Japanese ODA Loan

Ex-Ante evaluation
1． ProjectCountry: People's Republic of Bangladesh
Name of the Project: Matarbari Ultra Super Critical Coal-Fired Power Project (I)Loan Agreement: June 16, 2014
Loan Amount: 41.498 billion yen
Borrower: The Government of the People’s Republic of Bangladesh
2． Background and Necessity of the Project(1) Current Status and Issues in the Power Sector in Bangladesh
Bangladesh suffers from insufficient power supply to meet the increasing power
demand which itself is a result of improved electrification rates and industrialization in
the wake of the country’s rapid economic growth in recent years. As of March 2014,
the power supply meets only 80 percent of the potential demand estimated as 9,268
megawatts and the maximum power supply was 6,887 megawatts. The power
demand is expected to continue increasing over the next decade by 10 percent per
year over the next decade. Although 70 percent of the power generation is currently
operated by gas-fired plants using domestic natural gas, domestic natural gas will
face depletion in the near future. Therefore, Bangladesh needs to seek other energyresources that are more sustainable than natural gas in order to ensure a stable
power supply. To meet the future power demand, Bangladesh has started a long-term
power development plan based on coal power plants using imported coal as a primary
power source.
(2) Development Policies for the Power Sector in Bangladesh and the Priority of theProject
The 6th Five-Year Plan (2011/2012-2015/2016) as the nation's top-ranked plan of
the National Development Strategy defines power sector as a key infrastructure for
economic growth with reduction of poverty. The government also defined the PowerSystem Master Plan 2010 as an important development policy in the power sector andhas reached the conclusion that coal is the most important primary energy source.
Based on this conclusion, the government announced the construction of an ultra
super critical coal-fired power plant capable of extremely high generating efficiency
through the use of imported coal. With its construction, the country is looking to satisfy
its predicted power demand, which is expected to rise to 34,000 MW by 2030.
(3) Japan and JICA’s Policy and Operations in the Power Sector of Bangladesh
In the JICA Country Analytical Work for Bangladesh (April 2013), "economicinfrastructure improvement" is defined as a priority issue, and within this scope, "development of new power generation to minimize the gap between power supply anddemand, while supporting high-efficiency thermal power generation using coal as analternative power source from natural gas" is identified as a priority issue. Accelerating
inclusive economic growth is also identified as a priority area in Japan’s Country
Assistance Program for Bangladesh (June 2012). As such, this project is consistentwith Japan and JICA’s aid policies. Major support provided to the country's power
sector is listed below:
・ Loan assistance projects: New Haripur Power Plant Development Project(2007, 2009), Bheramara Combined Cycle Power Plant Development Project(2013), National Power Transmission Network Development Project (2013),
Renewable Energy Development Project (2013), and others.
・ Technical Cooperation projects:
Dispatching Power Sector Adviser(2004–present), Total Quality Management Training (2007), Master Plan Studyon Coal Power Development in Bangladesh (2009), and others.
(4) Other Donors’ Activity
The World Bank supports power grid transmission improvement project, Sector
loan for supporting energy sector development, restructure and rehabilitation for thefinancial affairs in the energy sector, construction of gas-fired power plants, and more.
The Asian Development Bank (ADB) supports enhancement of operational efficiency
at the Bangladesh Power Development Board (BPDB), establishment of theBangladesh Energy Regulatory Commission, construction of gas-fired power plants,and more.
(5) Necessity of the Project
As noted above, this project is consistent with Japan and JICA’s aid policies, andis also consistent with the Bangladesh government’s policy, since the necessity ofconstructing a high-efficiency coal-fired power plant using imported coal is listed ingovernment policy as a response to surging power demand and as a measure tostabilize the power supply. Accordingly, the necessity and relevancy to implement of
this project are high.
3． Project Description(1) Project Objectives
This project aims to construct a highly-efficient ultra super critical coal-fired power plant(rated output: 1,200 MW (600 MW × 2) in Matarbari District, Chittagong Division insoutheastern Bangladesh, and thereby respond to surging power demand in the country
and mitigate greenhouse gas emissions. This will contribute to the revitalization of the state
economy as a whole while helping to limit climate change.
(2) Project Site/Target Area
Chittagong Division, Cox Bazar District(3) Project Components
1) Ultra super critical coal-fired power plant (1,200 MW (600 MW × 2)), deep-water port
for carrying in coal (maximum water depth: 15.8 m)

2) Power grid (400kV power grid: 61 km, steel tower, reinforcing transformer stations,etc.)
3) Access roads (bridge: 640 m, new roads: 1.2 km, and rehabilitation of existing roads:35 km)
4) Rural Electrification (132-kV power grid: 25 km and distributing substation)5) Procurement of equipment (large vehicles for maintaining the power station, devices
and equipment for disaster prevention, etc.)
6) Consulting services (e.g. detailed designs, bidding assitance, and supervision ofconstruction)(4) Total Project Cost
449.925 billion yen (including Yen Loan Amount: 41.498 billion yen)
(5) Project Implementation Schedule
From June 2014 to December 2025 (total of 137 months). The project will becompleted when all the facilities start operation (December 2022).
(6) Project Implementation Structure1) Borrower: The Government of the People’s Republic of Bangladesh
2) Executing Agency: Coal Power Generation Company Bangladesh Limited(CPGCBL) Power Grid Company of Bangladesh Limited (PGCB) Roads andHighways Department (RHD)
3) Operation and Maintenance System: The same as the executing agency
above.
(7) Environmental and Social Considerations, Poverty Reduction, and SocialDevelopment
1) Environmental and Social Considerationsi.
Category:Aii.
Reason for Categorization: Project is classified as an environmental
category ‘A’ project, due to the extent of the Project and complexity ofenvironmental and social issues associated with construction of the coal
power plant, port facility, transmission line, and access road.
iii.
Environmental Permit: The Environmental Impact Assessment (EIA)
Report for the Project was approved by the Department of Environment of
Bangladesh for construction and improvement of power stations, ports,and harbors in October 2013 as well as for construction and improvementof power grids and access roads in November 2013.
iv.
Anti-Pollution Measures: Exhaust gas from the power station is expectedto satisfy both domestic and international Environmental, Health, andSafety Guidelines (EHS))standard values for sulfur oxides (SOx) andnitrogen oxides (NOx) by using flue gas desulfurization equipment thatemploys seawater and a low-NOx combustion system. The power stationis also expected to satisfy domestic and international Environmental,

v.

vi.

Health, and Safety Guidelines (EHS) standard values for atmosphericconcentration. For smoke dust (particle pollution (PM)), the power station
conforms to the requirements of the Environmental, Health, and Safety
Guidelines (EHS). However, the estimated PM10 concentration (annualfigure: 42.(4)–62.(4) μg/m3) of the power station exceeds the upper valueof Bangladesh's standards. This is because the figure is affected by theconcentration before the project inauguration (42–62 μg/m3). The
contribution of this project is thought to be insignificant--only 0.4 μg/m3.
The effects of the PM can be minimized by using a tall stack (275 m) andelectrical dust collectors. This project uses seawater as a coolant. By
limiting the increase in drainage temperature to 7°C or less over thetemperature of the intake water, the plant will comply with nationalstandards (less than 40°C). Thus the negative impact on the ecologicalsystem is expected to be minimal. The power station is also expected tosatisfy domestic and international Environmental, Health, and Safety
Guidelines (EHS) standard values for noise during construction and after
starting use.
Natural Environment: The Project site is not located in or aroundsensitive areas such as national parks. Located 15 km south of the projectsite is Sonadia Island, which is designated as an Ecologically Critical Areaby the Bangladeshi government. Despite its location, the impact of air andwater quality deterioration will be limited due to measures taken (seeabove), and thus the negative impact on Sonadia Island is expected to beminimal. In this regard, however, marine animals often move around or
migrate. Therefore, if rare species are observed visually, necessary
measures such as adjusting the intensity of light sources on the sea
surface or the surrounding area during construction or limiting noise orvibration should be taken. In addition, laborers will be prohibited fromcollecting, catching, or hunt rare species and/or their eggs.
Social Environment: The necessary land acquisition for constructing thepower station, ports, or harbors is about 475 ha. The area is used as a salt
farm in the dry season and a shrimp farm during the rainy season. It has
been confirmed that twenty families (including 16 families illegallyresiding) must be relocated, and another 1,000 people's livelihoods areexpected to be affected. Compensation related to land acquisition,
resident relocation, lost assets, or livelihoods are to be provided in linewith domestic procedures and the Relocation Assistance Program (RAP).
Although land must be acquired for power transmission wires and accessroads (about 0.13 ha and 3.1 ha respectively), no resident transfers arerequired. Land acquisition and compensation are to be provided in linewith domestic procedures and the RAP. No objection from participants
was heard at the on-site stakeholder discussion held for each projectcomponent; however, appropriate environmental management andsurrounding infrastructure development were requested. The executing
agency indicated that they would respond to feedback and requests
appropriately and obtain consent from participants.
vii.
Other/Monitoring: The relocation process for local residents will bemonitored by external experts as well as by the executing agency. Theenvironment will be monitored by the executing agency and contractors
while construction is underway and by the executing agency for air, waterpollution, and noise after service starts.
2) Promotion of Poverty Reduction: The homes of about 4,000 families(approximately 20,000 persons) living near the power station will electrified.
3) Promotion of Social Development (e.g. Gender Perspective, Measures toPrevent Infectious Diseases Including AIDS, Participatory Development,
Consideration for the Handicapped, etc.): The project will involve HIV/AIDS
prevention activities for construction workers, in collaboration with consultants.
(8) Collaboration with Other Schemes and Donors: N/A(9) Other Important Issues:This is an unprecedented project for constructing an ultra super critical coal-fired
power station. Incorporating highly efficient super critical power generation technology,
the new power station will reduce emissions by about 400,000 tons/year (converted toCO2) compared to other subcritical pressure coal-fired power stations of same size,
and thus contributes to mitigating climate change.
4． Project Benefits(1) Quantitative benefits
1) Evaluation Indicators (Operation and Effect Indicator)
Indicators

Unit

Target (2027)
five years after completion

MW%%%%
Hours/year
Hours/year
Hours/year

1,200
80
85
6.48
41.29
0218
1,096

times/year

10%

0.4

Operational index
Power station
Maximum output
Utilization ratio
Operation rate
Auxiliary power ratio
Gross thermal efficiency
Human error
MachinefailureUnit down time*
Periodic
inspections
Number of times unit operationsuspended*
Electric power cables
Transmission loss rate

Ports and harbors
Berth operation rate
Total cargo volume
Dredged volume
Operation and Effect Indicators
Transmission end electrical energy
CO2 emissions*
NOX emissions*
SOX emissions*
Dust emissions*
Fuel consumption*%
1,000 tons/year
Cubic meters/year

60
4,000
360,000

GWh/year
1,000 tons/year
1,000 tons/year
1,000 tons/year
1,000 tons/year
1,000 tons/year

7,865
3,416
6.1
10.9
0.7
1,863

Note: per unit

2) Internal Rate of Return (IRR)
Based on the conditions below, the Economic Internal Rate of Return (EIRR) of
this project was calculated as 19.63%, while Financial Internal Rate of Return (FIRR)
was 2.43% and the power transmission component was 16.85%.
EIRR:
Cost: Project costs, fuel costs, and maintenance costs
Benefits: Balance with petroleum power generated
Project Life: 25 years
FIRR:(Power generating component)
Cost: Project costs, fuel costs, maintenance costs, taxes, and discounts
Benefits: Revenue from sales of electric power (Power Purchase Agreement, PPA)
Project Life: 25 years(Power transmission component)
Cost: Project costs, fuel costs, maintenance costs, taxes, and discounts
Benefits: Power transmission fees, residual value when completing project life
Project Life: 25 years(2) Qualitative benefits
Revitalization of Bangladesh's economy as a whole and mitigation of climatechange
5． External Risk Factors and Risk Control
Delays in civil engineering work due to natural disasters such as cyclones andconclusion of PPA to ensure the financial viability of the executing agency.
6． Evaluation Results and Lessons Learned from Past Projects(1) Evaluation results of similar projects
The ex-post evaluation results for Kenya's Mombasa Diesel Generating Power
Plant Project demonstrate that appropriate supports from manufacturers cansignificantly improve the sustainability of power generation projects.
(2) Lessons for the ProjectThis project aims to establish a stable maintenance and control system bytransferring technology through consultants and establishing long-term service
agreements with manufacturers. In addition, the internal control systems of theexecuting agency will be reinforced by organizational capacity improvement
consultants hired separately through the project.
7． Plans for Future Evaluation(1) Indicators for Future Evaluation:1) Maximum output (MW)2) Utilization ratio (%)3) Operation rate (%)4) Auxiliary power ratio (%)5) Gross thermal efficiency (%)6) Unit downtime· Human error (hours/year)· Machine failures (hours/year)· Periodic inspections (hours/year)7) Number of times unit operation suspended (times/year)8) Transmission loss rate (%)9) Berth operation rate (%)10) Total cargo volume (1,000 tons/year)11) Dredged volume (cubic meters/year)12) Transmission end electrical energy (GWh/year)13) CO2 emissions (1,000 tons/year)14) NOx emissions (1,000 tons/year)15) SOx emissions (1,000 tons/year)16) Dist emissions (1,000 tons/year)17) Fuel consumption (1,000 tons/year)18) Economic Internal Rate of Return (EIRR) (%)19) Financial Internal Rate of Return (FIRR) (%)(2) Timing of Next Evaluation: Two years after completion