Bangladesh: Second Public-Private Infrastructure Development Facility

Sovereign (Public) Project | 42180-013

ADB is helping Bangladesh finance private sector-led infrastructure projects. The project will provide a $100 million credit line to the state-owned Infrastructure Development Company Ltd. for investment in projects with a minimum cost of $10 million. It will also help finance off-grid renewable energy systems for households and small to medium-sized businesses in rural areas.

Project Name Second Public-Private Infrastructure Development Facility
Project Number 42180-013
Country Bangladesh
Project Status Closed
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3045-BAN: Second Public-Private Infrastructure Development Facility
Ordinary capital resources US$ 100.00 million
Loan 3046-BAN: Second Public-Private Infrastructure Development Facility
concessional ordinary capital resources lending / Asian Development Fund US$ 10.00 million
Loan: Second Public-Private Infrastructure Development Facility
World Bank US$ 99.50 million
Japan International Cooperation Agency US$ 96.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Partnerships
Private sector development
Sector / Subsector

Finance / Infrastructure finance and investment funds

Gender Equity and Mainstreaming Some gender elements
Description

The Second Public-Private Infrastructure Development Facility (PPIDF II or the Project). PPIDF II builds on the efforts of Public-Private Infrastructure Development Facility (PPIDF I) in helping address the infrastructure deficiencies in Bangladesh by providing long-term debt financing and catalyzing private sector participation through Infrastructure Development Company Limited (IDCOL). This will support poverty reduction through enhanced investment, economic growth, and increase in employment opportunities. The design of the Project serves to attract commercial financing for infrastructure projects, thereby reducing the pressure on the public budget. An additional objective of the Project is to help provide the rural population and small to medium enterprises in off-grid areas with access to environment-friendly electricity.

The financing modalities of the Project. PPIDF II comprises two components, namely: (i) component 1 which uses the proceeds from the ordinary capital resources (OCR) sovereign loan of $100 million to provide IDCOL with long-term additional resources for the financing of medium to large-sized private sector-led infrastructure projects with a total project cost of minimum $10 million; and (ii) component 2 which routes the proceeds from the sovereign Asian Development Fund (ADF) loan of $10 million through IDCOL for the further expansion of its successful (Solar Home System (SHS) program which has so far provided financing of more than 2 million SHS (at appraisal) through a microfinance-based, direct sales program in rural off-grid areas to provide households and small businesses with a renewable source of energy. Component 1 will provide funding directly to subborrowers in form of providing long-term loans to infrastructure project while Component 2 will channel funding from IDCOL through participating organizations (POs) to the end-user which are typically households in off-grid areas.

Project Rationale and Linkage to Country/Regional Strategy

Bangladesh has achieved substantial economic growth over the last 15 years. From 1996 to 2009, the gross domestic product (GDP) increased at a compounded annual growth rate of 5.6%. During FY2012, the Bangladesh economy has continued to grow at 6.3%, which can mainly be credited to the growth in the manufacturing and agricultural sectors, although growth has slightly slowed from 6.7% in the previous year.

Deficient infrastructure. Underinvestment in infrastructure causes serious constraints in power, gas, ports, railways, and roads and prevents Bangladesh from achieving its full growth potential. Many years of underinvestment have taken a toll and resulted in poor access to basic infrastructure for a large part of Bangladesh's population, particularly the economically-disadvantaged and those in rural areas. The deficient infrastructure situation and the absence of deep-rooted regional integration restrict investment including foreign direct investments in Bangladesh.

Bangladesh suffers from a chronic shortage of energy which adversely impacts the economy. Gas, the main source of energy, is insufficient to meet the current demand. Power supply is 28% short of demand. Energy shortages are undermining the country's competitiveness causing an annual estimated loss of 2% of GDP. The situation is not expected to improve in the short term as gas production is expected to decline from 2019. Securing new sources of energy locally or abroad (e.g. coal, liquid natural gas) will take time because of the need for policy decisions largely related to setting energy tariffs at market levels. Energy efficiency measures can, to some extent, provide a cost-effective response to energy shortages.

The public sector is the dominant provider of infrastructure. As it is the case in most of South Asia, the public sector has been the main provider of basic infrastructure in Bangladesh. However, public financing alone will not be able to generate the investments needed to provide the required level of infrastructure facilities. At present, most public service providers show weak financial performance and inadequate investment. Recognizing the need for creating an enabling environment for attracting private investments on a sustained basis, the Government has taken a number of actions, such as: (i) the introduction in 2009/2010 of a PPP budget and a Policy and Strategy for PPP in 2010 and (ii) enabling arrangements for bridging the enormous deficit in infrastructure financing especially for long-term funds, for instance, through the establishment of the Bangladesh Infrastructure Finance Fund Limited, a long-term capital funding vehicle that seeks to raise debt capital markets funding from retail and institutional investors to support construction and take-out financing for PPP projects.

Underdeveloped capital markets impede the availability of infrastructure financing. Private investors in Bangladesh, however, face the challenge to source long-term financing required for infrastructure domestically. Bangladesh's capital markets, including long-term corporate debt market, remain underdeveloped. So far, the volume of funding sourced from the local debt and equity market for private investment expenditure in Bangladesh has been quite small and private sector sponsors still rely more on banks and internal resources than on market borrowings, indicating weakness in debt markets. Commercial banks in Bangladesh are facing maturity mismatches in their asset and liability management as they rely on short-term deposits as their financial source, and this prevents them from providing long-term financing for infrastructure projects. Currently, the Infrastructure Development Company Limited (IDCOL) is the only financial institution in Bangladesh that has the ability to provide dollar financing with long tenor.

Opportunities. ADB's country partnership strategy 2011-2015 for Bangladesh emphasizes the need for support of private sector-led infrastructure development. This is in line with Bangladesh's Sixth Five-Year Plan for 2011-2015, which focuses on accelerating the growth rate of the economy and reducing poverty by substantially boosting private sector investment and developing infrastructure. In particular, it emphasizes the need to triple infrastructure development, from 2% to 6% of GDP, with substantial participation of the private sector through PPPs. Moreover, the objectives of the Project are in line with ADB's Financial Sector Operational Plan, which prioritizes capital market development for infrastructure finance and financial inclusion.

Impact Enhanced development of infrastructure, including renewable energy facilities
Project Outcome
Description of Outcome Increased PSP in infrastructure development including in renewable energy facilities
Progress Toward Outcome

Number of infrastructure subprojects under PPP and PSP modality increased by 6 by 2019:

Six infrastructure subprojects have been financed through IDCOL in the power and transport sectors - (i) 52.2MW power plant with total project cost of $50.08 million, of which ADB's share is $15 million; (ii) a land port with capacity of 120,000 TEU and total project cost of $35.79 million, including ADB share of $10 million; (iii) 110 MW power plant with total project cost of $73.59 million, of which ADB share $30 million; (iv) 55 MW power plant with total project cost of $39.48 million, of which ADB financing $15 million; (v) a 80,000 TEU Container Terminal and Freight Station with total project cost of $72.35 million, of which ADB's share is $15 million; and (vi) a 38,700 TEUs Bonded Warehouse, Inland Container Depot and Container Freight Station for which ADB's share is $15 million.

PPIDF II provided financing of 9.02 million for solar home systems through IDCOL.

At least 57,700 tons of GHG emissions reduced by 2019:

46,758 solar home systems have received ADB financing through IDCOL's SHS Program. GHG emissions reduction from these SHSs will be measured in 2019.

Implementation Progress
Description of Project Outputs

1. Increased availability of long-term debt financing for innovative infrastructure subprojects

2. Increased availability and accessibility of financing for SHS

Status of Implementation Progress (Outputs, Activities, and Issues)

PPIDF II financed 6 subprojects, of which 4 have completed financial closure. The subprojects are:

1. Lakdhanavi Bangla Power Limited (LBPL)

2. Summit Alliance Port Limited (SAPL)

3. Summit Barisal Power Limited (SBPL)

4. Summit Narayanganj Power Unit 2 Limited (SNPU2L)

5. Ispahani Summit Alliance Terminals Limited (ISATL)

6. Summit Alliance Port Limited (Expansion)

Total private capital mobilized: $194.4 million. (Total amount leveraged - 218%)

Equity mobilized: $114 million. (Equity leveraged - 128%)

Debt mobilized: $80.45 million. (Debt leveraged - 90%)

Risk Manager recruited by IDCOL

46,758 SHSs installed.

46,758 households have access to electricity.

46,758 accounts opened. Percentage of women borrowers reached is not yet due to measure.

Percentage increase of SHS sale to women is not yet due to measure.

Geographical Location Nation-wide
Safeguard Categories
Environment FI-C
Involuntary Resettlement FI-C
Indigenous Peoples FI-C
Summary of Environmental and Social Aspects
Environmental Aspects The project is classified as financial intermediary for the environment, involuntary resettlement, and indigenous peoples. As the proceeds from the proposed ordinary capital resources loan will be used by one or more private sector sponsors to finance subprojects, there is a potential risk that some of those developers may not fully adhere to ADB's safeguard requirements during implementation. The project team will assess project-specific environmental impact assessment and/or resettlement plans as well as each sponsors' environmental management, involuntary resettlement, impacts on indigenous peoples arising from land acquisition, changes in land use, adherence to core labor standards, or restrictions of access to resources and social protection framework and policies, and assess where enhancements may need to be made by the company. IDCOL has adopted the environmental and social safeguard framework and improved its in-house capacity with ADB support.
Involuntary Resettlement The project is classified as financial intermediary for the environment, involuntary resettlement, and indigenous peoples. As the proceeds from the proposed ordinary capital resources loan will be used by one or more private sector sponsors to finance subprojects, there is a potential risk that some of those developers may not fully adhere to ADB's safeguard requirements during implementation. The project team will assess project-specific environmental impact assessment and/or resettlement plans as well as each sponsors' environmental management, involuntary resettlement, impacts on indigenous peoples arising from land acquisition, changes in land use, adherence to core labor standards, or restrictions of access to resources and social protection framework and policies, and assess where enhancements may need to be made by the company. IDCOL has adopted the environmental and social safeguard framework and improved its in-house capacity with ADB support.
Indigenous Peoples The project is classified as financial intermediary for the environment, involuntary resettlement, and indigenous peoples. As the proceeds from the proposed ordinary capital resources loan will be used by one or more private sector sponsors to finance subprojects, there is a potential risk that some of those developers may not fully adhere to ADB's safeguard requirements during implementation. The project team will assess project-specific environmental impact assessment and/or resettlement plans as well as each sponsors' environmental management, involuntary resettlement, impacts on indigenous peoples arising from land acquisition, changes in land use, adherence to core labor standards, or restrictions of access to resources and social protection framework and policies, and assess where enhancements may need to be made by the company. IDCOL has adopted the environmental and social safeguard framework and improved its in-house capacity with ADB support.
Stakeholder Communication, Participation, and Consultation
During Project Design tbd
During Project Implementation The Ministry of Finance (MOF), acting through its Economic Relations Division, is the executing agency while the Banking and Financial Institutions Division is the financial management agency, and IDCOL is the implementing agency of the Project. Policy direction and strategic oversight is provided by IDCOL''s board of directors. IDCOL''s project management unit, established under PPIDF I, monitors the day-to-day implementation of the loans. The same will build capacity within IDCOL in areas of monitoring exposure limits, process improvements, risk assessment, and analysis. Further, the project management unit will ensure compliance with state and national policies and IDCOL's environmental and social safeguard framework (ESSF) which ensures compliance with ADB safeguard policies and national norms.
Business Opportunities
Consulting Services not applicable
Procurement Advance contracting will be undertaken in accordance with established private sector or commercial practices, which are acceptable to ADB. For funding support under the IDCOL's credit facility, potential subborrower's issuance of invitations to bid under advance contracting will be subject to ADB approval. EA, IDCOL, and identified subborrowers have been (and will be) advised that approval of advance contracting does not commit ADB to finance the Project.
Responsible ADB Officer Al Hasan, Mohammad Rashed
Responsible ADB Department South Asia Department
Responsible ADB Division Bangladesh Resident Mission
Executing Agencies
Ministry of Finance
Mr. M. Khurshed Alamm
Economic Relations Division (ERD), MOF
Sher-e-Bangla Nagar, Dhaka_1207
Bangladesh
Timetable
Concept Clearance -
Fact Finding -
MRM 16 Jul 2013
Approval 17 Oct 2013
Last Review Mission -
Last PDS Update 01 Apr 2019

Loan 3045-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
17 Oct 2013 06 Apr 2014 12 Aug 2014 31 Jul 2019 - 02 Oct 2019
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 375.50 Cumulative Contract Awards
ADB 100.00 07 Sep 2021 100.00 0.00 100%
Counterpart 80.00 Cumulative Disbursements
Cofinancing 195.50 07 Sep 2021 100.00 0.00 100%

Loan 3046-BAN

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
17 Oct 2013 06 Apr 2014 12 Aug 2014 31 Jul 2019 - 02 Oct 2019
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 10.00 Cumulative Contract Awards
ADB 10.00 07 Sep 2021 9.12 0.00 100%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 07 Sep 2021 9.12 0.00 100%

Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

The Access to Information Policy (AIP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.

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Title Document Type Document Date
Second Public-Private Infrastructure Development Facility: Audited Project Financial Statements (July 2019-June 2020) Audited Project Financial Statements Dec 2020
Second Public-Private Infrastructure Development Facility: Audited Project Financial Statements (July 2018-June 2019) Audited Project Financial Statements Dec 2019
Second Public-Private Infrastructure Development Facility: Audited Project Financial Statements (1 July 2017 - 30 June 2018) Audited Project Financial Statements Dec 2018
Second Public-Private Infrastructure Development Facility: Audited Project Financial Statements (July 2016-June 2017) Audited Project Financial Statements Dec 2017
Second Public-Private Infrastructure Development Facility: Audited Project Financial Statements (July 2015-June 2016) Audited Project Financial Statements Nov 2016
Second Public-Private Infrastructure Development Facility: Audited Project Financial Statements (July 2014-June 2015) Audited Project Financial Statements Dec 2015
Loan Agreement for Second Public-Private Infrastructure Development Facility Project Loan Agreement (Ordinary Resources) Apr 2014
Loan Agreement (Special Operations) for Second Public-Private Infrastructure Development Facility Project Loan Agreement (Special Operations) Apr 2014
Project Agreement for Second Public-Private Infrastructure Development Facility Project Project/Program Agreements Apr 2014
Second Public-Private Infrastructure Development Facility Project/Program Administration Manual Sep 2013
Second Public-Private Infrastructure Development Facility Reports and Recommendations of the President Sep 2013

Safeguard Documents See also: Safeguards
Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.


Evaluation Documents See also: Independent Evaluation

None currently available.


Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

No tenders for this project were found.


Contracts Awarded

No contracts awarded for this project were found


Procurement Plan

None currently available.