Japanese ODA Loan

Ex-Ante Evaluation
1. Name of the ProjectCountry: People’s Republic of Bangladesh
Project: Dhaka-Chittagong Main Power Grid Strengthening Project
Loan Agreement: December 13, 2015
Loan Amount: 43,769 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
In the People’s Republic of Bangladesh (hereinafter referred to as “Bangladesh”), theelectrification rate and annual per-capita electricity consumption are very low, atapproximately 62% and 321kWh, respectively (as of 2013). With rapid economic growth inrecent years, the power demand is projected to continue to grow at around 8.5% per annum toreach 33,708MW by 2030 (estimated in 2010); nevertheless, the maximum power supply
capacity has remained at around 80% of the demand (in FY 2012-2013, the actual maximum
power supply capacity was 6,350MW while the potential peak power demand was 8,349MW),
which leading to regular planned power cuts.
Currently, approximately 70% of electricity is generated by gas-fired thermal power plants
using domestic natural gas; however, there is a need to diversify the energy sources becauseof the growing demand for domestic gas and the elevated risk of running out of it in recentyears. Against this backdrop, the Government of Bangladesh has formulated the Power
System Master Plan 2010, according to which the Government is planning to developthe
deep-sea port to import natural gas, coal and other fuels and construct power plants using
these imported sources of energy in the Chittagong Division. While the power generation
capacity in the division is expected to continue to expand in years to come, this electricity
needs to be transmitted to the Dhaka Metropolitan Area (accounting for around 50% of thedemand for electricity), for securing a stable supply of high-quality electricity is a key tosustainable economic development in Bangladesh.
(2) Development Policies for the Power Sector in Bangladesh and the Priority of the Project
As the most important national development strategy, the Sixth Five Year Plan (fromFY2011-2012 to FY2015-2016) identifies the power sector as one of the most important areasfor economic development leading to poverty reduction. The Power System Master Plan 2010aims to raise power generation capacity as well as develop and expand high-voltage
transmission networks. The Master Plan also points out the necessity of transmitting power tothe Dhaka area, where there is a high demand for electricity, from other areas. Meanwhile, theBangladesh Climate Change Strategy and Action Plan 2009 outlines a course of action todevelop infrastructure that can improve the efficiency of power generation, transmission, anddistribution in order to create a low-carbon society. This Project is in line with these policiesof Bangladesh.
(3) Japan and JICA’s Policy and Operations in the Power Sector
The JICA Country Analysis Paper for Bangladesh (issued in April 2013) identifies thestable supply of electricity as an important issue. The Country Assistance Program forBangladesh (issued in June 2012) also points out that the power supply shortage is thegreatest impediment for the country’s economic development and that it is essential to make asignificant improvement in electricity and energy supply (in terms of quantity and efficiency).
Thus, this Project is consistent with the policy and analysis of the Japanese Government andJICA. Major cooperation projects implemented in the electricity sector are listed below. In
addition to the projects below, Japan has also extended active support for climate changemeasures, as represented by the Programme for Improvement of Solid Waste Management in
Dhaka City toward the Low Carbon Society (Grant Aid for Environment Program in 2009),
because the Japanese Government has identified it as an important issue in Bangladesh.
- Loan assistance: New Haripur Power Plant Development Project (in 2007 and 2009),
Central Zone Power Distribution Project (in 2009), Rural Electrification Upgradation
Project (in 2010), Bheramara Combined Cycle Power Plant Development Project (in 2013),
National Power Transmission Development Project (in 2013), and Matarbari Ultra Super
Critical Coal-Fired Power Project (I) (in 2014)- Technical cooperation: Dispatch of Power Sector Advisor (in 2014), The study for masterplan on coal power development in the People's Republic of Bangladesh : power system
master plan 2010 (PSMP2010), The project for development of energy efficiency andconservation master plan in Bangladesh (in 2014), etc.
(4) Other Donor’s Activity
The World Bank is supporting the power sector reform, the promotion of rural
electrification, and the development of renewable energy. Meanwhile, the Asian Development
Bank is supporting the extension of electrification, the improvement of energy efficiency, thepromotion of privatization, the facilitation of international electricity interconnections, and thepromotion of renewable energy development and energy conservation.
(5) Necessity of the ProjectThis Project is in line with the priority areas of the Government of Japan and JICA as wellas the development issues and policies of the Government of Bangladesh; therefore, it ishighly necessary and relevant for JICA to implement this Project.
3. Project Description(1) Project Objective
By constructing high-voltage main power lines between Dhaka and Chittagong, thisProject aims to ensure a stable supply of electricity in Bangladesh, thereby contributing to its
economic growth and mitigation of climate change.
(2) Project Site/Target Area
Dhaka and Chittagong Divisions(3) Project Components
1) Construction of 400kV transmission lines (from Dhaka to Matarbari Ultra Super Critical
Coal-Fired Power Plant)
2) Construction of new 400kV/230kV substations and expansion of a 230kV/132kV
substation
3) Consulting services: detailed design (D/D), tender assistance, construction supervision,etc.
(4) Estimated Project Cost (Loan Amount)
70,011 million Yen (Loan Amount: 43,769 million Yen)
(5) ScheduleThis Project is planned to run from December 2015 to March 2022 (76 months in total).
Project completion is defined as when all the facilities start to operate (in March 2021).
(6) Project Implementation Structure1) Borrower: The Government of the People’s Republic of Bangladesh
2) Guarantor: N/A
3) Executing Agency: Power Grid Company of Bangladesh Limited (PGCB)
4) Operation and Maintenance System: The Operation and Maintenance Department ofPGCB is responsible for the operation and maintenance of the transmission grid,substations, and other relevant facilities of this Project.
(7) Environmental and Social Consideration/Poverty Reduction/Social Development
1) Environmental and Social Consideration:① Category: B② Reason for Categorization:
It is because the Project does not fall under any of the categories in the list ofsensitive sectors, characteristics, and areas provided in the JICA Guidelines forEnvironmental and Social Considerations (published in April 2010), nor is likely tohave any significant adverse impact on the environment.
③ Environmental Permit:
The Initial Environmental Impact Examination (IEE) Report was approved by theDepartment of Environment, the Ministry of Environment and Forests, the Government

of Bangladesh, in September 2014. Moreover, the Environmental Impact Assessment(EIA) Report of the Project is to be submitted by PGCB to obtain approval from theDepartment of Environment, the Ministry of Environment and Forests, the Governmentof Bangladesh, by April 2016.
④ Anti-Pollution Measures:
During construction, the contractor will take following actions: measures to prevent
air pollution, such as sprinkling water, covering loading trucks to minimize dustemissions, and ensuring the proper management of vehicles and heavy equipment;
measures to prevent water pollution, such as routing the transmission lines in a way thatno transmission towers will be built on steep slopes and reinforcing slopes to control
muddy water; and measures to manage waste, such as ensuring the separation ofconstruction waste and the proper treatment of hazardous waste to prevent water, soil,and other pollution.
⑤ Natural Environment:
The Project sites (the substation construction sites and transmission line route) are
not located in or around sensitive areas such as nature reserves, habitats of precious
species, and national parks. Moreover, this Project is planned to install bird deterrentson the transmission lines to prevent bird strikes as well as take necessary measures,
including slope reinforcement, to prevent geological and geographical damage.
Therefore, the Project is likely to have a minimum negative impact on the naturalenvironment.
⑥ Social Environment:This Project will require land acquisition of approximately 100 hectares for theconstruction of Meghnaghat Substation. Because the land is held by a government
agency, the ownership of the land is to be transferred from the agency to PGCB. This
Project will also acquire approximately 10 hectares of agricultural land for theconstruction of Madunaghat Substation. This process will be managed in accordancewith the regulations of Bangladesh and the resettlement action plan. Compensation for
replacement costs will be offered to the 46 owners of the agricultural land. Moreover,
the tenant farmers who will lose their livelihood as a result of the land acquisition will
receive compensation for the loss of earnings and assistance for the recovery oflivelihood. Meanwhile, the land acquisition for the construction of transmission towers
will be conducted in accordance with the laws and regulations of Bangladesh and thecompensation policies formulated by the executing agency. Neither of the landacquisition processes will entail any resettlement of residents.
⑦ Other/Monitoring:
In this Project, PGCB is responsible for monitoring the land acquisition andcompensation payment in the planning stage; the air, noise, water, ecosystem, and otherpollution during the construction; and the ecosystem protection, waste management,
working environment, and other relevant matters after the commencement of theoperation of the facilities.
2) Promotion of Poverty Reduction:
None in particular.
3) Promotion of Social Development:This Project is not classified as a gender project since it is hardly possible to takespecific actions that can contribute to gender equality.
(8) Collaboration with Other Donors
None in particular.
(9) Other Important issues
None in particular.
4. Targeted Outcomes(1) Quantitative Effects
1) Performance Indicators (Operation and Effect Indicator)
Indicator

Baseline(Actual value in FY2014)

Target (in 2023)[Expected value two years
after project completion]

400kV/230kV transformer capacity (MVA)
Meghnaghat Substation-1,500

New Meghnaghat Substation-2,250230kV/132kV transformer capacity (MVA)
Old Madunaghat Substation-

900

Average operating ratio of the 400kV/230kV transformers (%)
Meghnaghat Substation-38

New Meghnaghat Substation-35

Average operating ratio of the 230kV/132kV transformer (%)
Old Madunaghat Substation-

23

Sending-end output of the 400 kV transmission lines (GWh per year)
Matarbari Power Plant - New-

12,569-6,878

Madunaghat Substation
New Madunaghat Substation Meghnaghat Substation
Transmission loss rate of the 400 kV transmission lines (%)
Matarbari Power Plant - New
Madunaghat Substation-1

Indicator
New Madunaghat Substation -Baseline(Actual value in FY2014)

Target (in 2023)[Expected value two years
after project completion]-1

Meghnaghat Substation(2) Qualitative Effects
Bangladesh’s economic development and mitigation of climate change(3) Internal Rate of Return
Based on the conditions indicated below, the Economic Internal Rate of Return (EIRR) andFinancial Internal Rate of Return (FIRR) of this Project were calculated to be 20.33% and12.88%, respectively.
【EIRR】
Cost: Project costs (excluding taxes), operation and maintenance costs, and electricity
purchase costs
Benefit: Reduction in the cost of alternative energy production and consumers’ willingness
to pay (WTP) for additional electricity to be sold on the market
Project Life: 35 years【FIRR】
Cost: Project costs, operation and maintenance costs
Benefit: Estimated revenue of power transmission
Project Life: 35 years
5. External Factors and Risk Control(1) Preconditions: None in particular.
(2) External Factors: None in particular.
6. Evaluation Results and Lessons Learned from Past Projects(1) Results of Evaluation of Similar Past Projects
The results of the ex-post evaluation of the Anpara Power Transmission System Project (1)and (2) in India identified the following lesson: when systems with new specifications, suchas super-high voltage transmission lines, are introduced for the first time in the country, it isnecessary to formulate a realistic implementation plan based on a sufficient examination of
the possibility of difficulties and obstacles arising in terms of administrative procedures
because the country may have not established relevant criteria, such as those for permission
for deforestation and approval required by the aviation law.

(2) Lessons for the ProjectThis Project will build the first 400kV extra-high-voltage transmission lines in Bangladesh;
therefore, based on the above-mentioned lesson learned, this Project will formulate animplementation plan after confirming the approval processes and administrative procedures
required to build high-voltage transmission lines.
7. Plan for Future Evaluation(1) Indicators to be Used1) 400kV/230kV transformer capacity (MVA)
Meghnaghat and New Meghnaghat Substations
2) 230kV/132kV transformer capacity (MVA)
Old Madunaghat Substation
3) Average operating ratio of the 400kV/230kV transformers (%)
Meghnaghat and New Meghnaghat Substations
4) Average operating ratio of the 230kV/132kV transformer (%)
Old Madunaghat Substation
5) Sending-end output of the 400 kV transmission lines (GWh per year)
The transmission line between Matarbari Power Plant and New Madunaghat Substation;
andThe transmission line between New Madunaghat Substation and Meghnaghat
Substation
6) Transmission loss rate of the 400 kV transmission lines (%)
The transmission line between Matarbari Power Plant and New Madunaghat Substation;
andThe transmission line between New Madunaghat Substation and Meghnaghat
Substation(2) Timing of Next Evaluation
Two years after the completion of the Project (ex-post evaluation)