VZCZCXRO6146
PP RUEHAST RUEHBI RUEHCI RUEHDBU RUEHLH RUEHNEH RUEHPW
DE RUEHKA #0109/01 0350832
ZNR UUUUU ZZH
P 040832Z FEB 10
FM AMEMBASSY DHAKA
TO RUEHC/SECSTATE WASHDC PRIORITY 9977
INFO RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE
RUEHGP/AMEMBASSY SINGAPORE 3113
RUEHLO/AMEMBASSY LONDON 2235
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMCSUU/DEPT OF ENERGY WASHINGTON DC
RUEVDEE/DEPT OF INTERIOR WASHDC

UNCLAS SECTION 01 OF 03 DHAKA 000109 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR SCA/INSB 
ENERGY FOR NICHOLAS SHERMAN 
INTERIOR FOR OSMRE ALFRED WHITEHOUSE 
 
E.O. 12958: N/A 
TAGS: ENRG EINV ETRD EAID ECON PREL BG
SUBJECT:  BANGLADESH ON THE ROAD TO WOO POWER INVESTORS 
 
SUMMARY 
------- 
 
¶1.  (SBU) Six power projects valued at $5.5 billion are the core of 
a Government of Bangladesh (GOB) plan to add close to 4,000 
megawatts (MW) of power to Bangladesh's grid.  GOB officials 
unveiled these plans at a series of investment roadshows in London, 
Singapore and New York in December and January.  Investors at the 
Singapore conference were impressed with the GOB's plans and 
presentations.  Business representatives in Singapore said they 
hoped the GOB would move more quickly on these projects than it had 
on previous power projects.  These and other power generation 
projects, including power sharing initiatives between India and 
Bangladesh, are desperately needed to address Bangladesh's growing 
power crisis and represent a commercial opportunity for U.S. firms. 
 
Bangladesh Needs More Than 2,000 MW of Power 
---------------------------------------- 
 
¶2.  (SBU) At an investment conference held in Singapore January 
25-26, GOB officials were frank about Bangladesh's energy needs. 
According to the Chairman of Bangladesh's Power Development Board 
(BPDB), the country has the capacity to produce 5,800 MW of power. 
However, most existing power plants are old, do not operate at peak 
capacity and frequently are shut down for repairs and maintenance. 
Bangladesh's Power Secretary reported that Bangladesh generated 
between 3,800 and 4,300 MW per day in 2009, while demand ranged from 
4,200 to 5,500 MW per day. 
 
Planned Generation Expansion Well Short of Demand 
--------------------------------- 
 
¶3.  (U) The BPDB Chairman told investors in Singapore that existing 
power expansion plans would still leave Bangladesh with a 
1,400-1,800 MW power shortfall annually through 2014.  Therefore the 
GOB had developed additional plans for six large power plants, a 
wind-powered plant, three small solar-powered plants, and a terminal 
for the import of liquefied natural gas (LNG) to address the 
shortfall.  The Chairman said these private sector projects, which 
were the focus of the investment roadshow, along with a range of 
public sector programs aimed to gradually reduce the supply-demand 
gap and ensure power supply exceeded demand by 2013 or 2014. 
 
Power Expansion Based on Gas, Dual Fuel, Coal Plants 
------------------------------------- 
 
¶4.  (U) The GOB highlighted at the roadshow six proposed independent 
power projects for companies to invest in on a build-own-operate 
(BOO) or build-own-operate-transfer (BOOT) basis: 
 
--a 300-450 MW gas-fired, combined cycle plant located near 
Chevron's Bibiyana gas field in northeastern Bangladesh (Bibiyana 
2); 
 
--a 300-450 MW dual fuel, combined cycle plant located at Meghnaghat 
outside Dhaka (Meghnaghat 2); 
 
--a 150-225 MW gas-fired, combined cycle plant located in Bhola in 
southern Bangladesh; 
 
--a 100 MW dual fuel, peaking power plant located at Savar outside 
Dhaka and near a cluster of leather tanneries; 
 
--a 100 MW dual fuel, peaking power plant located at Kaliakoir north 
of Dhaka and near a planned information technology industrial park; 
and 
 
--a 2,000-2,600 MW coal-fired power project that would include four 
500-700 MW plants located in central and southern Bangladesh. 
 
The BPDB Chairman estimated that these projects would involve a 
total investment of $5.5 billion.  The Chairman also described plans 
for three small solar power plants, between 1 and 4 MW each.  He 
outlined a proposal to establish a 100 MW wind-based power plant on 
the coast at Chittagong, Bangladesh's second city in southeastern 
Bangladesh. 
 
Proposed LNG Terminal in Chittagong Port 
----------------------------- 
 
¶5.  (U) The Chairman of the state-owned Bangladesh Oil, Gas and 
Mineral Corporation (Petrobangla) reviewed a proposal to build a 
 
DHAKA 00000109  002 OF 003 
 
 
liquefied natural gas (LNG) terminal south of Chittagong near the 
site where the GOB would like to build a deep sea port.  The LNG 
imported and stored in the terminal would augment Bangladesh's own 
natural gas resources.  Bangladesh relies on natural gas for power, 
fertilizer, industrial and transportation purposes. 
 
Investors Keen on Coal and Other Domestic Energy Sources 
------------------------------------- 
 
¶6.  (SBU) Investors in Singapore were quick to question the GOB's 
plans for supplying energy to these proposed plants.  They focused 
on the fact that Bangladesh anticipated importing coal to fuel the 
proposed coal-fired plants.  Why didn't Bangladesh use its own vast 
reserves of high-quality coal instead, several investors asked. 
Bangladesh has an estimated 2 billion metric tons of coal, which 
many observers believe represent the most economically efficient 
solution to Bangladesh's energy deficit.  A U.S.-U.K.-Australian 
venture to develop a large portion of these reserves has languished 
as a result of the GOB's reluctance to fully exploit its coal 
reserves. (COMMENT:  The now-governing Awami League vigorously 
opposed development of these reserves when it was the opposition 
party and is now finding it difficult to reverse track.  END 
COMMENT.) 
 
GOB Considering Ways to Exploit Large Coal Reserves 
--------------------------------- 
 
¶7.  (U) Tawfiq Elahi Chowdhury, the Bangladesh Prime Minister's 
Energy Advisor and top energy decision-maker, admitted the GOB was 
undergoing some "soul searching on coal."  Chowdhury said the GOB 
was grappling with technical, social and environmental challenges 
connected to surface mining, which would be the best way to access 
Bangladesh's coal reserves.  Chowdhury told investors he anticipated 
the GOB would reach a decision on this issue of coal within "a 
couple of months."  He added that the GOB hoped to mine Bangladesh's 
coal fields in the future. 
 
Recovering Gas Reserves More Attractive to GOB 
-------------------------------------- 
 
¶8.  (SBU) Chowdhury also noted that the GOB's plans for an LNG 
terminal were a response to short- and medium-term shortages in 
Bangladesh's domestic gas supplies.  The GOB is pursuing onshore and 
offshore gas prospects, including with U.S. firms Chevron and 
ConocoPhillips. 
 
What about timing and pricing? 
------------------------------ 
 
¶9.  (U) The BPDB Chairman said the GOB planned to complete the 
tendering process and sign contracts on the six main power projects 
by the end of 2010 or early 2011.  The GOB estimates that the gas 
fired and dual fuel plants could be operational between late 2010 
and early 2014.  The coal fired power plants have an operations 
target of late 2014 or early 2015. 
 
Energy Regulation and Pricing 
----------------------------- 
 
¶10.  (U) Bangladesh's Power Secretary described ongoing GOB efforts 
to rationalize power prices so they better reflect power costs and 
lower GOB power subsidies.  According to the Power Secretary, the 
Bangladesh Energy Regulatory Commission (BERC), which has evolved 
largely as the result of USG assistance since its inception in 2003, 
increased power tariffs in 2008 and 2009.  BERC planned further 
incremental increases between now and 2014 to better match prices 
and costs. 
 
Bangladesh Also Exploring Power Sharing with India 
----------------------------------------- 
 
¶11.  (SBU) As GOB officials were on the road to promote these power 
and energy projects, Prime Minister Sheikh Hasina returned from a 
highly successful summit with Indian Prime Minister Manmohan Singh 
in New Delhi.  Among the topics discussed was power sharing, and 
India committed to providing 250 MW of electricity from its grid to 
Bangladesh.  This is an important step towards regional power 
sharing, one that programs like USAID's South Asia Regional 
Initiative for Energy (SARI/Energy) can build on. 
 
Comment 
------- 
 
DHAKA 00000109  003 OF 003 
 
 
 
¶12.  (SBU) Investors at the Singapore conference agreed the GOB had 
presented itself and its projects very favorably.  They rightly 
questioned the GOB about the timing of tenders and sources of 
energy.  The GOB tender process usually moves at a glacial pace. 
For example, it is now nine months since the GOB revitalized plans 
for its first proposed power plant at Bibiyana (Bibiyana 1). 
Despite having promised to award the contract for Bibiyana 1 in the 
fall of 2009, the GOB has not yet floated the tender, though the 
pre-qualification process is complete.  Many local experts question 
whether the timelines outlined at the road show are realistic. 
 
¶13.  (SBU) Bangladesh desperately needs power, and power generation 
is one of the top election commitments made by the Awami League 
government.  It is no coincidence that the projects highlighted at 
the road show are reportedly set to come online in late 2013 or 
early 2014.  This corresponds with the end of the Awami League's 
term in office.  The Awami League government must follow through on 
its power promises if it hopes to stand a chance in the next 
national elections.  U.S. companies stand to benefit from 
participating in meeting Bangladesh's energy deficit and sharply 
increasing demand.  Mission Dhaka will continue to aggressively 
support U.S. companies in this endeavor. 
 
MORIARTY