92906 September 28, 2009 Links: - What is IDA? - Our Work in Bangladesh More on Bangladesh: - Borrowing History - Data & Statistics - Research - Contact Us Bangladesh is a poor, densely populated country of about 162 million people. A longstanding impediment to economic growth and poverty reduction has been an inadequate and unreliable power supply. In the late 1990s, fewer than 30 percent of residents had access to electricity. The weak finances and limited capacity of the two main energy companies—Bangladesh Power Development Board and Dhaka Electricity Supply Authority—prevented them from filling the growing gap in power generation, suggesting that involvement by privately financed independent producers might be required. Unfortunately, the country had no experience building a major power plant with private funding, and prevailing constraints in the Bangladesh infrastructure market suggested that such an innovation was unlikely to happen anytime soon. To address these challenges, the IDA-financed Haripur Power Project was launched in 2000 to increase electricity supply through low-cost generation. IDA crafted a framework for attracting private investments to the sector by offering partial guarantees to commercial lenders that offset certain risks related to government policy and regulatory regimes. At the same time, the Private Sector Infrastructure Development Fund worked to alleviate financial market constraints in Bangladesh by making long-term, dollar-denominated debt available for infrastructure projects with private participation. In addition to establishment of a financing facility, the project also assisted Bangladesh with the crafting of transparent procurement procedures, regulatory frameworks, and risk-sharing mechanisms for private sector infrastructure promotion and operation. The outcome was development of two cost-effective independent producers—the 360 megawatt Haripur and 450 megawatt Meghnaghat power plants sponsored by the U.S.-based AES Corporation. Two new, well-maintained and reliable electricity plants in Bangladesh now generate 30 percent of the country's power, serving tens of millions of people every minute of every day. The plants at Haripur and Meghnaghat have dramatically altered the country’s energy profile, helping stoke economic growth and resolving the power crisis of the 1990s. Highlights: -Power that can be counted on. Haripur was online more than 96 percent of the time in 2008. Both plants are by far the best-operating, best-maintained and most reliable generating facilities in the country, operating nearly flawlessly since start-up. -Power that costs less. In 2008, Haripur and Meghnaghat had unit costs of 1.93 cents per kilowatt hour and 2.47 cents per kilowatt hour, respectively, compared to the average cost of 3.4 cents per kilowatt hour for all independent power producers in the country and 3.8 cents per kilowatt hour for the Bangladesh Power Development Board. The two plants register the least expensive unit-cost performance by far, even when compared to older depreciated plants. -Cutting-edge technology that is environmentally friendly. The two plants introduced state-of-the- art, gas-fired, combined-cycle technology for the first time in Bangladesh. Their environmental record is spotless, and they have received the highest level of ISO certification, having passed a rigorous onsite review of environmental, safety and health procedures. -Maximum impact beyond installed capacity. Haripur began commercial operation in December 2001 and Meghnaghat in November 2002, adding a total of 810 megawatts of generating capacity to the power grid. Although accounting for 20 percent of Bangladesh's installed capacity, the two facilities are so reliable and efficient that they provide 30 percent of all generated power. -A model for the sector. Private operation of the plants has become a paradigm for the Bangladesh Power Development Board as it restructures and corporatizes its generation entities. -A model for the sector. Private operation of the plants has become a paradigm for the Bangladesh Power Development Board as it restructures and corporatizes its generation entities. -A model for the sector. Private operation of the plants has become a paradigm for the Bangladesh Power Development Board as it restructures and corporatizes its generation entities. IDA support for large-scale private generation projects in Bangladesh totals US$141 million, and an additional US$331 million has been leveraged. Of the US$183 million total cost for the Haripur Power Project, IDA provided US$60.9 million of support for commercial debt financing. IDA investment strategy in Bangladesh’s power sector targets specific service improvements by leveraging public and private investment in distribution, transmission and generation, by building institutional capacity and by enhancing the commercial operating environment. AES Corporation, USA, a global independent power producer that owns and operates a large number of generation plants worldwide, was the original project sponsor. Initial plans called for the project to be financed by sponsor’s equity, the International Finance Corporation (of the World Bank Group) and commercial banks, with IDA providing partial risk guarantees. However, the deal with IFC and the original commercial banks fell through when the parties could not agree on certain terms and conditions of the loan facilities. AES later arranged for a US$60.9 million commercial loan syndicated by ANZ Banking Group with partial risk guarantees from IDA, scheduling the remaining debt as a Shareholders Loan (subordinated) and Senior Sponsor Facility (SSF). The outstanding SSF balance of US$32.7 million was later refinanced by the Dutch development bank FMO. IDA’s strategy supports the government’s goal of connecting all households to the grid by 2020 through a focused program of public and private investment in power generation, targeted interventions in electricity and natural gas transmission, extension assistance in rural electrification, and re-entry into lending for investment in urban distribution and services. IDA’s support of policy reform spotlights the energy sector for particular attention. While the two power plants have made dramatic contributions to electricity service in Bangladesh, no major plants have been privately financed since Meghnaghat powered up in 2002. Haripur Power Project (2000 - Closing date not available) Project documents Last updated: 2009-09-28