Bangladesh’s citizens still talk about the big blackout of 2014, when 150 million people lost power for about 10 hours because of a glitch at a substation distributing power from India. It may have been an extraordinary event for an entire country to experience together, but people in Bangladesh endure smaller-scale brownouts and blackouts frequently.
Aside from the inconvenience, these power shortages present significant challenges to the job-creating manufacturing sector, hamper economic growth, and interfere with efforts to raise people out of poverty.
Worse than that, nearly 40 percent of Bangladesh’s 160 million people live without access to any electricity at all, which prevents them from meeting basic needs.
To expand electricity access throughout Bangladesh, IFC has provided $165 million to a company incorporated by Sembcorp Utilities, a wholly owned subsidiary of Singapore-based Sembcorp Industries. The financing is provided through a combination of a $73 million loan from IFC’s own account and an additional $92 million mobilized from partners Clifford Capital and the Japan International Cooperation Agency (JICA).
The support will allow Sembcorp to significantly expand power generation capacity. Along with a local sponsor, it will set up Sirajganj Unit 4, a 414-megawatt power plant that will lower the cost of energy generation and help Bangladesh meet its growing demand for power. The electricity will reach about 5.8 million domestic consumers by 2019. As the reliability of energy supply improves, it is also expected to attract other investments to the country.
Recharging a Nation
Bangladesh has among the lowest per capita electricity consumption in the region—only slightly above Myanmar. As recently as 2014, demand shortages occurred 30 percent of the time. The Sirajganj Unit 4 project is expected to increase power generation by approximately 3,000 gigawatts hour. Moreover, because the new plant is expected to be one of the most efficient in the country, it will help modernize the Bangladeshi power sector and optimize the use of natural gas—which produces less than half the amount of carbon emitted from coal when burned.
Although Sirajganj Unit 4 will offer greater access to reliable energy, this is only one of the significant benefits the initiative brings to Bangladesh. Because it is among the few Independent Power Projects (IPPs) in Bangladesh to be implemented by international developers in recent years, it helps demonstrate the sustainability and feasibility of public and private sector partnerships in the power sector.
Job creation is another important byproduct of Sembcorp’s new plant. Planners estimate that it is creating around 500 temporary jobs during construction and 60 jobs during operations. Even more employment will follow through downstream economic activities linked to the plant.
Fulfilling National Infrastructure Needs
Development of the new power plant is in line with the Government of Bangladesh’s Power System Master Plan 2010, which recommends setting up low-cost, large power generating capacity in the country.
IFC’s support for Sirajganj Unit 4 fits in well with our broader strategy by bringing power to domestic consumers while improving the quality and availability of power supply—a major investment climate issue for the country. The proposed investment is also aligned with IFC’s regional strategy in South Asia, which focuses on infrastructure solutions, logistics and connectivity, and financial inclusion.
The total project cost is estimated at around $412 million. In addition to IFC’s financing, the United Kingdom’s development finance institution CDC Group, the Singapore-based infrastructure firm Clifford Capital, and JICA are contributing total of $339 million in debt. The Multilateral Investment Guarantee Agency (MIGA), also a member of the World Bank Group, is providing a risk guarantee to Sembcorp.
Read more about IFC’s work in infrastructure at www.ifc.org/infrastructure
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Published in May 2018.