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Black & Veatch's Tarakhil Power Plant: White Elephant in Kabul

by Pratap ChatterjeeSpecial to CorpWatch
November 19th, 2009

Children in West Kabul. Photo by Stuart Webb (Channel Four News)

Click here for a January 2010 blog update and a news update

In a secluded valley a few miles from Kabul's international airport, Caterpillar turbines custom-built in Germany and giant transformers flown in from Mexico hum away at a brand-new power plant. If all goes as planned, one engineer sitting at a single computer with four flat screens will be able to run this state-of-the-art diesel facility built by Black & Veatch of Kansas.

The help of three U.S. ambassadors to Afghanistan and $285 million in U.S. taxpayer dollars have flowed into the power plant outside Tarakhil village. President Hamid Karzai supported the project, convinced that it could help him win the August 2009 Afghan presidential election.

Two weeks before the August 20 vote, at an opening ceremony for the unfinished plant, Karzai stood beside Karl Eikenberry, the current U.S. ambassador, who told the assembled media: "I would ask the citizens of Kabul when you turn on your lights at night, remember that the United States of America stands with you – optimistic of our combined prospects for success, and confident in you and our mission."

But much, so far, has not gone according to plan: The $280 million-a-year cost to run the power plant full tilt is more than a third of total tax revenues for the entire country; the plant would supply electricity to less than 2 percent of the population; and the plant's cost – already more than $300 million – is roughly three times that of any similar plant in the region.

Far from the public relations coup Karzai and Eikenberry envisioned, their shining the spotlight on the plant exposed problems with planning, cost over-runs and alleged corruption.

Desperate for Power

Under the spectacular expanse of the Darul Aman mountains, tens of thousands of ethnic Hazara people live in Dasht-e-Barchi, a poor suburb of west Kabul. They have no proper sanitation and, without the investment of local residents, would have had no nighttime electricity. These local entrepreneurs invested in small diesel generators and a patchwork of low voltage electrical lines slung across the unpaved streets and open ditches that serve as sewage culverts.

Mohammed Taleb, who hails from Maidan Wardak, is one such entrepreneur. Out of a shopfront on Dasht-e-Barchi's main street, he sells just enough electricity to power a single light bulb each in 300 households. He charges 80 Afghani (US$1.60) a month. "We have been waiting for the government to give us electricity but we don't know when it will come," he says.

Such generators have long been a major source of power for most citizens of Afghanistan, one of the least developed countries in the world. Just one in seven Afghans has access to electricity, according to USAID.

Even though Afghanistan has tremendous hydro-power potential and modest natural gas reserves, neither the transitional government that took over in 2001, nor the donors who supply two-thirds of the government's annual expenditures have put serious effort into developing these power sources. As a result, five years after the fall of the Taliban, even the country's capital lacked a guaranteed source of basic electricity.

Two major projects had been in the works for a while: a $35 million project to build a 220 kilovolt power line from Uzbekistan over the Hindu Kush, and a second $28 million power line from Tajikistan. Each is expected to supply 300 megawatts to Kabul. Engineers from KEC, an Indian company, have been hard at work since October 2005 on the Uzbek project with money from the Indian government, the Asian Development Bank, and the World Bank. The Tajik project was awarded in November 2008 with funding from the Asian Development Bank and OPEC Fund for International Development.

But, engineering difficulties and cost aside, there is no political guarantee that either project will work. Tajikistan is a failed state, and the Uzbeks, who kicked U.S. troops out of their country in July 2005, are seen as an unreliable political partner to the U.S.-backed Karzai regime.

In April 2006, shortly before he left Afghanistan, U.S. ambassador Ronald Neumann dreamed up an alternative to the Central Asian transmission lines. According to former finance minister Anwar-ul-Haq Ahadi, Neumann asked USAID to offer the Karzai government a 100-megawatt diesel plant. Budgeted at $120 million, it would be able to supply 500,000 people with basic electricity. And if completed in just over two years, before the 2009 elections, it would also allow Karzai, whose political star was already fading fast, to claim that he had provided electricity to Kabul.

Karzai readily agreed and instructed the nervous Ministry of Finance to approve the scheme in early 2007, and add $20 million of Afghan money to the U.S. contribution.

An Unwanted Gift

Juma Nawandish, the former deputy minister of electricity, told CorpWatch that he had never asked for a diesel power plant in the four years that he was in charge after the fall of the Taliban.  Nawandish, a trained natural gas engineer, who now runs the Energy and Power Construction Company, favors locally produced gas as a power source. At his office in central Kabul, he pulls out a series of slides and engineering studies of the northern Afghanistan Shebhergan gas fields where he once worked. "I advised USAID to put their money here," he said. "If they had rehabilitated the gas wells, and used our local engineers, we would have saved a lot of money."

But USAID wasn't listening. In July 2007, the agency issued a contract to a joint venture of Louis Berger of New Jersey and Black & Veatch of Kansas to build a 105 megawatt power plant with the latter company in the lead. The approved price tag was $257.8 million, more than twice what USAID had initially told the Karzai government the project would cost.

Numerous power experts from around the region said that the price was far too high. Bikash Pal, an engineering expert from Imperial College in London, said that the rough price for building a 100-megawatt plant should be $100 million. Indeed, a search online for similar projects using Caterpillar turbines in the Dominican Republic, the Philippines and Sri Lanka, have lower price tags. Wartsila, a Finnish company that builds more sophisticated turbines than Caterpillar, is completing a 200-megawatt project in neighboring Pakistan for $180 million.

Abdul Ghaffar, an Afghan engineer who runs his own power plant construction company in Dubai, says that the Black & Veatch price is exorbitant. "I built a 22-megawatt plant in Kandahar for $550,000 a megawatt," he scoffs. That plant was finished in 2008 and Ghaffar did not bid on the Tarakhil project.

Asked why the price was so high, Jack Currie, the Scottish manager of the Tarakhil project, cites: $109 million for the turbines built in record time; $22 million to transport the turbines and transformers from Germany and Mexico under contract with Matrix, a subsidiary of Agility of Kuwait; and $10 million for private security provided by London-based Hart Security.

Currie's numbers did not include $60 million for executive salaries, expatriate consultants, and profits. The cost escalation "was because [USAID] wanted to do this in the shortest possible time," said Deputy Minister of Energy and Water Ahmed Wali Shairzay, in charge of the electricity sector. "It became very uneconomical."

Even at the inflated price tag, now heading toward $300 million, the original December 2008 deadline became an impossible target. Ironically, the Indian engineers at KEC finished work on the Uzbek power line months before the Americans were able to turn on just one block of the Tarakhil plant. By January 2009, cheap power was flowing from the north down to Kabul at 6 cents a kilowatt-hour.

By contrast, USAID estimated Tarakhil's electricity at 22 cents a kilowatt hour. Under the agreement signed with the Karzai government, Kabul is solely responsible for fuel and maintenance costs. When news broke at the monthly meetings of the Inter-ministerial Commission on Energy in Kabul, that Afghanistan was expected to pick up these costs, a number of donors and Afghan government bureaucrats registered anger and dismay.

"The contractor was lying to USAID. They were lying to the Afghan government. They were lying to everybody," Shairzay told CorpWatch. "We were called into the president's office many times to solve this problem" of getting electricity to Kabul.

In early 2009 Black & Veatch dismissed Tarakhil project manager Jack Currie, and it was not the first time. Black & Veatch had previously suspended Currie as project manager for a similar plant – a combined cycle gas turbine facility at Qudas outside of Baghdad. A January 2006 report by the Inspector General of Iraq Reconstruction (SIGIR) faulted planners and the contractors for supplying turbines that were unsuitable for the available fuel supply, and for failing to provide adequate training and maintenance for the plant.

Asked how long the Qudas plant had functioned after he left the project, Currie replied: "Six weeks." Currie blamed the Iraqi engineers for not maintaining the power plant. He added that he hoped this would not be a problem at Tarakhil because Black & Veatch expects to spend a year in Afghanistan after the power plant is completed to avoid similar mistakes.

Too Expensive to Sustain

One of the biggest problems with Tarakhil is that Afghanistan simply does not have the cash to pay the fuel that will be imported from Turkmenistan. Indeed Abdul Ghaffar's modest 22-megawatt plant in Kandahar has been mothballed for precisely that reason.

Jack Whippen, the head of Black & Veatch's operations in Afghanistan, estimates that if diesel stays at 80 cents a liter, it will cost $96 million to supply and $12 million to operate the Tarakhil plant at 55 percent capacity. Extrapolating to full capacity brings the operational costs closer to $200 million. If the price of diesel goes up by just 25 percent to a dollar a liter, as Currie estimated, a back-of-the-envelope calculation puts the cost at $280 million a year for full production. Afghanistan's total tax revenue for 2008 was $800 million.

Asked if he could justify spending this kind of money, Mohammed Khan, a member of the Afghan parliament and chair of the energy committee, answered: "No. Not unless we have an emergency." Khan, a Karzai supporter and trained electrical engineer, worked in the Kabul Electricity Department for many years.

Meanwhile USAID has failed to complete studies on a cheaper alternative to Tarakhil. In February 2008 Black & Veatch was finally tasked with figuring out how to rehabilitate the Shebhergan gas fields. In June 2009 after spending $7.1 million, USAID "terminated" Black & Veatch from the project for "poor performance." Black & Veatch says it failed because of security problems and because necessary equipment was held up at the border.

The agency maintains that time will prove that their investment was worthwhile. "I believe that the Tarakhil power plant contributes significantly to the overall energy project for Afghanistan," says John Smith-Sreen, the technical representative for energy and water for USAID in Afghanistan.

Ongoing Inspections and Investigations

Two weeks before the election, U.S. Ambassador Eikenberry and President Karzai opened the plant – still only a third complete – to great fanfare. Twelve days later, a team of inspectors from the Special Inspector General for Afghanistan Reconstruction (SIGAR) in Arlington, Virginia, arrived to determine why costs were so high and whether operations were sustainable.

Fuel for an Election

Two very well-connected companies, Ghazanfar and Zahid Walid, supply diesel for Kabul's power plants: Tarakhil and an older plant in northwest Kabul.

Zahid Walid is owned by Abdul Hasin. His brother, warlord Mohammad Qasim Fahim, was President Karzai’s running mate in the August 20 elections that were marked by massive fraud. In the winter of 2006, Zahid Walid won a $12 million contract from the Afghan Ministry of Energy and Water to supply diesel to the northwest Kabul plant, according to data published on the website of Afghanistan Reconstruction and Development Services (ARDS), the government procurement agency.

In the summer of 2007, Zahid Walid won another $40 million diesel supply contract, and last winter, it took on a $22 million contract. On Oct. 6, 2009, Kabul awarded the company an exclusive $17 million contract to supply diesel to Tarakhil.

Ghazanfar is run by the family of Hosn Banu Ghazanfar, the women's minister, and a close associate of Hamid Karzai. The Mazar-i-Sharif-based company won $17 million in diesel supply contracts for the winter of 2006-2007, and then an astonishing $78 million in new contracts in 2008, stretching into early 2009 (paid for mostly by the Japanese government).

The contracts soon paid off handsomely for Karzai. In March 2009, Ghazanfar opened a new bank and plastered the capital with giant billboard advertisements showing a cascade of gold coins. Less than six months later, the bank wrote a $2 million interest-free loan to Karzai for his election campaign

SIGAR spokesperson Susan Phalen confirmed that the agency had "intense concerns" and that a report on the plant was due on November 30, but refused to speculate on the findings. "SIGAR's policy is that we do not discuss inspections that are currently underway," she wrote in an email response.

"Their job is to look in a manner that allows that if there was an error it not be repeated," says Whippen, who claims to welcome the inspection. "So I would expect they would flash up what they considered to be weaknesses and I would hope they would. At the same time I expect they will also flash up some strengths."

The SIGAR inspection is not the only probe into Tarakhil. In response to a complaint about possible fraud in Black & Veatch's sub-contract awards, Laszlo Sagi, a special agent for USAID's Inspector General, traveled to Kabul in September to interview Ian Cameron, who had handled the specific sub-contract for security at the plant.

Speaking for Black & Veatch, Currie says that Cameron is currently on vacation and unable to answer questions. Sagi refused to comment on Cameron, but acknowledged that in August he had recommended that the District Court in Virginia issue arrest warrants for fraud for two other individuals associated with security sub-contracts for Black & Veatch's eastern region power contract.

Veteran political observers including Ramzan Bashardosht, former Afghan minister of planning under Karzai, say that the problems at Tarakhil are in no way unusual, and point to a series of similar project failures in the past. (See Afghanistan, Inc.)

"The problem is that these contractors are here to make money for themselves not to help us," says Bashardosht. "We have to break up this political and economic mafia if we want to develop."

Pratap Chatterjee is an investigative journalist and senior editor at CorpWatch. He is the author of Halliburton's Army: How A Well-Connected Texas Oil Company Revolutionized the Way America Makes War (Nation Books, 2009) and Iraq, Inc. (Seven Stories Press, 2004). He can be contacted at pchatterjee [at] igc [dot] org.

Dr Ali Safi contributed research and reporting for this article. A video story by Chatterjee related to this one can be seen at Britain's Channel 4 News.

Also see a related story by Chatterjee from TomDispatch.com, "Paying Off the Warlords, Anatomy of an Afghan Culture of Corruption."