Caterpillar, Europe, Middle East, Middle East & Africa, North America

$335m Afghan power plant beset by problems

An oil-fired power plant just outside Kabul in Afghanistan, which was designed to bolster the country’s fragile power infrastructure, has been hit by serious cost over runs and is still not yet completed, eight years after construction begun in 2007.

The US Agency for International Development is behind the Tarakhil diesel power plant. The plant, built by contractor Louis Berger Group/Black & Veatch Joint Venture, was designed to give the Afghan people a backup power source and independence from energy imports.
Tarakhil diesel power plant
The plant has run into multitude problems associated with the contractors charged with carrying out the work. Although the project was plagued by cost overruns, poor contractor performance and delays, the plant was ultimately handed over to the Afghan government in June 2010.

While the plant is expected to finally be completed this spring, the electricity is no longer urgent. One year ago, a 300 MW power line to Kabul from Uzbekistan was completed, with funding from the World Bank, German and Indian governments. The construction cost was just 35 million dollars and the operation costs are expected to be just over six cents a kilowatt hour compared to the 22 cents a kilowatt hour that it will cost to run the diesel plant.

Special Inspector General for Afghanistan Reconstruction (SIGAR), a watchdog overseeing such projects in the country noted last year, as “alarming” that the plant was operating “at just 2.2 per cent of power production capacity, and that the Afghan national power utility could not afford to operate the power plant, with an estimated $245m per year needed for the fuel alone.”

Kabul has since suffered from blackouts due largely to avalanches.

North America InterPress Service reports that independent investigations found a number of lessons connected with similar power projects in Iraq were not heeded.

First the US planners chose to ignore other ongoing reconstruction projects that were cheaper and more likely to succeed, or to pay attention to alternative recommendations from Afghan government officials. Second, the planners picked expensive technologies that the city of Kabul could not afford to maintain or utilise.

Finally, USAID asked for the plant to be built in record time – by a complex system of multiple contractors – causing costs to soar.

Much of the failure of the project so far has been put down to the nature of what is called cost-plus contracting.

Black & Veatch sub-contracted on a fixed price basis to Symbion Power, which has completed six fixed-price projects for the US government in some of Iraq’s most conflicted areas. Symbion in turn hired several Kabul companies like AB Managers and Afghan Electrical Power Corporation (AEPC) to provide local workers.

The problems began when USAID decided that they wanted the project completed before the Afghan elections in 2009. So Black & Veatch ordered Caterpillar engines custom-built in Germany at an exorbitant price and then had them flown to Kabul.

By the time the project started, the price tag for the fast-track turbines and multiple layers of contractors was $259m, two-and-a-half times that of similar projects. Disputes between the chains of contractor command have since led to delays that pushed the costs ever higher.