WASHINGTON – Blackwater Worldwide’s legal woes haven’t dimmed the company’s prospects in Afghanistan, where it’s a contender to be a key part of President Barack Obama’s strategy for stabilizing the country.

Now called Xe Services, the company is in the running for a Pentagon contract potentially worth $1 billion to train Afghanistan’s troubled national police force. Xe has been shifting to training, aviation and logistics work after its security guards were accused of killing unarmed Iraqi civilians more than two years ago.

Yet even with a new name and focus, the expanded role would seem an unlikely one for Xe because Democrats have held such a negative opinion of the company following the Iraqi deaths, which are still reverberating in Baghdad and Washington.

During the presidential campaign, then-Sen. Hillary Rodham Clinton, now Obama’s secretary of state, backed legislation to ban Blackwater and other private security contractors from Iraq.

Xe eventually lost its license to operate as guardian of U.S. diplomats in Iraq and the State Department, with Clinton at the helm, elected not to rehire the company when the contract expired in 2009. Delays in getting a new company in place led to a temporary extension of the State contract.

A federal judge on New Year’s Eve dismissed criminal charges against five of the Blackwater guards, citing repeated missteps by federal prosecutors. The Iraqi government has vowed to pursue the case, a new strain on relations between the U.S. and Iraq.

Xe on Wednesday reached a settlement in a series of civil lawsuits in which dozens of Iraqis accused the company of cultivating a reckless culture that allowed innocent civilians to be killed. On Thursday, however, two former Blackwater contractors were arrested on murder charges in the shootings of two Afghans after a traffic accident last year.

Reliance on Xe

Despite the scrutiny, the U.S. relies heavily on Xe — pronounced “zee” — for support in Afghanistan and the workload may grow significantly.

Xe spokesman Mark Corallo declined to comment on whether the company, based in Moyock, N.C., is bidding for the Afghan police training contract. But a U.S. official knowledgeable of the deliberations said Xe is competing. The official requested anonymity to discuss sensitive information about the federal contracting process.

Xe provides security services in Afghanistan, though on a smaller scale than it did in Iraq. As of November, Xe had more than 200 security personnel on the ground in Afghanistan, according to documents highlighting Xe’s operations.

Two Xe guards were killed Dec. 30 during a suicide bombing attack at a CIA base in southeastern Afghanistan, again raising questions about services the company provides for the CIA.

Late last year, CIA Director Leon Panetta terminated the use of Xe personnel in loading and other logistics for airborne drones used to hunt militants in Pakistan.