PROSPECT OF INVESTMENT IN BANGLADESH POWER SECTORby Fatima Begum ID: 0330011 An Internship Report Presented in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business Administration INDEPENDENT UNIVERSITY, BANGLADESH SEPTEMBER, 2007 PROSPECT OF INVESTMENT IN BANGLADESH POWER SECTOR PROSPECT OF INVESTMENT IN BANGLADESH POWER SECTOR by Fatima Begum ID: 0330011 has been approved September, 2007 _________________________________ Dr. Osman Gani Assistant Professor School of Business Independent University, Bangladesh This is the first time I have done this kind of study in a complete form and I have tried my level best to complete the study in proper way. It is a great pleasure for me to submit the report on “Prospect of investment in Bangladesh Power Sector”. Yours’ most obediently Fatima Begum ID: 0330011 . 2007 Dr. Osman Gani Assistant Professor School of Business Independent University.SEPTEMBER 09. Your kind advice will encourage me to do richer research in future. This report will help the organization to find out the prospect of investment in Bangladesh power sector. I hope you will asses my report considering the limitations of the study. It is true that it could have been done in better way if there would not be the limitations due to confidentiality and sensitive issue. I am submitting this report as the part of my internship (BBA-499A) at IDLC Finance Limited. Bangladesh Dear Sir. Assistant Director (Finance). for providing me a smooth and very gracious learning period in the organization by teaching me. I acknowledge the encouragement and assistance given by a number of people and institution. I would like to thank some persons who had given me appointment from their precious time to collect related data of my report and also helped me to understand many related matters and gave me their precious time to me more then once. Thus I want to mention the name of Bilkis Jahan. for allowing me to do the internship in the organization. . Executive Director. Bangladesh Power Development Board (BPDB). Consultant (E- Governance). they are Mahbub Murshed. Independent University. I also want to show my up most respect to Mahmudul Bari. KNM Tariqur Rashid. I am grateful to my honorable supervisor Dr Osman Gani. Md. School of Business. I would like thank the omnipotent Allah for giving the chance to complete my internship and preparing the internship report. IDLC Securities Limited. Md. Bangladesh (IUB) for providing me much needed assistance and diluting time constraints and also to encouraging me to prepare the internship report on “Prospect of investment in Bangladesh Power Sector”. Research Associate. Merchant Banking Division. Dhaka Electric Supply Company Ltd. Dhaka Electric Supply Company Ltd. Merchant Banking Division. the head of HR. Faridul Haq. Md. In the preparation and finish this internship report. I would like to express my gratitude to my. (DESCO). literally by hand on practice. Tanvir Hasan Zoha. Power Grid Company of Bangladesh Ltd. Assistant General Manager.Acknowledgement At the very beginning. Sheraj. Moumita Manzoor. Assistant Manager. Summut Power. Ataur Rahman Patwary. Deputy Maneger (Finance). Finally. I am most grateful to IDLC Financial Limited to give me the opportunity to complete my internship in their organization. Deputy General Manager. (PGCB). organization supervisor Hosam Md. Company Secretary. for providing me the opportunity and much needed feedback to furnish my qualities in the real job world. Asian Development Bank. (DESCO). Nurul Huda. ................................. 17 8.......................Table of Content List of Tables List of Figures Executive Summery I I II 1.................................................................................8 7............................................ 15 7.............................................................................................04 EA & CEI: ......................................................................................................................................................................................................................................................................................................................................02 Analysis Instrument:.. 14 7.....................................................12 Rural Electrification Board (REB) ......................................11 West Zone Power Distribution Company (WZPDC)......................08 Power Grid Company of Bangladesh (PGCB) ..................0 Overview: ...........................................................04 Data Analysis: .............................................................................................................................................01 Government’s Vision:....................................................................03 Power Cell .......................................................07 Electricity Generation Company Bangladesh (EGCB) .............................. 01 Power Division: ......... 17 ................................................................................... 15 7................................................................ 16 8........................0 Purpose of the Study:.........................0 Government’s Vision and Policy for Power Sector:...........02 Energy Regulatory Commission (ECR):..................................................................................................................................5 5...................................................................0 Current Power Sector Structure: .............06 Ashuganj Power Company (APS) ................................... 13 7......... 14 7................................ 15 7.............. 16 7..0 Introduction: ...................... 4 4.............. 10 7.........................................0 Methodology: ...03 Data Collection: ..................5 6.............................1 2.............................13 Palli Bidyut Samity (PBS): ............................01 Analysis Design: ..................................................2 3................................. 16 7.................................... 3 3.................................... 15 7..........................10 Dhaka Electric Supply Company (DESCO) ............................................. 3 3.... 10 7.....................................................3 3......... 14 7.........0 Limitations:...............................................02 Policy Objective:... 12 7.........................0 Background of Power Sector:.............................................................................................................................................................................. 3 3.................. 16 8.09 Dhaka Electric Supply Authority (DESA) ..........05 Bangladesh Power Development Board (BPDB) ................................... .... 33 13.....................................................06 Load Shedding and System Loss:.......02 Power Generation Mix: ... 38 14...................................... 21 9...............................................01 Power Generation: .. 22 9.....0 Investment Analysis:................ 43 ..................................03 Private Investment in Power Sector: ....................................................................................0 Managing Finance:............................................................0 Power Market Structure:.... 19 9........ 42 16.................... 38 15.....................9................................................ 36 14................................................... 37 14............04 Electricity Growth and Availability: ................................ 27 11.......07 Management Inefficiency:............08 Corruption Exists in Power Sector: ......... 31 13...................................... 21 9....................................................................................09 Effect on Economy: ............ 30 13................................................................................................................................................01 Market Capital of Power Sector: .......0 Power Sector Reform and Restructure: ..01 Reform Objective:..................06 Analysis:...................................................02 Generation Capacity and Maximum Demand Served:...02 Current Market Capital of Three Power Companies:..................................................................... 28 11.....04 Foreign Investment in Power Sector: ............................................. 18 9.........................02 Components of Reform ...............................................02 Facilities and Incentives for Foreign Investors:................................................................................................................................................................ 40 16........................................................................................... 36 14..................................................03 Dividend Distribution and Major Sponsors Three Power Sector Companies: .............................. 29 12........04 Fuel Availability: .....05 Technology:...........................................................05 Technology Lacking:................................................................................................... 35 14............................... 24 10.................................................................... 23 9................................. 42 16......................................................................... 35 14...............03 Net Generation and Capacity of Private and Public Sector: 20 9...03 Power Generation Cost:..................................................................................................................... 35 14....................01 Demand Forecast: ....................................................0 Government Future Plan:........................................................................................................................ 18 9....... 39 16............01 Fiscal Incentives: .............0 Capital Market Performance of Power Sector: .......................................................................... 28 11.0 Investment Opportunity:...................................................................................................................................................... 30 13.....................................0 Current Power Situation: ..... 32 13................................................... 24 9................................................................................... ...............................................................06 Future Prospect of Summit Power:....................04 Future Prospect of PGCB:.....05 General Information of Summit Power:.0 Participants in Capital Market:............................................... 47 17.................. 51 18..................................... 44 17........ 47 17... 50 17.............................................................................0 Conclusion:.........................03 General Information of PGCB:..............17.......... 44 17.... 44 17....................................................................................................................01 General Information of DESCO ..................................................................02 Future Prospect of Desco: ........................................................................................................................................................... 52 Reference Bibliography 54 55 ... Year wise power generation and load shedding and system loss: 6. Segregation of Power Generation 4. Segregation of Power Generation Mix 9. Access and Per Capita Generation of electricity 5. Government’s future plans: 8. Dividend Distribution and Major Sponsors of Power Industry in Capital Market Page 18 19 21 21 23 25 27 36 37 41 42 43 LIST OF FIGURES Page 1. Diagram of Current Power Sector Structure 2. Position of Power and Fuel in Capital Market 12.I LIST OF TABLES 1. Production Capacity and Maximum Demand Served 3. Year wise Growth. DSE sectoral performance – June 2007: 11. Power demand forecast 2. Year wise Installed Capacity. Participants of Power Industry in Capital Market and Their Market Position 13. Price graph of one year of Summit Power 10 46 49 52 . Price graph of one year of DESCO 3. Segregation of Power Generation Cost: 10. Price graph of one year of PGCB 4. Contribution to country’s GDP: 7. As power sector is a rising sector. Increasing demand and very low supply of power created an investment opportunity in Bangladesh power sector and government is also encouraging private investment so this power sector has a huge prospect for investment in power sector. In this report the prospect of investment in power sector in power generation has been elaborately discussed. . Only 42% population of Bangladesh has access to electricity which is very low compared to other developing country. Demand of power is very high but supply is not adequate. where GDP is one of the important measures of the economic condition for a developing country like Bangladesh to attract foreign investment. the companies which are listed in capital market are also doing very well and the future prospects of those companies are also very good so investing in capital market in power sector will also be profitable. Now to reduce this power crisis huge additional power generation is required and to increases power generation huge investment is required in this Bangladesh power sector. to upgrade the socio economic condition and to alleviate poverty. In this report investment prospect in capital market in power sector has also been discussed. But Bangladesh is going through a huge power crisis for a long time. For this reason Bangladesh government created the environment for private and foreign investor to invest in power generation in power sector through approving “Private sector power generation policy” and through reforming and restructuring the power sector. The report will help an investor to know the prospect of investment in power sector.II Executive Summery Electricity is a fundamental requirement. This power crisis is slowing down the economic growth of the country. Proper and enough electricity supply have a great positive impact on our national economy as well as on GDP of the country. investment of foreign investors is very necessary to develop the country. available and reasonably priced electricity is a prerequisite. Proper and enough reliable electricity supply have a great positive impact on our GDP and GDP is one of the key measures to understand the economy of a country.51% which need to be increased a lot to have a stable economy.03 million (approximately) which is expected to be 140. To increase the GDP growth rate. Population is increasing but generation of power is not increasing. Currently. Only 42 % of the country’s population has access to electricity. The main reason for the current power crisis is the demand of power is very high but the generation capacity is very low and for that there is a huge short fall of power. Huge power capacity addition is needed. commercial and other economic development and these development directly and indirectly depend upon fluent electricity supply.6 million (approximately) in 2007. Additional generated power will need to be transferred to the desired distribution centers so transmission capacity also need to be upgraded and transmitted power need to distributed with a minimum system loss to . Because when the foreign investors want to invest in any country at first they observe the economic growth or the GDP growth rate of the country and for the developing country like Bangladesh. Bangladesh is densely populated country of 140. And per capita generation is 164 kWh which is also lower compared to the neighboring countries. industrial.0 Introduction: Electricity is a vital ingredient. Because Bangladesh economy is depending upon educational. The supply of electricity has a great impact on the national economy. which is very low compared to other developing countries of the world. agricultural. to upgrade the socio-economic condition and to alleviate poverty. Bangladesh GDP growth rate is 6.1. This current power crisis is slowing the pace of our GDP growth rate. For new generation of power huge investment is needed in power sector. Thus the purpose of this paper is to document the investment opportunity in Bangladesh power sector. making reform and restructure and by giving fiscal incentives. There is huge gap existing in Bangladesh power sector. Bangladesh government alone can not invest such a big amount in power sector. For the improvement of power sector huge investment is required. Demand for power is very high but supply of power is very low. . Power is a very important ingredient to improve the socio economic situation. As power sector is a growing sector so investing in power sector in capital market will also be very profitable.Prospect of investment in Bangladesh Power Sector 2 different places so distribution technology also need to be upgraded. So government opened the door for private and foreign investors to invest in power generation. Power sector one of the most important sectors which need a huge investment. 2. Currently net generated power is not enough more power need to be generated. Huge power crises exist in Bangladesh. So investment opportunities in Bangladesh power sector are promising for private sector and foreign investors. For this reason government is attracting foreign and private investors through vision and policy guideline. This demand supply gap has created an investment opportunity.0 Purpose of the Study: The growing future of any country is totally dependent upon the socio-economic situation. Because a Descriptive study tries to discover answers to the questions who. 2003). or events. valid web sites and various annual reports and brochures of different company has been used. The data was collected by the in-depth interview with experts. And prospect of investment in power sector was described. people. often by creating a profile of a group of problems. the thoughts and interpretations of professionals of the field had been collected.Prospect of investment in Bangladesh Power Sector 3 3. To present the data in a handy manner the analyst absorbed the descriptive analysis by employing descriptive statistics.01 Analysis Design: The study was conducted to uphold and demonstrate the investment pros and corns in Bangladesh power sector. Based on various secondary data regarding statistical facts. 3. different insights. what. Thus secondary data was collected.02 Analysis Instrument: The analyst of the current paper has used secondary data. when. Such studies may involve the collection of data and the creation of a distribution of the number of times the researcher observes a single event or characteristic (Cooper & Schindler. where and sometimes how. And to collect the secondary data.0 Methodology: 3. 3. The researcher attempts to describe or define a subject.03 Data Collection: Secondary data used in the paper has been personally collected by the analyst. The analyst conducted indepth interview with the various designated professional of the power sector in Bangladesh. The data has been collected over phone and also by going to designated personnel work place. and . different books. Thus various numeric projections. Bangladesh Power Development Board (BPDB). 3. In addition the whole analysis has been done to show the prospect of investment in Bangladesh power sector. Md. Research Associate. Summut Power. Consultant (E-Governance). Assistant Director (Finance). (DESCO). rules and regulations and historic information has been provided in the paper. Nurul Huda. Secondary data was collected from different prescribed web sites of the government. Interviewed persons are: Mahbub Murshed. Again based on the secondary data. trend analysis of different graphs has been provided to project the future. Asian Development Bank. Executive Director. Power Grid Company of Bangladesh Ltd. Company Secretary. which ensures to get the maximum information. Zahangir Azad.Prospect of investment in Bangladesh Power Sector 4 opinions. (DESCO). IDLC Securities Limited. Deputy Maneger (Finance). . Appointments were fixed prior going to the personnel as dedicated time would be provided to the analyst. (PGCB). and participants of the power sector in Bangladesh.04 Data Analysis: Anticipated study is a descriptive study where industry of power sector has been analyzed from the investor’s perspective. Different statistical data has been presented in this paper. Faridul Haq. (PGCB). Dhaka Electric Supply Company Ltd. Power Grid Company of Bangladesh Ltd. Moumita Manzoor. KNM Tariqur Rashid. The data has been presented in different tables and the explanation of those tables has been provided. Md. and Bangladesh economic review has been viewed. Md. Tanvir Hasan Zoha. Based on secondary data. Assistant Maneger (Account). Dhaka Electric Supply Company Ltd. various analyses have been conducted in this paper. Ataur Rahman Patwary. Deputy General Manager. search. A private enterprise.com.bd/HT/P ) . The power generation capacity of this company was very limited and power was supplied to only posh areas of Dhaka. 5. He acquired an electric generator in the nineteenth century. set up a power station at Paribagh and started generation and distribution of electricity on commercial basis for the common people. another private company. has its effect on the paper. Then in 1957. the government of East Pakistan took over all private power generation houses and distribution lines and established Power Development Board (PDB) in 1959 as an associate of the East Pakistan Water and Power Development Authority.0 Background of Power Sector: At the very beginning the zamindar of Bhawal (Gazipur district) is known to have been the first consumer of electricity in East Bengal. so the verification of this data was not possible. still the depth of reliability varies as by the nature of web sites. In 1933. Octavia Steel Company took the overall responsibility of power generation and distribution in Dhaka city and in Dhaka. Its responsibility was to control power plants and distribution network throughout Bangladesh. though the cross check was conducted. electric light was first introduced on 7th December 1901. For data.0 Limitations: As most of the data were taken from the web sites. Lastly the limited knowledge of the analyst. with a name “DEVCO”. retrieved from http://banglapedia.Prospect of investment in Bangladesh Power Sector 5 4. It became an independent body in 1972 and it’s headquarter was in Dhaka. interviews were taken and most of the data used in this paper are government published data. (Banglapidia. who is conducting such report for the first time. One of our main earning sources is agriculture and for irrigation purpose power is very much needed. Baridhara and Uttora area of Dhaka. BPDB started generating power.com. (Banglapidia. To achieve this objective of rural . The Board is a statutory Government organization with primary responsibility to implement countrywide rural electrification. To increase economic growth. Gulshan. At that time. so government created a new subsidiary named Dhaka Electric Supply Company Ltd. The firms studied overall related issues in depth and gave recommendation for a sustainable and viable rural electrification program. Bangladesh government engaged two consulting firms of USA to carry out a comprehensive feasibility study on rural electrification in Bangladesh.htm ) A well planned and organized rural electrification program did not exist till 1970s. BPDB used to distribute power to mainly the urban areas except the metropolitan city of Dhaka. transmission responsibility was given to PGCB. Then in late 1970s Government of Bangladesh (GOB) created Rural Electrification Board (REB) through REB ordinance LI of 1977. The responsibility of distributing power in Dhaka was given to Dhaka Electric Supply Authority (DESA). (DESCO) and provided the responsibility of electricity distribution in Mirpur.search. Later. employment generation.Prospect of investment in Bangladesh Power Sector 6 At first BPDB used to generate transmit and distribute power. DESA went through lots of controversies and corruption. transmission. retrieved from http://banglapedia. and distribution functions in to separate services. alleviation of poverty and to improve living standard electrifying rural area is a very important component in the development infrastructure.bd/HT/P_0241. Bangladesh was being developed after independence and development plans of Bangladesh recognized the necessity of electrifying rural area. Then Bangladesh government formulated National Energy Policy in 1996 and segregated power generation. the independent power producers (IPP) started coming to generate power. But some remote areas and isolated islands are still not covered by . But additional generation capacity required huge investment so government thought about mobilizing finance by attracting private sector in power generation and more importantly to increase power supply to alleviate the shortage. This also improved the standard of rural people’s living. Later small power producers (SPP) came in power market to generate power and to serve those areas which were not electrified. retrieved from http://www.733 other establishments in the rural areas. REB achieved an outstanding success in electrifying rural area. the rural people are under coverage of electrification. For the commendable performance of PBS at present. 62. The main reason of REB’s success was the introduction of the Performance Target Agreement (PTA).bd/about_reb. so the necessity was felt to generate more power. 373. Government owned power plants were not enough to fulfill the power demand. Bangladesh Government formulated “Private Sector Power Generation Policy of Bangladesh” and adopted in 1996. which encouraged rural electric societies to improve their performances. Electricity is now available to operate 86. (REB history.9 MW to 30 MW.htm ) But Bangladesh power demand was much higher then the supply. In 1996. All the produced power of IPPs is purchased by REB.reb. which created new job opportunities and access to electronic media.766 irrigation pumps. IPPs came in power market under the condition given by government that they will be run on build-own-operate (BOO) basis.119 commercial setups and 8.875 small and cottage industry units. REB signed contracts with Independent Power Producers (IPPs) to purchase power from them.Prospect of investment in Bangladesh Power Sector 7 electrification program the Board established Palli Bidyut Samities (PBS) based on the model of Rural Electric Co-operatives in USA.gov. SPPs own generation plant of 9. Ltd (APSCL) Electricity Generation Company of Bangladesh Ltd.gov.bd/renewables. facilitated and regularized by the government in such a way that delivers the flourished outcome. 6. Overview of Bangladesh power sector has been given below Owner & Regulator • Power Division.bpdb.09 MW capacity of the Grid Connected Wind Energy (GCWE). REB has taken initiatives to use Solar Photovoltaic Systems (Solar PV) for producing electricity.htm ) Later based on necessity many new entities entered in power sector and in between time to time Bangladesh government reformed and restructured power sector. This areas are being Electrifying with renewable energy.0 Overview: Till date in Bangladesh the power sector has been under the authority of government directly or indirectly. Ministry of Power. For the first time in Bangladesh BPDB implemented a pilot project of 0. BPDB also implemented an excellent Solar PV electrification project in the Chittagong Hill tracts. The power sector in Bangladesh has been managed. difficult and risky. (EGCBL) . BPDB also established a Wind Resource Assessment Station (WRAS) in Cox’s Bazar. (Retrieved from http://www.Prospect of investment in Bangladesh Power Sector 8 national grid because of the maintenance of the National Grid and transportation of fuel is very highly expensive. Energy & Mineral Resources Generation • • • • Bangladesh Power Development Board (BPDB) Rural Electrification Board (REB) Ashuganj Power station co. (PGCB) Distribution • • • • Bangladesh Power Development Board Dhaka Electricity Supply Authority (DESA) Dhaka Electric Supply Company Ltd. Ltd (WZPDCL). Palli Biddyut Samities (PBS) • West Zone Power Distribution Co. (DESCO) Rural Electrification Board through Rural Electric Co-operatives.Prospect of investment in Bangladesh Power Sector 9 • • Independent Power Producer (IPP) Small Power Producer (SPP) Transmission • Power Grid Company of Bangladesh Ltd. . . • • Formulation and Application of National Power Policy. General policies relating to generation. transmission and distribution of electricity including thermal power.Prospect of investment in Bangladesh Power Sector 10 7.0 Current Power Sector Structure: ERC Power Division (Ministry of Power. Hydro and Mini Hydro-Electricity etc. 01 Power Division: DESA DESCO REB PBS The Government created power division and gave it the responsibilities to observe the following matters: • • All matters and policies relating to Power sector. Energy and Mineral Resource) Power Cell EA & CEI Generation BPDB APSCL EGCB IPP SPP Transmission PGCB BPDB Distribution WZPDCL Figure 1: Diagram of Current Power Sector Structure 7. Regulation and development of electrical energy/nuclear energy. o Dhaka Electric Supply Company Ltd. • • Inquiries and statistics on any of the subjects allotted to this Division. o West Zone Power Distribution Co. o Any other State-owned Agency/Company in the power sector. o Electricity Generation Company of Bangladesh Ltd. rules made there under and allied matters. • • All laws on subjects allotted to this Division. Office of the Chief Electrical Inspector & Electrical Adviser.Prospect of investment in Bangladesh Power Sector 11 • • • Acquisition and revocation of licenses for electrical undertaking. • Any other matters relating to : o Bangladesh Power Development Board o Rural Electrification Board o Energy Monitoring Unit o Office of the Electrical Adviser & Chief Electric Inspector. Preparation of Budget. (DESCO)./Corporations/Companies/Offices etc. (PGCB). Ltd. Administration of Electricity act. all administrative matters & control of financial matters of the Ministry and Subordinate Dept. o Power Cell. o Dhaka Electric Supply Authority (DESA). Administration and Control of Bangladesh Power Development Board. o Power Grid Company of Bangladesh Ltd. . Fees in respect of the subjects allotted to this Division except fees taken in courts. o Ashuganj Power Station Company Ltd. Rural Electrification Board. This commission is responsible to establish rules and regulation to ensure transparency in the management. and distribution entities. This policy separated power sector’s generation. (Retrieved from http://www.Prospect of investment in Bangladesh Power Sector 12 • Liaison with international organizations and matters relating to treaties and agreement etc. . transmission. Major functions of ERC: • • • Issue. operation and tariff determination in electricity.php?page_id=235 ) 7. Then later Electricity Regulatory Commission Act 2003 (Act No. • Approve investment program. 13 of 2003) was passed in the parliament in March 2003 to regulate electricity gas and petroleum sector. This commission will protect consumer and industry interest and promote competitive market. cancel.bd/index.gov. The Energy Regulatory commission.powerdivision. gas and petroleum sector. (ERC) was established and started functioning under Electricity Regulatory Commission Act in April 2004. • Resolves dispute between licensees and between licensees and consumer and refer those to arbitration if necessary.02 Energy Regulatory Commission (ECR): The National Energy Policy was prepared in 1995 and adopted in 1996. Determine tariff safety enhancement. Frame codes and standards and make enforcement of those to ensure quality of service. amend and determine conditions of licenses. 03 Power Cell Power Cell has been created by the government under Power Division. Energy & Mineral Resources under “TA for Implementation of Bangladesh power sector reform”. Power cell was created in 1995 to design. 7. consumer satisfaction and viability of the sector. Ministry of Power. Promote competition. To structure financial & business plan of the existing & emerging entities. To develop & Implement the centrally well designed MIS & IT system of power sector. To implement specific program to achieve desirable performance improvements. • • To develop HR/D plan for the existing & emerging entities. • • • To develop strategy for corporatization of different entities. marketing. and drive reform measures. The objectives of the reform program can be stated as (not limited to): • • To develop an implement able plan of reform program. facilitate. Protect consumer and investor interest. Advise the government on power sector development. • Appoint electrical adviser and chief electrical inspector.Prospect of investment in Bangladesh Power Sector 13 • • • • Monitor performance of the public sector entities/utilities. • To help the utilities to achieve accelerated development of the sector with optimum utilization of resources. To develop strategy for distribution area demarcation & rationalization of the utilities. regarding generation transmission. and supply distribution. . php?page_id=212 ) 7. (Retrieved from http://www. Cinematograph Act to control and ensure safety of lives and properties in electricity sector. To establish a communication system among the sectors utilities. combined cycle and gas turbine generating unit.bd/ ) 7. Electricity Rule. (Retrieved from http://www. (Retrieved from http://www. Its responsible to distribute power mainly urban areas except Metropolitan City of Dhaka. APS was created in 2002.powerdivision.gov.05 Bangladesh Power Development Board (BPDB) BPDB is responsible for generation. • • To develop the power sector master plan incorporating the updated data.gov. The .bd/ ) 7. APS generate power through comprising steam.04 EA & CEI: The office of the Electrical Advisor and Chief Electrical Inspector has been established under section 36 of the Electricity Act 1910.Prospect of investment in Bangladesh Power Sector 14 • To build in house capacity of system improvement & the sector's efficiency in formulating the tariff calculation and cash flow studies. BPDB's retail sale accounts for about 40% of total retail sales.powercell. transmission and distribution of electricity. There is lots of Independent Power Producers (IPP) who generate and sell power to BPDB.powerdivision.06 Ashuganj Power Company (APS) Ashuganj Power Company is a power generation subsidiary company of BPDB.gov. The installed generation capacity of APS is 728 MW. EA & CEI office performs the functions as specified in the Electricity Act.bd/index. (PGCB.powerdivision. It hasn’t started operating.Prospect of investment in Bangladesh Power Sector 15 gross energy generation was 3387 Gwh during 2003. The company has a massive program to build new facilities in the coming years including transmission lines and sub-stations. (Retrieved from http://www. 1994. for mass departure of power with the objective to help electrify more new villages and towns of the country.gov.09 Dhaka Electric Supply Authority (DESA) DESA is responsible to distribute electricity in a part metropolitan Dhaka & some adjustment area. annual report. It purchases power from BPDB at 132 kV. DESCO is responsible for distribution of electricity in Mirpur. PGCB is 100% responsible for power transmission. DESA's retail sale accounts for about 21% of total sales.bd/ ) 7. which was about 25% of total energy generation in public sector.07 Electricity Generation Company Bangladesh (EGCB) EGCB is another new power generation subsidiary company of BPDB.gov. annual report. Baridhara and Uttara area of Metropolitan City of Dhaka. (Retrieved from http://www. (BPDB. Gulshan.08 Power Grid Company of Bangladesh (PGCB) PGCB was established under the Company's Act. It is a subsidiary of BPDB.bd/ ) 7.10 Dhaka Electric Supply Company (DESCO) DESCO was established in 1996 under Companies' Act of 1994. unpublished data) 7. PGCB is responsible for operation the grid network of 230kV and 132kV system. 2006) 7.powerdivision. (DESCO. 2006) . It is expected to be started very soon. It purchases power from BPDB and different IPPs and SPPs at 33 kV.gov.powerdivision.htm ) 7. WDPDC was created under company act 1994.0 Government’s Vision and Policy for Power Sector: The vision is the first step of any project.reb. (REB history. retrieved from http://www. The company starts functioning since July 2003.13 Palli Bidyut Samity (PBS): Palli Bidyut Samity (PBS) is a consumer owned entity organized on the basic principles of Co-operative for distribution of electric power to its members and other consumers.bd/about_reb.reb. Bangladesh government had to go for a feasible vision of . REB's retail sale accounts for about 38% 0f total retail national sales.Prospect of investment in Bangladesh Power Sector 16 7.11 West Zone Power Distribution Company (WZPDC) BPDB’s one of the subsidiary distribution company is WZPDC. As a sole owner of the regulation of the power sector.12 Rural Electrification Board (REB) REB is responsible for distribution of electricity in rural areas through a system of cooperatives known as Palli Biddyut Samities (PBS). retrieved from http://www. Sixty seven (70) PBS's are operating at present in rural areas. (REB history.gov. REB electrified 46640 numbers of villages and they have 61 numbers of districts under their program. the implementation will become more attainable.gov. (Retrieved from http://www.htm ) 8. The Company is operating is the South West part of the country. It is an independent corporate body. If the vision has been projected through the right path.bd/about_reb.bd/ ) 7. • • • • Increase the sector efficiency. To provide electricity at a reasonable price. Thus the Vision statement and policy on power sector was reformed in June 2000. Using natural gas as the primary fuel for electricity generation and exploring the possibility for export of power to augment and diversify foreign exchange earnings.02 Policy Objective: In order to realize the vision. 8. Improving the reliability and quality of electricity supply. Ensuring reasonable and affordable price for electricity by pursuing least cost options.Prospect of investment in Bangladesh Power Sector 17 this sector to ensure that it leads a flawless result. Making the power sector financially viable and able to facilitate economic growth. Making the sector commercial. 8. • • Increasing private sector participation to mobilize finance.01 Government’s Vision: • • • To make electricity available for all. . These include: • • Bringing entire country under electricity service by the year 2020. To ensure reliable and quality supply of electricity. the Government has set a number of objectives for the power sector reforms. Prospect of investment in Bangladesh Power Sector 18 • Promoting competition among various entities.powerdivision.01 Demand Forecast: As per the Power System Master Plan (PSMP) of 1995 demand forecast is given bellow: Table1 Power demand forecast Fiscal Year Demand Forecast MW 2004 4256 2005 4597 2006 4967 2007 5368 2008 5802 2009 6271 2010 6779 2011 7311 2012 7887 2013 8508 2014 9180 2015 9907 Source: Bangladesh Power Development Board.bpdb.htm . retrieved from http://www. Corruption.gov.php?page_id=237 ) 9. (Demand forecast. High demand and less supply of power is creating power shortfall. http://www. (Government’s vision and policy.gov.bd/index.bd/plan_gen.0 Current Power Situation: At present Bangladesh is in huge power crisis. technology lacking etc are some reasons behind this current power situation. This current power situation has been described below: 9. Socio-economic environment are being effected. retrieved from. Because sufficient production capacity were not been added. Demand has gradually increased over time but compared to that the amount of demand served is very low due to low power generation. demand of 5368 MW was forecasted for the year 2007 but now power demand is close to 6000 MW. A table is given below: Table 2 Year wise Installed Capacity. But now it has been observed that demand of electricity is increasing more than. For an example. 06) 5275 4150 3587 Source: Bangladesh Economic Review. Power crisis always topped the chart of the problems of our country. Production Capacity and Maximum Demand Served Installed Production Dependable Production Maximum Demand Financial Year Capacity (MW) Capacity (MW) Served (MW) 1995-96 2908 2105 2047 1996-97 2908 2148 2114 1997-98 3091 2320 2136 1998-99 3611 2850 2449 1999-00 3711 2665 2665 2000-01 4005 3033 3033 2001-02 4230 3300 3218 2002-03 4710 3600 3458 2003-04 4710 3700 3622 2004-05 5025 3900 3751 2005-06 5275 4150 3812 2006-07 ( Dec.Prospect of investment in Bangladesh Power Sector 19 It can be observed that demand is increasing on an average around 8% every year. Professionals say in year 2006 peak demand of power was about 6000 MW (more then forecasted in PSMP-1995) but against that maximum demand was served only 3587 MW. dependable production capacity is very low. Demand is more then which was forecast. 2007 . Moreover compared to current installed production capacity.02 Generation Capacity and Maximum Demand Served: At present there is a huge shortage of power in Bangladesh. that was forecasted. 9. Decreasing production capacity. In FY 2006-2007 installed capacity of public sector was 75.Prospect of investment in Bangladesh Power Sector 20 In financial year 2005-2006 dependable production capacity was only 78% of installed production capacity which is very low and only 91% of production capacity was served against maximum demand which was only 3812 MW. On an average production capacity is 72% to 78% of installed capacity. Almost all power plants of Private sector generate 100% of its installed capacity. 9. Private sector generates power and sells it to BPDB. insufficient installed production capacity and increasing demand are responsible for current power crisis.76% of total generated power. Production capacity of these power plants are less then 50% of installed capacity. On the other hand power demand is increasing day by day. Production capacity is decreasing day by day but to supplement this trend new capacity installed are not sufficient. for the last 10 years production capacity was 72% to 78% of installed capacity which is resulting low generation of electricity. Net generation was 11. Power plant efficiency is negatively related with the age of power plant.45% and in same year public sector generated 65. The more the power plant gets older its efficiency decreases.03 Net Generation and Capacity of Private and Public Sector: Many IPPs and SPPs are doing fantastic job in generating power and adding good amount of power to national grid.55% and private sector was 24. Some of the power plants are 50 years even more then 50 years old. Most of the power plants owned by BPDB are 20 to 30 years old.24% and private sector generated 34. There is about 2500 MW power deficit currently in Bangladesh. here public sector generated 7505 kWh and private sector generated 3998 kWh. Installed capacity is also very low to produce sufficient power to meet the power demand. Not only that year.503 kWh. . 29 9. supply is inadequate. transmission system and distribution system for more efficiency. Pakistan has 431kWh and Sri Lanka has 336kWh.19 Access to electricity % 25 30 32 35 Per capita generation 129 136 144 155 (kWh) Source: Data Book. Power Cell. so compared to high increasing demand. Other neighbor countries have successfully developed there power sector to achieve economic excellence.04 Electricity Growth and Availability: In Bangladesh electricity is growing at a very low rate.78 7. 2007 9. Per capita generation is only 141 kWh which is also very low compared to other neighbor countries.45% Capacity Net Generation 65. Table 4 Year wise Growth.Prospect of investment in Bangladesh Power Sector 21 Table 3 Segregation of Power Generation Year 2007 Public sector Private sector Production 75.54 38 158 20052006 7.6 7.55% 24.76% Source: Bangladesh Economic Review. Only 42% of the total population has access to electricity which is very low compared to other developing country. Access and Per Capita Generation of electricity 2000200120022003Item 2001 2002 2003 2004 Growth of electricity % 7. 2006 9. Low generation of power is resulting huge load shedding.24% 34. like India has per capita generation of 473 kWh.45 42 141 . Technology inefficiency is one of the reasons for low generation capacity.05 Technology Lacking: Technology of Bangladesh power sector is very poor. Technology improvement is required in generation system. Technology lacking in 20042005 8. Total (transmission and distribution) standard system loss of a weak power system is 16. Dhaka alone has around half of the customer of electricity as it is one of the pick lode centers.75. Because of system loss a substantial amount of power are being lost from the net generation. Hugh power theft was also a reason for the load shedding. Another load center is east zone (Chittagong) for commercial use. . Because power generation is increasing at a lower rate compared to increased demand of power. System loss of a weak power plant is higher then strong power system. Though system loss decreased year to year. as well as gas transmission line. As maximum amount of produced power are being provided to the main load centers like to industrial and commercial areas to keep the economy run smoothly and deficit of electricity are being passed to the domestic areas and domestic areas are under huge load shedding. 9.97% which is much higher then standard system loss of a weak power system. Because of system loss a junk amount of power is being lost from the net generation. voltage dips and flicker etc. still high system loss exist in power sector. There are also other technical problems like leakage in transmission line and distribution line. Another reason for power shortage is system loss. short circuit. Power generation is increasing but at the same time load shedding is also increasing.06 Load Shedding and System Loss: Significant load shedding due to lack of generation occurred in each of the historical years. sudden failure of sub-station. Still huge load shedding accurse in industrials and commercial areas. System loss accrues at the time of transmission and distribution.Prospect of investment in Bangladesh Power Sector 22 transmission and distribution system is resulting system loss. In 2006 system loss was 20.5% and for strong power system is 8. unavailability of spare transformer. Then process of bidding restarts.20 30. For these reasons many foreign bidders are losing their interest to bid for Bangladesh power sector.07 Management Inefficiency: System Loss (%) 31.97 Government management is very inefficient.47 27.79 20. (2006) 9.30 31.97 25.69 24. Different foreign companies are interested for investing in power sector of Bangladesh. Existing guide lines are not being followed.49 22. . People of Bangladesh are suffering for huge power crisis at this stage additional power need to be added in national grid as soon as possible but for public sector slow processes is slowing down the additional power generation. Power Cell.Prospect of investment in Bangladesh Power Sector 23 Table 5 Year wise power generation and load shedding and system loss: Load Shedding Financial year Actual generation (MW) (MW) 1996 2087 545 1997 2114 674 1998 2136 711 1999 2449 774 2000 2665 536 2001 3033 663 2002 3248 367 2003 3458 468 2004 3622 694 2005 3751 770 2006 up to 3812 891 Mar.80 31. Many tenders were stopped at the mid stage because of all these situations.60 28.40 31.06 Source: Power Sector Data Book. Foreign companies bid for different tenders but due to lack of efficiency BPDB and other public companies till the tenders get approved tender cost goes up then those investors don’t have any interest for the tender. Huge mismanagement is affecting our power sector for the absence of proper guide line. Public sector employees also lose their commitment to their work because of top level corruption. But sponsors face lots of problem to get approved to set up a captive power plant. For this corruption DESA ran at loss for many years. This power short fall is affecting our economy. At present electricity coverage in Bangladesh is only 42% and per capita electricity consumption is about 140 kWh which is one of the lowest in the World. Many engineers and professionals who are committed to their work can not successfully work on their business plan because political persons make many changes on the business plan for their personal benefit. a foreign bidder bid for a project at a certain cost but for the power sector management irregularities executing on the project gets late and due to inflation the cost of the project gets high and then the bidder don’t have any more interest on the project.09 Effect on Economy: Electricity is a vital ingredient. Small power plants are cost effective for captive consumption. . This power crisis has been the number one problem of Bangladesh. Lack of commitment is an additional problem. Management is also very poor and long term and short term plans are not strategically managed. to upgrade the socio-economic condition and to alleviate poverty. It has been seen that.08 Corruption Exists in Power Sector: One of the major reasons of today’s power problem is corruption. DESA went through lots of controversies.Prospect of investment in Bangladesh Power Sector 24 9. Economy of any country is highly dependent on power supply. Industrial and commercial activities are being interrupted for this power crisis. Problem multiplies because of inefficient linkage between project plans and financing plans. 9. Corruption is at all level from top management to operational level. Inefficiency exists in linkage between project plan and financing plan. At the same time urbanization is taking place to a great extent so the share of electricity on GDP is growing with the growth of electricity as well as with the GDP growth rate. Another significant point is growth in the urban population considerably increased by 38% over last decade by birth and migration. Irrigation process is being interrupted for insufficient power supply.51 Source: Bangladesh Economic Review. Again when the fuel is used instead of electricity. commercial sector have depend on . the cumulative savings go down in the households as they have to spend more and their fewer saving generates less investment and thus it had its ripple effect on the total GDP of the country.Prospect of investment in Bangladesh Power Sector 25 Table 6 Contribution to country’s GDP: 2001Particulars 2002 Share of electricity on GDP 1.96 20052006 1.27 % Growth of electricity sub7.26 20032004 1.42 20022003 1.3 7.78 station % GDP growth rate% 4. As the prices are high.54 5.37 8. the extra cost is charged to the final user and again the farmers are having less margin.38 7. 2007 Bangladesh economy is growing and the share of industrial activity is increasing.45 6.52 6. Low growth rate of electricity is slowing down GDP growth. But expansion of electricity sub-stations is near to the ground then required and this low growth rate is affecting GDP growth rate.63 20062007 1. For irrigation and other purpose electricity is a very necessary issue in agriculture. In Bangladesh.35 4. Not only agriculture industrial and commercial sector are also incurring huge loss for power short fall or load shedding.27 20042005 1.19 6.29 5.34 9. And as a result the cost of production rises and the timing of the irrigation hampers also. The daily commutation is hampered as the electricity is having mishaps on its production. 51% of total man power is involved in agriculture. Thus to cover up. Sales percentage is decreasing in shopping malls and grossary shops after caretaker government order. from agriculture to the manufacturing sector. The students of today not only have to deal with the books they also had to plan their time of studying while matching with the availability with the electricity. Production level is decreasing in garments and factories. thus the normal households will be allowed to have better savings. The shortfall in the power sector is hampering the normal practice of our educational sector. thus the investment will provide more jobs and the GDP will be escalated automatically. Small to big businessmen. . caretaker government ordered all commercial and industrial entities to be closed at seven o’clock. This improvement also demands fluent power supply. Load shedding is also interrupting school. all are incurring huge lose for that. The effect of electricity has a huge impact to play on the economy of a country like Bangladesh. the improvement on electricity will reduce the general cost of production. Thus it also hampers the broader version of economy of the long run. the country will have more cash inflow to the economy as those collective savings will be invested. This electricity also hampers the living condition of the labors as the alternative power sources does not permit to have normal working condition as it would have with electricity thus it reduces the productivity of the employees. collage university students. Many cottage industries and SMEs are increasing and creating new job opportunities and our economy is having a positive out come. To manage load of the power.Prospect of investment in Bangladesh Power Sector 26 the alternatives and again the cost goes high. MKWh Transmission line. Km No. retrieved from http://www. KWh Access to electricity 5950 9642 266375 9.03 190 47% 11575 17920 345530 12.Prospect of investment in Bangladesh Power Sector 27 10.bd/index.76 450 100% 575 2005-2007 6441 5368 26651 4898 2008-2012 9666 7887 39157 7180 2013-2020 17765 14600 76545 8396 Investment requirement (billion Tk) 115 307 Source: Power Division (Future development plan. . transmission and distribution system to achieve desired level of reliability of power supply. Km Capacity of grid S/S. A summary of the development plan is given below: Table 7 Government’s future plans: Item Installed capacity. medium-term (up to 2012) and long-term (up to 2020) development plans.gov. MW Peak demand. the Government has developed short-term (up to 2007). MVA 230/ 132 KV 132/ 33 KV Distribution line. of consumers.powerdivision. These plans include balanced development in generation.0 Government Future Plan: To deal with the current power crisis. The plans had been developed based on techno-economic analysis and least-cost option.php?page_id=222 ) Government has taken steps to create conducive environment for Private Sector through appropriate policies and power sector reforms & restructuring. to realize the vision of the Government to provide electricity to most of the population at reasonable price and to achieve overall socio-economic development of the country. million Per capita generation. MW Net generation.75 260 65% 19075 27367 477558 20. powercell.gov. Bangladesh Government reformed and restructured power sector time to time to create an environment and room of investment for private and foreign investors. • Promoting competition among various entities. 2000. Huge investment is required in power sector. Ensuring reasonable and affordable price for electricity by pursuing least cost options. To mobilize finance government seek for foreign and private investment in power sector. with the following objectives: • • • • • • • • Bringing the entire country under electricity service by the year 2020 in phases. Making the power sector financially viable and able to facilitate economic growth Increasing the sector’s efficiency Introducing new corporate culture in the power sector entities Improving the reliability and quality of electricity supply Using natural gas as the primary fuel for electricity generation Increasing private sector participation to mobilize finance.0 Power Sector Reform and Restructure: Government alone can not fulfill this plan.Prospect of investment in Bangladesh Power Sector 28 11.bd/index. Government’s reform objective and components of reform has been stated below which was collected from (“3-Year Road Map for Power Sector Reform (Year 2007-2009)” Retrieved from http://www.php?page_id=245 ) 11.01 Reform Objective: GOB issued its Vision and Policy Statement on Power Sector Reforms in February. . Effective regulation under BERC for power and gas. • Capacity building and HRD for sector entities and corporative bodies.02 Components of Reform The principal components of the reform programme are as follows: • Segregation of power generation. • • • • • Corporatization and commercialization of emerging power sector entities.Prospect of investment in Bangladesh Power Sector 29 11. Financial Restructuring and Recovery Plan for the sector. • Utilization of captive power potential of the country through appropriate policy framework. • Creation of appropriate framework and institution to facilitate the development of alternative/renewable energy resources. Introduction of cost reflective tariff for financial viability of the utilities and promoting efficient use of electricity. . transmission and distribution operating companies will be the subsidiaries of the holding company. Private sector participation and private-public partnership in power sector. transmission and distribution functions into separate services and creation of BPDB holding company as a head body where generation. • Development of Demand Side Management (DSM) including energy efficiency measures to conserve energy. small and mini). So for foreign and private sector opportunities exist in developing new plants (barge-mounted and other. rehabilitating or upgrading existing plants and supplying a variety of support services. 13. Single buyer purchases all the power from generators and sells the power to different distributor.0 Investment Opportunity: Power sector is a capital intensive industry. Bangladesh government has created a good investment climate for foreign and private investors through reform and restructure in power sector.Prospect of investment in Bangladesh Power Sector 30 12. large. Only 42% of populations in Bangladesh have access to electricity. In Bangladesh there is an extensive demand gap for electricity. Investment opportunities also exist under buildown-operate (BOO) basis for private sector. private-public partnership in power sector. To encourage the private sector investment government decided to issue a “Private Sector Power Generation policy of Bangladesh” in October 1996. BPDB is functioning as a single buyer. This policy encouraged privet sector to invest in power sector. constructing transmission and distribution system. Private sector participation will help to mobilize finance. Government is promoting private sector power generation. Investment is also well protected by law and practice in . Multi buyer and competitive pool may be adopted when the market becomes mature and stable. Huge investment is required to serve the electricity demand.0 Power Market Structure: At present power market has been designed as a single buyer model. New generation of power is the immediate requirement for Bangladesh. Exemption from income tax in Bangladesh for foreign lenders to such companies. .01 Fiscal Incentives: • The private power companies shall be exempt from corporate income tax for a period of 15 years. The foreign investors will be free to enter into joint ventures but this is optional and not mandatory. • The companies will be exempted from the requirements of obtaining insurance/reinsurance only from the National Insurance Company. Fiscal incentives stated in “Private sector power generation policy of Bangladesh (revised in November 2004)” are given below: 13. Government approved many fiscal incentives in private sector power generation policy for private and foreign investors to invest in power sector. • Private power companies will be allowed to buy insurance of their choice as per requirements of the lenders and the utilities. • The companies will be allowed to import plant and equipment and spare parts up to a maximum of ten percent (10%) of the original value of total plant and equipment within a period of twelve (12) years of Commercial Operation without payment of customs duties. VAT (Value Added Tax) and any other surcharges as well as import permit fee except for indigenously produced equipment manufactured according to international standards. namely Sadharan Bima Corporation (SBC).Prospect of investment in Bangladesh Power Sector 31 Bangladesh. • • • Repatriation of equity along with dividends will be allowed freely. • Local engineering and manufacturing companies shall be encouraged to provide indigenously manufactured equipment of international standard to private power plants.php?page_id=232 ) 13. • The private parties may raise local and foreign finance in accordance with regulations applicable to industrial projects as defined by the Board of Investment (BOI). retrieved from http://www. and facilities for their repatriation. technical know-how and technical assistance fees.bd/index.Prospect of investment in Bangladesh Power Sector 32 • The Instruments and Deeds required to be registered under local regulations will be exempted from stamp duty payments.02 Facilities and Incentives for Foreign Investors: The following facilities and incentives would be provided to private power producers: • Tax exemption on royalties. Avoidance of double taxation in case of foreign investors on the basis of bilateral agreements. Tax exemption on capital gains from transfer of shares by the investing company. • Exemption of income tax for up to three years for the expatriate personnel employed under the approved industry. • Power generation has been declared as an industry and the companies are eligible for all other concessions which are available to industrial projects.gov. • • • Tax exemption on interest on foreign loans.powercell. . (Investment opportunity. • TAKA.bd/index. would be convertible for international payments in current account. Foreign owned companies duly registered in Bangladesh will be on the same footing as locally owned companies with regard to borrowing facilities. (Investment opportunity retrieved from http://www. With the name of Independent Power Producer (IPP) private sector started generating power.powercell. • No restrictions on issuance of work permits to project related foreign nationals and employees. • • Re-investment of remittal dividend to be treated as new foreign investment. the national currency. profits and dividends.gov. This policy encourages small local generation projects to server electricity in under served areas. To increase small power generation Government also adopted a “Small Power Generation Policy”. Inviting private sector and allowing to setup such a small power plants has been proved to be an effective solution to manage the power . • • Facilities for repatriation of invested capital. This policy encouraged privet sector to invest in power sector.03 Private Investment in Power Sector: Huge demand gap created investment opportunities in power sector and government also provided lots of facilities in a “Private Sector Power Generation policy of Bangladesh” in October 1996. Provision of transfer of shares held by foreign shareholders to local shareholders/ investors.Prospect of investment in Bangladesh Power Sector 33 • Remittance of up to 50% of salary of the foreigners employed in Bangladesh and facilities for repatriation of their savings and retirement benefits at the time of their return.php?page_id=232 ) 13. 9 MW. AES. Baghabari. Government has granted permission to Privet operators to install power plants with a generation capacity from 10 MW to 30 MW and more in different places to help to overcome power crisis situation.Prospect of investment in Bangladesh Power Sector 34 crisis with in a very short time. BOO projects may involve limited resource financing and funds will be raised with out guarantee of repayment. Under the policy guideline it was stated that entrepreneurs have to take license from the Electricity Regulatory Commission (ERC) before setting up any power plants in any place of the country. Rural Power Co. Meghnaghat of 450 MW. Ltd of 70 MW all together these IPPs are contributing 1330 MW in net generation of power. Ltd of 10 MW. Minimum requirement of equity investment is 20%. (RPCL) of 140 MW. NEPC.8 MW and these SPPs are contributing 90. Because. M/S Unique Power Plant Ltd of 10. IPP’s projects will be implemented on Build-own-operate (BOO) basis. M/S Rahim Energy Ltd of 30 MW. WESTMONT of 90 MW. There are seven IPP they are: Khulna Power Company Ltd. M/S Amirate Power Co. such small plants need very low investment and short time to be installed. It was also approved that. 2006) . Haripur of 110 MW. (Power Cell. Haripur of 360 MW. the government will buy electricity from private power plant through mutual agreement. M/S Surma Energy Ltd of 30 MW. There are five small power producer those are M/S Meghna Energy Ltd of 9. AES. Summit Power Co.(KPCL) of 110 MW. Bangladesh Power Sector Data Book. Independent power producers having power plant of install capacity from 10 MW to 30 MW is known as Small Power Producer (SPP).7 MW to the net generation. Ltd. 14. Energy sector is the largest recipient of all foreign investment in Bangladesh. So a cost benefit analysis needs to be done before setting up a power plant.0 Investment Analysis: Bangladesh government is planning to corporatize and privatize different sectors of power.Prospect of investment in Bangladesh Power Sector 35 13. Many private IPPs and SPPs are doing profitable business by generating power. for cooling the plant.04 Foreign Investment in Power Sector: Lots of foreign investors have invested in Bangladesh power sector and there are also many foreign investors who are interested to invest in Bangladesh power sector. A good investment opportunity exists in power generation in Bangladesh power sector. as Bangladesh has huge power demand.01 Power Generation: A power plant generally set up close to the load center to lower the transmission cost. 14. Generation plant near the peak demand is also needed to minimize . Tata Group of India showed their interest to invest in Bangladesh power sector. Transmission of fuel is also a huge cost so setting the power plant close to fuel is also necessary. Dhabi Group of United Arab Emirates. Recently. enough transmission and distribution line is available now. A power plant needs to be set up beside the river. safe place is also a prerequisite. Till now Bangladesh government allowed fully private sector investment for power generation. A sound. Foreign investors bid for tenders offered by BPDB and the lowest bidder gets the tender. as main problem in power sector is low power generation. One year ago coal was not being used as fuel for generating power but Bangladesh has huge prospect on coal. As in Bangladesh gas is available and cheaper then other materials of generating power. Table 8 Segregation of Power Generation Mix Fuel type 2004-05 Gas 91% Hydro 2% Liquid fuel 7% Cole Source: Bangladesh economic review. So factors such as expense and availability of fuel.53% 4. 2007 2005-06 86% 3% 8% 3% 2006-07 81. Like.06% 9. in west side gas is not very available so most of the liquid fuel is being used in west side and as gas is more available in east side so most of the plants are gas fired. 14. Bangladesh has favorable environment for power generation. and coal are being used as fuel to generate power. fuel type and source of finance.74% Depending on different region other materials are also being preferred to generate power.03 Power Generation Cost: Power generation cost depends upon the power plant type. Most of the power plants are gas fired in Bangladesh. On an average generation cost per kilo watt calculated by BPDB is given below: .74% 4. liquid fuel. transportation of heavy equipment.02 Power Generation Mix: Power is generated from different types of power plants and transmitted through national grid. cooling water. 14. proximately to grid network and load center etc are considered for plant setting. Mainly gas and some percentage of hydro.Prospect of investment in Bangladesh Power Sector 36 the transmission cost. Gas as a fuel is cheaper but efficiency level is a bit low on the other hand imported liquid fuel is expensive but its efficiency level is comparatively high. As exploration proceeds there will be additions to existing reserve. Huge amount of gas is reserved in those gas fields. Coal can be a very cost effective fuel to generate power. Many foreign companies exploring Bangladesh gas reserve and many other foreign companies are interested to for exploration.04 Fuel Availability: Gas: Bangladesh has sufficient gas reserve. 14.16 1. which is an alternative source of energy to produce power. Substantial amount of coal reserve is in northern area. Generation cost using liquid fuel is four to five time higher then generation cost using other type of fuel. more exploration and development is needed. (Unpublished internal data) Power generation cost using hydro power is lowest and generation cost using liquid fuel is highest. Bangladesh explored 23 gas fields. Phulbaria Coal Project mines will provide adequate coal supply for power generation.82 2.9 Source: Bangladesh Power Development Board. Coal: There is also enough coal to produce power but only five coal basins are been explored. Barapukuria Coal Mine in the north-west side of Bangladesh is supplying good amount of coal for Barapukuria power plant.Prospect of investment in Bangladesh Power Sector 37 Table 9 Segregation of Power Generation Cost: Fuel Type Hydro Gas Coal Liquid Fuel Production cost TK/kW 1.87 8. Bangladesh exports liquid fuel different countries from the four types of fuel and the other three types of fuel are available in Bangladesh. The Geological Survey of Bangladesh (GSB) . As power generation cost through liquid fuel is very high so lowering the percentage of using liquid fuel. Liquid fuel: In Bangladesh.74% of power is generated through coal but 9. Experts say 5.06 Analysis: In Bangladesh. usage of gas. 14.74% of power is generated through liquid fuel where liquid fuel is very expensive and generation cost of . as Bangladesh is full of rivers and it is called “the land of river”. Technology improvement will increase power generation efficiency. coal and hydro power can be increased.Prospect of investment in Bangladesh Power Sector 38 is responsible for locating coal resources present in Bangladesh. “Eastern Refinery” at Chittagong provides 50% liquid fuel for generating power and exports the other 50% of liquid fuel. Eminent geologist and former chief of GSB. 14. Reserved liquid fuel of Bangladesh is not enough moreover it is very expensive to generate power from liquid fuel. setting up a power plant with optimum capacity cost of generation can be reduced.000 MW of electricity could be generated for upto 90 years by coal. Khurshid Alam said. By using modern technology. still there are many suitable sites for generating power near the rivers. From the generation mix it can be observed that only 4. 13 coal basins was identified in the northern region of the country. Currently used amount of hydro power will be available and used further. But private power producers are concentrating on technical improvement. Hydro power: Hydro power is not very available in Bangladesh.05 Technology: Power generation plants are not so technically efficient. All kind of power plants need to be set up near the river and Bangladesh is very lucky in that case. Infrastructure Development Company Limited (IDCOL) a Non-Bank Financial Institution established in Bangladesh in 1997 as a government owned public limited company to promote . Many private commercial banks are giving lone to many IPPs and SPPs.0 Managing Finance: Energy sector is the largest recipient of all foreign investment in Bangladesh. Bangladesh has only one coal power plant at Barapukuria. also a favorable environment for generating power. In the year 2005. 3. Technological improvement will also increase efficiency in generation and transmission. Bangladesh has enough reserve of gas and coal. Asian Development Bank (ADB) is also providing huge amount of lone to Bangladesh Bank (BB) for power sector every year and Bangladesh Bank provides lone to private power generation companies like IPPs and SPPs. huge additional power can be produced and can be add to the national grid and private sector can make good profit.2 million of U. There are also some new sites which can be explored and can be invented as very cost effective sites for power generation. 15. So by setting up new power plants and by replacing old power plants from the existing sites.2% of Foreign Direct Investment was provided to power sector which was 27.53% of power is generated through gas. Percentage of producing power through liquid fuel can be reduced by increasing generation of power through coal. Increasing the percentage of using coal for power generation will also decrease the generation pressure on gas where in 81. Some more coal power plant can be set up near the coal plant.Prospect of investment in Bangladesh Power Sector 39 power using liquid fuel is very high.S doller. A coal power plant at Phulbaria will be set up after coal mining. Prospect of investment in Bangladesh Power Sector 40 participation of the private sector in investment in infrastructure facilities and in operation, ownership and maintenance of them. IDCOL provides long-term senior and subordinate debt financing for viable infrastructure projects in the private sector. It finances up to 40% of the total project costs. So managing funds will not be a problem to invest in power sector, more over power sector always gets some priority every where. 16.0 Capital Market Performance of Power Sector: Bangladesh capital market had a tremendous growth from last year and also has a strong growing prospect in future. As Bangladesh political situation is improving so people are feeling risk free to invest in capital market. Both foreign and local investors are taking part in trading of securities in wide scale. As a result, both turnover and market capitalization crossed a new milestone. Market capitalization was Tk. 21542.18 in FY 2005-06 now in FY 2006-2007 market capitalization is 47585.54, as capital market is improving price of stocks are also increasing as well as new companies are also being listed. Market PE also increased from 10.66 to 17.28 (June, 2007). In capital market, power sector is increasing day by day and this sector is always on investor’s concentration. In power sector there are three companies and price of these three companies are increasing at an increasing rate. As to meet the power demand and to over come from the current power crisis many initiatives and development plans have been taken and power sector in improving tremendously and investors are being interested to invest in power sector. In capital market Fuel and power has second highest percentage of total market capital which is 11.69%. Market capital of this sector increased about 2680.92 million taka from May to June in 2007. Prospect of investment in Bangladesh Power Sector 41 Table 10 DSE sectoral performance – June 2007: sector June % of total Mkt Cap May 206,300.70 9,714.01 4,938.41 220,953.12 6,622.30 36,194.37 10,197.37 10,207.28 608.48 3,118.93 272.09 137.6 31,895.71 99,254.13 45,418.66 1,811.50 2,117.13 9,737.68 59,084.97 379,292.22 % of total Mkt Cap 54.39% 2.56% 1.30% 58.25% 1.75% 9.54% 2.69% 2.69% 0.16% 0.82% 0.07% 0.04% 8.41% 26.17% 11.97% 0.48% 0.56% 2.57% 15.58% 100.00%3 Financial Sector Banks 231,127.95 56.16% Insurance 12,023.45 2.92% Investment 5,327.66 1.29% Total 248,479.06 60.38% Manufacturing Foods 6,764.53 1.64% Pharmaceuticals 37,901.81 9.21% Textile 10,961.71 2.66% Engineering 10,469.52 2.54% Ceramics 595.36 0.14% Tannery 3,325.50 0.81% Paper & Printing 271.79 0.07% Jute 142.4 0.03% Cement 30,593.00 7.43% Total 101,025.62 24.55% Service & Miscellaneous Fuel & Power 48,099.58 11.69% Service & Real 1,828.29 0.44% Estate IT 2,251.24 0.55% Miscellaneous 9,863.19 2.40% Total 62,042.30 15.08% Prospect of investment in Bangladesh Power Sector Total 411,546.98 100.00% Source: Dhaka stock exchange, Monthly review, June 2007. Prospect of investment in Bangladesh Power Sector 42 16.01 Market Capital of Power Sector: Table 11 Position of Power and Fuel in Capital Market: Sector Till August-2007 Power Fuel Total Fuel and Power 41561.34 6538.24 48099.58 % of Market Capital 86.41% 13.59% 100% Fuel and power has BDT 48099.58 million of market capital. Out of fuel and power sector market capital, individually power sector has BDT 41561.34 million of market capital which is 86.41% of total fuel and power sector market capital. 16.02 Current Market Capital of Three Power Companies: There are three listed companies of power sector in capital market. Those are: 1. Dhaka Electricity Supply Company (DESCO), it is a government power Distribution Company. 2. Power Grid Company of Bangladesh Limited (PGCB), it is a government power transmission company. 3. Summit Power Limited, it is a private power generation company. These companies have huge growth prospect. Stock price of this companies are increasing at an increasing rate. Power sector has always been the focus of investors. As power sector is improving, so these companies are getting new projects and also getting huge amount of foreign investment which will increase net profit of these companies and stock price will increase. So investors are investing in power sector, as they are finding 02% Total 57.10% Power Grid 36. Table 12 Participants of Power Industry in Capital Market and Their Market Position: No of Share Market % of Market Institution Market Cap. government has 75% and public has 25% which is 27. As Bangladesh power sector will improve and investing in this sector will be profitable.940 978 12.07 sector.858 and 9.56 100. As it is a private .580.000 1.03 Dividend Distribution and Major Sponsors Three Power Sector Companies: DESCO has 12711940 number of shares outstanding from these government has 9533955 number of shares which is 75% and public has 3177985 number of shares which is 25%.00 12.00% 16.435.411.810 numbers of shares outstanding and from these. Outstanding Price as on Cap in power Name (BDT mn) (Dividend Adjusted) 15. Power Grid has 36.953 numbers of shares respectively.435. Summit Power has declared 20 % bonus share in year 2007.000 number of share outstanding.28 28.10 28.445. Monthly review.326. Table 13 Dividend Distribution and Major Sponsors of Power Industry in Capital Market: Dividend Distribution Company Major Sponsors (%) (2006-07) Cash Bonus Right Gen.Prospect of investment in Bangladesh Power Sector 43 this sector almost risk free.75 19.398.727.108. Director Institution Foreign Govt.18 43.711.241.810 532. So after adjusting 20% of bonus share summit power has 8. Power Grid declared 10% cash dividend in year 2006. DESCO declared 20% cash dividend in year 2006. DESCO 12. June 2007.08.750 44. (%) (%) (%) Public Name DESCO 20% 25 75 Power 10% 25 75 Grid Summit 20% 64 36 Power Source: Dhaka stock exchange.432.580.88% Summit Power 8. DESCO became a listed company in year 2006 with a face value of 100 Taka. 70. 2006) In 2007 price of this share highest reached to 1080 taka. year end EPS on June 2007 is expected to be Tk. DESCO is responsible for distribution of electricity in Mirpur. In future price can be higher based on some future prospect. They are working on some new projects for expansion and ADB also providing lone for technical improvement. Growth prospect of DESCO is very high and this company is improving tremendously. annual report. with an EPS of Tk. (DESCO. However. 17. EPS could be higher than this because of the following factors.491. 35. Roughly. . 17. Gulshan. Baridhara and Uttara area of Metropolitan City of Dhaka. Now till August its price range is around 950-990 Taka.02 Future Prospect of Desco: Half Yearly net profit of DESCO was Tk 450 million (end of 2006).0 Participants in Capital Market: The participation in capital market by the power sector industries has opened a door for the general people particularly for the medium and small investors and to facilitate them with the current market position and future prospect. general information of the participants has been provided below. 17.200 numbers of share and public has 36% of outstanding share which is 3.01 General Information of DESCO DESCO was established in 1996 under Companies' Act of 1994. In year 2005-06 EPS was 45.52.Prospect of investment in Bangladesh Power Sector 44 company so board of directors of this company has 64% of outstanding share which is 5.088.800 number of share. comparing to the last year an extra EPS of Tk. Thus.72.06. is expected to increase its net profit by 25% by the next financial year. 75 million to net profit. The company has signed a loan Agreement with the ADB on 28.15 will be added with each share in addition to the normal profit. For example. 69. Accordingly. because of industrial consumption.50 where else per unit average profit margin in other distribution area is Tk. DESCO was distributing 400MW electricity.07. because of the current demand supply scenario.Prospect of investment in Bangladesh Power Sector 45 DESCO incurred Tk.170. Even if DESCO will not incur exchange loss of Tk.000 as loan bearing an interest rate of 5. 3.72 in June 2007. . per unit gross profit margin for TONGI area is Tk. Recent inclusion of TONGI industrial area under DESCO’s distribution zone. as their last year calculated exchange rate is Tk. distribution demand increased to at least 450MW electricity. DESCO will receive USD 100.60. However. The proceeds of the loan will be applied to. 200 million this year. Recent declaration of the government of 5% enhanced tariff for electricity from March’1 2007. 200 million exchange loss because of currency devaluation against its U$D 43 million ADB loan. 69. For the inclusion of TONGI.20%. DESCO has system loss of 16. Currently. profit margin in the TONGI area is more than twice comparing to the commercial and residential consumption. This is a significant profitability growth prospect of DESCO for this year. Previously.5% per annum (inclusive of foreign exchange risk) having a repayment period of 20 years including a grace period of 5 years. 1% reduction of system loss contributes Tk. there is a possibility that exchange rate will remain below Tk. 1. there is a possibility of exchange gain instead of loss. Moreover. last year. DESCO expects it to be reduced to 14% by the end of this financial year. will also positively contribute to the profitability of DESCO. Prospect of investment in Bangladesh Power Sector 46 Strengthening DESCO's electric distribution network and Upgrading and expansion of distribution system in Gulshan Circle including Tongi Sales & Distribution divisions. Then in February after declaration of half yearly EPS the price went up and reached at around 700 Taka then the price of the stock gradually increased and now its price is 1050 Taka. 80 for the year ended in June. As the company has good growth prospect and the company is improving so the stock price is also increasing and based on their future growth prospect the price of the stock can increase in future. Stock Performance of DESCO 1200 1000 800 Price 600 400 200 0 06 06 06 06 07 07 07 07 7 07 7 r0 ov ec ay ct ar p n b n l0 Se Ja Fe Ap Ju Ju Month Closing Price Figure 2: Price graph of one year of DESCO From the graph it can be observed that in September 2006 the price of the stock of DESCO was around 500 Taka. So it can be expect that the EPS of DESCO will be around Tk. 2007. M Au O N D M g 07 . Then the price will go up from the current price and it will be proved to be very profitable investment. So investing in this share will be profitable in future and the future prospects have been discussed below. for mass departure of power with the objective to help electrify more new villages and towns of the country. appraises and finally approves all development projects and programs of Bangladesh.01. (PGCB. approved setting up of two new power plants and reconstructing of existing two. There is enormous growth opportunity of the company because of its monopoly in electricity transmission and only 42% of the population has access to electricity. annual report. 17. 2006) The company has a massive program to build new facilities in the coming years including transmission lines and sub-stations. PGCB is responsible for operation the grid network of 230kV and 132kV system. In future price can be higher based on some future prospect. Growth prospect of PGCB is very high and this company is improving tremendously. in which it has monopoly at present.03 General Information of PGCB: PGCB was established under the Company's Act. 1994. government also taking initiatives to encourage setting up of independent power plants and find ways to import . PGCB is 100% responsible for power transmission. PGCB became a listed company in year 2006 with a face value of 100 Taka. Besides. Now till August its price range is around 650-600 Taka. The main business of the company is to transmit power. The ECNEC. PGCB has no upcoming threats.04 Future Prospect of PGCB: Recently. Executive Committee of the National Economic Council. is the highest government body that examines. They are working on some new projects for expansion and ADB also providing lone for technical improvement. In year 2006 EPS was 17.Prospect of investment in Bangladesh Power Sector 47 17. In 2007 price of this share highest reached to 640 Taka. It is a subsidiary of BPDB. increase of revenue generated from increased transmission of electricity will not entail significant increase in operating expense. PGCB has the potential to earn additional Tk 1. it can be reasonably expected that the revenue of PGCB will be increased by at least 43% (33% for increased power supply and 10% for increased rental from OPGW). Also. 700 million leasing contract with PGCB. The total revenue of Tk. So in future PGCB will transmit more power and earn more revenue. It can be expected that the opportunity of this infrastructure is going to be explored by any of the telecom operators of the country. Considering the above. Importantly. Reportedly. Consequently.000 million per year by giving Optical Ground Wire (OPGW) network as rental along with its high voltage transmission lines throughout the country to Telecom and IT operators. The infrastructure of PGCB is very suitable for telecommunication and IT companies for their extension of service through fiber optic. Grameen Phone is in the process of Tk. small extension of capacity will have dynamic effect on the growth of EPS. it can be reasonably expected that minimum1200 MW additional power will be generated within the next two years. Though the main business of the company is transmission of power. This has a dynamic effect in its profitability margin. By 2008. government has planned to set up more large power plants. 45 million (year 2006) from this portion was net contribution to the profit. . PGCB is expected to bring all over Bangladesh under Optical Fiber Network.Prospect of investment in Bangladesh Power Sector 48 power from neighboring courtiers like Myanmar or Bhutan. Including all. as the fiber optic technology is going to available in Dhaka within a month. comes from leasing of OPGW. as there is no extra operating cost for this service. it has another revenue head. the company has no direct Cost of Goods Sold. Hence. on an average 30%40% continued growth of EPS can be expected for the next three years. institutions. foreign investors and public will keep continuing to invest in this stock. as always. the price could be even more. Stock Performance of Power Grid 700 600 500 400 Price 300 200 100 0 06 06 06 07 07 07 07 7 07 7 r0 ov ec ay ct ar n b n l0 Ja Fe Ap Ju Ju Month Closing Price Figure 3: Price graph of one year of PGCB From the graph it can be observed that in November 2006 the price of the stock of PGCB went down and was around 200 Taka.Prospect of investment in Bangladesh Power Sector 49 Considering the above factors. as the prospect of the stock will be there always. impending requirement of power sector development and already sanctioned low cost loan for the development of PGCB. So. there will be upcoming prospect of even more investment in the power generation. Then in February after declaration of half yearly EPS the price went up and reached at around 500 Taka then the price of the stock gradually decreased due to market fluctuation but now its price is around 570 Taka and M Au O N D M g 07 . However. at least until 2012. As the company has good growth prospect and the company is improving so the stock price is also increasing and based on their future growth prospect the price of the stock can increase in future. In year 2006 EPS was 25. Growth prospect of Summit Power is very high and this company is improving tremendously. Face value of Summit Power was 100 Taka. . it is a power generation company.30 MW of electricity from 16th of December 2006. The entire generated electricity is sold to Palli Biddut Samity (PBS) under Power Purchase Agreements signed with REB and implementation Agreement signed with Government of Bangladesh. On June 2004 the company was converted to Public Limited Company under the companies Act 1994. After a subsequent capacity expansion.Prospect of investment in Bangladesh Power Sector 50 now the price trend is in upward trend.66. Narsingdi and Comilla. Now till August its price range is around 12501658 Taka. The future prospects have been discussed below. The company had initially established three 11MW power plants for sale of electricity to Rural Electrification Board (REB) on Build Own and Operate (BOO) basis at Savar. 1997 as a private Limited Company. Comilla plant is now generating a total 24.05 General Information of Summit Power: Summit Power Limited (SPL) sponsored by Summit Group was incorporated in Bangladesh on March 30. 17. In 2007 price of this share highest reached to 1658 Taka.50 MW of electricity from 15th November 2006 and Narshingdi expanded plant is generating a total 35. in 2005. Gazipur under one company and 33 MW Gas-fired Power Plant at Rupgonj. Own and Operate (BOO) basis subject to the approval of Power Cell. By observing. Summit’s present expansion plans along with the long term vision of growth by the management.) to Establish 11 MW Gas-fired Power Plant at Ullapara. . Summit Power had added an additional 38 MW to their Primary generation capacity of 33 MW. the current government’s initiatives to reforming the power sector and the existing gap between demand and supply in the power sector it can be concluded that Summit has very bright future prospect. Government of the Peoples Republic of Bangladesh. Sirajgonj and 33 MW Gas-fired Power Plant at Maona. and the remaining 1% by Summit Industrial & Mercantile Corporation (Pvt.) Ltd. There is an opportunity for power generation and Summit Power has the experience and support to grow its business every year. Comilla under the second company on a Build.06 Future Prospect of Summit Power: There is huge electricity shortage in Bangladesh. Energy & Mineral Resources. Narayangonj and 33 MW Gas-fired Power Plant at Jangalia. Ministry of Power.Prospect of investment in Bangladesh Power Sector 51 17. So currently it generates about 70 MW of electricity but this capacity will increase to 105 MW by October 2007. Power Division. The company’s capacity will increase further because the company has informed that it has decided to form two new Special Purpose Companies (99% share of these companies will be held by Summit Power Ltd. The economic goals of the country can not be achieved without flourishing the power sector of Bangladesh. 18.Prospect of investment in Bangladesh Power Sector 52 Stock Performance of Summit Power 1800 1600 1400 1200 1000 Price 800 600 400 200 0 06 06 06 06 07 07 07 07 7 07 7 r0 ct ov ec ar ay p n b n l0 Se Ja Fe Ap Ju Ju Au g 07 O N D M Month Closing Price Figure 4: Price graph of one year of Summit Power From the graph it can be observed that the stock price of summit power was with in the price range of Taka 500 to 700 from September 06 to May 07. Then after their expansion and declaration of getting their new projects the price of the stock gradually increased. At present.0 Conclusion: The need of electricity in Bangladesh can not be expressed in words. the effect of power in each and every growing sector of Bangladesh is undeniable. it is way over the time that we still locating the gaps and M . Demand of electricity in Bangladesh is very high and still electricity is no available to more then half of the country. now it is the time to act. still government holds the key of this sector but the private sector is always encouraged to participate in Bangladesh power sector to fulfill the government future plan of power sector. Again. And also the medium or small investors can also play their part on the capital market as it indicates the potential growth of the power sector. Though. Thus the investment in this sector will only produce profit margins. A jam-packed plan needs to be implemented as soon as possible to make the power sector effective. Lots of encouraging incentives has been provided by the government to the private sector. Only the combined investment of both large and small investors can manage the much needed improvement of the power sector of Bangladesh. private sector can grasp a good amount of profit from this sector. Private sector needs to play an important role to upgrade the contemporary condition of the power sector in Bangladesh. Government has taken lots of initiatives through reform and restructures programs and policy to facilitate private sector to invest in this immerging sector. Hopefully this paper let an investor know about the prospect of investment in Bangladesh power sector. .Prospect of investment in Bangladesh Power Sector 53 shortfalls on the power sector. More over demand for electricity will always exist so growth opportunity will always exist. gov. A brief on Rural Electrification Program.htm Bangladesh Power Development Board.bd/index.gov.gov. Dhaka. Govt. Bangladesh. 2006 Rural Electrification Board.powerdivision.gov. 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