Japanese ODA Loan

Ex-Ante Evaluation (for Japanese ODA Loan)
1. Name of the ProjectCountry: The People's Republic of Bangladesh
Project: Bheramara Combined Cycle Power Plant Development Project
Loan Agreement: February 20, 2013
Loan Amount: 41,480 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 Electricity Sector in Bangladesh
The annual power consumption per capita in Bangladesh is at world's lowest level,
170kWh (FY2009/10), and the electrification rate is also low at 47%. The electricitysupply cannot meet the increased demand: in FY2009/10, the peak demand reached6,454MW but the installed capacity of electricity supply was 5,271MW only and themaximum power-generating capacity was a mere 70% or so of the demand. Thus, thecountry was obliged to perform planned outage chiefly at peak times. Due to an
improvement in the electrification rate and industrialization thanks to the recent higheconomic growth, electricity demand is expected to increase by around 10% per year
for the time being. The supply-demand gap is likely to remain due to delay inconstruction of new power generating plants because of fund shortages and otherreasons. Accordingly, Bangladesh is faced with an urgent issue of establishing astable electricity supply system through development of new power sources(particularly highly efficient power plants), diversification of energy sources including
coal-fired thermal power, and rectification of system losses in the electric powertransmission and distribution.
(2) Development Policies for the Electricity Sector in Bangladesh and the Priority ofthe Project
The Government of Bangladesh cites three long-term visions for the electricity
sector in the “Policy Statement on Power Sector Reforms (2000)”, which are (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 Sixth
Five Year Plan (FY2011-FY2015), the latest national plan, refers to the necessity ofreform on the electricity sector, viewing it as important infrastructure for economic
growth leading to poverty reduction, and set out goals to increase thepower-generating capacity to 15,457MW by 2014/15 and to 20,000MW by 2020/21,and the electrification rate to 68%. This project will, in line with these national policies,
construct a highly efficient new-type power plant and support building of theoperational structure of power generating companies that were spun off in accordancewith the sector reform. Meanwhile, “The Bangladesh Climate Change Strategy andAction Plan (2008)” stipulates action policies that infrastructure for higher efficiency inpower generation, transmission and distribution in the electricity sector will beestablished to realize a low carbon society.
(3) Japan and JICA’s Policy and Operations in the Electricity SectorThe Country Assistance Policy for Bangladesh formulated by the Ministry ofForeign Affairs of Japan in June 2012 views “acceleration of economic growth fromwhich all the citizens can benefit to become middle income earners” as one of thepriority areas, and shows the intention to assist development of power generating
plants and transmission and distribution networks to overcome the shortage ofelectricity. Based on the policy, JICA designed the Country Analytical Work (February2012), which regarded the electricity sector as a priority area and showed theintention to assist infrastructure development, and formulation and implementation ofplans for comprehensive sector reform in collaboration with other donors. Thus, thisproject is consistent with the policies of the Japanese government and JICA itself. To
date, Japan has given positive assistance to the electricity sector in Bangladesh,
including the Program for Improvement of Solid Waste Management in Dhaka City
toward the Low Carbon Society (2009. Grant Aid for Environmental Program). Major
assistance programs conducted for the electricity sector in Bangladesh are as listed
below:・ Loan assistance: National Power Transmission Network Development Project;
Central Zone Power Distribution Project; New Haripur Power Plant Development
Project; and Rural Electrification Upgradation Project・ Technical Cooperation: dispatches of advisors on electricity policies; training on
Total Quality Management (TQM); and study for master plan on coal power
development(4) Other Donors’ Activity
As major donors, ADB and WB have been supporting the electricity sector reform in
Bangladesh, including spinning-off and improving business efficiency of electricity
companies; development of new power sources; development of transmission anddistribution networks; and energy efficiency.
(5) Necessity of the ProjectThis project deals with tight electricity demand in Bangladesh by constructing ahighly efficient new power plant and promotes the sector reform in collaboration withother donors by assisting development of the organizational structure of North WestPower Generation Co., Ltd. (NWPGCL). It also contributes to alleviation of climatechange by constructing a highly efficient new power plant. An ODA loan for theengineering services (E/S) for designing, bidding assistance, construction supervisionand enhancement of the organizational capacity for this project was already made inFY2009. As stated above, the project conforms to the policy of the Bangladeshigovernment, and the assistance policy of the Japanese government and JICA. Thus,

the project is highly necessary and relevant.
3. Project Descriptions(1) Project Objective(s)The objective of this project is to stably supply electricity and deal with increased
electricity demand by establishing a highly efficient combined cycle power plant in thewestern zone of Bangladesh where the electricity demand is tight, thereby
contributing to the improvement of industrial competitiveness and living standards ofthe targeted region as well as the enhancement of mitigation measures against globalwarming.
(2) Project Site/Target Area: Bheramara Upazila, Kushtia District, Bangladesh(3) Project Components (Including the Procurement Method)1) Construction of a combined cycle power plant (360MW class) and associatedfacilities (international competitive bidding)2) Development of the SCADA system for gas transportation network (internationalcompetitive bidding)3) Consulting services (detailed design review for the above-mentioned SCADA
system, bidding assistance, construction supervision, strengthening of theoperation and maintenance capacity, etc.) (short-list method) (An ODA loan for
E/S (designing of the power plant, bidding assistance, construction supervision,
strengthening of the operation and maintenance capacity, etc.) was already given
in FY2009.)(4) Estimated Project Cost (Loan Amount)
Total Project Cost: 58,995 million Yen, including ODA Loan Amount: 41,480 million
Yen(5) Schedule
From February 2013 to June 2019 (77 months). The project will be completed when
all the facilities start operation (June 2016).
(6) Project Implementation Structure1) Borrower: the Government of the People’s Republic of Bangladesh
2) Executing Agency: North West Power Generation Co., Ltd. (NWPGCL). However,Gas Transmission Co., Ltd. will be in charge of development of the SCADA
system under the supervision of NWPGCL.
3) Operation and Maintenance System: the same as the executing agency above.
(7) Environmental and Social Consideration/Poverty Reduction/Social Development
1) Environmental and Social Consideration① Category: A
Reason for Categorization: this project falls under the thermal power
generation sector under the “JBIC Guidelines for Confirmation ofEnvironmental and Social Consideration” (established April 2002).

② Environmental Permit: the detailed Environmental Impact Assessment (EIA) for
this project was approved in June 2009 by the Department of Environment(DOE).
③ Anti-Pollution Measures: measures will be taken for air quality, water quality
and noise by constructing tall stacks and wastewater treatment facilities,
planting trees and installing soundproof walls, so the project is expected tomeet the emission and environmental standards of the country. Meanwhile,
cooling water will be taken from the neighboring river, but the amount of water
to be taken will be small even in dry seasons as the cooling water is cyclicallyused in the coolant tower, so the impact on the river flow is expected to beminimal.
④ Natural Environment: this project site is located outside nationally and locallydesignated protected areas (National Reserves and Conservation Areas), andso adverse impact on the natural environment is assumed to be minimal.
⑤ Social Environment: this project requires land acquisition and resettlement of
two retail shops for gas pipelines and transmission cables, which will be carriedout in accordance with the domestic procedures of Bangladesh. The projectrequires no resettlement of any residents.
⑥ Other / Monitoring: the executing agency will monitor the progress of landacquisition, the environment, air quality, drainage and underground water
during construction and provision of service. It will also monitor the quality of
public water resources, noise and other neighboring environments after thefacilities start operation.
2) Promotion of Poverty Reduction: none
3) Promotion of Social Development: as part of the consulting services of the project,
HIV/AIDS preventative programs will be conducted for construction workers
during the construction period.
(8) Collaboration with Other Schemes and Donors
Pipeline to supply gas to the power plant is under construction under an ADB
assistance project (to be completed in 2013).
(9) Other Important Issues
The introduction of a highly efficient gas combined cycle reduces greenhouse gas
emissions and thus contributes to alleviation of the climate change. The effect of theproject to alleviate the climate change (in terms of the volume of GHG emissions
reduction) is approximately 360,000 tons/year of CO2 equivalent. A Japanese firm has
already received the order for the consulting services for construction of the power
plant in this project and has commenced the services. In addition, Japanese firms arehighly competitive in EPC contracts for construction of power plants and associatedfacilities, giving Japanese companies the advantage in obtaining the contract.

4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicator)
Target (2018)
Indicator【Expected value 2 years after
project completion】

Maximum output capacity (MW)360

Plant Load Factor (%)

75

Plant Availability (%)

90

Auxiliary power ratio (%)

3

Gross Thermal Efficiency (%)

52

Human errors

0Machine errors

438

Planned outage

192

Annual Amount of Net Generation Output(Gwh/year)

2,294

Outage by cause(hours/year)

2) Internal Rate of Return
Based on the conditions indicated below, the economic internal rate of return (EIRR)of the project is 19.6% and the financial internal rate of return (FIRR) is 8.6%.
[EIRR]
Cost: project cost (excluding taxes) and operating and maintenance costs
Benefits: earnings from electric power selling based on the estimated electricity
wholesale price
Project life: 25 years[FIRR]
Cost: project cost and operating and maintenance costs
Benefits: earnings from electric power selling
Project life: 25 years(2) Qualitative Effects
Improvement of industrial competitiveness and living standards of the targeted
region as well as the enhancement of mitigation measures against global warming.
5. External Factors and Risk Control
Delay in civil engineering and other work due to floods or other natural disaster, andsustainability of supply of natural gas to the power plant
6. Evaluation Results and Lessons Learned from Past Projects(1) Evaluation results of similar projects

The ex-post evaluation of Mombasa Diesel Generating Power Plant Project in Kenya
has given a lesson that self-reliant efforts of the executing agency and appropriate
support from manufacturers will considerably increase the possibility ofself-sustainability of the power generation project. The ex-post evaluation of Surabaya
Metropolitan Area Communication Network Improvement Project in Indonesia has
given another lesson: in order to produce effects of the project that is executed by agovernmental agency, it is essential to reform the awareness of officers of the agency
and strengthen the internal management structure of the agency by transferring andgiving authorities over the operation to the agency.
(2) Lessons for the Project
The NWPGCL, the agency responsible for execution of the project, and theoperation and maintenance of the power plant, was recently established as agovernmental agency. Thus, based on the lessons above, a long-term service
agreement (LTSA) will be concluded with manufacturers and other parties concerned,
and a consultant will be hired to strengthen the agency’s organizational structure withthe support of the existing E/S loan.
7. Plan for Future Evaluation(1) Indicators to be Used
1) Maximum output capacity (MW), plant load factor (%), plant availability(%),
auxiliary power ratio (%), gross thermal efficiency (%), outage by cause(hours/year) (human error, machine failure and planned outage) and power
generating at sending end (Gwh/year)2) EIRR (%) and FIRR (%)(2) Timing of Next Evaluation: two years after project completion
END