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Uzbekistan, Afghanistan to sign new contract for electricity supply

4 July 2019

Mutually beneficial cooperation between Uzbekistan and Afghanistan in electricity supply plays an important role in the development of bilateral relations.

Uzbekistan and Afghanistan plan to sign a 10-year contract for the electricity supply on "take-or-pay" terms by the end of October 2019.

A take-or-pay contract is a rule structuring negotiations between companies and their suppliers. With this kind of contract, the company either takes the product from the supplier or pays the supplier a penalty. For any product the company takes, they agree to pay the supplier a certain price.

The Uzbek side made the key decision that it would build a 500 kV line from Surkhandarya to Afghanistan, which would allow it to export three times more electricity than it does now.

Sherzod Khodzhayev, Deputy Minister of Energy of Uzbekistan, said that Asian Development Bank (ADB) will allocate funds for the line construction for the Afghan side. Khodzhayev noted that ADB agreed to build this line without holding any international tenders.

"The only condition of ADB to finance construction was that the Afghan side should conclude a 10-year take-or-pay contract with Uzbekistan. That is, even if the Afghan side refuses to get electricity, they will be forced to pay," he said.

Uzbekistan will be able to sell electricity purchased from other countries to Afghanistan if the country does not have enough of its generating capacity.

"We now have two 220 kV lines through which we sell electricity to Afghanistan. Last year we helped Tajikistan by transiting their electricity. This year, due to the limited capacity of the Afghan side to accept electricity, Uzbekistan and Tajikistan directly sell electricity to Afghanistan," Khodzhayev stated.

The new power line Surkhan - Puli-Khumri, which is being built by Uzbekistan and Afghanistan, will increase the supply of electricity to 6 billion kWh per year.

To date, Uzbekistan is one of the main suppliers of electricity for Afghanistan, where there is an acute shortage of electricity. Representatives of the Afghan side said earlier that due to the growing consumption they intend to further increase purchases of Uzbek energy.