Japanese ODA Loan

Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry: The People’s Republic of Bangladesh
Project: Energy Efficiency and Conservation Promotion Financing Project(Phase 2)
Loan Agreement: May 29, 2019
2. Background and Necessity of the Project(1) Current State and Issues of the Power Sector and the Priority of the Projectin Bangladesh
In Bangladesh, the power supply has not kept pace with the sharp increase inelectricity demand accompanied by recent stable economic growth and progressin industrialization. While electricity demand was 12,644 MW in FY2016/17, themaximum electricity supplied at peak hours was 9,479 MW (Bangladesh Power
Development Board “Annual Report,” 2016/2017 Bangladesh Fiscal Year).
Although the power demand is estimated to increase by 9.3% per annum overthe next decade, the output of domestic natural gas, which accounts forapproximately 60% of total power generation, will hit a ceiling. Therefore, it is anurgent requirement to develop power sources and diversify energy sources.
Under these circumstances, the Government of Bangladesh has taken
measures to enhance the electricity supply system through the diversification ofenergy sources and the improvement of power generation facilities. At the sametime, it is imperative to promote energy conservation policies in order to control
the electricity demand at peak hours for meeting the power generation capacity.
The Government of Bangladesh formulated the Sustainable and Renewable
Energy Development Authority (hereinafter referred to as “SREDA”) Act in 2012and established SREDA under the Ministry of Power Energy and Mineral
Resources. Under the Bangladesh Energy Efficiency and Conservation Master
Plan up to 2030(2016), SREDA has set a target of reducing energy consumption(energy intensity) per GDP by 20% by 2029/30 Bangladesh Fiscal Year
compared to 2013/14, and has strengthened the development andimplementation systems of related laws and regulations. To achieve the target,
however, it is essential to take measures to promote the introduction ofenergy-saving equipment.
(2) Japan and JICA’s Cooperation Policy in the Power Sector of Bangladesh
and the Priority of the Project

The JICA Country Analysis Paper for Bangladesh (May 2014) identifies apriority target for implementing cooperation to accelerate economic growth. The
target aims to reduce energy consumption by expanding and improving theefficiency of electricity supply, which is an essential infrastructure but is inserious shortage and a bottleneck for all economic activities. The Energy
Efficiency and Conservation Promotion Project (Phase 2) (hereinafter referred toas the “Project”) is, therefore, consistent with the policy and analysis. In addition,
Japan’s Country Assistance Program for Bangladesh (February 2018) sets oneof the priority areas as being to accelerate economic growth, and identifies theshortage of power as the largest barrier to economic development.
The Project also aims to promote the introduction of energy-saving equipment
in Bangladesh through concessional loans. Furthermore, it is expected tocontribute to achieving SDGs goal 7, “Ensure access to affordable, reliable,sustainable, and modern energy for all,” SDG 9, “Build resilient infrastructure,promote inclusive and sustainable industrialization, and foster innovation,” andSDG 13, “Take urgent action to combat climate change and its impacts.”
JICA has been supporting the stable supply of electricity in Bangladesh
through the following yen-loan projects: New Haripur Power Plant Development
Project (approved in FY2007 and FY2008), Bheramara Combined Cycle Power
Plant Development Project (approved in FY2010 and FY2013), National Power
Transmission Network Development Project (approved in FY2013), Matarbari
Ultra Super Critical Coal-Fired Power Project (I) and (II) (approved in FY2014
and FY2016), Dhaka-Chittagong Main Power Grid Strengthening Project(approved in FY2015), Dhaka Underground Substation Construction Project(approved in FY2017), and others.
In addition, in order to promote energy conservation on the demand side, JICA
supported the establishment of energy conservation policies and systemsthrough a technical cooperation entitled the Project for Development of Energy
Efficiency and Conservation Master Plan (January 2014 – February 2015).
Furthermore, with regards to the promotion of introduction of energy-saving
equipment through concessional loans proposed in the master plan, JICA has
provided support by using policy-based financing, which is characterized byconcessional interest terms and simple loan application procedures, through theEnergy Efficiency and Conservation Promotion Project (hereinafter referred to as
the “Phase 1 Project”).
The support has promoted the introduction of energy-efficient equipment,which is expected to achieve a reduction in electricity consumption of 43,721
MWh per year (the sum of the estimated value for subprojects with L/Cs
established as of the end of December 2018) raised awareness of the promotionof investment in energy-saving equipment in Bangladesh. Based on the resultsof the Phase 1 Project, the Project will expand concessional loans to support thepromotion of further investment in energy-saving equipment, in order to achieve
the target of reducing energy intensity in the Energy Efficiency and Conservation
Master Plan. The Project is positioned as a priority project in the power sector inBangladesh.
(3) Other Donors’ Activities
The Asian Development Bank (ADB) provides assistance concerning planningof measures for renewable energy and provision of two-step loans for energy
conservation projects. The World Bank provides assistance for disseminatingknowledge on energy diagnosis. The United Nations Development Programme
provides assistance for establishing energy-saving standards and incorporating
the labeling system for home appliances. The German Development
Corporation provides assistance for developing and implementing energy
conservation laws and regulations.
3. Project Description(1) Project Objective(s)The objective of the Project is to facilitate installation of energy efficiency andconservation equipment in Bangladesh as well as supporting the promotionof policy in energy efficiency and conservation by the Government ofBangladesh by extending concessional loans and other support, thereby
securing the balance between energy supply and demand and contributing
to the reduction of greenhouse gas.
(2) Project Site / Target Area
Throughout Bangladesh(3) Project Component(s)a) Loans for promoting energy-saving: Financing for private businesses in theindustrial and commercial sectors to incorporate energy-saving equipment
through financial institutions in partnership with SREDAb) Consulting services: Technical assistance for loans to promote
implementation of the Project and loans to promote incorporation ofenergy-saving equipment

(4) Estimated Project Cost (Loan Amount)
22,040 million Yen (Loan Amount: 20,076 million Yen)
(5) ScheduleMay 2019 - October 2025 (78 months in total). The Project will be completed
when the JICA’s final disbursement is made (October 2025)(6) Project Implementation Structure1) Borrower: The Government of the People’s Republic of Bangladesh
2) Guarantor: N/A
3) Executing Agency: Sustainable and Renewable Energy Development
Authority (SREDA), Infrastructure Development Company Limited(IDCOL) and Bangladesh Infrastructure Finance Fund Limited (BIFFL)
4) Operation and Maintenance System(7) Cooperation and Sharing of Roles with Other Donors
1) Japan’s Activity
The Energy Efficiency and Conservation Promotion Project (approved inFY2016, Loan amount: 11,988 million yen, Cooperation period: May 2016 toAugust 2022) has been implemented as a prior project.
2) Other Donors’ Activity
N/A(8) Environmental and Social Consideration / Poverty Reduction / Social
Development
1) Environmental and Social Consideration① Category: FI② Reason for Categorization: The Project is classified as Category FI,
according to the JICA Guidelines for Environmental and Social
Considerations (April 2010), because its sub-projects cannot be specified
prior to JICA’s approval of funding and because those sub-projects areexpected to have a potential impact on the environment.
③ Environmental Permit: In the Project, IDCOL and BIFFL will receive
support from consultants hired through the Project, classify each
sub-project according to the laws and regulations of Bangladesh and theJICA Guidelines for Environmental and Social Considerations (April 2010)
and take necessary measures depending on the category. None of thesub-projects will fall under the Category A.
2) Cross-Cutting Issues
The Project, which supports the promotion of energy consumption efficiency,

is consistent with COP 21 and other global efforts to reduce greenhouse gasemissions. The project contributes to mitigating climate change.
3) Category of Gender: GI (Gender mainstreaming needs assessment andanalysis project)
Activities / reason for Classification:
Although the preparatory survey examined gender mainstreaming needs, it
did not result in the implementation of specific activities that contribute togender equality and women's empowerment.
(9) Other Important issues
N/A
4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicator)
Indicator
Amount of sub-project approval andtotal loan amount (million yen)
Rate of receivables in arrear(amount basis) (%)
Rate of receivables in arrear (countbasis) (%)
Rate of energy efficiency andenergy-saving (%) (achievement
rate by targeted energy-saving
equipment of loan target)

Baseline(Actual Valuein 2019)--Target (2027)[Expected value 2years after projectcompletion]
19,000To be set upon
start of the Project
To be set upon
start of the Project
To be set uponcompletion ofsub-loan(2) Qualitative Effects
Stabilization of energy demand and supply, improvement of energy-saving
awareness in the industrial sector and improvement of the screening capacityof the executing agencies (SREDA and intermediary financial institutions)(3) Internal Rate of Return
The Financial Internal Rate of Return (FIRR) and Economic Internal Rate ofReturn (EIRR) were not calculated because it is difficult to identify
sub-projects before implementing the Project.

5. Preconditions / External Conditions(1) Preconditions
N/A(2) External conditions
N/A
6. Lessons Learned from Past Projects
From the ex-post evaluation of the Small and Medium Scale Industry
Promotion Program (BPIMB, BITMB, MIDF11) in Malaysia (evaluated in 1998), it
has been learned that it is effective for each executing agency to set thetransaction amount flexibly according to the financial demand and scale of thetargeted end users in cases where several executing agencies (financialinstitutions) are involved in development loans. Based on what has been learned,
the Project will not previously determine the credit line for the two executing
financial institutions (IDCOL and BIFFL), but will set the transaction amount ofeach financial institution according to the loan condition, thereby ensuringcompetitiveness.
In addition, the ex-post evaluation of the Micro, Small, and Medium
Enterprises Energy Saving Project (Phase 2) in India (evaluated in 2016)
suggested the necessity of an appropriate review of the energy-savingequipment list. Specifically, items can be added to the list or deleted if they are
no longer required, in light of the needs of end users. In the Project, SREDA,
which is in charge of overall supervision and coordination of the Project, will form
the Technical Advisory Committee to receive advice on the preparation andrevision of the list of equipment subject to the loan.
7. Evaluation Results
The Project is consistent with Bangladesh’s development issues and policies
and with the development cooperation policies and analyses of the Governmentof Japan and JICA. The Project improves energy use efficiency in Bangladesh,
where energy demand and supply is in a serious condition, by promoting theintroduction of energy-saving equipment through concessional loans, thereby
contributing to SDGs goal 7, “Ensure access to affordable, reliable, sustainable,BPIMB, BITMB, MIDF stand for “Bank Pembangunan & Infrastruktur Malaysia Berhad”,“Bank Industri & Teknologi Malaysia Berhand” and “Malaysia/Malaysian Industrial
Development Finance Berhand” respectively.
1and modern energy for all,” SDGs goal 9, “Build resilient infrastructure, promote
inclusive and sustainable industrialization, and foster innovation,” and SDGs
goal 13, “Take urgent action to combat climate change and its impacts.” Thus,
the necessity for JICA to support the Project is substantial.
8. Plan for Future Evaluation(1) Indicators to be Used
As indicated in sections 4. (1) to (3).
(2) Timing
Ex-post evaluation: Two years after the project completion