DRAFT

GUIDE LINES FOR INTRODUCING COMPETITION AND FURTHERING

PUBLIC-PRIVATE PARTNERSHIP IN THE POWER SECTOR
Background:
A. In 1996, Government of Bangladesh (GOB) adopted the Private Sector
Power Generation Policy (PSPGP) to promote private sector participation
in the generation of electricity in order to attain higher economic efficiency;
B. In 2000, GOB issued a vision statement on power sector reforms with the
objective of providing access to affordable and reliable electricity to all by
the year 2020;
C. Augmenting generation capacity is an overwhelming priority for GOB to
meet existing energy shortfall as well as the impending demand growth in
the future years. A combination of various measures have been attempted
by GOB, including pursuing large generation capacity addition through the
state-sector entities and through Independent Power Producers (IPPs),
tendering out small power plants on fast-track basis and encouraging
procurement of surplus power from Captive Power Plants (CPPs);
D. GOB desires to promote further participation of the private sector in the
power sector and harness competition, seek optimal use and conservation
of countrys limited natural gas resources, and intends to upgrade some of
its old and inefficient power plants, especially, those running inefficiently in
terms of heat rate and high consumption of fuels and those requiring major
overhauling and refurbishment before getting into operation, through
rehabilitation in order to provide reliable power supply to the people; and
E. GOB also desires to develop new power plants or rehabilitate old power
plants through joint venture/partnership between public and private sector.
F. GOB is keen to develop entrepreneurship in the Bangladeshi private
sector in developing power projects.
G. Now, therefore, GOB has decided to involve/allow the private sector to:
(a) Set up power plants for supply to Eligible Large Consumers including
entities in Export Processing Zones, Special Economic Zones, Hightech parks etc. on mutually negotiated tariffs. Such plants will also
supply part of their electricity to the Public Sector Power Utilities at
tariffs, as determined by the Bangladesh Energy Regulatory
Commission (BERC).
(b) Permit use of transmission and distribution lines of Power Grid
Company of Bangladesh (PGCB) and distribution utilities on a nondiscriminatory basis by plants as set out in clause (a) for wheeling of

power produced in their existing as well as new power plants for bulk
supply;
(c) Upgrade old and inefficient plants owned by the government on
Rehabilitate Own and Operate (ROO) or Rehabilitate Own Transfer
(ROT) model ; and
(d) Develop new power plants or rehabilitate old, inefficient power plants in
partnership with BPDB or other power generation companies owned by
GOB.
.
Definitions
Unless the context shall otherwise require, the following terms shall have the
meaning ascribed to them, whenever used in these guidelines:
Private Investors means Bangladeshi Private Investors and joint venture
between foreign companies and Bangladeshi Private Investors.
Bangladeshi Private Investors means Bangladeshi Private Investors
including Non-resident Bangladeshis.
Eligible Large Consumers means consumers as defined in Annexure I of
these Guidelines.

PPP means long term risk sharing arrangements entered into between the
public and the private sector to meet a service typically provided by the public
sector. This can be structured in various forms including a joint venture /
partnership. It also includes arrangements where the private sector puts in the
entire investment with the public sector providing material guarantees and
commitments that make the project feasible.
PSIDG means Private Sector Infrastructure Development Guidelines, 2004.
Public Sector Power Utilities include BPDB, REB, DPDC, DESCO, PGCB,
WZPDCO, APSCL, EGCB, SWZPDC, NWZPGC and other such boards,
authorities, companies formed and successor thereof as well as any other
bodies involved in the Power Generation, Transmission and Distribution in which
GoB ownership is more than 50% (fifty percent).
ROO means a contract under which old and inefficient power plants of GoB
and Public Sector Power Utilities is transferred to Bangladeshi Investors to
Rehabilitate, Own and Operate as long as the operator is not in violation of its
franchise.
ROT means a contract under which old and inefficient power plants of GoB and
Public Sector Utilities is turned over to Bangladesh Investors to Rehabilitate, Own

and maintain for a franchise period, at the expiration of which the legal title to the
facility will be turned over to the original owner.

Part I.
Private Power Plants and Wheeling of Power from Private Power
Plants
1.

Private Power Plants :

a. Private Investors can establish and operate power plants on its own.
However, it would be required to obtain license from Bangladesh
Energy Regulatory Commission (BERC) under Chapter 6 of BERC Act,
2003 for generation of power. It would also be required to comply with
relevant environmental laws for development of new power plants and
applicable technical standards for grid connectivity and operation.
b. Such investors in power plants shall be free to find their own buyer(s)
for the power generated. They will be free to negotiate and charge the
applicable tariff for power with Eligible Large Consumers,.
c. Public Sector Power Utilities may purchase power from power plants
covered in clause 1 (a), as needed, subject to approval by BERC , but
GOB will not provide any guarantee in favour of any utilities interested
to purchase power from such power plants..
d. Given the fast depleting condition of domestic natural gas, the new
power plants shall preferably rely on coal, imported gas, liquid fuel, or
renewable energy sources like solar, wind, hydro, biomass, municipal
waste etc. as fuels, instead of domestic natural gas. Any fuel supply or
source of energy has to be arranged by developers of such power
plants as covered in clause 1 (a) without GOB involvement. However
such private investors will have priority for development of coal mines
and supply of coal from existing coal mines.
e. GOB will not be responsible to supply inputs, or provide guarantee in
favour of any fuel supplier interested to supply fuels to power plants as
covered in clause 1 (a).
f. Private Power Plant will be eligible for all fiscal and other incentives
provided under PSPGP subject to certification by concerned Gov.
Authority and compliance with all licensing requirement by BERC.
g. If approached, and subject to the availability, GOB may lease out
suitable land to the private sector investors for setting up power plants
as covered under clause 1 (a)
h. Private Investors will
(i) pay a royalty/surcharge to GoB as shown in Annexure II

(ii) sell electricity to public sector utilities, at regulated price as in

Annexure II.
Such royalty/surcharge or amount of electricity sold may be changed by GoB
from time to time.

2.

Wheeling of Power from Private Power Plants

a. PGCB and all distribution utilities shall provide non-discriminatory open
access to their transmission / distribution system for use by
i. any generation licensee on payment of transmission /
distribution wheeling charges, as determined by BERC; or
ii. any Eligible Large Consumer on payment of transmission /
distribution wheeling charges and any additional charges, as
determined by BERC
iii. any captive generating station for the purpose of carrying
electricity from the captive generating station to the destination
of his own use on payment of transmission / distribution
wheeling charges, as determined by BERC.

b. Open access, as per clause 2 (a), will be subject to availability of

adequate capacity of transmission and distribution facilities, provided
that any dispute regarding the availability of adequate transmission and
distribution facilities will be adjudicated upon by the BERC. BERC shall
specify the manner in which such applications for adjudication of any
disputes shall be filed by disputing parties.
c. Applicable transmission loss for open access transactions, shall be as
per applicable regulations of BERC in this regard.
d. Power plants will be responsible to establish their dedicated
transmission facilities in compliance with the technical standard set by
BERC to reach the transmission facilities of PGCB or other distribution
utilities.

Part II.
PPP for Existing Power Plants
Rehabilitation of Existing Power Plants through PPP
a. Subject to the terms and conditions of these Guidelines, GOB intends to
allow some of its existing power plants, especially those:
i. operating inefficiently for the last three years with the average heat
rate of maximum 3500 kcal/kwh for gas turbines, 3200 kcal/kwh for
steam turbines and 2500kcal/kwh for combined cycles; and

ii. subject to frequent shutdown, operating with availability of less than

30% percent for the last three years and or are in need of major
overhauling or refurbishment in order to get into operation,
to be opened to the Bangladeshi Private Investors through PPP route on
ROO or Rehabilitate Own Transfer (ROT) basis.

b. GOB will invite PPP in those existing Power Plants, as described in clause
1(a) above through a tender and award process in accordance with
provisions under clause 6 of the Private Sector Infrastructure Development
Guidelines, 2004 and Public Procurement Act 2006.
c. The assets of the relevant power plants will be valued by the Government
through an independent valuer (with proven experience of valuing similar
power plants) to assess the market value of such assets. The valuation
report determining the market value of the existing assets of such plants
will be available to all bidders.
d. The successful bidders will be required to pay the value of the existing
assets of the relevant power plants, as determined by the independent
valuer, to the Government as consideration money for transfer of such
assets by the Government.
e. The consideration money for transfer of existing assets of relevant power
plants may be paid to the Government up front, or subject to
Governments approval, adjusted against the tariff proposed by the
bidders.
f. Following pre-qualification and successful submission of bids, power tariff
offered by the bidders will form the basis for awarding a ROO or ROT
Project.
g. Following award of the contract, the Bangladeshi Private Investors would
Rehabilitate Own and Operate, or Rehabilitate Own and Transfer the
Project as per provisions in the Power Purchase Agreement.
h. GOB will have the right to terminate a ROO or ROT contract if the
Investors fail to rehabilitate and operate the Project, as per the Power
Purchase Agreement.
i. In a ROO or ROT Project attempts shall be made to retain at least 60% of
qualified existing/laid off staff of the Project on a priority basis.
j. In case a joint venture / partnership form of PPP is adopted, the equity
contribution of the Public Sector Power Utilities could include monetized
value of project land, existing machineries, etc. as valued by an
independent valuer.

Part III.
Joint venture/partnership between Public and Private Sector for
development of new power plants

a. Public Sector Power Utilities can form joint venture or partnership with
Bangladeshi private investors to develop new power plants on Build Own
and Operate (BOO) Basis.
b. For projects developed on joint venture/partnership basis a Special Project
Vehicle (SPV) will be established to carry out the Project activities.
c. Terms and conditions of the joint venture/partnership will be stipulated in a
joint venture/partnership deed signed between the public sector electric
utilities and Bangladeshi Private Investors.
d. The nature of the SPV will be determined as it is incorporated under the
relevant laws of Bangladesh.
e. Bangladeshi Private Investors will be required to own at least 51% shares
in the SPV.
f. Contribution of public sector electric utilities i.e. project land and other
assets will be monetised and added to the cash contribution, if any, and
shall form the basis for its share in the joint venture/partnership.

Part IV.
Miscellaneous
1 Qualification of Private Investors:
A.

The interested private investors should posses the following

qualification for installation of a power plant under Part I of this
guideline.

:
i.

Proven financial strength to arrange financing for development of

Private Power Plant at their own risk to sell power to mutually
agreed customer.

ii.

Proven experience in developing and operating a power plant as

IPP or Private Power Plant.

B.

2.

The interested Bangladeshi private investors should posses the

following qualification for ROO/ROT project under Part II of this
guideline.

i.

Proven financial strength to arrange financing for any large project.

ii.

Proven experience in developing and operating a Power Plant as

IPP.

iii.

Proven experience in rehabilating a power plant or they have

contractual arrangement with third party having adequate
experience in rehabilitation of a power plants

C.

The interested Bangladeshi private investors should posses the

following qualification for new power plant development on Joint
Venture/partnership under Part III of this guideline.

i.

Proven financial strength to arrange financing for any large project

ii.

Proven experience in developing and operating a Power Plant as

IPP or they have contractual arrangement with third party having
adequate experience in developing and operating a power plant as
IPP

Power Purchase, Gas Supply and Land Lease/Transfer by GOB:

a. Public Sector Power Utilities will purchase power from ROO under Part-II
and Part-III under a Power Purchase Agreement (PPA). In this case,
provisions under clause 4 of the PSPGP will be applicable.
b. GOB will ensure the supply of required fuel to a ROO Project under a Fuel
Supply Agreement (FSA). Specification of the fuels will be provided in the
PPA or FSA.
c. GOB will arrange transfer, acquisition or leasing out of the Project land to
the Private Investor or SPV, as applicable, for a ROO Project under Part-II
and Part-III of these Guidelines. The relevant Private Investor or SPV will
be required to pay the relevant amount of money pursuant to such
transfer, acquisition or leasing of the Project land.
d. The Private Investors or SPV, as applicable, will not be allowed to do any
other business except the Project activities in the Project land.

3.

Licensing:
e. The Private Investors or SPV, as applicable, would be required to obtain
necessary License from BERC, as Independent Power Producer for a
ROO Project under Part-II and Part-III of these Guidelines.
f.

The Private Investors or SPV, as applicable, would also be required to

obtain all necessary License from Department of Environment and local
government authorities, if any, for a ROO Project under Part-II and Part-III
of these Guidelines.

g. The Private Investors would be required to submit environmental impact

assessment report along with mitigation measures undertaken for all
Project Projects under these Guidelines.
4.
Fiscal Incentives and GOB Support:
h.

5.

The Private Investors of a ROO Project under Part-II and Part-III of these
Guidelines will be eligible for all incentives and GOB support as provided
in clauses 5 and 6 of PSPGP.
Right to Interpretation:

i.
j.
k.

Clause headings are for convenience only and shall not affect
interpretation of any clause.
Singular terms include plural and vice versa.
In case of ambiguity with regard to interpretation of any provision of
these Guidelines, GOB interpretation shall be final.

Annexure I
Eligible Large Consumers shall be as per the phasing of open access in
Bangladesh and will start with the following consumers:
(a) Consumers connected to the national grid through transmission
lines of 33KV and above having connected load greater than or
equal to 20MW or any such amount fixed by the GoB from time to
time.
(b) Consumers connected at 33kV or 11 kV lines of distribution utilities
having connected load greater than or equal to 5 MW;
(c) All consumers having connected load equal to or greater than 0.5
MW in case they are seeking open access from renewable energy
projects.
Connected load of consumers shall be determined as per regulation of BERC,
agglomeration of a group of consumers shall not be allowed to seek eligibility.
The thresholds specified herein shall be reviewed from time to time by GOB and
BERC and subsequent lowering of threshold shall be as determined by BERC
with the concurrence of GOB. Any impact on loss of cross-subsidy to distribution
licensees for Eligible Large Consumers moving away from their systems shall be

duly considered by BERC while suggesting further lowering of threshold. Open

access can be introduced for consumers without elimination of cross-subsidies, in
which case a suitable compensatory mechanism will be suggested by BERC for
distribution licensees, including the need and possibility of imposing surcharge on
such Eligible Large Consumers.

Annexure II
Private Investors will
(i) pay a royalty/surcharge GoB with wheeling charge to cover cross
subsidy..
(ii) sell 20% of its electricity produced to public sector utilities at a
regulated tariff by BERC.
(iii) Government may change the amount of royalty/surcharge and the
amount of energy sold to public utilities from time to time.