Objective. The objective of this USAID funded project is to provide technical advice and training to Islamic Republic of Afghanistan (IRoA) agencies related to the design of a Commercialization Contract for the distribution operations of the Kabul Electricity Directorate (KED), and to corporate development of the newly formed national electricity utility Da Afghanistan Breshna Sherkat (DABS). This project is part of larger DABS Commercialization efforts being supported by multiple donors. The objective of this project is to commercialize electricity distribution services in Kabul, and to build the capacity of DABS to operate on a full cost recovery basis.

Background. Low cost recovery jeopardizes the financial and operational sustainability of KED and therefore DABS. The resulting lack of funds is a serious constraint on the system’s ability to maintain network assets and expand services to new customers. Without dramatic reductions in losses, the funds to pay for electricity imports and maintain rapid system expansion would not be available from KED’s own operations.

At the same time, the IRoA has corporatized DABS, the national electricity utility. DABS has been legally established, a Board of Directors has been appointed and is operational, and corporate bylaws and board procedures have been established. Senior and some middle management positions have been filled and the opening balance sheet and capitalization are being put in place. On September 30, 2009, the assets and personnel of DABM were formally transferred to DABS. Substantive assistance to DABS in business planning and performance improvement is now required.

Status. After much uncertainty, with strong backing from the donor community and key IRoA ministries, consolidation of DABS/DABM is now complete. Work Sessions with DABS senior and middle management have identified and prioritized critical external technical assistance needs for successful commercialization, and identified the need to establish a dedicated Corporate Planning Cell to help DABS meet agreed IRoA performance benchmarks.

Now that consolidation of all utility operations under DABS has been completed, the former Kabul Electricity Directorate (KED) distribution operations are known as the "Capital Hub".

Work on establishing a performance baseline for Capital Hub loss reduction is well advanced. A Cash Budgeting model is in place and additional forecasts are being developed to provide more accurate data for FY 2010-2011.

Anticipated Impact. Given the billions of dollars being put into Afghanistan’s electric infrastructure, it is essential that Afghan institutions be strengthened to sustain this infrastructure. The impact of the actions undertaken through this project and other concurrent donor actions will ensure the long-term viability of the assets being developed by all on behalf of the Afghan people.