GLE 11O Y CONFIDENTIAL Report No. 7879-BD BANGLADESH PROZPECTS FOR PPIVATE PARTICIPATION IN THE ENERGY SECTOR March 9, 1990. Industry and Energy Division Country Department 1 Asia Regional Office CURRENCY FQUIVALENTS Currency Unit= Bangladesh Taka ('k) Taka 1.00= US$ 0.03 Taka 33 - USS 1.00 Taka 1.00 = Paisa 100 FISCAL YEAR: July 1 to June 30 WEIGHTS AND MEASURES Btu British Thermal Unit (0.25 kcal) mBtu million Btu kW = Kilowatt (1.341 horsepower) kWh = Kilowatt hour MW = Kegawatt (thousand kilowatts) GWh Gigawatt hour (million kWh) MCF Thousand cubic feet MMCF Million cubic feet MMCFD = Million cubic feet per day t =Ton tpa. = Tons per year I = liter ABBREVIATIONS AND ACRONYMS BKB - Bangladesh Krishi Bank BOX - Board of Investments BOGMC - Bangladesh Oil, Gas and Mineral Corporation BOL - Bangladesh Oxygen Ltd. BOOT - Build-Own-Operate-Transfer BPC - Bangladesh Petroleum Corporation BPDB - Bangladesh Power Development Board BSB - Bangladesh Shilpa Bank BSCIC - Bangladesh Small and Cottage Industries Corporation BSRS - Bangladesh Shilpa Rin Sangstha CCI - Controller of Capital Issues CNG - Compressed Natural Gas DSE - Dhaka Stock Exchange EPZA - Export Processing Zones Authority FY - Fiscal Year GOB - Government of Bangladesh ICB - Investment Corporation of Bangladesh IDA - International Development Association IPDC Investment Promotion and Development Corporation IRR - Internal Rate of "eturn LPG - Liquefied Petroleum Gas LRMC - Long-vun Marginal Cost- MEMR - Ministry of Energy an4 Mineral Resources MOU - Memorandum of Understanding NCB - Nationalized Commercial Bank NIP - New Industrial Policy ODA - Overseas Development Administration (UK) PIP - Priority Investment Program REB - Rural Electrification Board SFYP - Second Five Year Plan TFYP - Third Five Year Plan BANGLADESH PROSPECTS FOR PRIVATE PARTICIPATION IN THE ENERGY SECTOR Table of Contents Page No. EXECUTIVE SUMMARY Role of the Private Sector .................................. 1 Regulatory Environment.......................................... 2 Fin:ancing....................................................... 2 Pricing Policy................................... ........... 3 Potential Private Investments................................ 3 Scenario for Private Investment............................. I. THE ROLE OF THE PRIVATE SECTOR......... ......................7 Current Private Involvement....................... ........... 7 Government policies Towards the Private Sector............... 8 Industrial Policy................................. ........... 8 Energy Investment Needs...................................... 9 Obstacles to Private Participation........................... 10 II. REGULATORY AND FINANCIAL ENVIRONMENT.......................... 11 Inventory of Existing Relevant Laws and Regulat.ons.......... 11 Evolution of Investment Regulations.......................... 12 New Board of Investment...................................... 13 Taxation..................................................... 15 Arbitration and Labor Issues.................................. 16 Capacity of Financial Markets................................ 16 Pricing Policy................................................ 19 Regulatory Priorities........................................ 21 III. POTENTIAL PRIVATE INVESTMENTS................................ 22 Petroleum Exploration.......................................... 22 Liquefied Petroleum Gas (LPG)................................. 25 Compressed Natural Gas (CNG)................................. Coal Development............................................... 37 Power Sector Investment........................................ 40 Other Investment Potential.................................... 46 IV. SCENARIO FOR PRIVATE PARTICIPATION........................... 49 Policy Measures................................... ........... 49 Key Investment Prospects..................................... 51 -ii- ANNEXES .......... Page No. Annex 1.1 Priority Investment Programme........................ 54 Annex 2.1 Regulations and Ordinances........................... 55 Annex 2.2 Privatization in Industry............................ 60 Annex 2.3 Public Issue of Holding Companies Shares............. 61 Annex 2.4 Abolition of Department/Agencies/Committee/Boards.... 62 Consequent upon creation of Board of Investment (BOI) Annex 2.5 The Investment Board Ordinance....................... 63 Annex 2.6 "Foreign Investment in Bangladesh"............ ........71 Annex 2.7 Highlights of Stock Market as or, 31st December 1988., 77 Annex 2.8 Petroleum Product Prices............................. 78 Annex 2.9 Nominal and Economic Energy Prices late 1988 ..........81 Annex .10 Relative Retail Energy Prices 1989................... 82 Annex 3.1 Oil/Gas Field Viability.............. .... 84 Annex 3.2 Petroleum Product Consumption in Bangladesh.......... 85 Annex 3.3 Baghabari and Kailashtila: LPG Bottling............. 86 and Transport Annex 3.4 LPG Bottling Plant Viability......................... 88 Annex 3.5 Two Perspectives on Economic Price of LPG............ 89 Annex 3.6 Fuel Substitution: Gasoline/Diesel vs. CNG.......... 90 Annex 3.7 CNG Project Costs and Benefits....................... 91 Annex 3.8 Barapukuria Coal: Economic Values of Cash Operating.. 93 Costs At Full Production, With Contingencies Annex 3.9 Economic Border Prices of Barapukuria Coal For ...... 95 the Economic Analysis Annex 3.10 Economic Cost Comparisons for a 260 MW Power Station 96 Annex 3.11 BPDB Investment Program Summary...................... 97 Annex 3.12 Cost Analysis for Alternative Plans for Padma........ 98 Textile Annex 3.13 Methanol Project..................................... 99 Following visits to Bangladesh in October 1988 and March 1989, this report was prepared by Karl G. Jechoutek (Mission Leader), Paul Hubbard (Sr. Financial Analyst), and Riaz Khan (Consultant). The report was updated following a visit to Bangladesh in December 1989. BANGLADESH PROSPECTS FOR PRIVATE PARTICIPATION IN THE ENERGY SECTOR EXECUTIVE SUMMARY Role of the Private Sector i. A general trend towards deregulation and involvement of the private sector has been evident in Bangladesh during the 1980s. This reflects an acknowledgement of the contribution that private investment can make to cost minimization, and improved operational efficiency. The greatest strides have been made in the industrial sector, where policies enacted since 1982 have generated a favorable climate for private investment. The newly created Board of Investment (BOI) is a further step in the direction of streamlining and facilitating private involvement. The energy cector has not experienced yet a similar surge of private sector interest, although modest private participation has existed for a long. time. Apart from dominating the supply of traditional energy, private operators are involved in the transport and retail of petroleum products, and in selected exploration activities. The cooperatively owned rural electricity distribution networ. -ce No. XLI of 1983) Date Enacted: August 25, 1983 Main Purpose of Document: To amend Electricity Act of 1910 in order to give the electricity authorities (BPDB and REB) the power to take action against theft of energy, and for the recovery of outstanding claims against consumers. Summary Assessment of Effectiveness of Document: This amendment represents a recognition of the recurring systems loss arising from theft of energy through the tampering of meters and installation of artificial means for dishonest abstraction and consumption of energy. Despite the legislation, theft of energy and systems loss remains a significant problem in the power sector. Similarly, non-payment of outstanding bills for the use of energy by consumers also continues to be a major issue. 7. The Rural Electrification Board Ordinance Date Enacted: October 31, 1977 Main Purpose of Document: To provide for the establishment of a Board for rural electrification in Bangladesh. Summary Assessment of Effectiveness of Document: With the enactment of this Ordinance, the responsibility for supply of electricity in rural areas was transferred from BDPB to a separate organization. Main Features of Document: This regulation gives REB the right to (i) establish electricity generation, transmission, transformation and distribution systems in the rural areas of Bangladesh; (ii) take over from BPDB electrical systems in rural areas; (iii) organize prospective consumers of electricity into formal and informal groups for the purpose of execution and management of electrical schemes and providing related services; (iv) prescribe by-laws for such groups -59 Page 5 of 5 for their registration with the Board and determine the manner of their functioning; (v) advance funds to the groups for execution of approved schemes; and (vi) hand over to any group completed schemes for operation. With respect to the private sector, the Ordinance allows REB to discharge responsibility for operation of electrical systems to private consumer-owned cooperatives. REB will provide funds for the execution of the schemes, and provide loans to the members of the groups for the the purpose of obtaining electrical connections. REB will also approve the rate of electricity to be levied by these groups for sale of electric power to their members. Aside from this provision for the organization of private groups for selling power to its members, the Ordinance does not envision any other role for the private sector in the generation or transmission of electricity in rural areas. -60- Annex 2.2 BANGLADESH Private Sector Participation in Energy Privatization in Industry In pursuance of the privatization policy of the Government, so far (upto 20-3-89) 563 industrial =nits under the following sectors having total investment of Tk 207.07 crores have been privatized. S1. No. Sector No. of Units (A) By sale of assets/transfer to Bangladesh former owners 1. Tannery 31 2. Rubber & Plastic 23 3. Chemicals 34 4. Engineering 140 5. Food and Allied Products 151 6. Tobacco 15 7. Ice Factory and Cold Storage 25 8. Specialized Jute 8 9. Specialized Textile 29 10. Pharmaceutical 10 11. Printing Press 13 12. Films and Cinema 6 13. Hotel 4 14. Textile Mill 30 15. Jute Mill 35 (B) By off-loading of 49? Shares 16. Chemicals 3 17. Engineering 3 18. Food and Allied Products 3 Total 563 Mention may be made that the process of privatization is a continuous process. V ~61- Anner 2.3 BANGLADESH Private Sector Participation_ia Energy PUtC kSSUE Og wOLDIN6 COMPANIFS SNARES - EMCL'OD!% EMPtY3EES PORTION Subscriptun Lin ie of Public !slue Public Subscription Percentage ¾r.ntage . of the epening CIosinq Nube? of taount in ýueoer Qf Atount i %srir n jate htNe !'eka ,hareau -lupall dank 17-01-87 1-46 3,:0 4,0,0 ,4,5 2,4,0 8.0! sa iåa åiass iheet I-k-7 30-6-7 9.00 it ?0).000 L35,0 :3,53,000 366 4 66 3 :astern Cables 16-07-87 M7-03-87 o5,0 3,3,000 740,570 74,057,000 108 31 3. i Dhaka Veget4ble .,l 25-11-97 5-t1-98 229,00)0 2,9300,00) 63695 66,369,500 229 65 :19 i oninoar C,etcali 15-5-88 3H05-88 0 17,1)00,)00 7147,575 14,757,500 439i7 At1as Bangiade1h 11-06-88 20-'6-8 3000 3,400.000 5,175,050 51,750,500 t,52 '7 :12.7 3eal angla Sugar "i11s 20-06-88 Z4-07-38 2,$å0,000 20,L00,)00 2,683,700 26,837,000 1. 55. 3 ;agle Box & Cartoon 4fg.Co, 1-!0-88 27-L0-e8 170,100 1,700.000 799.650 7,996,500 470 38 370 ) envick jagnesvar & Co. is-to-88 i3-11-88 68,-.00 40,:0Q '32,875 13,287,500 195 40 9543 'etalex Corporation 0-1H8 0-11-8 17,000 ,7110000 131,695 i3,169,500 774 68 74 8 .1 Kushtia sugar Mills 16-01-89 13-0-89 272,00 ) 27,230,000 Subscription not yet closed - -- Ctq.Ceent Ciniker Srinding 09-03-89 30-M9 292.400 9,.240,000 Subscription not yet close - S.137,400 284.,240,000 12,?59,1)9A 96.653,400 174 73 ' -;ource : -haa Sock ixchange Liited -62- Annex 2.4 . 8ANGLADESH Private Sector Pyrticipto Eeg 2tciation in Energy 'Aft tion of Departments/Agencies/Committee/ "WOOa consequent upon creation of Board of Investment (BOI)v ' a) Department of Industries b) Sub-Committee of the Investment Board c) Investment Board d) Discussion Committee of the-Standing Committee of the National Committee for Industrial Development (NCID) e) Standing Committee- of the National Committee for- Industrial Development (17CID) f) Executive Committee of the>National Committee for Industrial Development(NCID) g) Standing Committee for Employmnt of Foreign Personnel. h) Hard Term Loan Committee i) Figh Power Facility Board j) Bangladesh Licencing Board. -63- Annex 2.5 BANGLADESH Pg 1 of 8 Private Sector Participation in Energy The Investment Board Ordinance, 1988 Ordinance No. 32 of 1988 AN ORDINANCE to establish a Board for the puropse of encouraging investment in industry in the private' sector and providing necessary facilities and assistance in the establishment of industries: WHEREAS, it is expedient to make provision for establishing a Board for the purpose-of encouraging investment in industry in the private-sector and providing necessary facilities and assistance- in the establishment of industries and for matters. connected therewith: AND WHEREAS Parliament is not in session and the President is satisfied that- circumstances exist which- render immediate action necussary; NOW, THEREFORE. in exercise of the powers conferred by clause (1) of article 93 of the- Constitution of the, People's Republic of Bangladesh, the President- is. pleased to make and promulgate the following Ordinance:- 1. Shorttitle.:- This Ordinance-may be-called-the,investment Board Ordinance. 1988. 2. Definitions:- In this Ordinance, unless there, is anything repugnant in the subject or context :- (a) "Board" means the Board established under section 4- (b) "Chairman" means the Chairman of the Board; (c) "Executive Council" means the Executive Council constituted under section 8(1); (d) "letter of approval", in relation to the establishment of an industry, means a letter of approval issued under section 11(4); (e) "person" includes a group of individuals, a company or a commercial establishment: (f) "private sector" means an industrial sector not declared by the Government as an industrial sector reserved for the Government: (g) "rules" means the rules made under this Ordinance. 3. Ordinance to override other laws:- The provisions of this Ordinance and the rules made thereunder shall have effect notwithstanding anything to the contrary contained in any other law, for the time, being in force. -64- Anx2 Pg 2 of 8 4.- Establishment of the Investment Board :- As soon as may be after the commencement of this Ordinance, the Government shall, by notification in the official Gazette. establish a Board to be called Investment Board. 5. Head Office:- The head office of the Board shall be at Dhaka, and the Board may establish its branch offices at such place or places as it considers necessary. 6. Composition of the Board:- (1) The Board shall consist of the following members, namely :- (a) Chairman: (b) Minister in charge of the Ministry or Division dealing with industries who shall also be its Vice-Chairman, ex-officio; (c) Minister in charge of the Ministry or Division dealing with finance, ex-officio: (d) Minister in charge of the Ministry or Division dealing with power, fuel and mineral resources, ex-officio; (e) Minister in charge of the Ministry or Division dealing with commerce, ex-officio; (f) Minister in charge of the Ministry or Division dealing with textiles, ex-officio; (g) Minister in charge. of the Ministry or Division- dealing with jute, ex-officio: (h) Minister in charge of the Ministry or Division dealing with planning, ex-officio; (i) Governor of the Bangladesh Bank, ex-officio; (j) Secretary of the Ministry or Division dealing with industries, ex-officio; (k) Secretary of the Ministry or Division dealing with finance, ex-officio: (1) Secretary of the Ministry or Division dealing with internal resources. ex-officio: (m)President of the Federation of the Bangladesh Chambers of Commerce and Industry, ex-offi%io: (n) President of the Bangladesh Chamber of Industry, ex-officio; (o) Chairman of the Executive Council, who shall also be its Secretary. ex-officio; (2) The Chairman of the Board shall be the President or a person nominated by him from amongst the Minister-members of the Board. (3) The Board may co-opt not exceeding four additional members. -65- Annex 2.5 Pg 3 of 8 (4) No act or proceeding of the Board shall be invalid or called in question merely on the ground of existence of any vacancy in, or any defect in the constitution of the Board. 7. Functions:- The functions of the Board shall be- (a, providingt al kind.. nt lariit,s in the matter of investment of local and foreign capital for the purpose of rapid industrialisation in the private sector (b) implementation of the Government pchey relating to the investment of capital in industries in the private sector; (c) preparation of investment schedule in relation to industries in the private sector and itsfimplementation; d) preparation of area-schedule for establishment of industries in the private sector and determination of special facilities for such areas: .e) approval and registration of all industrial projects in the private sector involving local and foreign capital; () identification of investment sectors and facilities for investment in industries in the private sector and giving wide publicity thereof abroad: (g). invention of specific devices for the purpose of promotion of investment in industries in the private sector and their implementation: (h) creation of infrastructural facilities for industries in the private sector, (i) determination of terms and conditions for employment of foreign officers, experts and other employees necessary for industries in the private sector (j) preparation of policies relating to transfer of technology and phase-wise local production in the private sector and their implementation; (k) providing of necessary assistance for rehabilitation of sickly industries in the private sector (1) financing and providing of assistance in the financing of important new industries in the private sector (m) adoption of necessary measures for creation of capital for investment in industries in the private sector (n) collection, compilation, analysis and dissemination of all kinds of industrial data and establishment of data-bank for that purpose; (0) doing such other acts and things as may be necessary for the performance of the above functions. -66- Annex 2.5 Pg 4 of 8 8. Executive Council .- (1) There shall be an Executive Council of the Board which shall consist of a Chairman and other members not exceeding six in number. (2) The Chairman and other members of the Executive Council shall be appointed by the Government, and the tenure of their office and terms and conditions of their service shall be determined by the Government. (3) The Chairman of (he Executive Council shall be called the Executive Chairman and sr -! act as the chief executr- of the Board. (4) The Executive Council shall advise and assist the Board in the efficient performance of its functions, be responsible for implementation of the decisions of the Board shall exercise all powers ana perform all functions delegated to it by the Board. (5) Where the office of the Executive Chairman becomes vacant or he is unable to discharge his duties due to absence, illness or any other reason, a member of the Executive Council nominated by the Government in this behalf shall act as the Executive Chairman until the new Executive Chairman appointed to the vacant office enters upon that office or. as the- case may be, the Executive Chairman becomes able to resume the duties of his office. 9. Meetings:- (1) Subject to the other provisions of this section, the-Board shall determine the procedure for its own meetings and for the meetings of the Executive Council. (2) All meetings of the Board shall, with the approval of the Chairman, be convened by its Secretary and shall be held at least once in every three months at such times and places as may be determined by the Chairman. (3) All meetings of the Board shall be presided over by its Chairman or, in his absence, by its Vice-Chairman, and in the absence of both of them, by such member as may be nominated by the members present in the meeting from amongst themselves. (4) All meetings of the Executive Council shall be convened under the direction of the Executive Chairman and shall be held at such times and places as may be determined by him. (5) ATl meetings 6f the Geeutive Council shall be presided over by the Executive Chairman and. in his absence, by a member thereof as may be specified by the Executive Chairman. -67- Annex 2.5 Pg 5 of 8 10. Registration:- (1) All industries set up in the private sector, other than those falling within the jurisdiction of the Export Processing Zones Authority or of the Bangladesh Small and Cottage industries Corporation and textile industries set up by own finance and the industrial projects approve.y .the Board, shall be registered in the prescribed manner. (2) An indii try registered under this section shall be deemed to be an industry approved by the Board under tnts Ordinance, and such industry may, on its request, be provided with all such facilities as may be provided to an industrial project approved by the Board. 11. Approval etc.of -an industrial project :- (1) Every person intending to set up an industry in the private sector, other than an industry falling within the jurisdiction of the Export Processing Zones- Authority or of the Bangladesh Small and Cottage Industries. Corporation, shall apply to the Board in the form and manner prescribed by it for obtaining the Board's approval on the proposed industrial project. (2) Notwithstanding the provisions of sub-sOction (i), upon recommendation of the Board, the Government may, by notification in the official Gazette, exempt any industry or any industrial project from the operation of the provisions of this section. (3) The Board may, for the convenience of considering an. application received under sub-section (i), direct the applicant to furnish any information which it considers necessary for such purpose, and may also consult any relevant authority on any matter relating to the proposed industrial project. (4) If, after considering the application, the Board is satisfied that the project should be approved, it shall, subject to such conditions and limitations as it deems fit to impose, approve the same and shall issue a letter of approval to the applicant and shall specify in such letter the time-limit for the implementation of the project and also the time-limit for commencement of production thereat. (5) At the time of approving an industrial project under sub-section (4), the Board shall give its decisions on all facilities that may be required for implementation of the project in due time and. in particular, on all or any of the following matters, subject to their relevancy, and shall send such decisions to the concerned persons or authorities, namely:- -68- Annex 2.5 (a) the extent and the terms and conditions of foreign loan and of suppliers, credit; (b) allotment of land in the industrial areas under the control of, or belonging to, the Government or a local authority other than the Export Processing Zones Authority and the Bangladesh Small and Cottage Industries Corporation: (c) time-limit for giving connections of electricity, gas and water-supply: (d) time-limit for giving sewerage connections* (e) time-limit for giving connections of all kinds ot tele-communications; (f) time-limit for clearing by the customs- authorities of imported machineries. spares of such machineries and raw materials; (g) time-limit for issuing clearance regarding environment pollution; (h) other facilities and services that may be required for speedy setting up of an industry. (6) A decision given by the Board under sub-section (5) shall be deemed to be a decision given by the Government or by such other person or authority as is authorized by, or entitled to give such decision under, the provisions of the relevant law on the relevant subject, and such decision shall be implemented accordingly. (7) No person shall, except with the prior permission of the Board, use any service or facility availed of by him persuant to a decision under sub-section (5) for any purpose other than for the industrial project for which it was so availed. (8) Where an industrial project is a company registered under the provisions of the Companies Act. 1913 (VII of 1913), the Board may, in respect of all matters relating to the issue of capital and sale of shares of that company, exercise all powers and perform all functions of the Government under the provisions of the Capital Issues (Continuance of Control) Act, 1947 (XXI of 1947). (9) Where an industrial project faces any difficulty in the completion of the project within the time-limit specified in the letter of approval or if, after such completion, it faces any difficulty in commencing, within such time-limit, production thereat. the entrepreneur of the project may apply to the Board for removing such difficulty, and upon such application, the Board shall endeavour to extend to the entrepreneur necessary assi.tance. Annex 2.5 -69- t9 o- (10)The Board may, from time to time, require the entrepreneur of an industrial project approved under sub-section(4) to furnish such information relating to the implementation of the project as the Board may consider necessary. 12. Determination of import entitlement:- (1) If, an industry set up in the private sector, other than a textile industry or an industry falling within the jurisdiction of the Bangladesh Export Processing Zones Authority or of the Bangladesh S mail and Cottage ydustries Corporation, is in need of import entitlement for importing machineries, spares of machineries, raw-materials and packing materials for its own use. it may, in the form and manner prescribed by rules, apply to he Board for such entitlement. (2) The- Board shall, issue to the applicant a clearance so that such machineries, spares of machineries, raw materials and packing materials may be imported in accordance with the import entitlement determined by the Board after considering the application. 13. Royalty and fees:- If an industry set up in the private sector. other than an industry falling within the jurisdiction of Export Processing Zones Authority, is required to pay to a foreign national or a foreign organisation any royalty or any fees in respect of technical know-how or technical assistance, that industry shall, in the manner prescribed by the Board, apply to the Board for determination of such royalty or fees; and the royalty or fees determined by the Board shall be payable by the industry. 14. Duties of other concerned authorities regarding an approved industrial project :- (1) If, at the time of approving an industrial project. the Board sends to any person or authority any decision under section 11. that person or authority shall take necessary steps so that the decision is implemented within the time-limit specified by the Board. (2) If such person or authority fails or is unable to take, within the time-limit specified by the Board, proper steps persuant to such decision, the Board may, after considering the circumstances of the case, issue direction for taking proper step pursuant to the decision, and upon such direction the concerned person or authority shall be bound to take necessary step accordingly. 15. Cancellation of approval:- If an industrial project approved under section 11 contravenes any of the provisions of this Ordinance or of any rules made -70- Annex 2.5 Pg 8 of 8 thereunder or violates any condition or limitation specified In the letter of approval, the Board may, in the manner prescribed by rules, cancel the approval of the project. 16. Inspection, etc.:- The Executive Council or a person or authority appointed by it may inspect the progress of the implementation of an industrial project approved under section 11 and shall, after such inspection, submit to the Board a report of the inspection. 17. Declaration of in-, al area :- or carrying .ut th purcosis of this Ordinance. the Government may, by notification in the official Gazzette, declare one or more areas specified therein to be an industrial area or areas. 18. Acquisition of land for industrial areas:- If any land jituated in an area declared under section 17 to be an industrial area, is7 required for any industrial project approved under section 11. such land shall be deemed to be required for public purpose and it may be requisitioned or acquired for such purpose under the provisions of the Acquisition and Requisition of Immovable Property Ordinance, 1982 (11 of 1982). 19. Committee:- The Board may appoint one or more committees.to assist it in the performance of its functions. 20. Appointment of officers and other,employees :- For the proper performance of its functions, the Board may appoint such number of officers and other employees and consultants or advisers as it may deem fit. 21. Delegation of powers :- The Board may. by order, delegate to the Executive Council or the Executive Chairman or a member of the Exceutive Council any f its powers or functions under this Ordinance or the rules made there- under. 22. Power to make rules :- The Government may, by notification in the official Gazette, make rules for carrying out the purposes of this Ordinance. This is English vemon ofia f41ar1 C4t XVWW. bavr I -71- Pg 1 of 6 BANGLADESH Private Sector Participation in Energy POREIGH IN4VESTME1NT INl BANGLADESH Board of Investment x. .... Annex'12.6 Pg 3 of 6 In addition, he followng services are rendered to the enterDnes tby the 801 by giving a time-limit to the concerned agencies. a. Electncity, gas and water supply t. Sewerage connection c. All kinds of telecommunicatiOn d. Customs clearance for imported machinery, spares and raw materials e. Clearance regardtng environment pollution f, All other facilities and services that may be required for speedy setting up of ar idustry, PROCEDURE FOR ESTABUSHING AN. INDUSTRIAL PROJECT No prior approval for establishing an industry with foreign investment is required if* - The total project cost does not exceed Tk. 100 million (US S 3.3 million approx.), - The foreign equity does not exceed 49%, and - The proposed industry does. not fall within the purview- of discouraged list. Joint venture projects not falling under the aforesaid conditions require aDproval- of the Board of Investment. There is no fixed ratio of equity between Iccal and foreign investors. Foreign equity to the extent of 100% is also allowed. Applications in prescribed forms may be forwarded to the BOI directly or through any Bangladesh Mission abroad for consideration. Decisions on fully documented proposals are given expeditiously. B0i's approval of a project includes approval of all required facilities to implement the project. Post investment services and facilities ouring the iife of the project are also provided by -the B01. Annex 2.6 Pg 4 of 6 INVESTMENT GUARANTEE Foreign Pr'vate investment (Promotion & Protection) Act, 1980 ensures -egal protection to foreign investment in Bangladesh. Further, tiateral investment protection agreements nave Deen signed by the government with several countries. REPATRIATION FACILITIES - Repatriation of capital invested including capital gains - Remittance of all post-tax dividend on foreign capital - c'r7 ince of Royaity and Technical Fees FISCAL INCENTIVES Tax-hoiday for 5 years for Developed Areas. 7 years for Less Developed Areas. 9 years for Least developed Areas an 12 Years for the Special. Economic Zone. 20% import duty on capital machinery for industnes in Developed Areas. 7.5% duty for less Developed Areas and 2.5% for Least Developed Areas. 2.5% import duty on capital machinecy for selective industnes using 70% or more of indigenous raw matenals irrespective of their location. 2.5% import duty on capital machinery for export oriented industries irrespective of their location. Accelerated depreciation at the rate of 80% of actual cost of machinery or plant from the year the unit starts commercial production and 20% for the following year is allowed it the industry is located in a Developed Area. If the unit is set up in a Less Developed Area the depreciation shall be 100%. Depreciation allowance can be camed forward if the unit sustains toss. Exemption of tax on interest on foreign loans. Exemption of tax on Royalty, Technical K 13.56 1/ (with HSOC) Gasoline (xs) 10.20 10.84 11.11 14.03 14.67 14.87 12.88 -/ Jet Fuel (JP-1) 8.23 8.8T 7.20 9.24 9.25. 9.25. 8.44- Kerosena (SKO) 3.88 4.95 5.20 7.22 7.22 7.22, 6.71 Diesel Oil (HSD) 4.95 4.95 5.20 7.22 7.22 7.22 8.71 Jut* Batching Oil (JBO) no na no no no 8.16 7.52 Hi-Sulph Fuel Oil (HS). 2.86 3.87 3.86, 5.40 6.00 6.40 4.70 no = not available * Bangladesh PetroleueCorporation (BPC) ** 008 Min. of Energy.AaMineral Resources-, Petroioawand Mineral Resources.a0vision ./ January 1990: reduction to Tk 7.51/L (regular) and Tk 7.89/L (premium). -79- ANNEX 2.8 Page 2 of 3 BANGLADESH Private Sector Participation in Energy RETAIL NATURAL GAS PRICES 1980-1988 Tk/mcf (Except Domestic Unmetered in Tk per month) June 7 Jun. 7 July 1 Juno 30 Jun. 27 Jun. 30 June 27 June 18 July 1980 1981 1982 1983 1984 1995 1996 1987 1988 RETAIL CONSUMER CATEGORIES Bulk Power 7.75 9.30 10.60 11.60 13.06 15.66 19.09 24.82 28.54 Bulk Fertilizer 7.75 9.30 10.60 11.50 13.06 16.60 19.09 24.82 28.54 Industry 18.00 27.75 31.00 36.00 386.00 48.20 52.14 52.14 59.96 Commercial 19.00 28.00 31.00 36.00 46.20 64.24 65.39 86.00 97.75 Teo Estates 60.00 72.30 no 83.16 Seasonal (Brick) 61.00 65.00 78.30 na 90.05 Domestic Metered 18.00 20.00 27.00 34.00 34.00 40.80 44.88 56.10 66.10 Domestic Unmetered - 1 burner 22.00 26.00 38.00 46.00 46.00 60.00 66.00 80.00 92.00 - 2 burner 40.00 45.00 66.00 80.00 80.00 100.00 110.00 130.00 150.00 additional burner 41.00 45.00 56.00 64.00 oven (each) 89.00 97.00 121.00 139.00 additional oven (each) 45.00 49.00 61.00 70.00 grill (each) 89.00 97.00 121.00 139.00 additlonel grill 46.00 49.00 61.00 70.00 water heater (20 gal 177.00 194.00 242.00 278.00 water heater >20 gal 221.00 242.00 303.00 348.00 dryer (each) 265.00 291.00 364.00 419.00 refrigerator (each) 177.00 194.00 242.00 278.00 Sources: 80CMC, Titas * Category introduced at this point -80- ANNEX 2.8 Page 3 of 3 BANGLADESH Private Sector Participation in Energy BPDB FY89 Tariff Suammary Category Tariff .2s of Consumer or-'ce TK/KWh TK/KN TK/Month Domestic (up to.50 kW) A ast slab (0-70 kWh) 1.30 0.00 5.00 (Single Phase) 2nd slas (71-200 kWh) 1.46 10.00 26.00 (Three Phase) 3rd slab (beyond 201 kWh) 2.90 10.00 Agricultural (up to So kW) B Flat Rate 1.76 35.00 25.00 Off-peak Rate (exceeding 20 kW) 1.40 Peak Rate (exceeding 20 kW) 4.05 Small industrial (up to 60 kW) C Flat Rate 2.36 36.00 60.00 Off-Peak RAt (exceeding 20 kW) 2.06 Peak Rate (exceeding 20 kW) 4.30 Education.Hospitals Religions- and Charitable Institutions (up to 60 kW D 1.70 15.00 5.00 (Single Phase) 26.00 (Three Phase) Commercial including offices, commercial establishnt (up to 2.5 MW) E Flat Rat*p 2.85 40.00 6.00 (Single Phase) Off-peak Rate (exceeding 60 kW) 2.05 25.00 (Three Phase) Peak Rate (exceeding 50 kW) 5.46 360.00 (6.35/11kV) Large General Purse (up to 2.5 MW, F beyond 50 kW supply at 11kV) Flat Rate 2.15 40.00 350.00 Off-Peak Rate 1.76 Peak Rate 4.05 Extra MHih_Voltale (up to 150 MW and at 132-kV) G Off-Peak Rate 0.80 36.00 To be determined on individual basis High Voltage General Purpose (up to 0 MW abdat33-) H Flat Rate 2.05 35.00 400.00 Off-Peak Rate 1.70 Peak Rat. 3.80 REBPB (up to 10 MW and at 33-kV) I Flat Rate 1.19 - 400.00 Off-Peak Rate. 0.80 Peak Rate 2.90 Street Light & Water Supply (up to 50 kW) J 2.20 35.00 200.00 Temporary Power Service Category E or F or H whichever is applicable, multiplied by 2. 1/ There is an additional charge-of Tk 0.06/kWh levied as electricity duty on all categories of consumer except Category I. -81- ANNEX 2.9 BANGLADESH Private Sector Participation in Energy Nominal and Economic Energy Prices late 1988 (Taka) Domestic Estimated Product Unit Retail Price Economic Price Type Premium Gasoline liter 13.56 1/ 4.29 1/ CIF Diesel. liter 6.71 3.78 CIF Karosena liter 6.71 4.18 CIF Fuel Oil liter 4.70 2.67 CIF LPG 12.5 kg cylinder 113.50 86-135 CIF plus transport Natural Gas MCF 29-98 12-5A LRMC 45-98 !RMC plus deple- tion premium Power (average) kWh 1.96 3.3 Average LRMC 1/ January 1990: domestic retail price Tk 7.89/L, estimated economic price about Tk 5.15 (L). -82- ANNEX 2.10 Page 1 of 2 BANGLADESH Private Sector Participation in Energy Relative Retail[11 Enerry Prices 1989 Energy Content(21 Price (per mm BTU)(4] Products BTU X 1000/Unit Tk $ Petroleum Products LPG 45.21kg 212.39 6.46 Gasoline (MS) 32.5/ltr 406.15 12.35 Kerosene (SKO) 34.9/ltr 196.85 5.98 Diesel Oil (HSD) 35.7/ltr 192.44 5.85 Fuel Oil.(FOHS) (5] 37.0/ltr 127.03 3.86 Natural Gas Power .941/scf 30.33 0.92 Fertilizer .941/scf 30.33 0.92 Industr:y .941/scf 63.72 1.94 Commercial .941/sof 103.88 3.16 Tea Estates .941/scf 88.36 2.69 Seasonal (Brick) .941/scf 95.70 2.91 Domestic (metered) .941/scf 97.77 2.97 Firewoodr3] Urban - Dhaka 6.5/lb 129.97 3.95 Urban - Rangpur 6.5/lb 93.50 2.84 (1] For oil products, except fuel oil, retail prices are official ex-filling station or retail outlet prices for locations within 40 km of oil company depots. These prices are equal to the ex-depot prices plus allowable equalized transport costs and dealer's margins. (2) Lower heating values (3] Based on Jan 1988 prices of 69.5 Tk/maund Dhaka and 50 Tk/maund Rangpur (1 maund = 82.27 Ibs). (4] 32.9 Tk = 1 $ (5] Ex-depot price (61 January 1990: Tk 237 or $7.15 per mmBtu. -83- ANNEX 2.10 Page 2 of 2 3ANGLADESH Private Sector Participation in Energy Comparative Financial Cost of Household Energy Costs(1] Conversion[3,4] Costs/Un*t(6] Energy Delivered Energy Form Tk/mm BTU Efficiency Tk/mm BTU Fuelwood Dhaka 129.97 12 - 15 (12) 1083 Fuelwood Rangpur 93.50 12 - 15 (12) 121 779 Natural Gas metered 97.77 30 - 60 (35) 279 Kerosene 196.85 20 - 50 (30) 656 (7] LPG 212.39 35 - 60 (35) (5] 607 (7] (1] From previous page (2) Depends on type of stove and pot, assumption here is mud/clay stove (formed open fire) and aluminum pot. (3) Depends on stove type. Figures used are meant to be for illustrative purposes only. [4] Figures in parentheses used in calculation of costslunit energy delivered. (5] LPG efficiency often slightly higher than natural gas but for illustrative purposes here set at same efficiency. [6] Energy costs stoves or other equipment costs excluded. [7] Higher combustion efficiency makes lt LPG = 1.5t kerosene, thus widening the price gap per energy delivered for cooking. -84- ANNEX 3.1 BANGLADESH Private Sector Participation in Energy Field Viability Basic Economics - No Government Take 1. OIL FIELDS ONLY Field Sizes (MR barrels) 10 30 100 Numbe- 3f development wells 3 6 12 Average maximum well productivity (bopd) 1300 1300 2500 Exploration costs (MM 1987 S) 15 15 15 Total, development costs (MR 1987 $Iyr) 50 100 200 Fixed Operating costs per year (MM 1987 $/yr) 4 7 12 ROR on Total Capital (Z) (Current $) - Based on $15 by the year 2000 9% 27Z 38Z - Based on $25 by the year 2000 26Z 44% 56Z 2. GAS FIELDS ONLY Field Sizes (Bcf) 800 2000 5000 Number of development wells 8 12 18 Average maximum well productivity (MMcft/d) 24 27 46 Exploration costs (MM 1987 $) 25 15 15 Total development costs (MM 1987 $) 130 200 300 Fixed Operating costs per year (MM 1987 $/yr) 9 12 18 RESULTS ROR on Total Capital (2) (Current $) -Based on $15 by the year 2000 - No Export by pipeline 252 26% N/A - Export by pipeline 31% 44Z 532 -Based on $25 by the year 2000 - No exports by pipeline 40Z 40Z N/A - Exports by pipeline 50% 62% 70% ANNEX 3.2 -85- BANGLADESH Private Sector Participation in Energy Petroleum Product Consumption in Bangladesh (Metric Tons) Product 1985/86 1986/87 1987/88 HOBC 7,573 9,538 11,294 High Octane Blending Compound for Premium Gasoline MS 53.323 58,628 76,844 Motor Spirit (Gasoline) SKO 384,485 394,090 497,088 Kerosene HSD 648,435 674,184 800,117 High Speed Diesel LDO 16,189 11,508 13,552 Light Diesel Oil FO (HS) 385,072 283,234 327,964 High Sulphur Fuel Oil JBO 26,252 28,384 31,822 Jute Batching Oil LPG 8,951 8,800 9,000 Liquid Petroleum Gas Bitumen 32,564 N.A. N.A. JP-1 76,171 71.897 100,063 Jet Fuel !.ubes and Others 23,001 25,266 30,145 TOTAL 1,662,404 1,565,529 1,897,889 UiANQ> A1Dtbi . ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ' ...t .... ... -a t, ---t--, -- - - - -- - - - -- - - - - --.. . ...r. .. . . . Phys.c.l Total Pro,-5on l ar-.,se tapendetr Guant.tyI fnanc al I i -197 1987-19F8- 1'. -l ln 19q 199 ITEMS of Work i Total tocal F k T.t.i local i I I Tot.i toL F E | 1-r-al .1.l E E tlcl toca.t E e I Pr. -trct,on E.p.nd.t.r. . ta-j (Baghabar) 4 acras 16 00 16 00 400 40 12 00 12 0 b t.,d De,oop.nt 4 acres 4 00 4 00 - . - 4 00 4 00 - Il C- tr-ct#on Works . 'ff,c Be d-g (1 No ) 125 M2 3 80 3 80 - - 1 30 1 30 2t50 250 - - b Res-dent-l didg (1 No 135 M2 5 00 5 00 1 50 l 50 3 50 3 50 c Cthr Constr'ction Workt 1 Ma-ntena.ce Shop 1 No 140 M2 3 00 3 00 - [ 2 Product Pump Houe I No 29 M2 0 65 0 65 - 3 F.r. Pump House 1 No 15 M2 0 35 0 35 - I 4 Fill load,ng å T,rklorry shed 425 M2 9 00 9.00 - - 5 00 5 00 - 9 00 900 - 2 50 2 50 5 Sou.ndary call, Interna dra,n, concrete paemert.etc 3.50 3 00 - 6 Foundataon af storag. spher«s A tanka i5 00 i5 00 - - - 2 50 2 50 - 10 00 10 o - 2 50 2 50 - 7 Pipelines layng A construc- 40.00 40 00 - - - 6 00 6 00 26 00 26 00 - 8 00 8 00 - tion of ,i ~or,ng - III M.chinery & Equipment (-cl spares) LPC BulIk Carr,ar a Bay crossing *.ype (600 MT 1 No 405.00 135 00 270 00 - - - - - - 40 00 - 40 00 365 00 135 00 230 00 capacity) duty 0501 b LPO Tank Lorry ( MT 3 Nos 84 00 28.00 56 00 - - . - - 8 00 8 00 76 00 28 00 48 00 capacity) 0501 e Sphercal Tank. (500 3/250 Mtan)l N. I d -orizontal Tank (50 M3/250 ton) I 137.50 12 50 125 00 - 18 50 - 18 50 119 00 12 50 106 50 - - - æ duty 0101 2 Nos C 0N o Pipelne fac,i.t.es, 2 pumps -ter arms, cauplings. valves, etc 69 00 9 00 60 00 - - - 10 00 - 10 00 59 00 9 00 50 00 - at Ctg & Bsaghabar .1 duty 015% Fsiling M/C'& for bottling plant (2000 bottles of 12 5 KC capacity per shift). 1 prod.ct pump, 1 air co.pressor. evacuating unit e/ gas 99.00 9 00 90 00 - - 13 50 - 13 50 85 50 9 00 76 50 - c.pressr, 1 surge tank, p-pe,fitt.ng k other ar,e Iary aqup .duty 010% g F r. f.ghting Oq~ep ,d.ty 0100% 40 00 20 00 2, 00 - - 3 00 - 3 00 37 00 20 00 17 00 - h Cylinder&. duty * 100% 35.000 Nos 385.00 192 50 192 50 - - - - - - 29 00 _ 29 00 356 00 192 50 163 50 Transportation to &.te (./o LP0 Vesasel A Tank Lorry) 7 00 7 00 - - - - - - 3 00 3 00 - 4 00 4 00 - IV Transport Microbus (12 seater) A car l No å 1 No 11.00 11.00 - - - - 5 50 5 50 - 5 50 5 50 - - V Oth.r & C -, f supervisron,eractran 23.00 5.00 18 00 - - - - - - 10 00 2 00 8 00 13 00 3 00 10 00 b. C sioning A Installation c lI-po.er (detala at pp 18) 14 persons 57 70 12 70 45 00 - - - 28 06 5 56 22 50 28 06 5 56 22 50 1 58 1 58 - d Training (details at Ax V) 4 persons 15 00 2 50 12 50 - - - - - - 11 00 1 50 9 50 4 00 1 00 3 00 * O.erhaad 5 00 5 00 - - - - 0 50 0 50 - 1 00 1 00 3 50 3 50 - f. Unforesøgn/phya contingency 14.00 5 00 9 00 - - - 1 50 0 50 1 00 5 00 1 00 4 00 7 50 3 50 4 00 g. Interest 167 00 167 00 - - - - 6 50 6 50 - 42 00 42 00 - 118 50 118 50 - Total 1,619 50 721 00 898 00 4 00 4 00 0 00 58 36 44 86 42 00 500 06 163 06 371 00 <62 08 503 58 4-,8 50 Total Cost Escalat,on 245 83 117 03 128 80 - - - - - - 53 41 16 31 37 10 192 42 100 72 91 70 Totat Investment 1.865 33 33A 03 1.026 80 4 00 4 00 0 00 68 36 44 86 42 W0 553 47 179 57 406 10 1.154 50 o04 30 550 20 (D (D i - Q~~.ntt,j r''~'.~.l 1 l9bb- 19d7to~li81~ i. ..e-construct,on E.pe-J.t-o a L.nd (Kal.ahtila) 4 acr.. 4 0U 4 00 1 00 1 0 - 3 ou 3 00 b tand Deoelopment 4 acre 2 00 2 00 - - - - 2 00 2 00 lCon,struct:on Works a Off.ce B.1dng (1 Np ) 125 M2 3 70 3 /0 - 1 20 1 20 b Res.dent.al Building (1 No 135 M2 7 00 5 00 - - - - 1 50 1 50 - 3 50 50 - - c Other Construction W.,rk 1 Maintenance Shop (1 No ) 140 M2 3 00 3 00 - 2 Product Pump Houso (1 No 29 M2 0.65 0 65 - 3 Fire Pump Houose 1 No 15 M2 0 35 0 35 - 4 Filling I Londing Shed 300 M2 6 50 6 50 5 Boundry Wall. Internal 3 50 3 50 - - - - 4 00 4 00 - 8 0 00 - 2 00 - - road, dike dra.n, concrete pavament,etc 3 50 3 00 - 6 Foundation of storage 3 Nos 15.00 15 00 - - - 2 50 2 50 - 10 00 10 00 - 2 50 - - 11 Machinery & Equipment (sncl. spares) Spherical Tanka (500 M3/250 H Ton) I No 8 00 8 00 8 001 > Horizontal Tank l - - - 1850 - 1 50 119 00 12 50 106 50 - - - (50 M3/25 M Ton) d.ty B10% 2 Nos 49 50 4 50 45 00 | c Filling M/C's for Bottling Piart (2000 bottles of 12 5 Kg capac,ty per shift) 1 product pump, 1 asr 99 00 9.00 90 00 - - - 13 50 - 13 >O 65 50 9 00 76 50 - compressor. *vacuating unit m/ 1 gas compressors I surge tank, 9,pa fittings 4 other a.- i.ary aquipefnt; duty 10% 4 Fire f,ghting aq.ip , d.ty 0100% 40 00 20 00 20 00 - - - 3 00 - 3 0 37 00 20 00 17 00 - - - 4 Cylinders 25.000 Nos 275 00 137 50 137 50 - - - - - - 21 00 - 21 00 254 00 137 50 116 50 f 7ransportat.on to ste 5 00 5 00 - - - - - - 2 00 2 00 - 3 00 3 00 - 14 rans.port I M.crob.s (12 seater&) 1 No 6 00 6 00 - - - - 6.00 6 00 - - v Oth-r4 a Cost of Supervision,arection j 18 00 5 00 13 00 - - - co y00 6 00 10 00 3 00 7 00 b Commisaioning & Installation c Manpower 12 persons 56.80 11 80 45.00 - - - 27.70 5 20 22 50 27 70 b 20 22 50 1 40 1 40 - d Training 4 person 15 00 2 50 12 50 - - - - - - 11 00 1 50 9 50 4 00 1 00 3 00 Q ,nerhead 3.00 3 00 - - - - 0 50 0.50 - 1 00 1 00 - 1 50 1 50 - 7 Unforesen/physical contingency 7 00 3 00 4 00 - - 1 50 0 50 1 00 3 00 1 00 2 00 2 50 1 50 1 00 g Interest 99 50 99 50 - - - 5 00 5.00 - 29 50 29 50 - 65 00 65 00 - Total 731 00 361 50 375.00 1 00 1.00 0 00 89 90 31 40 58 ,0 368 /0 107 70 261 00 345 90 213 90 127 50 Total Cost Escalaton 106 05 54 37 51 60 - - - - - - 36 67 10 77 26 10 69 18 43 68 2b 50 Total Investment Cost 837 05 415 87 426 60 1 00 1 00 0 00 89 90 31 40 58 50 405 57 116 17 28/ 10 415 08 257 5 153 00 x Qt (D• BANGLADESH Private Sector Participation in Energy LPG Bottling Plant Viabilitj; 5,000 and 10,000 tpa (1k Million) Year Year Year Year Cost 1 2 3 4-20 5,000 tpa Capital Investment 60 60 - - 0 AM 2% of Assets - 2.4 2.4 Cost of bulk LPO ex ref. - - 11.9 19.8 (T 3,960/f) (3000) (50000) Transport (T 1,600/f) - - 4.8 8.0 Total Cost 60 0 19.1 30.2 Benefit goTrix plant at T 120/cylinder = T 9,800/t - 28.8 48.0 [IRR=11M Year Year Year Year Year Year Year CO Cost 1 2 3 4 5 6 7-20 10,000 tpa Capital Investment 60 60 - 60 60 - 0 & M at 2% of Assets - - 2.4 2.4 2.4 4.8 4.8 Cost of Bulk LPG - - 18.7 22.2 22.2 38.9 44.4 (T 6,660/t delivered) (3000t) (6000) (6000t) (7000t) (10,000t) Total Cost 80 80 19.1 84.8 84.8 43.7 49.2 Sales at T 120/cylinder - - 28.8 48.0 48.0 87.2 96.0 [IRR=14%] (T 9,800t) fD Ir w -89- . 5 BANGLADESH Private Sector Participation in Energy tW0!fFCTIWS OM ECMnIlC 21CE 0F t2X Dustic rductfi C Ist rs 200 100 0 100 200 300 400 5® ............... t ....*....... ........t.........* $19 ~Cosonent 4 asfo $91 Cont1 Cree±t for $75 ..........> Cost oi atural cs 8nroduct nth oltfrative Economic Vrices of Cas valus $131 as MS $142 $107 ......... > Co~ponent 2. oN.Eurg Operatng Cosu $286 ..........................> C~ 3 ?.flut CapitaL Casts $449 - auaa,Illustrative Econmic Cost $290 . Minian Illustrative Econic < ....-> teoic rent $39 t Substitute ksis Casm 3b $232 Kerosene vith effiiency @ .33 * 4 $206 - rsnvith efficienc Q11 2 $174 rom m efficincy djustmnt Ib $209 SLaortU I La Trspor Case la $329 taporte LX High Trasort. 200 100 100 200 300 400 500 *. .... *.....t.........t.........t.........t -5-14 -90- ANNEX 3.6 BANGLADESH Private Sector Participation in Energy Full Substitution: Gasoline/Diesel vs. CNG 1. Comparative Retail Price Tk (mm Btu) Gasoline at Tk 12.88/1 406 Gasoline at Tk 7.51/1 237 Diesel at Tk 12.88/1 400 CNG at Tk 180/MCF 191 CNG at Tk 130/MCF 122 LPG at Tk 120/cylinder 212 LPG at Tk 170/cylinder 301 2. Conversion (i) Gasoline tO CNG: Conversion cost Tk 20,000 Annual use about 1,900 1 gasoline or 54 KCF of CNG Annual gasoline cost at Tk 12.88/1: Tk 24,500 Annual CNG cost at Tk 180/MCF Tk 9,700 Annual Saving Tk 14,800 Annual gasoline cost at Tk 7.51/1 Tk 14,300 Annual Saving : Tk 4,600 (ii) Diesel to CNG: Conversion cost Tk 30,000-40,000 Annual use about 3,800 1 diesel or 108 MCF of CNG Annual diesel cost at Tk 6.71/1 : Tk 25,500 Annual CNG cost at Tk 180/MCF : Tk 19,400 Annual Saving : Tk 6,100 Annual diesel cost at Tk 10/1 Tk 37,900 Annual Saving : Tk 18,500 Annual diesel cost at Tk 12.88/1 : 'i 48,800 Annual Saving : Tk 29,400 BANCLADESH Private Sector Participation in Energy CNG Project Costs and Benefits (Tk million) Capital Conver. D&M and Cost of Gas Total Sales of CNG Sales CNG Sales Cost of Gas CNG Sales Year Invest. Kits Electricity at T 29/MCF Cost Conver.Kits at T 180/MCF at TOO/MCF at T 80/MCF at T130/MCF 1 17.4 - 3.6 - 21.0 - - - - - 2 17.1 22.0 10.7 2.0 51.8 25.1 12.2 6.8 4.1 8.8 3 18.2 35.2 21.3 5.1 79.8 40.2 31.8 17.6 10.5 22.8 4 9.2 39.2 21.0 8.6 78.4 45.2 53.5 29.7 17.8 38.6 5 - 35.2 25.0 11.8 72.0 40.2 72.9 40.5 24.3 52.7 6 - - 25.0 11.8 38.8 - 72.9 40.5 24.3 62.7 7 - - 25.0 11.8 38.8 - 72.9 40.6 24.3 52.7 8 - - 25.0 11.8 38.8 - 72.9 40.6 24.3 62.7 9 - - 25.0 11.8 36.8 - 72.9 40.5 24.3 62.7 10 8.8 - 26.0 11.8 45.5 - 72.9 40.6 24.3 62.7 11 8.8 - 26.0 11.8 45.6 - 72.9 40.6 24.3 52.7 12 10.0 - 25.0 11.8 45.6 - 72.9 40.6 24.3 52.7 13 4.9 - 25.0 11.8 41.7 - 72.9 40.5 24.3 62.7 14-26 - - 26.0 11.8 38.8 - 72.9 40.5 24.3 52.7 0* Annex 3.7 Page 2 of 2 -92- BANGLADESH Private Sector Participation in Energy CNG Project - Internal Rate of Return CNG BULK CNG Retail Purchase Cost Price IRR (Tk/MCF) (Tk/MCF) 29 180 44 29 130 19 29 100 -3 60 180 29 BANGLADESH Private Sector Participation in Energy ECONOMIC VALUES OF INITIAL CAPITAL WITH CONTINGENCIES COST BASIS : Q4 1988, El = TK55 TK 106 ITEM UK SUPPLY LOCAL SUj?PLY TOTALS Financial* Conversion Economic Financial Conversion Economic Financial Economic Cost Factor Value Cost Factor Value Cost Value Site Development 1,784 1.0 1,784 110 0.8 88 1,894 1.872 U/G Equipment 1,156 1.0 1,156 - - - 1,156 1,156 Surface Equipment 986 1.0 986 - - - 986 986 Surface Infrastructure - - - 658 0.8 5Z6 656 52b Total - Initial Capital with Cont.agencies 3,925 1.0 3,925 768 0.8 614 4,694 4,540 Note: Economic Value of Replacement Capital is Financial Cost of Replacement Capital/1.025 (to exclude Import Duties). Working Capital is excluded from the economic analysis. * Excluding import duties. (D ' BANG.AI)ESH1 Private Sector Participation in Energy ECONOMIC VALUES OF CASH OPERATING COSTS AT f-ULL PRODUCTION, WITH CONTINGENCIES COST BASIS : Q4 1988, fl = TK55 TK 106 ITEM UK SUPPLY LOCAL SUPPLY TOTALS Financial* Conversion Economic Financial CoRyqrsion Economic Financial Economi Cost Factor Value Cost Factor Yalue Cost Value U/G ZZZ.23 1.0 2ZZ.23 4.Z5 0.8 3.40 337.59. 336.74 Surface 49.35 1.0 49.35 6.80 0.8 5.44 56.15 i4.79 Townsite - - - 4.37 0.8 3.50 4.37 3.50 Power - - 58.54 0.8 46.83 58.54 46.83 Manpower (Year 10 onwards) - - - 131.98 0.8 105.58 131.98 105.58 Subtotal - Direct 271.58 1.0 271.58 205.94 0.8 164.75 477.52 436.33 Indirect - - - 55.61 0.8 44.49 55.61 .44.49 Total - Cash Operatin (osts with Cortingen rfs 271.58 1.0 271.58 261.55 0.8 209.24 533.13 486.82 . Exc ludi g import dties -95- Annex 3.9 BANGLADESH Private Sector Participation in Energy ECONCMIC BOR.DER PRICES OF BARAPUKURIA COAL FOR THE ECONOMIC ANALYSIS Ez-Mine Barvier Prices for the b'"e-moutb Power Station Financial Conversion Economic Price Factor Price COST STRUCTURE C & F - USD/tonne 48.00 TA/tonne (4th Qtr 1988) C & F - TK/tonne 1,584 1.00 1,584 Import taxes (10.Z5%) 16Z 0.00 - Ship unloading (USD 1.05/t) 35 1.00 35 Misc. Handling/Depot charges 81 3.8 65 Total - TK/tonne 1,86Z - 1,884 Total - USD/tonne 56.42- 51.03 Price Basis: 4th Qtr 1988 USD 1.00 TK 33 -96- Annex 3.10 BANGLADESH Private Sector Participation in Energy ECONOMIC COST COMPARISONS FOR A 360 MWe POWER STA.ON 4th QTR 1988 Steam Electric CoI Fuel Oil H.S.14at Oil N. "as N.G.A $10/bbi $l5bbi SZ0/bbl* S10lbbit SIbbi Z0/bbi Total Capital and 0 & M Cotsa - USD 106/yr 33.5 ZZ.7 ZZ.7 ZZ.7 ZZ.7 ZZ. 7 ZZ.7 31.8 L. zi - Mills/kWh 19.1 13.4 13.4 !A 4 13.4 13.4 13.4 1Z.3 3 .3 FUEL COSTS Net-Heat.Rate,(HIV) - 8tuikWh 10.10 9,490 9.490 9.490 9.490 9.490 9.490 9,750 ad.1J Heat Requrement - 101Z Btuir 17.357 16.133 16.133 16.133 16.133 16.133 16.133 16.575 13._5 Fuel Purchase Cost - USD/106 Stu ZZ4 1.67 Z.36 Z.86 Z.45 3.49 4.4 1.18 1.74 Materials Handling.- USD 106/yr 3.3 0.7 0.7 0.7 0.7 0.7 0.7 - - Fuel Coat - USD 106/yr 38.9 36.9 38.1 46.1 39.5 56.3 64.4 39.5 .A.7 Total Fuel Cost - USD 106/yr 4Z.1 37.6 38.1 46.8 40.3 57.0 69.1 19.5 14.1 - Mills/kWh Z4.8 16.3 3Z.8 Z7.5 Z3.6 33.5 40.6 17.4 14.5 TOTAL COSTS - USD/yr 74.6 50.3 61.5 69.5 6Z.9 79.7 91.8 51.3 47.3 - MiLls/kWh 43.9 39.6 36.Z 40.9 37.0 46.9 54.0 30.2 - TE/kWh 1.45 0.98 1.19 1.35 1.ZZ 1.55 1.78 1.UQ U.'., Price Basiss Q4, 1988 1USD * TK33 * Ex-Singapore carude oil price. I tonne crude oil 7.33 barrels Fuel Oil prices include USD 10/t for ocean freight (Singapore to Chittagong), USD 3.66/t for irland freight (Chittagong to Kulnal with a fuel oil prce of 7S26 of ex-refinery crude oil price. Fael oil has 18,000 Stu/Ib heating value. High Speed Diesel oil prices Include USD 10/ for ocean freight (Singapore to Chittagong). USD 3.66/t for inland freight (Cbstta%onW to rtino ) with a high speed Diesel oil price of 1Z0% of ex-refinery crude oil price. High speed Diesel oil price of 10% of ex-refinery crude oil price. High aeed Diesel oil has 19,300 8tuilb heating value). Econoink price of Natural Gas is from Use tangliadesh Power TarIff Study 19861. The Iuoted 111ad-I'Itst p"".e la I. :6 Ju. sent I... " 444 for the dep!etton premium is Inflated by 9% to give an estimate of the Q4. 1988 economic price. Natural Ias hsas 941 litu/s.f ei:nU valiu. -97- Annex . SANGLADESH Private Sector Participation Ln Eaergy BPDB Invescment Program Summary (YEAR ENDING JUNE 30) (Current Prices in Tk. Million) 1NESTMENT SUMMARY 1988 1989 1990 1991 1992 1993 1994 1995 ACTUAL ESTnUTED-- -------- Generacion - Foreign 3657.5 719.7 997.9 2584.7 382Z.5 6763.8 7078,9 5270.2 * Local. 947.0 490.2 598.3 1008.0 2384..2 5157.6 461Z.6 4009.5 Sub - Total .. ------ ---*** ------ .- -.- * ...... ...... .. -. - 4604.5 1209.9 1596.2 3592.7 6206-.7 11921.4 11691.5 9279.7 Transmission - Foreign 214.8 1849.5 1535.1 1465.5 1677.8- 1094.6 2025.0 2025.0 - Local 258.1 203.7 912.1 743.0 1058,.2. 998i.8 1830.0 1350.0 Sub - ToC L .****. **.--. ------ .**.** ***** -... .. . . . . ...... 472.9 2053.15 2447.21 2208.45 2736.01 2093.42 3855 3375 Distribution - Foreign 881.8 L909.4. 2138.7 2311.6 1940.5 2692.2 4055.1 4564.7 - Local 740.0 621.7 1253.5 1844.2 2373.7 1890.5 3128.9 4071.4 Sub - Total. ..**.* ***.** ..---. .----- .. -- ------ ...... .....- 1621.8 2531.0 3392.1 4155.8 4314.2 4582.7 7184.0 8636.1 Kiscellaneous * Foreign 134.2 232.9 130.0 653.4 322.0 0.0 0.0 0.0 Local 69.3 80.5 78.6 192.9 209.4 0.0 0.0 0.0 Sub * Total .--.* .-**** ..**** ...--- ***... *..*.* ****** ------ 203.5 313.43 205.57 846.28 531.35 0 0 0 Total * Foreign 4888.3 4711.4 4801.7 7015.1 7762.8 10550.6 13159.1 11859.3 - Local 2014.4 1396.1 2842.5 3788.1 6023.5 8046.9 9571.5 9431.0 TOTAL 6902.7 6107.5 7644.1 10803.2 13788.3 18597.5 22730.5 21290.9 BANGLADES11 Private Sector Part icipation in Energy Period of stujy - 20 years _U fO ALIR-NAI-C- Rate of interest - 15' COAS AANAYSI Minimum ROR - 10% PAFactory run s3 shifts. 6 day/wjeek No peak load restriction PLAN 1 PLAN 2PLAN 3 PLAN 4 ITEMS I Runs PDB power Runs VDB Power Run; Gas 4 x 630 KVA Run * Diesel 2 x 1250 KVA Standbys Diesel Standby s Gas Standby I PD3 Power Standbys PDB Power. 2x1250KVA 4x630KVA INVESTMENTS S/S TK 4,e67,000 S/S TK. 4,e67,000 Gas k. 14,400,000 Diesel Tk. 7,300,000 engine engino Diesel Tk.70800,CO0 Gas Tk. 14,4001000 S/S TK. 4,867,000 S/S 1k. 4,867.000 engine eagino t11THLY PDB Bill TK 1378,791 TK. l378,791 1k. 164,073 T. 164,073 OPERATIXI jGen*Set Operation Tk. 81,407 TK. 25?702 TX. 458,24: 1k. 1,212,6id COSTS Gen.set Miaint. Tk. 13,000 TK. 24jO00 K. 130 coo 1k. 97,500 YEAR! v OPERATION Tk. 17,678,376 TK. 179141,916 T. 9,6270852 TK. 17169L,652 COSTS. PRESENLT 4O0RTH OF NET1 DISBURSEMiNTS Tr .l23,26:3,297 It*,. 126,470,26a 7K 831643,378 IK.125,030,476 FOR 20 YEARS. ANWiiAL (;OSTS* TK. 14,479,094 TK. 14,1355,197 TK 9,707,291 Tk. 14,691,9 2 P1e,r, s y -020 yeirso Rateof nterst 15 -99- Annex -- BANGLADESH Private Sector Participation in Energy Methanol Project (Basis: Product Price - US$120/MT and Natural Gas Price - USSO.5/MMBT'J; Oueration Year (Unit: US$1000) 1st 5th 10th L. Total Inve-tment 109.000 Fixed Capital investment 97,000 (includ. contingency) Working Capital Investment 5,000 Interest during const. 7,000 2. Production Cost Natural Gas 3821.2 5458.8 5458.8 5-S3.3 Utilities 1363.9 1948.4 1948.4 :1-8.4 Selling Expenses 231.0 360.0 360.0 ' 0. Labor Cost 531.0 531.0 531.0 31.. Administrative Cost 159.3 159.3 159 3 129.3 Plant Overhead 212.4 212.4 212.4 Maintenance Cost 1940.0 1940.0 1940.. Insurance 970.0 970.0 970.0 970.2 Depreciation 9700.0 9700.0 9700.0 0 Financial Charge 7266.1 4206.7 382.4 0 3. Sales Revenue 23100.0 36000.0 36000.0 39000.0 4. Total Profit B/Tax -2345.1 10513.4 14337.7 26451 5. Corporate Tax 0 0 0 6. Net Profit A/Tax -2345.1 10513.4 14337.7 29223 7. Financial Ratios - Debt/Equity Ratio 2.3 0.6 0 - Current Ratio 0.2 3.8 144.2 - Liquidity Ratio 0.2 0.2 - Cash Ratio 0.1 0.0 0.3 - Debt Service Coverage Ratio 1.0 2.1 3.n c 8. IRR (Z) On Total Project (B/Tax) 19.10 On Total Project (A/Tax) 18.71 Stockholders (A/Tax) 16.65 9. Payback Period for Equity 4.0 Year (exclud. Construction Period)