Japanese ODA Loan

Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry: The People’s Republic of Bangladesh
Project: Renewable Energy Development Project
Loan Agreement: March 10, 2013
Loan Amount: 11,335 million Yen
Borrower: The Government of the People's Republic of Bangladesh
2. Background and Necessity of the Project(1) Current State and Issues of the Power Sector in Bangladesh
Bangladesh’s electricity demand has been increasing in accordance with the recent
economic growth, whereas the country’s per capita electricity consumption is 252 kWhin 2009 remaining at the lowest level in the world. Electricity supply in Bangladesh is
not sufficient with the demand increase, and the supply capacity remains 80% of thedemand (5,271MW of installed capacity for electricity supply compared to 6,454MW ofelectricity demand in peak time). Moreover, all gas-fired generation plants accounting
for 80% of the whole installed capacity of power generation rely on natural gas
produced in the country, and diversification of energy resources is therefore needed.
The household electrification rate in Bangladesh is 50 percent (2012), making thecountry the second in South Asia after India in terms of its non-electrified population at
approximately 95 million people. Looking at the electrification rate in Bangladesh byregion, rural areas are merely at 35 percent, compared to 90 percent in urban areas,making the need for electrification particularly high in rural areas. Moreover, theexisting customers have frequently experienced voltage fluctuation and sudden power
outage in off-peak time due to the lack of transmission and distribution capacity andfailure in electric equipment, etc. Based on above, the challenge in the power sector isto facilitate increase of power supply capacity through development of new powersources and efficient operation of existing equipment, in addition to promote
diversification of energy resources including introduction of renewable energy andlocal electrification at the same time.
(2) Development Policies for the Power Sector in Bangladesh and the Priority of theProjectIn the “Sixth Five Year Plan” (FY 2011 – 2015), as a measure for the worldwide
depletion of fossil fuels and for consideration of the environment, the Government of
Bangladesh has set a goal of increasing the amount of renewable energy to 5% of allits electrical power by 2015. In addition, in the “Policy Statement on Power Sector
Reform (2000)”, the following three goals are set as a long-term vision of the power
sector: (a) securing of the supply capacity so that all citizens can use electricity by
2020; (b) reliable electricity supply; and (c) electricity supply at appropriate prices.

The Government of Bangladesh put a high priority on the Project as it is in accordancewith these goals..
(3) Japan and JICA’s Policy and Operations in the Power Sector
The Japanese Government has intended to play a leading role to solve challenges
in energy policies and transformation to green economy, etc. corresponding to theglobal warming, and put its interim goal until FY 2015 to provide assistance of 3 billion
dollars for the area of climate change including renewable energy. In addition, “stableelectricity supply” is a priority issue according to JICA Country Analytical Work for
Bangladesh (in February 2012) and acceleration of economic growth is one of thepriority areas expressed in the Country Assistance Policy for Bangladesh (in June2012) and JICA Rolling Plan for Bangladesh, deciding its assistance for disseminationof renewable energy in order to respond to the gap between power demand andsupply and contributing to increase of electrification ratio. Hence, the Project is in linewith these analysis and policy. Major assistance projects conducted in the power
sector are as listed below:・ Loans: Grid Substations and Associated Transmission Lines Project (2006), New
Haripur Power Plant Development Project (Phase-I) and (Phase-II) (2007 and2009), Central Zone Power Development Project (2009), Rural Electrification
Upgradation Project (2010)
・ Technical Cooperation: Project for Strengthening Management and PerformanceStandards in Power Sector of Bangladesh through promoting of TQM (2006-2009),
Master Plan Study on Coal Power Development in Bangladesh (2009 – 2010)(4) Other Donors’ Activity
The World Bank, Asian Development Bank (ADB), the Islamic Development Bank,
Kreditanstalt fuer Wiederaufbau (KfW), the Deutsche Gesellschaft für Internationale
Zusammenarbeit (GIZ), and other donors have provided loans, grant aid, andtechnical assistance to the Infrastructure Development Company Limited (IDOCL) for
the Solar Home System (SHS). With regard to other renewable energy technologies,
the World Bank, KfW, the GIZ, etc. implement loans, grant aids, and technicalassistance projects for solar irrigation systems, biomass-based power generation, andsolar mini-grids in remote areas, etc.
(5) Necessity of the Project
The IDCOL is working in collaboration with local NGOs and private sectors (sponsoragencies) to spread the SHS in rural areas since 2003, and has installed 1,709,714
systems (cumulative from 2003) as of September 2012, smoothly expanding theprogram size. In order to address significant needs for power supply expansion inoff-grids regions, the IDCOL aims to install 3 million SHS systems in total by
December 2015, and estimates 788 million dollars necessary for further disseminationof the SHS from 2013 to 2015. Moreover, the IDCOL is expanding its target of solar
irrigation systems, etc., based on its experience in above-mentioned program.

Besides financial assistance, the IDCOL requires assistance for establishingmechanism for technical specifications, etc. The Project aims to promote
diversification of power supply sources and increase of power supply throughinstalling renewable energy equipment including the SHS program specifically byproviding two-step loan to the IDCOL. As above, the Project meets Bangladesh’s
challenges and development policy and assistance policy of Japan and JICA,Therefore, its necessity and relevance is high.
3. Project Description(1) Project Objective(s)The objective of the Project is to promote the increase of power supply and thediversification of energy source, by financing the installation of solar PV power
generation and biomass power generation mainly in the rural area of Bangladesh,
thereby contributing to sustainable economic development, improvement of thepeople’s living conditions and mitigation of climate change.
(2) Project Site/Target Area: Throughout Bangladesh(3) Project Components (Including the Procurement Method)1) In order to implement sub-projects for renewable energy, fund is provided tosponsor agencies in charge of sales and maintenance and management ofequipment (the type of ODA loan: two-step loan)2) Consulting services: monitoring, sub-project screening support, technicalassistance, etc. (a short list method)(4) Estimated Project Cost (Loan Amount): 26,669 million Yen (11,335 million Yen)
(5) Schedule
The Project is planned to be implemented from March 2013 to December 2016 (46months in total). The Project will be completed upon completion of disbursement(December 2016)(6) Project Implementation Structure1) Borrower: The Government of the People’s Republic of Bangladesh
2) Executing Agency: Infrastructure Development Company Limited (IDCOL)
3) Operation and Maintenance System: Sponsor agencies (IDCOL implementsmonitoring)(7) Environmental and Social Consideration / Poverty Reduction / Social Development
1) Environmental and Social Consideration① Category: FI② Reason for Categorization: The Project is designed to provide financing tofinancial intermediaries. Sub-projects cannot be specified prior to JICA’sapproval for funding, and they may have environmental impacts under theJICA guidelines for environmental and social considerations. (April 2010)③ Other / Monitoring: In the Project, along with the Bangladesh’s domestic law

and the guidelines as described above, the implementation agency classified
each sub-project and take measures necessary to each category. Those
sub-projects classified as Category A are not expected to be implemented.
2) Promotion of Poverty Reduction: the Project contributes to poverty reduction
through installation of the SHS targeting the poor as the main beneficiary.
3) Promotion of Social Development (e.g. Gender Perspective, Measure for
Infectious Diseases Including HIV/AIDS, Participatory Development,Consideration for the Handicapped etc.): Giving priority for funding the capacity
development of female technicians in charge of installation and maintenance of
the SHS and sponsor agencies making their efforts on disseminating the SHS toschools and hospitals etc., the Project contributes to promotion of socialdevelopment. .
(8) Collaboration with Other Schemes and Donors
KfW and the GIZ, etc. provide grants to where not covered by the ODA loan. TheWorld Bank and ADB, etc. also provide assistance to the IDCOL.
(9) Other Important Issues
Considering the importance of ensuring appropriate technical specifications andscreening capacity, an ODA loan expert is dispatched and provides assistance forestablishing a mechanism for technical specifications and a screening manual, etc.
4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicator)
Indicator(unit)
Yearly Power Generation Volume (MWh/year)
Installed Generation Capacity (MW)
Effect of the Reduction of CO2 (CO2conversion tons/year)

00Target (2018)【Expected value 2years after projectcompletion】
63,16246.632040,422

Baseline2) Internal Rate of ReturnNo rate for the Project in whole is calculated as the target sub-projects cannot be
selected before the Project implementation. On the other hand, sub-projects with
their EIRR over 12% are to issue loans with regard to the project components otherthan the SHS. EIRR of each sub-project is not calculated in the SHS program.
However, a result of a trial calculation based on a sample shows approximately
45 %.
(2) Qualitative Effects
Sustainable economic development, livelihood improvement, and climate change
mitigation.

5. External Factors and Risk Control
n/a
6. Evaluation Results and Lessons Learned from Past Projects(1) Evaluation Results of similar projects
When several implementation agencies (financial institutions) intervene in a case of
two-step loan, it is effective to address demand for fund and size according to sponsor
agencies targeted by each agency in a flexible manner, not standardizing the size ofproject and sub-loan condition. The lessons have been learned from the result ofEx-post evaluation of “Small & Medium Industries Development Corporation” inMalaysia, etc.
(2) Lessons for the Project
Based on the lessons as described above, the Project brings flexibility to the loan
condition by each sponsor agency according to their cumulative amount of loans inthe SHS program.
7. Plan for Future Evaluation(1) Indicators to be Used
1) Yearly Power Generation Volume (MWh/year)
2) Installed Generation Capacity (MW)3) Effect of the Reduction of CO2 (CO2 conversion tons/year)(2) Timing of Next Evaluation: 2 years after project completion
END