Bangladesh Power Sector Development Policy Credit

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The Power Sector Development Policy Credit Project for Governments of Bangladesh (GOB) supported by the credit cover the areas of: (i) financial stability and restructuring, (ii) private investment in generation; (iii) regulatory reform and institutional strengthening, (iv) corporate governance of state-owned enterprises in the sector, and (v) transparent and accountable commercialization of energy services; and (vi) rural electrification strategy and institutional development. The development objective is the enhancement of governance and accountability, and of financial stability, in the sector leading to better and more sustainable service provision. The benefits of the project are follows: (i) enhanced quality, transparency, and efficiency of power generation contracting processes leading to increased private investment on competitive terms; (ii) enhanced governance of corporative service providers, including through improved metering, billing and collection systems; (iii) accelerated development of regulatory capacity by strengthening the operations of the Bangladesh Energy Regulatory Commission; and (iv) reduction of commercial losses. The risks under this project are: (i) change in Government leading to change in policy; (ii) macro-fiscal deterioration that complicates energy pricing adjustments; (iii) inadequate investor interest to meet Bangladesh's power sector needs on affordable terms; (iv) labor strife that blocks governance reform, especially in the context of the corporatization process; and (v) service delivery problems, linked to both inadequate generation and natural gas shortages, that damage the credibility and legitimacy of the GOB reform program.