At program appraisal, the reliability of Bangladesh’s electricity supply was low and had become a major deterrent to economic development. By 2011, with more than half of Bangladesh’s population without access to electricity, improvements to electricity generation, transmission, and distribution systems were urgently required. During peak hours, up to 30% of the total electricity demand—equivalent to about 2,000 megawatts (MW)—could not be met, resulting in load shedding for up to 5 hours a day. The government planned to improve the situation by investing in power system infrastructure development and energy sector reforms.
In support of the government’s plan, the Asian Development Bank (ADB) approved a $700 million multitranche financing facility (MFF) for the Power System Expansion and Efficiency Improvement Investment Program in November 2012, and a month later, a $185 million loan for tranche 1 of the MFF. The envisaged impact of the tranche 1 project was for Bangladesh to have increased access to clean and reliable electricity supply. Its expected outcome was improved efficiency in electricity generation and transmission in Bangladesh. It had four intended outputs: (i) increased generation capacity through supply side energy efficiency improvements in four power plants, (ii) increased transmission capacity through construction of three transmission lines, and (iii) enhanced capacity of power sector agencies, and (iv) project management system in place.
The Islamic Development Bank (IsDB) and the European Investment Bank (EIB) initially joined as parallel cofinanciers, with the IsDB looking to finance the conversion of one open cycle power plant (OCPP) to a combined cycle power plant (CCPP) and the EIB financing the conversion of two other OCPPs. The EIB also offered a grant for capacity building to be administered by ADB. While the EIB grant materialized, albeit administered by EIB itself, the cofinancing arrangements fell through. Using its own funds and after a 3-year delay, the government completed the conversion of the power plant supposed to be financed by the IsDB in March 2020. Conversion of the other two power plants with EIB financing was cancelled, reducing the scope of the project.
The delay and cancellation of subprojects affected the outcome related to output 1 of the project. Only 150 MW or 64% of the planned 235 MW of additional generation capacity was completed, rendering the outcome only partially completed. Half of the additional generation capacity came from the ADB-financed conversion of the 150 MW Khulna OCPP to a 225 MW CCPP, completed in June 2017. Construction of additional transmission lines and substations, financed by ADB, were completed in December 2018, following a 2-year delay. The new transmission lines and substations reduced some bottlenecks in the transmission network, facilitated the dispatch of more efficient power plants, and increased the supply capacity of the power system. They helped reduce transmission losses from 2.72% in 2011 to 2.64% by end-2017.
Power sector personnel were trained on investment planning, operations planning, energy auditing, monitoring, governance, and more. Several officials were sent for capacity building abroad. Consultancy services for the preparation of the MFF tranche 2 and tranche 3 projects were supported and so were consultancy services to assist with the implementation of one transmission subproject under another ADB loan and build the technical capacity of the project management units.
Overall, the project helped the Bangladesh power sector achieve significant improvements in supply reliability and efficiency and enhanced the capacity of power sector personnel. However, the project design was not robust enough to deliver the output and outcome targets. Project design shortfalls were noted in the following areas: (i) lapses in due diligence such as substantially low-cost estimates and applicable policies for the administration of EIB grant funds; and (ii) weaknesses in the design and monitoring framework; failure to update for changes in scope, for example, by not conducting a midterm review mission; and failure to address main design deficiencies during project implementation. On a weighted basis, according to the relative financial cost of the various components at appraisal, the overall outcome achievement of the project was less than 80%.
The project had four executing agencies: the North-West Power Generation Company Limited; the Bangladesh Power Development Board; the Power Grid Company of Bangladesh; and the Power Division of the Ministry of Power, Energy, and Mineral Resources.
