGIONAL ELECTRICITY MARKET (CASAREM)

March 2012

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The CASAREM Vision

The Central Asia South Asia Regional Electricity Market (CASAREM) will help develop a modern, sustainable

electricity market between the two neighboring regions.

Central Asian countries, endowed with large energy resources, can help South Asian Countries meet their rapidly

increasing demand for electricity – a key growth constraint

The Central Asian countries could diversify markets for their energy exports and create a source of revenue for their own

economic development.

Kazakhstan Reserves:

Oil 30 billion bbl Natural Gas 85 TCF Coal 31.3 billion tons Hydro Power 20,000 MW

Uzbekistan Reserves:

Oil 594 million bbl Natural Gas 66 TCF Coal 3.3 billion tons Hydro Power 1,700 MW

Turkmenistan Reserves:

Oil 600 million bbl Natural Gas 280 TCF Coal Modest Hydro Power Modest

Tajikistan Reserves:

Oil 0.01 billion bbl Natural Gas 0.2 TCF Coal 3.6 billion tons Hydro Power 40,000 MW

Kyrgyzstan Reserves:

Oil 0.04 billion bbl Natural Gas 0.2 TCF Coal 0.9 billion tons Hydro Power 26,000 MW

CENTRAL ASIAN REPUBLICS ARE ENDOWED WITH VAST ENERGY RESOURCES

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SOUTH ASIAN COUNTRIES FACE SEVERE ELECTRICITY SHORTAGES WITH RAPIDLY INCREASING DEMAND

CountryPopulation

Million

GNI per capita Current US$

Per Capita Electricity

Consumption (KWh/year/cap)

Installed Capacity

(GW)

Access Rate

Peak shortage (MW)

Afghanistan

29 310 31 0.5 13% --

Bangladesh

160 580 195 5.5 47%1,500-1,800 (summer)

Bhutan

0.68 2020 1278 1.5 60% 20 (winter)

India

1,140 1220 527 174.4 70%

11,460

Maldives

0.30 3970 793 0.1 -- --

Nepal

29 440 88 0.7 44% 400 (summer)

Pakistan 166 1000 413 19.8 84% 5,022

Sri Lanka

20 1990 391 2.6 88% 300-500

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CASA-1000, THE FIRST PHASE OF CASAREM, WOULD SUPPORT 1,300 MW OF CLEAN ELECTRICITY TRADE BETWEEN CENTRAL ASIA

(KYRGYZ REPUBLIC & TAJIKISTAN) AND SOUTH ASIA (AFGHANISTAN & PAKISTAN)

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PROJECT COMPONENTS

500 kV line Datka-Khudjand (477 km), with Tajik network transferring Kyrgyz exports to Sangtuda

Tajikistan Grid Strengthening 1300 MW AC-DC Convertor Station

at Sangtuda 750 km HVDC line Sangtuda-Kabul-

Peshawar 300 MW Convertor Station at Kabul

(with both import & export capability)

1300 MW DC-AC Convertor Station at Peshawar

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A CHALLENGING BUT TRANSFORMATIVE PROJECT

• A significant first step in realizing the CASA Regional Electricity Market (CASAREM) vision.

• Would demonstrate landmark cooperation between the Kyrgyz Republic, Tajikistan, Pakistan, and Afghanistan.

• Provide economic benefits to all four countries.

Opportunities

• Large investment at US$1 billion.• Significant security and geopolitical challenges.• Involves four countries with constrained commercial

borrowing capacity.Challenges

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CASA-1000

Ensure a steady source of revenue from power exports for Tajikistan and Kyrgyz Republic

Alleviate electricity shortages in Pakistan during the peak summer season

Establish Afghanistan’s role as a viable transit country , enhancing growth prospects

SIGNIFICANT BENEFITS TO ALL COUNTRIES

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FEASIBILITY STUDY UPDATE CONFIRMS SOUNDNESS OF PROJECT

Feasibility Study Update

Sufficient quantities of surplus electricity are available in summers in the Central Asian Countries (the Kyrgyz Republic and Tajikistan), even under the conservative assumption of no new generation projects.

Significant need for electricity imports exists in South Asia (particularly Pakistan) to meet existing and projected demand.

Differences in the cost of electricity between the importing and exporting countries provides a strong economic and financial rationale to make transmission investments in order to support the electricity trade.

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Summer Surplus, in the base case scenario, has been estimated by using: Generation from existing plants only over the projection period; and

The countries’ demand based on GDP growth and other relevant factors. Kyrgyz Republic and Tajikistan have been exporting power to neighbors (up to

2.5 TWh annually ) and spilling water from the reservoirs without any generation.

Combined Surplus (GWh) in the base case would reduce every year

ESTIMATES OF SUMMER SURPLUS BASED ON EXISTING GENERATION PROJECTS ONLY

FEASIBILITY STUDY DEMAND FORECAST HIGHER THAN OTHER STUDIES ESTIMATES

20102011

20122013

20142015

20162017

20182019

20202021

20222023

20242025

20262027

20282029

20300

5

10

15

20

25

30

Demand Projection

TAJ-CASA Feasibility UpdateTAJ-ADB CA Power Master PlanKYZ-CASA Feasibility UpdateKYZ-ADB CA Power Master Plan

TWh

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CASA-1000 IS ECONOMICALLY VIABLE EVEN WITH CONSERVATIVE ESTIMATES OF SURPLUS

The base case economic analysis gives a Benefits to Cost ratio of 1.34 and EIRR1 of 15.6% {excludes benefits of GHG reduction and Telecom connectivity).

Sensitivity: New generation added enabling a constant yearly exportable surplus of 4 TWh - Benefits to Cost ratio of 2.11 and EIRR of 20.8%

Sensitivity: Opportunity cost of US$ 0.20/kWh for Pakistan - Benefits to Cost ratio of 2.89 and EIRR of 31.9%

1- EIRR: Economic internal rate of return.

HUGE DIFFERENCE IN COST OF ELECTRICITY BETWEEN IMPORTING AND EXPORTING COUNTRIES

Kyrgyz and Tajikistan: • Current Cost < US¢ 3.0 /kWh

• Based on existing IPPs in Tajikistan.

Pakistan:

•the operating cost is US¢ 9.2/kWh and•the cost including capacity charges is US¢ 13.2/kWh

•Fuel costs estimated based on the international crude price of USD 70-75 per barrel

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PROJECT COST ESTIMATES AS PER THE FEASIBILITY STUDY

Kyrgyz Republic US$ 200 million

Tajikistan US$ 250 million

Afghanistan US$ 300 million

Pakistan US$ 200 million

Total US$ 950 million

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MAJOR MILESTONES

May 2006 - Invitation from the Government of Islamic Republic of Pakistan for the CASA conference and first Inter- Governmental MoU signed.

Aug 2008 - the MOU and the Inter-Governmental Agreement (IGA) for CASA signed by all of the four countries

June 2011 - Pakistan and Afghanistan signed a joint declaration calling for ‘speedy implementation of the CASA-1000 power transmission line’

Sept 2011 - Bishkek Inter-Governmental Council (IGC) meeting sought IFI help in speedy preparation of the CASA-1000 Project.

Nov 2011 - Country Working Groups (WG) established and the first monthly Technical WG Meeting in Dushanbe

Dec-Feb 2012- Three subsequent meetings of the Country Working Groups

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PROJECT BUILDING BLOCKS – CURRENT STATUS

Techno-economic feasibility study completed, establishing the economic viability of the project even without new power generation.

Initial Environmental and Social Assessment completed; supplementary studies in advanced stages.

Financial Model prepared to help all countries build negotiations strategy.

Legal and commercial Advisors for the IGC are in place; recruitment of the IGC Executive Director is in progress.

Community benefit sharing design studies and project structure and draft Power Purchase Agreements under preparation.

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NEXT STEPS

Finalizing the Structure of the Project for its development and operation (May 2012)

Other supporting analysis {Tajik grid strengthening; Governance Arrangements for Export Revenues, etc.} (August- 2012)

Finalizing Country Specific ESIA based on Consultations (Nov 2012)

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DONOR PARTICIPATION

The US State Department, AusAid, DFID, ADB, Islamic Development Bank, USAID, IFC and the World Bank are among the donors who have supported pre-preparation activities of the project to-date.

Donors who attended the Sept 2011 IGC Meeting in Bishkek include: Islamic Development Bank, JICA, KfW, Eurasian Development Bank, DFID, EBRD, IFC, USAID, US State Dept, Russia, China.

CASA-1000 PROJECT TIMELINE 2006-2013

2006-2008 2009 - 2011

February 2011Feasibility study update completed.

June 2011Draft ESIA delivered

September 2011IGC meeting in Bishkek, MOU signed

Nov 2011 – Dec 2011Country Working Groups were set up and monthly WG meetings started

Oct 2006First Intergovernmental MoU signed.

August 2008Intergovernmental Agreement Signed – Intergovernmental Council (IGC) created and Secretariat established in Kabul

- Strengthen IGC, recruitingExecutive Director, advisors

- Hire country advisors and start negotiation

- Completion of ESIA studies and community consultation

- Prepare and issue bidding documents

- Build the financing plan/structure with firm commitments

2012-2013

• Around US$ 3 billion in energy-water project investment commitments • Development Policy Operations (DPOs) to advance fundamental energy policy reforms at the

national level – Kyrgyz Republic and Tajikistan• Analytical, institutional development and investment support being provided under the umbrella of

the Central Asia Energy Water Development Program

WORLD BANK ENGAGEMENT IN ENERGY AND WATER

Kyrgyz Republic

• Improving water management systems

• Urgent rehabilitation of generation assets, electricity , gas and heat distribution

• Winter energy support • Policy Operations – for

energy development strategy, tariff reforms, and energy governance

Tajikistan• Fergana valley water

resources & watershed management

• Policy Operations – budget control, tariff and governance reforms

• Climate resiliency pilot- Adaptation investments

• Energy loss reduction • Winter energy

management support• Power supply options

study; Assessment study for proposed Rogun HPP & Rehabilitation for Nurek HPP

Afghanistan• Improve electricity

supply and access in major towns on the North East Power system ;

• Improve revenue collection and distribution efficiency.

• Rehabilitate power generation capacity (e.g.Naghlu, Mahipar)

• Demand side energy efficiency

• Irrigation rehabilitation

Pakistan• Reduce excessive

dependence on costly imported oil by expanding indigenous hydropower (e.g. Tarbela) and improving efficiency of gas supply.

• Improving sector financial condition and strengthening the sector, jointly with other development partners.

• TA for capacity building on all aspects of water resource management including feasibilities of new hydro.

Regional Programs• Central Asia – South Asia (CASA) electricity exports • Analytic work with regional institutions – International Fund for Saving the Aral Sea (IFAS)

Central Asia Regional Economic Cooperation (CAREC)• Afghanistan-Pakistan trade facilitation and customs Reforms