Bangladesh: Power System Expansion and Efficiency ... · Power System Expansion and Efficiency...

Power System Expansion and Efficiency Improvement Investment Program (RRP BAN 42378)

Project Number: 42378-014 Loan Number: LXXXX October 2012

Bangladesh: Power System Expansion and Efficiency Improvement Investment Program

Facility Administration Manual

Contents

I. PROJECT DESCRIPTION 1

A. Impact and Outcome 1 B. Outputs 1

II. IMPLEMENTATION PLANS 2

A. Project Readiness Activities 3 B. Overall Project Implementation Plan 4

III. PROJECT MANAGEMENT ARRANGEMENTS 5

A. Project Stakeholders – Roles and Responsibilities 5 B. Key Persons Involved in Implementation 5 C. Project Organization Structure 7

IV. COSTS AND FINANCING 7

A. Detailed Cost Estimates by Expenditure Category of Tranche 1 9 B. Allocation and Withdrawal of Loan Proceeds of Tranche 1 10 C. Detailed Cost Estimates by Financers for Tranche 1 11 D. Detailed Cost Estimates by Component for Tranche 1 12 E. Detailed Cost Estimates by Year for Tranche 1 13 F. Contract Award and Disbursement S-curve for Tranche 1 14 G. Fund Flow for Tranche 1 14

V. FINANCIAL MANAGEMENT 15

A. Financial Management Assessment for Tranche 1 15 B. Disbursement 16 C. Accounting 17 D. Auditing 17

VI. PROCUREMENT AND CONSULTING SERVICES 17

A. Advance Contracting and Retroactive Financing 17 B. Procurement of Goods, Works and Consulting Services 17 C. Procurement Plan 18 D. Outlined Terms of Reference (Appendix 1) 20

VII. SAFEGUARDS 20

VIII. GENDER AND SOCIAL DIMENSIONS 22

IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION 23

A. Project Design and Monitoring Framework 23 B. Monitoring 25 C. Evaluation 25 D. Reporting 26 E. Stakeholder Communication Strategy 26

X. ANTICORRUPTION POLICY 27

XI. ACCOUNTABILITY MECHANISM 27

XII. RECORD OF PAM CHANGES 27

FACILITY ADMINISTRATION MANUAL PURPOSE AND PROCESS

The facility administration manual (FAM) describes the essential administrative and management requirements to implement the facility on time, within budget, and in accordance with Government and Asian Development Bank (ADB) policies and procedures. The PAM should include references to all available templates and instructions either through linkages to relevant URLs or directly incorporated in the FAM. The executing and implementing agencies are wholly responsible for the implementation of ADB financed facility, as agreed jointly between the borrower and ADB, and in accordance with Government and ADB’s policies and procedures. ADB staff is responsible to support implementation including compliance by executing and implementing agencies of their obligations and responsibilities for facility implementation in accordance with ADB’s policies and procedures. At Loan Negotiations the borrower and ADB shall agree to the FAM and ensure consistency with the Loan agreement. Such agreement shall be reflected in the minutes of the Loan Negotiations. In the event of any discrepancy or contradiction between the FAM and the Loan Agreement, the provisions of the Loan Agreement shall prevail.

After ADB Board approval of the facility's report and recommendations of the President (RRP) changes in implementation arrangements are subject to agreement and approval pursuant to relevant Government and ADB administrative procedures (including the Project Administration Instructions) and upon such approval they will be subsequently incorporated in the FAM or subsequent Project Administrative Manuals (PAMs), if applicable.

ABBREVIATIONS

ADB = Asian Development Bank ADF = Asian Development Fund AFD = French Agency for Development AFS = audited financial statements BPDB = Bangladesh Power Development Board DESCO = Dhaka Electricity Supply Company Limited DMF = design and monitoring framework DPDC = Dhaka Power Distribution Company Limited DPP = Development Project Proposal EA = executing agency EIA = environmental impact assessment EIB = European Investment Bank EMP = environmental management plan ERD = Economic Relations Division FAM = facility administration manual FMA = financial management assessment FFA = framework financing agreement FIRR = financial internal rate of return GACAP = governance and anticorruption action plan GAP = gender action plan GDP GOB

= =

gross domestic product Government of Bangladesh

IA = implementing agency ICB = international competitive bidding IEE = initial environmental examination IsDB = Islamic Development Bank kV = kilo volt LIBOR = London interbank offer rate MFF = multitranche financing facility MOU = memorandum of understanding MPEMR = Ministry of Power, Energy and Mineral Resources MW = megawatt NWPGCL = North-West Power Generation Company Limited OCR = ordinary capital resources PAI = project administration instructions PAM = project administration manual PCU = Project coordination unit PGCB = Power Grid Company of Bangladesh PMU = project management unit PV = photovoltaic REB = Rural Electrification Board RP = resettlement plan RRP = report and recommendation of the President to the Board SOE = statement of expenditures SPS = Safeguard Policy Statement TOR = terms of reference

1

I. PROJECT DESCRIPTION 1. The Government of Bangladesh has prepared an investment plan worth of $12.15 billion for the period of 2012-2015 with the objectives of increasing electrification rate to 68%, eliminating the supply demand gap and resolving reliability and supply quality issues. The Government’s investment plan will expand generation and undertake matching investments on transmission and distribution improvements. The proposed multitranche financing facility (MFF) support selected generation expansion, transmission and distribution improvements from the Government’s investment program1. 2. The proposed investment program (MFF) finances carefully selected subprojects from the Government’s investment plan. A flexible modality is required to support the government’s medium-term investment plan. About 50% of the external finances of the proposed investment program will be mobilized through co-financing. The proposed MFF also facilitate systematic sector capacity building with a longer planning horizon. It will also undertake sector reforms to ensure efficient management of sector entities and their financial sustainability.

Power sector investment plan 2012-2015 Year Funding Gap in $ million

of Generation Transmission Distribution Total

commissioning Public Private Public Public Public Private Grand Total

2012 524 1,123 - 601 1,125 1,123 2,247

2013 1,216 1,138 144 601 1,961 1,138 3,099

2014 1,376 1,357 341 601 2,318 1,357 3,676

2015 1,169 640 715 601 2,485 640 3,125

Total 4,286 4,258 1,201 2,402 7,889 4,258 12,147 Source: BPDB, PGCB and ADB estimates

A. Impact and Outcome 3. The proposed investments will contribute to low carbon economic growth, productivity, competitiveness and jobs. The outcome will be increased access to clean and reliable supply of electricity in Bangladesh and more effective power sector institutions. B. Outputs 4. The proposed investment program will deliver four outputs: (i) improved efficiency in electricity generation, transmission and distribution; (ii) increased renewable energy use; (iii) enhanced capacity of power sector agencies and farmer organizations; and (iv) project management system. The major physical investment will be undertaken on generation capacity additions through supply side efficiency improvements, transmission expansion and distribution improvement under the first output. Pilot program of solar irrigation will install up to 200 irrigation pumps under the second output. Solar irrigation component will enable up to 4000 poor farm families to cultivate 3 crops instead of one crop per year. The capacity building will provide support for subsequent tranche preparation, supervision consultants for project implementation and training for power sector personnel and members of farmer organizations (for solar irrigation). The training programs will include investment appraisal, operations planning, energy auditing and monitoring, financial performance management and reporting, auditing and governance.

1 The Asian Development Bank provided project preparatory TA, ADB. 2011. Technical Assistance to Bangladesh for

preparing Power System Efficiency Improvement. Manila.

2

5. Under the output (i), up to 700 MW generation capacity will be added to the system of which about 2752 MW would be added using ADB and government finance. Generation capacity additions in the investment program will be undertaken by converting open cycle gas fired power plants to combined cycle plants. This conversion allows generation of 50% additional power without burning extra gas, hence viewed as an environmentally friendly technology to add generation capacity. Power plant conversion is also a solution for the acute gas shortages in Bangladesh. The output (i) will also build up to 470 km of transmission lines and associated facilities of which about 200 Km will be built using ADB and government funds. The upstream improvements in the 33kV network include up to 500 km of distribution lines and associated facilities and up to 39 new or upgraded 33/11kV substations. Up to 250 km of distribution lines will be added using ADB and government funds. These physical investments will ease overloading of existing transmission and distribution lines, achieve higher reliability and reduce technical losses and provides 450,000 new power connections to households. 6. Efficiency improvement component in tranche 1 will convert four plants: (i) Khulna (150MW), (ii) Baghabari (100 MW), (iii) Sylhet (150 MW), (iv) Shahjibazar (70 MW)3. Transmission system strengthening in tranche 1 constructs three transmission lines and associated substations, namely (i) 100 km 132 kV double circuit transmission line Mynmensingh-Tangail, (ii) 80 km 132kV double circuit transmission line Chandraghona-Rangamati-Khagrachari, and (iii) 50 km 132kV double transmission line Brahmanbaria-Narsingdi. These lines are aimed at removing constraints in operating the high voltage network in the country, enabling more generation capacity to be dispatched, reducing transmission losses and improving the reliability of the transmission system.

II. IMPLEMENTATION PLANS 7. The program will be implemented from December 2012 to October 2022. Estimated completion date will be on 31 December 2020. Details on the implementation arrangements are shown below.

2 These estimates are tentative because financial plans for tranche 2 and three will be developed during the tranche

preparation. 3 Technical details of the power plants are given in supplementary linked document on technical assessment.

3

Implementation Arrangements Aspects Arrangements Implementation period December 2012-December 2022

Estimated completion date 31 December 2020

Management

(i) Oversight body Steering Committee Secretary, Power Division, MOPEMR - chair Chairman BPDB, Managing Directors of PGCB, NWPGCL, DESCO, DPDC and Chairman REB, Representatives from ERD, Finance Division, Planning Commission, and IMED.

(ii) Executing agency BPDB, PGCB, NWPGCL, DESCO, DPDC, REB Power Division, MOPEMR, REB

(iii) Implementation unit PMUs in BPDB, PGCB, NWPGCL, DESCO, DPDC, REB, Power Division MOPEMR

Procurement Four procurement packages are under Tanche 1, with total estimated contract value of $ 338 million. ICB will be used for all procurement packages.

Consulting services Five consulting services packages (firm) are to be engaged under Tranche1, with total estimated contract value of $8.5 million. Consulting firms will be recruited using quality- and cost-based selection.

Retroactive financing and/or advance contracting

Under each tranche, ADB may, subject to its policies and procedures, allow advance contracting. Retroactive financing will be requested for one contract package in capacity building component for tranche preparation.

Disbursement The loan proceeds will be disbursed in accordance with ADB's Loan Disbursement Handbook (2012, as amended from time to time) and detailed arrangements agreed upon between the government and ADB

ADB = Asian Development Bank, BPDB = Bangladesh Power Development Board, DESCO = Dhaka Electricity Supply Company Limited, DPDC = Dhaka Power Distribution Company Limited, ERD = Economic Relations Division, MOPEMR = Ministry of Power Energy and Mineral Resources, NWPGCL = North West Power Generation Company Limited; PGCB = Power Grid Company of Bangladesh Limited, PMU = project management unit; REB = Rural Electrification Board; IMED =Implementation, Monitoring and Evaluation Division. Source: Asian Development Bank.

A. Project Readiness Activities

2012 2013

Month Month

Indicative Activities 7 8 9 10 11 12 1 2 3 4 5 6 Responsibility

Advance contracting actions x BPDP/NWPGCL/

PGCB/ Power Division

Retroactive financing actions x BPDP/NWPGCL/

PGCB/Power Division/ADB

ADB approval x ADB

Loan signing x Power Division/ADB

Government legal opinion provided

x Power Division

Government budget inclusion x Power Division

Loan effectiveness x ADB

4

B. Overall Project Implementation Plan

Figure 1: Overall Project Implementation Plan

Activities 2012 2013 2014 2015 2016 2017 2018-2020

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

TRANCHE 1

Component 1: BPDB Projects

Bidding

Bid evaluation and award

Implementation

Component 1: NWPGCL

Bidding

Bid evaluation and award

Implementation

Component 2: PGCB

Preparation of Bidding Documents

Bidding and Contract Signing

Implementation

Component 3: MPEMR

Implementation consultants for BPDB and NWPGCL projects

Preparation of Tranche 2

Preparation of Tranche 3

Governance and Planning

TRANCHE 2

PGCB



Implementation

DESCO



Implementation

DPDC



Implementation

TRANCHE 2

BPDB



Implementation Dec 2019

PROJECT COMPLETION REPORT Jun 2020

5

III. PROJECT MANAGEMENT ARRANGEMENTS A. Project Stakeholders – Roles and Responsibilities

Project Stakeholders Management Roles and Responsibilities

Steering Committee:

Chaired by Secretary, Power Division, MOPEMR, and consisting of Chairman BPDB, Managing Directors of PGCB, NWPGCL, DESCO, DPDC and Chairman

REB, Representatives from ERD, Finance Division, Planning Commission, and IMED.

Executing Agencies: Power Division, Ministry of Power Energy and Mineral Resources (MPEMR) Bangladesh Power Development Board (BPDB) North-West Power Generation Company Limited (NWPGCL) Power Grid Company of Bangladesh (PGCB) Dhaka Power Distribution Company Limited (DPDC) Dhaka Electricity Supply Company Limited (DESCO) Rural Electrification Board (REB)

Power Division will implement the capacity building component which include activities for all other executing agencies

BPDB and NWPGCL will implement energy efficiency improvement component

PGCB will implement transmission components

DPDC and DESCO will implement distribution components in Tranche 2

REB will implement renewable energy development component in Tranche 2

Project Management Units PMUs will be established within each EA for implementing, monitoring, and reporting on the progress of project implementation to ADB and the government

Power Division, MPEMR will form a project coordination unit (PCU) to coordinate all the project activities and report to ADB

Asian Development Bank Will undertake regular project reviews and facilitate in implementation of the projects

B. Key Persons Involved in Implementation

Executing Agencies

BPDB

Tamal Chakraborty Member (Generation) Telephone: +880-2-956 4667 Fax: +880-2-955-1296 E-mail: [email protected]

mailto:[email protected]

6

Executing Agencies

NWPGCL PGCB REB Power Division, MPEMR DPDC DESCO

A.M. Khurshedul Alam Managing Director Telephone: +880-01730066976 Fax: +880-2-9513530 E-mail: [email protected] Md. Jamal Ullah Managing Director Telephone: +880-02-9560883 Fax: +88002-7171833 E-mail: [email protected] Brig. Gen. Moinuddin Chairman Telephone: +880-2-7911334 Fax: +880-2-8900611 E-mail: [email protected] Md. Nazrul Islam Joint Chief Telephone: +880-2-9558868 Fax: +880-2-7168410 E-mail: [email protected] Brig. Gen. (Rtd) Md. Nazrul Hasan Managing Director Telephone: +880-2-9563520 Fax: +880-2-9566699 E-mail: [email protected] Md. Shah Alam Director (Engineering) Telephone: +880-01713090467 Fax: +880-2-8900100 E-mail: [email protected] / [email protected]

Asian Development Bank

Division Director

Yongping Zhai Director, Energy Division Telephone No.: (63-2) 632-5976 Email address: [email protected]

Mission Leader

Herath Gunatilake Lead Energy Economist Telephone No.: (63-2) 632-5468 Email address: [email protected]










7

C. Project Organization Structure 8. Bangladesh Power Development Board (BPDB), North-West Power Generation Company Limited (NWPGCL) and Power Grid Company of Bangladesh (PGCB) Rural Electrification Board (REB), Power Division, Ministry of Power Energy and Mineral Resources (MPEMR), Dhaka Power Distribution Company Limited (DPDC), and Dhaka Electricity Supply Company Limited (DESCO) will be the executing agencies with overall responsibility for the implementation of respective project components. Power Division, MPEMR will implement the capacity building component which include activities for all other executing agencies. Project implementation consultants will be recruited by Power Division, but they will report to the respective EAs. BPDB and NWPGCL will implement energy efficiency improvement component while PGCB will implement transmission components. DPDC and DESCO will implement distribution components in tranche 2. Project management units (PMU) will be established within each executing agency for implementing, monitoring, and reporting on the progress of project implementation to ADB and the government. The PMUs’ responsibilities will include (i) overall coordination, macro level project management and monitoring; (ii) annual budget preparation and monitoring utilization of loan proceeds; (iii) progress reporting, including reports on financial management, safeguard compliance and project impact; and (iv) ensuring compliance with loan covenants. The PMUs will also be responsible for administration, and financial and technical supervision of the subprojects, including procurement of goods and services, engagement of consultants, engineering and construction contractors, and monitoring subproject operation performance. Power Division of MPEMR will form a a project coordination unit (PCU) to coordinate all the project activities and report to ADB.

IV. COSTS AND FINANCING 9. The Government’s investment plan faces a funding gap of about $12,150 million investments during 2012-2015 period. A major portion (70%) of the total investment of the Government program will be allocated for generation expansion. The proposed investment program provides up to $1,600 million (13%) of the investment requirements. The government has requested up to $700 million from ADB’s ordinary capital resources to finance part of the identified investments in the governments investment plan. The investment program is expected to have three tranches, subject to the government’s submission of periodic financing requests; execution of loan and project agreements; and fulfillment of terms, conditions, and undertakings set forth in the framework financing agreement. The first tranche will include generation expansion, transmission expansion and capacity building components. The second tranche includes generation expansion, transmission expansion, distribution improvement and pilot solar irrigation program. The third tranche will undertake generation expansion. 10. The indicative investment plan for the program is shown below. The first tranche of $185 million will have a 25-year term including a grace period of 5 years, and an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR), a commitment charge of 0.15% per year and such other terms and conditions as set forth in the draft loan and project agreements. ADB loan proceeds in each tranche will be provided to the relevant power sector agencies by the government on terms and conditions consistent with Bangladesh legislation and acceptable to ADB.

8

Indicative Investment Plan for the Program Amount US$ million Item MFF Tranche 1 Tranche 2 Tranche 3

A Base Costs 1 Energy Efficiency Improvements 624.0 240.0 - 384.0 2 Transmission Expansion 276.0 63.0 213.0 - 3 Distribution Improvements 303.0 - 302.0 - 4 Renewable Energy Development 8.0 - 8.0 - 5 Capacity Building 10.0 8.5 1.5 - 6 Taxes and duty 192.0 41.0 106.0 45.0 Subtotal A 1,413.0 352.5 631.5 429.0 B Contingencies 163.0 41.5 68.5 53.0

C

Financing Charges During Implementation 24.0 6.0 10.0 8.0

Total (A+B+C) 1,600.0 400.0 710.0 490.0 a In mid-2012 prices.

b Physical contingencies computed at 5% for civil works; Price contingencies computed at 5% local currency costs.

c Includes interest and commitment charges. Interest during construction for ADB loan(s) has been computed at the 5-year forward London interbank offered rate plus a spread of 0.4%. Commitment charges for an ADB loan are 0.15% per year to be charged on the undisbursed loan amount.

Source: Project preparatory technical assistance consultants

11. Financing plan for the investment program is given below. ADB will finance $700 million for the investment program, with counterpart funding of $222 million from the government. The rest of the $678 million will be provided by three co-financiers: Islamic Development Bank (IsDB), Agence Francaise de Developpement (AFD), and European Investment Bank (EIB). All three donors visited Bangladesh together with an ADB mission, agreed in principle to finance the investment program, and met the relevant government officials to explain terms and conditions of the co-financing. Government made official request for co financing from AFD and IsDB. ADB and the cofinenciers are in the process of preparation of Memorandom of understanding on cofinancing.

Financing Plan of the Investment Program

Source Investment Program Funding, $ Million

Tranche 1,

Year 2012

Tranche 2,

Year 2013

Tranche 3,

Year 2015 Total

ADB 185.0 310.0 205.0 700.0

IsDB 85.0 195.0 100.0 380.0

EIB 98.0 - 100.0 198.0

AFD - 100.0 - 100.0

Government 32.0 105.0 85.0 222.0

Total 400.0 710.0 490.0 1,600.0

ADB = Asian Development Bank, EIB = European Investment Bank, IsDB = Islamic Development Bank,

AFD = L’Agence Française de Développement (French Agency for Development) Source: Project preparatory technical assistance consultants

9

A. Detailed Cost Estimates by Expenditure Category of Tranche 1 Component 1

Description NWPGCL BPDB

A Base Costs Khulna Baghabari Sylhet Shajibazar Total

Material, equipment and civil works 74.08 44.62 79.51 33.02 231.23 Engineering design & incidentals 4.06 1.73 2.82 1.14 9.75 Capacity development - - Taxes and Duty 9.51 6.11 10.01 4.16 29.79 Subtotal A 87.65 52.46 92.34 38.32 270.77

B Contingencies 10.17 6.76 10.00 4.53 31.46 C Financing Charges During Implementation 1.85 1.78 0.07 0.07 3.77 Total Project Cost (A+B+C) 99.67 61.00 102.41 42.92 306.00

Component 2

Description PGCB

A Base Costs MT Line CRK Line BN Line Total

Material, equipment and civil works 15.76 28.71 14.04 58.51 Engineering design & incidentals 0.89 1.08 0.74 2.71 Capacity development - Taxes and Duty 3.19 6.36 2.97 12.52 Subtotal A 19.84 36.15 17.75 73.74

B Contingencies 3.35 4.63 2.57 10.55 C Financing Charges During Implementation 0.34 0.59 0.28 1.21 Total Project Cost (A+B+C) 23.53 41.37 20.60 85.50

Component 3

Description MOPEMR

A Base Costs Total

Material, equipment and civil works Engineering design & incidentals Capacity development 8.50 Taxes and Duty Subtotal A 8.50

B Contingencies - C Financing Charges During Implementation Total Project Cost (A+B+C) 8.50

MOPEMR = Ministry of Power Energy and Mineral Resources, NWPGCL = North-West Power Generation Company Limited, BPDB = Bangladesh Power Development Board, PGCB = Power Grid Company of Bangladesh Limited, MT = Mymensingh-Tangail transmission line, CRK = Chandraghona-Rangamati-Khagrachari transmission line, BN = Brahmanbaria-Narsingdi transmission line

10

B. Allocation and Withdrawal of Loan Proceeds of Tranche 1

CATEGORY ADB FINANCING BASIS

Amount Allocated for

ADB Financing Percentage and Basis for Withdrawal from the Loan Account

S.N. Item (US$ million)

Category Subcateg.

1 Power Plant 1.1* 84.12 100% of total expenditure

claimed**

2 Transmission lines and substations

74.10 100% of total expenditure

claimed**

3 Tranche 1&2 preparation consulting services

1.50 100% of total expenditure

claimed**

4 Interest and Commitment Charges

3.10 100% of total amount due

5 Unallocated 22.18

6 Total 185.00

* Conversion of Khulna Power Plant **Inclusive of all duties and taxes imposed within the territory of the Borrower.

11

C. Detailed Cost Estimates by Financers for Tranche 1

Item

($ million)

Total Cost

ADB OCR EIB Loan and

Grant IsDB Fund GOB Fund

Amount % of Cost

Category Amount

% of Cost

Category Amount

% of Cost

Category Amount

% of Cost

Category

A. Investment Costsa

1 Power Plant 1.1

b 84.12 84.12 100.0%

2 Power Plant 1.2 86.34

76.08 88.1%

10.27 11.9%


80.99 89.5% 9.51 10.5%

4 Transmission line and substations

b 74.10 74.10 100.0%

5 Consulting services for Tranche 2& 3preparations

b 1.50 1.50 100.0%

6 Capacity Development 7.00

7.00

c 100.0%

7 Safeguards and administrative costs 8.85

8.85 100.0%

Total Base Cost 352.42 159.72 45.3% 83.08 23.6% 80.99 23.0% 28.63 8.1%

B. Contingenciesd: 41.34 22.18 53.6% 11.86 28.7% 3.94 9.5% 3.37 8.1%

C. Financing Charges in Imple. 6.24 3.10

3.07

0.07

Total Project Cost (A+B+C) 400.00 185.00 99.0% 98.00 52.3% 85.00 32.5% 32.00 8.0%

a. Cost based on May 2012 Prices; Estimates by EA and PPTA consultants;

b. Taxes and duties imposed within Borrower's territory are funded by ADB.

C This will be provided as a grant.

d. Physical contingences computed at 8%, and price contingencies computed as per ADB’s Financial Management and Analysis of Projects,2005.

Power Plant 1.1: Conversion of Khulna power plant; Power Plant 1.2: Conversion of Baghabari and Shahjibazar power plants; Power Plant 1.3: Conversion of Sylhet power plant.

12

D. Detailed Cost Estimates by Component for Tranche 1

Item

($ million)

Total Cost

Component 1 Component 2 Component 3

Amount % of Cost

Amount % of Cost

Amount % of Cost

A. Investment Costsa

1 Power Plant 1.1

b 85.29 85.29 100.0%

2 Power Plant 1.2 88.10 88.10 100.0%

3 Power Plant 1.3 90.51 90.51 100.0%

4 Transmission line and substations

b 74.10

74.10 100.0%

5 Consulting services for Tanche 2& 3 preparations 1.50

1.50 100.0%

6 Capacity Development 7.00

7.00 100.0%

7 Safeguards and administrative costs 6.09 4.10 67.3% 1.99 32.7%

Total Base Cost 352.59 267.99 76.0% 76.09 21.6% 8.50 2.4%

B. Contingenciesc: 41.18 33.02 80.2% 8.16 19.8%

C. Financing Charges in Imple. 6.24 4.99 80.0% 1.25 20.0% - Total Project Cost (A+B+C) 400.00 306.00 76.5% 85.50 21.4% 8.50 2.1%


b. Taxes and duties imposed within Borrower's territory are funded by ADB. c. Physical contingences computed at 8%, and price contingencies computed as per ADB’s Financial Management and Analysis of Projects,2005. Power Plant 1.1: Conversion of Khulna power plant; Power Plant 1.2: Conversion of Baghabari and Shahjibazar power plants; Power Plant 1.3: Conversion of Sylhet power plant.

13

E. Detailed Cost Estimates by Year for Tranche 1

Item

($ million)

ADB OCR

Year 1 Year 2 Year 3 Year 4 Year 5

A. Investment Costs


17.06 51.17 17.06

2 Power Plant 1.2

4 Transmission line and substations 74.10

14.82 44.46 14.82

5 Consulting services for Tanche 2& 3 preparations 1.50 0.75 0.40 0.35

6 Capacity Development

7 Safeguards and administrative costs

Total Base Cost 160.89 0.75 0.40 32.23 95.63 31.88

B. Contingencies: 21.01

6.30 14.71

C. Financing Charges in Imple. 3.10

0.62 1.86 0.62

Total Project Cost (A+B+C) 185.00 0.75 0.40 32.85 103.80 47.20


b. Taxes and duties imposed within Borrower's territory are funded by ADB. c. Physical contingences computed at 8%, and price contingencies computed as per ADB’s Financial Management and Analysis of Projects,2005. Power Plant 1.1: Conversion of Khulna power plant; Power Plant 1.2: Conversion of Baghabari and Shahjibazar power plants; Power Plant 1.3: Conversion of Sylhet power plant.

14

Reimbursement including SOE Procedure for Part 3

F. Contract Award and Disbursement S-curve for Tranche 1

G. Fund Flow for Tranche 1

Figure 1: Fund Flow Diagram

Ministry of Finance Economic Relations

Division

Ministry of Power, Energy, and Mineral

Resources (Power Division)

BPDP/PGCB

Asian Development Bank

Document Flow

Legend:

Turnkey Contractors/Suppliers

Fund Flow

Direct Payment Procedure

Supplier’s Bank

Commitment Procedure

Reimbursement including SOE Procedure

15

V. FINANCIAL MANAGEMENT A. Financial Management Assessment for Tranche 1 12. The financial viability assessment of tranche 1 was undertaken considering additional cash flows to the power sector companies due to generated or wheeled extra power. The weighted average cost of capital was calculated following ADB guidelines. The financial internal rates of return (FIRR) were estimated for the power plants and transmission lines separately. Power plant conversion and transmission lines results FIRR values of 4.0% and 4.5%, respectively. These FIRR values exceed the respective values of WACC of 1.9% (power plant conversion) and 2.1% (transmission lines), which demonstrates the financial viability of the project. The financial management assessment shows NWPGCL and PGCB are currently making profits and their financial indicators are satisfactory. The current financial position of the BPDB needs to be improved. BPDB has prepared a loss reduction plan and additional measures were incorporated as undertakings in the FFA to ensure financial sustainability of BPDB. 13. NWPGCL was registered as a Public Limited Company in August 2007 with main line of business of electricity generation for North-western region of Bangladesh. Currently, NWPGCL is still wholly owned enterprise of Government through BPDB. NWPGCL is the EA for Part A1. FMA was conducted in accordance with ADB's Financial Management and Analysis of Projects, 2005 during Project preparation and was found to be acceptable. NWPGCL is using the Chart of Accounts of BPDB as its wholly owned subsidiary enterprise. NWPGCL follows the accruals basis of accounting in line with Bangladesh Accounting Standards (BAS) and other applicable Accounting standards of the Institute of Chartered Accountants’ of Bangladesh. NWPGCL’s accounts are audited by a firm of Chartered Accountants as in accordance with the Bangladesh Standards of Auditing (BSA).The auditors of NWPGCL have not reported any major accountability issue in the recent past. The senior personnel of NWPGCL are professionally qualified and are well conversant with foreign donor requirements in terms of procedures and reports. 14. BPDP was established in 1972 as the authority for planning, construction and operation of power generation and transmission facilities throughout the country. BPDB is the EA for Part A2. FMA was conducted in accordance with ADB's Financial Management and Analysis of Projects, 2005 during Project preparation and was found to be acceptable. BPDB follows the accruals basis of accounting. It has an accounting system which is adequate for the recording of all relevant financial transactions of the projects being implemented. The Chart of Accounts of BPDP is adequate to properly record and report on project activities and disbursement categories. The accounts of BPDB are prepared in accordance with the requirements of Bangladesh Financial Reporting Standards (BFRS) and audited annually by a firm of Chartered Accountants. The audit is carried out in accordance with Bangladesh Standards of Auditing (BSA). No major issues came up for mention in the Audit Reports of the past three years. All recommendations made by the external Auditors are implemented without any delay. BPDP has years of experience of implementing Projects financed by ADB and other donors. It has adequately trained personnel to look after all aspects of a foreign-funded project. BPDB has a number of qualified professional accountants heading various accounting/finance offices. Personnel are conversant with all aspects of ADB procedures. 15. For NWPGCL and BPDB, while the present Management Information System produces the information required, computerization of the various sub-systems needs to be initiated at the earliest. The training on internal audit is also needed.

16

16. PGCB was incorporated in 1996 in accordance with Companies Act 1994 with main business of power transmission. PGCB has over 2000 employees and listed on the Dhaka Stock exchange and the Chittagong Stock Exchange. PGCB is the EA for Part B. FMA was conducted in accordance with ADB's Financial Management and Analysis of Projects, 2005 during Project preparation and was found to be acceptable. PGCB follows the accruals basis of accounting. It has an accounting system which is adequate for the recording of all relevant financial transactions of the projects being implemented. The Chart of Accounts of PGCB is adequate to properly record and report on project activities and disbursement categories. The accounts of PGCB are prepared in accordance with the requirements of Bangladesh Financial Reporting Standards (BFRS) and audited annually by a firm of Chartered Accountants. The Financial Statements of PGCB are audited by a firm of Chartered Accountants. The Audit is carried out in accordance with the International Standards of Auditing (ISA), as adopted by the Institute of Chartered Accountants of Bangladesh (ICAB). PGCB has years of experience of implementing Projects financed by ADB and other donors. It has adequately trained personnel to look after all aspects of a foreign-funded project. PGCB has a number of qualified professional accountants heading various accounting/finance offices. Personnel are conversant with all aspects of ADB procedures. 17. PGCB needs to have a Business Plan prepared at the earliest. HRM needs to be computerized and carried out by a separate department, given the large number of 2,000 employees. 18. Based on above, each EA is capable of managing the funds flow, disbursement procedure, accounting and financial reporting under the project. B. Disbursement 19. The Loan proceeds will be disbursed in accordance with ADB’s Loan Disbursement Handbook (2012, as amended from time to time), and detailed arrangements agreed upon between the Government and ADB. Pursuant to ADB's Safeguard Policy Statement (2009) (SPS), ADB funds may not be applied to the activities described on the ADB Prohibited Investment Activities List set forth at Appendix 5 of the SPS. ADB's direct payment, commitment, reimbursement including statement of expenditures (SOE) procedures will be followed. Regarding SOE procedure, it will be used for reimbursement for eligible expenditures not exceeding $100,000 per individual payment. 20. Before the submission of the first withdrawal application, the Borrower should submit to ADB sufficient evidence of the authority of the person(s) who will sign the withdrawal applications on behalf of the Borrower, together with the authenticated specimen signatures of each authorized person. The minimum value per withdrawal application is US$100,000, unless otherwise approved by ADB. The Borrower will consolidate claims to meet this limit for reimbursement claims. Each EA will be responsible for (i) preparing disbursement projections for each year, (ii) requesting budgetary allocations for counterpart funds, (iii) collecting supporting documents, and (iv) preparing and sending withdrawal applications. Withdrawal applications and supporting documents will demonstrate, among other things that the goods, and/or services for all the packages were produced in or from ADB members, and are eligible for ADB financing. Government counterpart funds will be used to finance the remaining miscellaneous works, services, taxes and duties.

17

C. Accounting 21. Each of the EAs will maintain separate project financial statements and records by funding source for all expenditures incurred on each component of the Project. Project financial statements will follow international accounting principles and practices. D. Auditing 22. Each of the EAs will cause the detailed consolidated project financial statements to be audited in accordance with International Standards on Auditing or the Government's audit regulations by an auditor acceptable to ADB. The audited project financial statements will be submitted in the English language to ADB within 6 months of the end of the fiscal year by the EA. The Borrower and the EA have been made aware of ADB’s policy on delayed submission, and the requirements for satisfactory and acceptable quality of the audited project financial statements. ADB reserves the right to verify the project financial statements to confirm that ADB’s share of the financing is used in accordance with ADB’s policies and procedures.

VI. PROCUREMENT AND CONSULTING SERVICES A. Advance Contracting and Retroactive Financing 23. In order to expedite project implementation, the Borrower has requested and ADB has approved advance contracting actions for the procurement and consulting service. All advance contracting will be undertaken in conformity with ADB’s Procurement Guidelines (2010, as amended from time to time) (ADB’s Procurement Guidelines). The issuance of invitations to bid under advance contracting will be subject to ADB's prior approval. The Borrower and the EAs have been advised that approval of advance contracting does not commit ADB to finance the Project. 24. Except as otherwise agreed with ADB, the expenditures incurred for equipment, civil works, and consulting services will be eligible for retroactive financing, provided that these are incurred before the effectiveness of the related loan agreement, but not earlier than 12 months preceding the signing of the related loan agreement, and as long as they do not exceed an amount of 20% of the individual loan. B. Procurement of Goods, Works and Consulting Services 25. Goods and works to be financed under the project will be procured in accordance with ADB's Procurement Guidelines (2010, as amended from time to time), except the packages for the conversion of Baghabari and Shahjibazar power plants, and conversion of the Sylhet power plant which will be respectively funded by European Investment Bank (EIB) and Islamic Development Bank (IsDB). Those packages will be procured in accordance with the respective co-financier's procurement guidelines. All goods and works will be procured by international competitive bidding. Project Preparation Support consultants for Tranche 2 and Tranche 3 will be engaged in accordance with ADB’s Guidelines on the Use of Consultants (2010, as amended from time to time). Project Implementation Management Support consultants for NWPGCL and BPDB, and Capacity Development consultants will be funded by EIB and administered by ADB using its guidelines in consultation with EIB. All consulting services, except implementation consultants will be recruited using quality- and cost-based selection (QCBS), with a quality–cost ratio of 80:20. Implementation consultants will be recruited using 90:10 quality–cost ratio. Taxes and duties of ADB funded packages will be paid by ADB.

18

26. An 18-month procurement plan indicating threshold and review procedures is in Section C. 27. All the consulting services will be recruited in accordance with ADB’s Guidelines on the Use of Consultants (2010, as amended from time to time). The outline terms of reference (TOR) for the consulting services are in Section D. C. Procurement Plan

Basic Data Project Name: Power System Expansion and Efficiency Improvement Investment Program (Tranche1) Country: Bangladesh Executing Agency: Power Division, Bangladesh Power Development Board (BPDB), Northwest Power Generation Company Ltd. (NWPGCL), Power Grid Company of Bangladesh Ltd. (PGCB) Loan Amount: $185 million Loan (Grant) Number: Date of First Procurement Plan 28 June 2012 Date of this Procurement Plan: 9 August 2012

a. Process Thresholds, Review and 18-Month Procurement Plan

1. Project Procurement Thresholds

28. Except as the Asian Development Bank (ADB) may otherwise agree, the following process thresholds shall apply to procurement of goods and works.

Procurement of Goods and Works

Method Threshold

International Competitive Bidding (ICB) for Works $1,000,000 International Competitive Bidding for Goods $500,000

2. ADB Prior or Post Review

29. Except as ADB may otherwise agree, the following prior or post review requirements apply to the various procurement and consultant recruitment methods used for the project.

Procurement Method Prior or Post Comments

Procurement of Goods and Works

ICB Works Prior ICB Goods Prior

Recruitment of Consulting Firms

Quality- and Cost-Based Selection (QCBS) Prior

Recruitment of Individual Consultants

19

Procurement Method Prior or Post Comments

Individual Consultants Prior

3. Goods and Works Contracts Estimated to Cost More Than $1 Million

30. The following table lists goods and works contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Description

Contract Value

($million) Procurement

Method Prequalification of Bidders (y/n)

Advertisement Date

(quarter/year) Comments

1.1 Conversion of Khulna power plant

85.29 ICB N 2nd

Quarter 2013 Financed by ADB and GOB

1.2 Conversion of Baghabari and Shahjibazar power plants

88.10

ICB

TBD

4

th Quarter 2012

Financed by EIB and GOB

1.3 Conversion of Sylhet power plant

90.51 ICB TBD 4th

Quarter 2012 Financed by IsDB and GOB

2. 132kV Transmission line construction

74.10 ICB N 4th

Quarter 2012 Financed by ADB and GOB

4. Consulting Services Contracts Estimated to Cost More Than $100,000

31. The following table lists consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

General Description Contract

Value Recruitment

Method1

Advertisement Date

(quarter/year)

International or National

Assignment Comments

Project Preparation Support for Tranche 2

$750,000 Individual 3rd

Quarter 2012 International Financed by ADB

Project Preparation Support for Tranche 3

$750,000 QCBS 80:20

3rd

Quarter 2013 International Financed by ADB

Project Implementation Management Support for NWPGCL

$1,500,000 QCBS 90:10

2nd

Quarter 2013 International Financed by EIB grant

Project Implementation Management Support for BPDB

$2,000,000 QCBS 90:10

4th

Quarter 2012 International Financed by EIB grant

Capacity Development $3,500,000 QCBS

80:20 3

rd Quarter 2013 International Financed by

EIB grant

5. Goods and Works Contracts Estimated to Cost Less than $1 Million and

Consulting Services Contracts Less than $100,000 32. The following table groups smaller-value goods, works and consulting services contracts for which procurement activity is either ongoing or expected to commence within the next 18 months.

20

General Description

Value of Contracts (cumulative) Number of Contracts

Procurement / Recruitment

Method1 Comments

N.A.

b. Indicative List of Packages Required Under the Project 33. The following table provides an indicative list of all procurement (goods, works and consulting services) over the life of the project. Contracts financed by the Borrower and others should also be indicated, with an appropriate notation in the comments section. Goods and works

General Description

Estimated Value

($million)

Estimated Number

of Contracts

Procurement Method

Domestic Preference Applicable Comments

Component 1: Power Plant Upgrade

1.1 Conversion of Khulna power plant

85.29 1 ICB N Financed by ADB and GOB

1.2 Conversion of Baghabari power plant and Shahjibazar power plant

88.10 1 ICB N Financed by EIB and GOB

1.3 Conversion of Sylhet power plant

90.51 1 ICB N Financed by IsDB and GOB

Component 2: Transmission Line Improvement

132kV Transmission line construction

74.10 1 ICB N Financed by ADB and GOB

Consulting Services

General Description

Estimated Value

(cumulative)

Estimated Number

of Contracts

Recruitment Method Type of Proposal Comments

Project Preparation Support

Tranche 2 $750,000 1 International STP Financed by ADB and GOB

Trench 3 $750,000 1 International STP Financed by ADB

and GOB

Project Implementation Management Support

NWPGCL $1,500,000 1 International FTP Financed by EIB grant and GOB

BPDB $2,000,000 1 International FTP Financed by EIB

grant and GOB

Capacity Building

Capacity Development

$3,500,000 1 International FTP Financed by EIB grant and GOB

D. Outlined Terms of Reference (Appendix 1)

VII. SAFEGUARDS

21

34. An environmental assessment and review framework, and a resettlement framework were prepared outlining the environmental and social safeguard principles and requirements.4 The executing agencies will undertake environmental and social safeguard due diligence on subprojects based on the environmental assessment and review framework and resettlement framework and submit bi-annual reports on implementation of the environmental management plan and resettlement plan for subprojects. Tranche 1 is classified as category B for both involuntary resettlement and the environment. The proposed project has no potential for significant air, water, or noise pollution and it has positive environmental effects of reduction in local air pollution and carbon emissions. It does not fall in the vicinity of any natural ecosystems, reserve forests, protected areas, and cultural sites. It has temporary minor impacts during construction that can be readily mitigated. An initial environmental examination and environmental management plan have been prepared for tranche 1 components based on selected representative subprojects sites. Tranche 2 and 3 are likely to be classified as category B for environment. 35. Tranche 1 components will require only minimum amount of land acquisition. Construction of new transmission lines will have minor temporary impacts on standing crops. Tranche 2 components will have 21 new 33/11 kV substations in the DISCOM-W area for which the sites have already been identified. Most of the substations are proposed to be located on government land. The lines under tranche 2 will have no impact on land acquisition and resettlement except some temporary damage to standing crops that may occur during the construction.

36. Tranche 1 is classified as category C for indigenous peoples. According to social assessments, no indigenous peoples are expected to be significantly affected by the investment program. In the event of impacts on indigenous peoples, the project will apply the mitigation measures provided the resettlement framework, which include specific measures that provide entitlements to vulnerable groups, including indigenous peoples. Project construction activities are expected to be small in scale, with the possible involvement of local people in construction activities, and are not considered to pose a threat to the existing socio-cultural system of indigenous peoples. No tribal lands will be acquired or affected. Tranche 2 may be classified as category A and tranche 3 is likely to be classified as category B for involuntary resettlement. 37. The EAs will ensure the timely and adequate implementation of the environmental management plans (EMP) and the Resettlement Plans (RPs) for each project component (as relevant), and will ensure that all activities comply with the applicable national and local environmental laws and regulations, in addition to ADB’s Safeguard Policy Statement 2009. In the event a sub project requires modifications to its design or configuration prior or during project construction, the EA will ensure to revise and update the EIA, IEE, EMP and RPs accordingly, and will submit these to ADB for approval and clearance. The EAs will assist in promoting environmentally and socially responsible implementation of the contracts. Contracts shall include provisions that comply with host country employment laws and ADB guidance on labor standards, wages and acceptable working conditions, including measures to avoid and prevent discrimination against women in the workplace, equal pay for equal work, and also public awareness and sensitization of the risks and prevention of the spread of HIV/AIDS. Ensuring these measures are implemented will be the responsibility of the EAs.

4 Environmental Assessment and Review Framework, and Resettlement Framework (accessible from the list of

linked documents in Appendix 2).

22

38. The mitigation measures will be incorporated into the contractor’s contract document. The EA will monitor, audit, and report to ADB on the implementation of the EMP for each subproject semiannually during construction and annually during operation5. Summary appraisal reports will be submitted to ADB subsequent to the EA’s approval. 39. The contractor/subcontractor shall prepare and submit the semi-annual progress reports in conformance with the EMP to the EAs and shall indicate when, how and at what cost the contractors plan to satisfy the requirements as per detailed design. The construction schedules shall detail the resources to be provided or utilized and any related sub contracting proposed. 40. Project implementation is expected to pose minor impacts of a temporary and reversible nature on peoples living in the direct/indirect area of influence of construction sites. The EA/IA and its contractors will be responsible for designing and implementing culturally acceptable and sensitive measures to manage and address significant community, health, safety, and labor issues, in consultation with locally affected peoples, and in accordance with national laws and ADB safeguard requirements. 41. Implementation of Resettlement Plan (RP) activities are the sole responsibility of the EA/IA (as applicable). Implementation of RP activities shall be closely monitored by the responsible party and performance shall be reported back to the ADB on a six monthly basis. RP activities will be carried out in line with applicable ADB policies. During this process, the EA/IA will ensure to improve or at least restore the quality of life of all displaced persons. 42. Where construction works require large numbers of workers, especially migratory (from areas other than the host community), the EA/IA will impart HIV/AIDS awareness campaigns to prevent and control its spread to others during the duration of construction works. Campaigns will include information disclosure of the risks and methods of prevention to women and girls in the local community. The project will not hire child workers for any project related activities and the EA/IAs will ensure that workers are not bonded or forced laborers.

VIII. GENDER AND SOCIAL DIMENSIONS

43. Tranche 1 is classified as "No Gender Elements", given the limited opportunities for gender mainstreaming. The loan agreement includes a standard assurance related to compliance with labor standards for contractors, including provisions to ensure equal pay for work of equal value, and the provision of awareness training on sexually transmitted infections (incl. HIV), forced/bonded labor and human trafficking. Dialogue and communication (both written and verbal) with stakeholders will be carried out in a gender-specific and culturally sensitive manner and in local languages, as required.

5 Where all subprojects will result in insignificant environmental impacts, financial intermediaries are not required to

adopt an environmental management system or environmental assessment.

23

IX. PERFORMANCE MONITORING, EVALUATION, REPORTING AND COMMUNICATION

A. Project Design and Monitoring Framework

DESIGN AND MONITORING FRAMEWORK FOR THE INVESTMENT PROGRAM

Design Summary Performance Targets/Indicators

Data Sources/Reporting

Mechanisms Assumptions

and Risks

Impact Increased energy sector contribution to low carbon growth in Bangladesh

Electrification rate increased from the 50% in 2012 to 68% by 2025 Overall system losses reduced from 15.2% in 2011 to 12% by 2025. Overall thermal generation efficiency improved from 31% in 2011 to 37% by 2025

BPDB annual reports BPDB annual reports BPDB annual reports

Assumptions Government’s continuous strong emphasis on energy sector development Improved regulatory environment Risk Inadequate gas supplies for electricity generation

Outcome Increased access to clean and reliable supply of electricity in Bangladesh

Electricity supply increased from

26.6 TWh in 2011 to 40.8 TWh by 2020 Reduced CO2 emissions by 2.8 million tCO2 per year by 2020 against the baseline of 67.2 million tCO2 in 2011

Annual reports of BPDB Annual reports of BPDB

Assumptions Demand for electricity continues to increases at the rate of 7.5% per annum.

Outputs Improved efficiency in electricity generation, transmission and distribution Increased renewable energy use Enhanced capacity of power sector agencies and farmer organizations

Energy efficiency of selected power plants increase from 32% in 2012 to 50% by 2020 Transmission losses reduced from 3.3% in 2012 to 2.5% by 2020 Distribution losses reduced from 13.1% in 2012 to 11.0% by 2020 Up to 450,000 new power connections by 2020 Solar power generation for irrigation increased by up to 1800 MWh per annum by 2020 50 of power sector personnel (males/females) trained on investment planning, operations planning, energy auditing and monitoring by 2016

Annual reports of BPDB, NWPGC Annual reports of PGCB Annual reports of DESCO and DPDC Annual reports of BPDB Annual reports of REB Project review reports of EAs

Assumptions Power companies are provided with adequate independence to make management decisions Adequate cost recovery allowed through electricity tariffs Farmer associations maintain their interest and support for solar irrigation

24




and Risks

Project management system in place

Members of 20 farmer organizations (males/females) are trained on operation and maintenance of solar irrigation pumps by 2016. 20 of power sector personnel (males/females) trained on financial performance, auditing and governance by 2016. Functioning four project management units by October 2012

Project review reports of EAs Project review reports of EAs Project review reports of EAs

Activities with Milestones Inputs

1. Energy Efficiency Improvement in Generation, Transmission and Distribution

1.1 Conversion and or construction selected power plants

to increase the capacity up to 275 MW by December 2020 (ADB financed)

1.2 Conversion and or construction selected power plants to increase the capacity up to 425 MW by December 2020 (cofinanced)

1.3 Construction of up to 200 km of transmission lines and associate facilities by 2018 (ADB financed)

1.4 Construction of up to 270 km of transmission lines and associate facilities by 2018 (cofinanced)

1.5 Installation of up to 250 km distribution lines and associated facilities by 2018 (ADB financed)

1.6 Installation of up to 250 km distribution lines and associated facilities by 2018 (cofinanced)

1.7 Construction or upgrade up to 39 33/11kV substations by 2018 (ADB financed)

2. Enhanced Renewable Energy Use 2.1 Installation of up to 200 solar irrigation units by 2018

. 3. Enhanced Capacity of Power Sector Agencies and

Farmer Organizations 3.1. Completion of detail capacity needs assessment by

December 2013. 3.2. Development of training modules and identification of

training institutes by June 2014 3.3. Completion of all training programs by December

2016

4. Project Management Unit 4.1. Advertisement of bids for Tranche 1 by December

2012 4.3. Consultants for implementation support and capacity

building recruited by June 2013

ADB (OCR) =$ 700 million Co-financing =$ 678 million Government of Bangladesh =$ 222 million

25




and Risks

4.4. Submission of PFR 2 by April 2013 4.5. Advertisement of bids for Tranche 2 by October 2013 4.6. Submission of PFR 3 by June 2015 4.7. Advertisement of Bids by October 2015

ADB = Asian Development Bank; OCR = Ordinary Capital Resources; BPDB = Bangladesh Power Development Board; PGCB = Power Grid Company of Bangladesh; GOB = Government of Bangladesh; PGCB = Power Grid Corporation of Bangladesh Limited; REB = Rural Electrification Board; DPDC = Dhaka Power Distribution Company Ltd; DESCO = Dhaka Electricity Supply Company Ltd; EA = Executing Agency; PFR = Periodic Financing Request

B. Monitoring 44. Project performance monitoring. EAs will undertake overall monitoring of the Project in terms of progress. ADB, the government and EAs will conduct semiannual reviews throughout the implementation of the Project. The review will monitor the (i) project output quality, (ii) implementation arrangements, (iii) implementation progress, and (iv) disbursements. Performance will be monitored based on indicators and targets stipulated in the design and monitoring framework. 45. Compliance monitoring. In addition to the standard assurances, compliance with the specific assurances will be monitored. They will be based on the Loan Agreement and Project Agreement as well as include Consulting Services, Procurement and Disbursement Guidelines. All consultants will be recruited according to ADB's Guidelines on the Use of Consultants (2010, as amended from time to time). The procurement of goods, related services, and works financed by the loan will follow procedures outlined in the ADB's Procurement Guidelines (2010 as amended from time to time). The loan proceeds will be disbursed in accordance with ADB's Loan Disbursement Handbook (2007, as amended from time to time).

C. Evaluation 46. ADB will field regular review missions every six months at the minimum to review status of contract awards, disbursements, physical progress, and implementation of the environmental management plan and resettlement plans. Within 6 months of physical completion of the Project, each EA will submit the project completion report (PCR) to ADB. Subsequently, ADB will field a mission to finalize the PCR.

Table 1: Evaluation Methodology

Evaluation Activity Purpose Methodology Who responsible and involved

Review Mission Review the progress of the project and provide guidance to facilitate implementation

Site visits and meetings with EA officials, contractors, consultants at least twice a year

ADB/ EAs

Mid Term Review Comprehensive review of the project

Not needed as review missions will be conducted regularly and the project implementation is only 3 years

26

Evaluation Activity Purpose Methodology Who responsible and involved

Project completion report

Evaluate the overall output of the project and its relevance and suitability

Site visit and meetings with EA officials, contractors, consultants

ADB/EAs

D. Reporting 47. EAs will provide ADB with (i) quarterly progress reports in a format consistent with ADB's project performance reporting system; (ii) consolidated annual reports including (a) progress achieved by output as measured through the indicator's performance targets, (b) key implementation issues and solutions; (c) updated procurement plan, and (d) updated implementation plan for next 12 months; and (iii) a project completion report within 6 months of physical completion of the Project. To ensure projects continue to be both viable and sustainable, project accounts and the AFSs, together with the associated auditor's report, should be adequately reviewed. E. Stakeholder Communication Strategy 48. The Stakeholder Communications Strategy is described in the following table. EAs will post all relevant information on their websites. The website will include at minimum information regarding the bidding process, bidders, contract awards, use of funds disbursed under the Project and physical progress.

Table 2: Stakeholder Communication Strategy

Project information to be communicated

Means of Communication

Responsibility Audience Frequency

Report and Recommendation of the President (RRP) with linked documents

ADB website ADB ADB, Government of Bangladesh, Development Partners, Civil Society, Individuals

Once

Project information while planning/ designing

Discussions and stakeholder consultations

EAs Project beneficiaries

Regular intervals during planning and design

Status of implementation during construction

Boards at site EA/ Contractors Project beneficiaries

All the time at construction sites

Project Performance Reports and Project Information Documents


Every quarter

Monthly progress reports

Website of EAs, EAs ADB, Government of Bangladesh, Development Partners, Civil Society, Individuals

Monthly

27

Project information to be communicated

Means of Communication

Responsibility Audience Frequency

Project completion report


Once

X. ANTICORRUPTION POLICY

49. ADB reserves the right to investigate, directly or through its agents, any violations of the Anticorruption Policy relating to the Project. All contracts financed by ADB shall include provisions specifying the right of ADB to audit and examine the records and accounts of the executing agency and all Project contractors, suppliers, consultants and other service providers. Individuals/entities on ADB’s anticorruption debarment list are ineligible to participate in ADB-financed activity and may not be awarded any contracts under the Project. To support these efforts, relevant provisions are included in the loan and project agreements and the bidding documents for the Project. 50. Bid evaluations and contract negotiations for the ADB-funded packages will be facilitated by ADB, supported by expert consultants. Once the evaluations are undertaken, the evaluation report will be submitted to a Government Steering Committee by the evaluation team. If needed, ADB will be present in the presentation as observer. The same will apply with the contract negotiation. ADB and its consultants will facilitate the meetings, assist in their administration, and have full access to all relevant documents. The consultants will be funded by ADB and will be responsible for their recruitment and remuneration. Their Terms of Reference will be prepared by ADB at a later stage. Evaluation and negotiation meetings will be held on a retreat basis to allow related administrative issues within the Government to still be addressed expediently.

XI. ACCOUNTABILITY MECHANISM 51. People who are, or may in the future be, adversely affected by the project may address complaints to ADB, or request the review of ADB's compliance under the Accountability Mechanism.

XII. RECORD OF FAM CHANGES To be inserted as and when any changes are necessary and agreed by both sides.

Appendix 1

28

Appendix-1

PROJECT IMPLEMENTATION SUPPORT AND CAPACITY BUILDING

1. The project implementation and capacity building component supports three aspects of the proposed investment program. First, it will provide implementation support consultants to supervise the implementation of the Tranche 1 projects. This support is required only for the power plant conversion, hence for Bangladesh Power Generation Company (BPDB) and North-west Power Generation Company Limited (NWPGCL). Capacity assessments showed that Power Grid Company of Bangladesh (PGCB) has adequate capacity for implementing transmission component in Tranche 1. Second, it will provide consultant support for preparation of Tranche 2 and Tranche 3. Third, it will provide a variety of training programs aiming for better management of the power sector. Annex 1 provides the estimated costs of the capacity building component A. Implementation Support for Tranche 1 2. Tranche 1 of the multitranche financing facility (MFF) on Power System Expansion and Efficiency Improvement Investment Program, has the following power plant upgrades: (i) BPDB power plants (Sylhet, Shajibazar and Baghabari), and (ii) NWPGCL power plant (Khulna). The brief scope of work and summary terms of reference (TOR) for the implementation support consultant for each component, are as follows. 3. Scope of services for implementation consultant for power plant upgrades: The consultant will report to the client implementing agency (BPDB or NWPGCL), and assist the client by (i) assisting the client’s evaluation committee for the analysis and interpretation of the bids received, (ii) assisting the client in preparation of contract documents and reviewing the draft contract, (iii) conducting supervision of the site work and inspection of equipment on behalf of the client, (iv) review designs and drawings prepared by the contractor(s), (v) reviewing progress and special technical reports such as type test and factory test reports, (vi) witnessing commissioning tests and performance tests, (vii) ensuring all defects are attended to and supervision of rectification of defects, and (viii) preparation of a completion report. 4. Qualifications and TOR for the Implementation Consultant: The consultant shall have a higher degree in engineering together experience in providing similar consultancy services for the implementation of retrofits to open cycle power plants, or in the implementation of combined cycle power plants. The TOR will include but will not be limited to the following:

(i) Upon decision by the client, review the draft contract for compliance with the Asian Development Bank (ADB) guidelines, the conditions in the successful bid and the client’s special considerations.

(ii) Ensure that the pre-requisites for the commencement of work on site are completed, including environmental and other clearances required.

(iii) Review the conceptual design for the power plant and all auxiliary systems and for the grid interconnection, and review the ensuing detailed engineering specifications and designs.

(iv) Supervise the construction of the power plant extensions by way of frequent site visits, regular meetings with the contractor and client, to ensure the equipment and workmanship are to the accepted standards and quality, and to enable the client to monitor project implementation schedule.

(v) Review contractor’s progress reports, prepare summary monthly progress reports, and reports on deviations and defects.

(vi) Participate in all the key meetings on the progress of site work and planned work.

29

(vii) Review all the relevant factory test reports and commissioning reports, and bring any issues to the attention of the client through regular reports or special reports.

(viii) Ensure the commissioning tests conduced by the client comply with the industry best practices and the relevant standards, such that the guaranteed capacity, heat rate and other key parameters are demonstrated by the contractors during commissioning, performance and reliability tests, as appropriate.

(ix) Review all commissioning test reports, and bring any shortcoming to the client’s notice.

(x) Prepare reports on defects and supervise the rectification of defects. (xi) Endorse payments of bills submitted by the contractor, on the basis of the

contract document, and the progress of work. and (xii) Any other activity related to the implementation support as requested by the

executing agency. 5. The consultants’ person-month effort will be as follows: BPDB projects (Shajibazar and Baghabari) 25 person-months of international consultants, in total for both power plants. For the NWPGCL project (Khulna), there will be 15 person-months of international consultants’ effort. B. Due Diligence for Tranche 2 and Tranche 3

1. Preparation of Tranche 2

6. The Power Division of Ministry of Power Energy and Mineral Resources (MOPEMR) is responsible for preparation of the Periodic Financing Request (PFR) 2 and PFR 3. Resource required for preparation of the PFRs for the two tranches are included in the Tranche 1 budget. The proceeds will be applied to recruit consultants to conduct due diligence on the components of the Project proposed by the Government of Bangladesh (the government) for inclusion in the PFR. The consulting team will comprise the following international consultants: (i) Power System Development Specialist, (ii) Power Economist, (iii) Financial Specialist, (iv) Environmental Specialist, (v) Social Safeguard/Development Specialist, (vi) Solar Irrigation Specialist, and their national counterparts. A total of 46 person-months of consultancy services will be engaged to prepare the project. The consultants will be recruited directly or through a firm. The outline TOR for the consultants is described in Table 1. The consultants are expected to conduct due diligence on the following components in Tranche 2: Component 1: Transmission development in the south west; Component 2: Transmission system strengthening and substation development; Component 3: Distribution development in Dhaka; and Component 4: Irrigation using off-grid solar PV.

Table 1: Summary of Consulting Services Requirement for Tranche 2 International National

Name of Positions Person-months Name of Positions

Person-months

Power System Engineer/ Team leader

5 Power System Engineer 5

Energy Economist 3 Energy Economist 4 Financial Specialist 3 Financial Specialist 4 Environment Specialist 3 Environment Specialist 4 Social Safeguard / development Specialist

3 Social Safeguard / development Specialist

4

Energy Efficiency Modeling Specialist

3

Solar Power Specialist 2 Solar Power Specialist 3 Total 19 27

7. Power System Development Specialist and Team Leader (international, 5 person-months, national, 5 person months). The international power system development specialist

30

and team leader, with the assistance from national consultant, will be responsible for the overall quality and implementation of the technical assistance assignment, providing the required support for the executing agency and reporting to ADB project officer. With national power system development specialist as well as other consultant team members, the international power system development specialist and team leader will provide technical and management expertise in the application of energy efficiency practices and technologies in the development of priority investment projects. The tasks of the power system development specialist and team leader will include, but not be limited to the following:

(i) As team leader, coordinate with other team members to develop a detailed work plan and implementation schedule, work with the executing agency to oversee the consulting team, and compile, edit, and ensure the quality of reports to be prepared under the TA;

(ii) Identify, analyze and evaluate various potential investment project components according to technical perspective and operating conditions;

(iii) Prepare the scope, capital and operating cost estimates, implementation schedule, contracting, and implementation arrangements, and formulate suitable procurement packages;

(iv) Based on the above reviews and analyses and in coordination with the other members of the team, recommend necessary policy, investment, and capacity building institutional needs to be addressed under the ensuing project;

(v) Prepare final project report consisting of information needed for ADB to bring the investment proposal for its Board consideration; and

(vi) Assist in preparation of relevant sections of the ADB’s Report and Recommendation of the President (RRP) for the ensuing project.

8. Energy (Power) Economist (international, 3 person-months, national, 4 person-months). In accordance with ADB’s Guidelines for the Economic Analysis of Projects, the international energy economist, with assistance of the national energy (power) economist, will undertake economic analysis of the proposed investment components and assess their economic viability. Working in collaboration with the financial analysts to ensure the use of consistent approach and assumptions across the financial and economic analyses, the energy (power) economists will carry out, but not be limited to the following tasks:

(i) Provide the economic rationale for the project including an analysis of alternatives;

(ii) Update the demand analysis for power in Bangladesh; (iii) Estimate the economic capital and operating costs, and carry out least-cost,

analysis of the proposed project components; (iv) Assess economic feasibility of various investment components, for efficient

development of power supply systems; (v) In collaboration with the Solar Power Specialist, undertake an assessment on

the feasibility of financing solar irrigation pumps using avoided energy subsidies for water pumping;

(vi) In consultation with the Social Development Specialist, incorporate poverty reduction impacts in accordance with ADB’s Handbook on Integrating Poverty Impact Assessment in the Economic Analysis of Projects;

(vii) Undertake benefit-cost analysis to assess the overall viability of the proposed project in terms of economic internal rates of return;

(viii) Identify the risk factors of the project and undertake sensitivity analysis; and (ix) Evaluate the proposed project’s direct and indirect environmental impacts, and

carry out economic analysis of these impacts in terms of net present value and internal rates of return in accordance with ADB’s Handbook on Economic Evaluation of Environmental Impacts.

31

9. Financial Analyst (international, 3 person-months, national, 4 person-months). In accordance with ADB’s Guidelines for the Financial Analysis and Management of Projects (2005), the Financial Management Assessment Questionnaire (2005), and the Financial Due Diligence Methodology Note (2005), the International Financial Analyst will undertake financial analysis of the proposed investment components and assess the financial performance and the financial management capabilities of the executing/implementing agencies, with assistance of the national financial analyst. Working in collaboration with the Energy (power) Economists to ensure the use of consistent approach and assumptions across the financial and economic analyses, the financial analysts will carry out, but not be limited to, the following tasks:

(i) Prepare a preliminary project cost table for the proposed investment components;

(ii) Prepare a financing plan for the investment components, including proposed ADB lending, any prospective co-financing, and appropriate counterpart funds for local currency and expenditures;

(iii) Carry out in-depth financial analysis of the proposed investment components, including preparing cash flows forecasts that identify specific sources and projecting revenues for the proposed investment components that would ensure its financial viability;

(iv) Carry out a financial evaluation of the proposed investment components over the construction and operating periods by calculating the financial internal rate of return and comparing it with a weighted average cost of capital in accordance with the ADB Guidelines;

(v) Identify all risks to project revenues and costs, conduct relevant sensitivity analysis, and identify potential risk mitigation strategies and approaches;

(vi) Undertake a financial management assessment of the proposed executing/implementing agencies, including, funds flow and disbursement arrangements, a review of corporate planning and budgetary control, financial management accounting and reporting, internal control and audit systems, and data processing, to identify any financial issues that could affect project implementation and/or sustainable operations of project investments and suggest mitigation strategies;

(vii) Review the executing/implementing agencies’ financial statements to assess its historical financial performance, retail tariff levels, and capital structure and ensure that it can generate sufficient internal funds to ensure the sustainability of ongoing operations;

(viii) Prepare pro forma financial statements, including a balance sheet, income statement, and cash flow statement for each of the executing/implementing agencies for the next 10 years, and identify appropriate financial performance indicators;

(ix) Study the proposed Project’s financial impact on the executing/implementing agencies and options for sharing the financial burden, recommend measures for improving their financial performance, suggest appropriate financial covenants to monitor the Project’s financial performance, and recommend ways to improve their corporate governance in light of ADB’s policy on governance; and

(x) Based on the above recommend financial related governance improvement measures to ensure project funds are utilized for the intended purpose.

10. Environmental Specialist (international, 3 person-months, national, 4 person-months). In accordance ADB Safeguard Policy Statement (2009) and other relevant guideline documents for environmental assessment, the international environmental specialist, with assistance of the national environmental specialist will undertake, but not be limited to, the following tasks:

32

(i) Review of institutional capacity of the proposed executing and implementing agencies to prepare environmental impact assessment (EIA) reports for the future project components and the required EMP to determine mitigation measures in the design, construction, and maintenance phases of the future investment subprojects, their components and national regulatory requirements;

(ii) Prepare Rapid Environmental Assessment Checklist and determine environmental category for each project component;

(iii) Prepare project descriptions and a summary of environmental issues identified for each project component to support the determination of the project environmental categorization;

(iv) Prepare EIA or IEEs depending on the subproject categorization (environmental category A or B) assigned by ADB;

(v) Prepare EMP and Monitoring Plan for each project component and a combined EMP and monitoring plan for the entire project. The project component EMPs and the combined EMP shall include a cost estimate plan for implementation the proposed mitigation measures;

(vi) Undertake necessary consultations with the project stakeholders on relevant environmental issues and impacts; and

(vi) Assist the Energy Efficiency Policy Specialist in identification of potential financing through the Clean Development Mechanism (CDM) or sales of Verified Emissions Reduction Credits in non-CDM carbon markets.

11. Social Safeguard/Development Specialist (international 3 person months, national 4 person-months). In accordance with all relevant policies, in particular with the relevant laws and policies of Bangladesh and ADB Safeguard Policy Statement (2009) the tasks of the international social development specialist, with assistance of national social development specialist will include, but not be limited to, the following:

(i) Review the national legal policies on land acquisition and involuntary

resettlement to verify adequacy and consistency with ADB's Involuntary Resettlement Policy and Indigenous People Policy and if gaps are found, recommend measures to bridge the gap. Analyze and confirm the following aspects (at national and local levels) that will apply to land acquisition and resettlement in the project area: (a) laws and regulations, including local practices; (b) budgetary processes (tentative agreement from concerned authorities on provision of outlays necessary for land acquisition and resettlement); and (c) relevant administrative arrangement and requirements;

(ii) If the project components involve resettlement, prepare a resettlement plan with full stakeholder participation including participation of the executing and implementing agencies. The resettlement plan should be implementable in the Bangladeshi context and still meet ADB policy requirements;

(iii) Determine the replacement costs of all categories of losses; and prepare an indicative budget for land acquisition and resettlement costs with specific sourcing and approval process;

(iv) Assess the need for an Indigenous Peoples Development Plan (IPDP); and carry out any further indigenous people-targeted surveys as necessary;

(v) Prepare a socioeconomic analysis, including a poverty profile and characteristics and determinants of primary project beneficiaries in the target areas of the proposed investment components based on a review of existing studies, data, and development plans. The analysis will include a review of poverty by gender and ethnic minority and propose specific actions to benefit vulnerable indigenous peoples and minorities;

(vi) Analyze access to electricity, affordability, consumption levels, and consumer satisfaction across socioeconomic groups in target project areas, assess the determinants and elasticity of the demand for power by different socioeconomic groups, categorize areas where electrification would have the largest growth

33

and poverty reduction impacts given the underlying potential of those areas; and assess the implications on employment generation for poor;

(vii) Define groups that would benefit from the proposed investment components, prepare an estimate of the distribution of the project’s financial and economic benefits, and summarize the likely net benefits for each group in accordance with ADB’s Handbook for Integrating Poverty Impact in Economic Analysis for Projects. Given the available dataset, assess the direct, indirect, and distributional impacts of the project under different growth scenarios with and without the project, summarize the distributional impacts in a matrix, calculate the poverty impact ratio, and carry out appropriate risk and sensitivity analyses with respect to the poverty impact ratio;

(viii) Assess and recommend ways to improve gender equity; (ix) Review land acquisition and relocation plans of project components that involve

resettlement, and assess their conformity with ADB Guidelines for Involuntary Resettlement, including (a) time-bound arrangements, public consultation, public disclosure, relocation, compensation for affected inhabitants, and (b) costs related to relocation, compensation for land acquisition, and right-of-way;

(x) Incorporate all mitigation measures into the cost estimates of the proposed components;

(xi) Prepare a Gender Action Plan (GAP), if needed; and (xii) Prepare the terms of reference for the non government organization/consultant

who will be in charge of the implementation of the resettlement plans, IPDP and GAP.

12. Solar Power Specialist (international, 2 person-month, national, 2 person months). Solar power specialist should have a thorough knowledge on application of solar power for irrigation water pumping. He/she should assess the technical, financial and economic feasibility of use of solar power for irrigation water pumping in Bangladesh. The main tasks of the solar power specialist include, but not limited to, the following:

(i) Assess the national level power and diesel subsidies at present and forecast the subsidies for next 20 years, in collaboration with the PPTA Economist.

(ii) Examine the savings of government subsidy on irrigation water pumps and feasibility of using such savings to finance solar irrigation water pumps, taking into consideration of cost of solar powered irrigation pumps, in collaboration with the PPTA Economist and Financial Specialist.

(ii) Review the information on pilot solar power irrigation schemes to examine the technical, financial, economic feasibility and success or failures of the pilot schemes.

(iii) Identify the reasons, if the pilot schemes have failed, for such failures and recommend remedial measures.

(iv) Identify appropriate solar technologies for irrigation water pumping in Bangladesh giving consideration to local conditions, capacity to undertake repair and maintenance and any other relevant considerations.

(v) Develop a strategy for mainstreaming solar powered irrigation pumps in Bangladesh. and

(vi) As a part of the implementation of the solar irrigation strategy, prepare an extended pilot project as a component of the Power Sector Efficiency Improvement Project.

2. Preparation of Tranche 3

13. Similar to the tranche 2, the proceeds will be applied to recruit consultants to conduct due diligence on the project components proposed for inclusion in the PFR2. The consulting team will comprise the following international consultants: (i) Power System Development Specialist (team leader), (ii) Energy Economist, (iii) Financial Specialist, (iv) Environmental

34

Specialist, (v) Social Safeguard/Development Specialist, and their national counterparts. A total of 17 international consultant man months and 28 national consultant man months will be made available for preparation of the Tranche 3. The TORs given above will be applicable for the corresponding expertise. Table 2 provides the consultant requirements.

Table 2 : Summary of Consulting Services Requirement for Tranche 3 International National

Name of Positions Person-months Name of Positions

Person-months

Power System Engineer/ Team leader

5 Power System Engineer 5

Energy Economist 3 Energy Economist 4 Financial Specialist 3 Financial Specialist 4 Environment Specialist 3 Environment Specialist 4 Social Safeguard / development Specialist

3 Social Safeguard / development Specialist

4

Energy Efficiency Modeling Specialist

3

Total 17 28

C. Training and Capacity Building

1. Financial Management, Auditing and Governance for Executing

Agencies 14. Executing agencies under this MFF are the BPDB, NWPGCL, PGCB, Dhaka Power Distribution Company (DPDC) Dhaka Electricity Supply Company (DESCO), and Rural Electrification Board (REB). Despite improvements in financial management, auditing and governance of these agencies in recent years, several limitations and weaknesses still exist and that practices need to be further improved to be at par with international standards. 15. The capacity building activities could be differentiated for each executing agency. BPDB has an established system for financial management, internal auditing and corporate governance while NWPGCL on the other hand, being a newly created company, still has to develop its chart of accounts, set up processes for financial projections and prepare business plans as well as strengthen its internal auditing system. The capacity building process needs to: (i) assess the present level of skill of the employees of the relevant departments of each EA and prepare a gap analysis, (ii) design a training course syllabus in consultation with relevant departments, (iii) prepare course materials, (iv) carry out the training program, and (v) evaluate the effectiveness of the capacity building program. 16. Common weaknesses of these executing agencies relate to weak and/or lack of management information systems, financial projections and business plans. A financial management capacity building program needs to be introduced to strengthen executing agencies in the preparation of financial projections and business plans which are crucial to their decision-making process and in identifying new investments. Training activities will focus on techniques, tools and analysis related to financial planning, control and decision making. 17. Another area that needs to be further strengthened is the executing agencies’ internal audit system. Public utilities are capital intensive and they are highly dependent on government borrowings. In order to be compliant with the requirements of various donors and lending institutions, executing agencies need to further improve its internal audit system. The internal audit training program would aim to strengthen the executing agencies capacity to evaluate and improve effectiveness of risk management, control and governance processes. Training activities will focus on: (i) techniques and standards in monitoring and

35

reporting, (ii) on methodologies and approaches in assessing and analyzing organizational risk and controls, and (iii) compliance with policies, procedures and laws. 18. Most executing agencies, being registered under the Company Act and recipient to public sector borrowings are expected to be transparent and observant to the principles of good corporate governance. The capacity building program would ensure that executing agencies processes adhere to the principles that promote integrity and fairness in business management, transparency, disclosures and decision-making, compliance with legal and regulatory requirements, accountability and responsibility and commitment to ethical business conduct. While the governance theme is broad, the training activities on good governance could focus on key utility management practices: (i) institutional and regulatory structures; (ii) tender/bid processes and evaluation criteria; (iii) power purchase agreement and associated tariff structures; and (iv) financing. 19. BPDB carries out its training activities under the Training Directorate while for PGCB under the Human Resources Department. The capacity building activities will take into consideration the training of trainers (TOT) to ensure that skill development can continue even after the MFF supported capacity building program.

20. Power Division, MPEMR will be provided a 6 person-month international consultant to support the implementation of the training component of the capacity building. The outlined TOR for capacity building implementation support consultant is given below:

21. International consultant should have a an advanced degree in power system engineering/ planning together with more than 5 years of international experience in designing and conducting power sector capacity building and training activities. His/her tasks include:

a) Undertake a detail capacity building needs assessment of the EAs of the

investment program; b) Identify in-house as well as overseas training opportunities to build the capacity

in the power sector; c) Design the in-house as well as overseas training program modules; d) In case of in house training develop the TOR and help recruit consultants to

undertake the training; e) Help the Power Division, MOPEMR to get nominations and select suitable

candidates for different types of training; f) Liaise with the overseas training institute to organize training and provide

logistic support for local and overseas training; anf g) Undertake any other activity related to capacity building as assigned by the

Power Division, MOPEMR.

2. Capacity Building for BPDB in Generation Planning, Investment Appraisal, and Power Plant Management/Operation

22. BPDB is performing the functions of (i) the single buyer, and (ii) owner and operator for about 46% of generation. The single buyer is required to develop the long-term generation plan for the country. Presently, generation investment decisions are on the basis of long-term master plans prepared at discrete intervals. The most recent master plan was supported by the Japan International Cooperation Agency (JICA).8 BPDB requires to conduct more detailed and regular studies, update previous master plans and studies, to meet the growing demand for electricity, at the highest possible reliability. Constraints faced by BPDB as the single buyer are the investment limitations and delays, causing limitations of installed capacity. The capacity building initiatives in BPDB’s generation planning functions

8 The Study for Masterplan on Coal Power Development in the Peoples Republic of Bangladesh, Power System

Masterplan 2010, Final Report, Ministry of Power, Energy and Mineral Resources, February 2011

36

are targeted to achieve the following objectives: (i) address the key requirements to establish a regular activity for generation expansion planning, and (ii) provide the tools and equipment for operations training on combined cycle power plants. These objectives cover capacity building in both investment planning and in power plant operations. 23. The summary scope of work for generation expansion planning is as follows: (i) review the status of generation expansion and investment planning activities at BPDB, in comparison with international best practices, (ii) propose the improvement to the approach, staff capacity and modeling inputs required to establish a regular planning function and an associated report, (iii) establish a mechanism for monitoring of generation project implementation, and to address project scheduling and contingency planning, (iv) use of natural gas most efficiently by building power plants most appropriate to meet the load profile of Bangladesh, and (v) providing power plant simulators to train BPDB power plant staff for efficient control and operations of combined cycle power plants. 24. The power sector development proposals are reviewed and approved by the Planning Commission. Appraising power sector projects has become complicated with power projects having serious environmental impacts, requiring them to be increasingly energy efficiency oriented. Training power sector professionals on state of the art power sector investment planning and appraisal would not make much difference if planning commission officials who evaluate project proposals are not trained. Therefore, a few officials from the planning division would also be included in the proposed training programs.

3. Enhancing the Network Planning and Economic Dispatch Functions of PGCB

25. PGCB has successfully implemented industry standard network planning software for the analysis of the transmission grid at 132 kV and above. Staff capability has been established to conduct modeling of the transmission network to conduct load flow, short-circuit and stability analyses. The planning staff has been trained in conducting the required studies and to examine alternatives for network expansion, to improve reliability of the transmission network. Operational limitations including gas resource limitations, supply limitations, and shortages of generating capacity owing to plant breakdowns, require new initiatives in modeling the power system for operations planning. 26. The capacity building requirements of the transmission planning unit of PGCB would be to further improve the analytical functions in the following areas: (i) conduct reliability analyses of the existing transmission network and evaluate improvements required, (ii) conduct optimal load flow studies and determine the most important improvements that would improve the loss performance of the network, reliability improvements and optimal use of fuel, especially gas, (iii) extend the analysis to the sub-transmission level (33 kV), to prepare an inclusive optimal plan for transmission development, considering locations for new substations, and (iv) establish an effective tool for security constrained operations planning, to optimize the operation of the generating system to minimize gas use to meet the system demand, subject to gas and power transmission constraints. 27. The summary scope of work will be the following: (i) review the status of transmission expansion planning at PGCB, current staff strengths and level of training, software used and the level of modeling, in comparison with the industry best practices, (ii) assess the requirements of the planning team in terms of software, modeling and training requirements, to conduct reliability assessment and optimization of losses, (iii) assist in the implementation of the models to conduct one cycle of transmission planning activity, (iv) prepare a comprehensive transmission planning document, listing the inputs, assumptions, planning indices and recommended plan, along with an investment plan and financial/economic evaluation, and (v) establish a system where the plan is updated once in two years and published after the necessary management and regulatory approval for the plan.

37

28. The summary scope of work for capacity building in power system operations planning is as follows: (i) review the present practice of dispatch modeling of the power system, to meet the forecast customer demand at the declared reliability and efficient use of fuel, comparing with international best practices, (ii) establish the requirements for a security-constrained operations planning model, to enable the load dispatch centre staff to conduct system security analysis and to develop an operational and dispatch plan for year ahead, month ahead, day ahead and the hour ahead, (iii) incorporate the characteristics and limitations of the gas and other fuel supply networks, to enable the development of a hybrid (gas and electricity) network optimization tool for planning and decision-making in the dispatch of generating plants and configuring the transmission network, (iv) preparation of specifications and assistance to PGCB to procure the required software models and training to implement the model, and (v) develop an operating manual on how the model is to be used for decision-making in the context of the capacity constrained generating system in the medium term, and a more flexible generating system envisaged once the capacity shortages are adequately addressed. The scope also includes the cost of procuring of the software model, and associated training for implementation.

4. Capacity Building in DPDC and DESCO for Distribution Planning, Energy Management, Energy Auditing and Loss Monitoring

29. Investment planning and operations planning of the distribution networks of DPDC and DESCO are conducted using manual techniques, mostly on the basis of line currents measured, and reports of overloading and line tripping. Accordingly, the distribution network topology has not been mapped into a database, to enable systematic network planning, data acquisition, maintenance planning and operations. Line and substation capacities are identified in a manual system of data collection. All 33 kV substations are metered, but there is no remote transfer of meter readings to a database to identify overload situations or load profiles, and to conduct a meaningful energy balance on a routine basis. A few recent initiatives have been observed: (i) DPDC has already initiated action to recruit a consultant to establish a GIS-based database of the company distribution network for one district in Dhaka; (ii) DESCO has already initiated action to recruit a consultant to write a TOR for a GIS-based database of the company distribution network for one district in Dhaka; (iii) A pilot project is in progress to install pre-paid meters to customers in DPDC areas and (iv) In DESCO areas, remote reading facilities through GSM are being installed in 27 substations 33 kV/11kV, as of June 2012 30. The planning and monitoring function requires to be upgraded to reflect state of the art, which would help optimize the investments, to provide an improved and reliable service, and improved network efficiency. The key to improve planning, management and auditing of energy flows in a distribution network is a comprehensive GIS. Additionally, the benefits of a GIS-based facility for network planning are many. Through its GIS database on each element of the network, a utility may extend the analysis to conduct routine load flow studies and identification of weak areas or segments of the network, by way of service voltage and energy losses. The network planning model would be used to develop a distribution investment plan, enumerating the outputs of the plan. 31. The summary scope of work for enhancing the planning skills of DPDC and DESCO will be the following: (i) review the on-going work if any to develop a GIS-based data storage system and propose improvements, (ii) develop the requirements including but not limited to, network planning tools, load flow and reliability analyses, loss analysis, (iii) procure consulting support for DPDC and DESCO to implement the model with the necessary software, (iv) procure software licenses, install and conduct the required training (v) collect data about the existing distribution network and develop the database, (vi) conduct basic system studies such as load flow analysis for 33 kV and 11 kV networks, and assessment of losses, for each year over a 10-year planning window, (vii) identify new network assets

38

required such as lines, substations and switchgear, to ensure that the capacity, service voltage, reliability and losses are within accepted industry norms, (viii) develop a cost-benefit analysis of the network improvements proposed over a 10-year planning window, and justify the investment proposals, (ix) develop a 10-year distribution development plan, documenting the network status and improvements/investments recommended, and their economic/financial justification, and (x) prepare a report to summarize the status, studies, results and recommendations, suitable for management and regulatory approval, and subsequent updates and publication by DPDC and DESCO at least once in two years. 32. The summary scope of work for enhancing energy management, energy auditing and loss monitoring of DPDC and DESCO will be the following: (i) review the present approach to metering and recording of energy flows in all segments of the distribution network, (ii) recommend and implement improvements to metering, information collection and analysis software and hardware, (ii) establish a pilot energy management system for a district within the DPDC service area, to comprehensively monitor energy flows from the point of purchase from BPDB to the point of delivery to customer, (iv) compare loss performance of the pilot network in relation to the estimated losses in planning studies established above, and address any discrepancies, (v) conduct an energy audit for the selected district to address any discrepancies between the measured energy flows and those provided by the planning models, and leakages identified through metering, (vi) prepare a monthly energy management report for the selected district, in a suitable format for replication in other districts, and eventually, for the entire DPDC and DECSO service areas, and (vii) prepare the mechanism for information flow, analysis and publication of the report, to enable its publication as a monthly energy management report.

39

Cost estimates for Capacity Building Component

Description Person months

US$ International National

1 Tranche preparation 1.1 Due diligence for Tranche 2

a 17 24 750,000

1.2 Due diligence for Tranche 3 17 24 750,000 2 Implementation Support for Tranche 1

2.1 BPDB Projects: Baghabari, Shajibazar, and Sylhet 68 0

2,000,000

2.2 NWPGCL Project: Khulna 48 0

1,500,000 3 Capacity building

3.1 Implementation consultant for capacity building 5 5 200,000 3.1 Training on financial management, auditing and

governance 700,000

3,2 Capacity building for BPDB in generation planning, investment appraisal, and power plant management/operation

650,000

3.3 Capacity building for PGCB on power system planning, security constrained dispatch modeling and operations

650,000

3.4 Capacity building for DPDC for distribution planning, energy management, energy auditing and loss monitoring

650,000

3.5 Capacity building for DESCO for distribution planning, energy management, energy auditing and loss monitoring

650,000

Sub Total for Capacity Building 3,500,000 Grand Total 8,500,000

aTranche 2 and Tranche 3 preparation will be financed by ADB loan while the rest of the capacity building will be

supported by a $7 million grant from European Investment Bank

Bangladesh: Power System Expansion and Efficiency ... · Power System Expansion and Efficiency...

Documents

Transcript of Bangladesh: Power System Expansion and Efficiency ... · Power System Expansion and Efficiency...