World Bank to provide $257 mln for Bangladesh's power sector

DHAKA (Reuters) - The World Bank will provide $257 million loan to support Bangladesh's power sector to overcome its nagging electricity shortages, the Bank said in a statement on Sunday.

"Inadequate power supply costs Bangladesh as much as 2 percent in GDP growth each year," said Ellen Goldstein, country director of the World Bank in Bangladesh.

"We are supporting the government of Bangladesh for reliable power generation to boost growth," she said in the statement.

Through public-private partnerships (PPP), independent power providers have increased generation by 178 megawatts in recent years.

The PPP model holds promise to further overcome Bangladesh's power deficit.

World Bank also supported government's $321 million rural electrification and renewable energy development project.

The World Bank official said it had contributed to connecting 630,000 rural homes to the national electricity grid and provided about 320,000 remote households with solar home systems.

The project has also connected another 270,000 households in remote rural areas through solar home systems.

Power plants at Haripur with 360 megawatts (MW) capacity and Meghnaghat with 450 MW capacity supported by the World Bank are providing reliable power to the national grid.

An ongoing project of the World Bank is supporting a 300 MW peaking power plant in Siddhirganj near Dhaka.

Bangladesh's foreign direct investment halved to $297 million during the first half of the fiscal year to end June 2010 because of global recession and crippling shortages in local power supply, the central bank said last week.

"Bangladesh can overcome energy shortage within the next three to four years through institutional capacity building and strong commitment from the government," Ellen said.

She also suggested importing hydroelectricity from neighbouring countries like Nepal and Bhutan that have the potential to export up to 24,000 MW of electricity.

"These sources can be an affordable and cost effective option for Bangladesh."

Bangladesh faces shortages of up to 300 million cubic feet of gas and up to 1,500 megawatts of electricity each day.

(Reporting by Serajul Islam Quadir; Editing by Hans Peters)