UNCLAS KABUL 001787

DEPARTMENT FOR SRAP, SCA/FO, SCA/A, EUR/RPM
STATE PASS TO AID FOR ASIA/SCAA
USFOR-A FOR POLAD

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: EAID ECON ENRG AF

SUBJECT: Baghlan Industry and Energy Sector Poised For Expansion


1. (SBU) Summary: Baghlan Province is well positioned to take
advantage of its energy production and industrial potential, though
some of its business leaders seem overly ambitious. With its intact
hydropower plants and location along one of Afghanistan's primary
electrical backbones, Baghlan almost has the energy it needs to both
power its capital city, Pul-i-Khumri, and its myriad of industrial
enterprises. Though Baghlan's dominant business conglomerate,
Afghan Investment Company, operates at a loss, it plans to construct
new cement plants and a large coal burning power plant within the
next few years. It remains unclear if Baghlan's coal mines have the
infrastructure or the coal to keep up. End Summary

Baghlan Hydropower - Still Working But Not Enough
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2. (SBU) Pul-i-Khumri has two hydropower energy plants which harness
the energy of the Kunduz River. The first plant (PK-1) was built in
the 1941 has three turbines, each with 1.6 MW capacity. In the
early 1960s, a 5.5 kilometer canal was dug connecting PK-1 to a new
plant with still greater capacity. Because the twenty meter wide
and four meter deep canal has never been cleaned or dredged, water
often backs up, causing the pressure at PK-1 to drop. Because of
this (as well as use of primarily original equipment), despite its
4.8 MW capacity, PK-1 is only able to produce a maximum of 2.1 MW of
energy, all of which is distributed to Pul-i-Khumri city residents.
Pul-i-Khumri's second plant (PK-2) also has three turbines with a
total capacity of 9 MW. From November through April, there is not
enough water to run all of the turbines, though the plant manages to
generate a minimum of 3 MW, enough to feed the energy needs of
Baghlan's four coal mines and the Baghlan Cement Factory. Any power
generated above this 3 MW minimum is distributed to Pul-i-Khumri's
general power grid. From May to October, the three turbines
generally run 24 hours a day, meaning a surplus 6 MW are distributed
to the public. As a component of USAID's Renewable Energy Project,
the U.S. Army Corps of Engineers is working jointly with USAID to

restore and develop hydroelectric resources in Pul-i-Khumri through
rehabilitation projects projects on both plants. Technical
assessments were completed in April 2008 and it is expected that the
contract will be awarded in November or December 2009. Once work
begins, it is expected to take 12 - 16 months to complete the
project.


Imported Energy From Uzbekistan Makes An Impact
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3. (SBU) On June 8, Water and Energy Minister Ismael Khan
inaugurated a new 220-Kw substation near the Pul-i-Khumri. The
substation feeds off the new Heyraton-Kabul energy backbone, which
currently carries up to 150 MW of power imported from Uzbekistan.
Baghlan has placed a new transformer at the substation to siphon off
up to 16 MW of this energy. According to local Water and Energy
Department head Haidar Sidiqi, Kabul has agreed to allow Baghlan
access to up to 32 MW, though it has not yet funded a second 16 MW
transformer. Of this 16 MW, 1 MW is now being pushed north along
newly laid power lines to Fabrika and Baghlan-i-Jadid, 6 MW are for
public consumption and 9 MW are destined to power the newly built
second cement factory.

How Much Power Does Pul-i-Khumri Need?
--------------


4. (SBU) At any given time, the city is subject to rolling brown
outs, particularly from January through March when the water level
in the canal remains low. According to the Chief of Baghlan's
Department of Energy, Pul-i-Khumri is wired to distribute
electricity in a radius of 15 kilometers around the city center. In
order to keep the city lit for 24 hours a day, the system requires
around 13 MW of power. The Department of Energy is now expanding
the network of power lines out to Fabrika, home of Baghlan's sugar
and cheese factories, and Baghlan-i-Jadid. This extended network
would need 30 MW to remain fully charged. With the Uzbek
electricity now on line, the cement factories and mines are slated
to receive a steady 12 KW, while the general population will receive
anywhere from 8 to 14 MW of power, depending upon the season.

Baghlan Cement Factory
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5. (SBU) The Baghlan Cement Factory dominates Pul-i-Khumri, from its
chimneyed skyline to its privileged access to energy. The Afghan
Investment Company (AIC) was organized in 2007 to purchase and run
the cement factory (Afghan Cement LLC), the nearby coal mines and
the city hospital. In addition to private investors, both Kabul
Bank and the NAF Group are corporate sponsors of AIC. The first
cement factory, Ghori 1, named after its location within
Pul-i-Khumri city, was built in the early 1960s and currently has
the capacity of producing up to 400 MT of "wet process" portland
cement per day. Begun in 2007, a second wet process portland cement
factory (Ghori 2) is now 92 percent complete and is slated to begin
t
eft 125 dead. As it is, the mines are primitive, using what little
1930s technology that remains after years of looting. During a
visit to Karkar, PRTOff observed several miners struggling to keep a
carload of coal on its tracks while pushing it up and out of the
primary shaft. An additional problem is that nobody is really sure
exactly how much coal there is in the Baghlan. Engineer Munir
admits as much, noting that a fully professional assessment needs to
be conducted. When confronted directly with this question, AIC
officials Farokh and Hadi disagreed with each other. When Hadi
expressed some doubt as to whether the current mines had enough coal
to provide a steady supply, Farokh interrupted, assuring the PRTOff
that unnamed experts believe Baghlan's coal vein runs well into
Bamyan province.

Comment
--------------


9. (SBU) Despite its apparent setbacks, and inability to generate a
profit, AIC seems poised to forge ahead with its ambitious plans.
Clearly, a full survey of Baghlan's coal fields needs to be
conducted before moving ahead with its coal burning power plant.
However, Baghlan's ability to tap its hydro, coal and imported
energy power places it far ahead of other provinces in the Northeast
who either depend on unsteady, expensive energy from Tajikistan or
generators. This steady supply of power will undoubtedly prove
attractive to future investors willing to take a chance on
Afghanistan's future.

EIKENBERRY