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The Asian Development Bank (ADB) will provide Bangladesh with US$500 million in loan to help build a state-of-the-art 800 megawatt (MW) power plant in Khulna.
Part of the loan will also be spent for linking it up with natural gas and power transmission facilities.
Board of Directors of the multilateral lender approved the loan on Tuesday at its headquarters in Manila, Philippines, said an ADB press release.
"Amid the rising demand for energy in a growing economy, the Rupsha Power Plant will be the first of its kind in Bangladesh, vastly increasing the availability of efficient and cleaner energy," said ADB Energy Specialist Aziz Yusupov.
"By providing additional electricity to about 300,000 consumers, the plant will stimulate business expansion and create new jobs," Mr. Aziz Yusupov was also quoted as saying.
Bangladesh faces a major challenge in providing modern and affordable energy, while suffering from recurring generating capacity shortages in the power sector, the ADB release said.
In fiscal year 2017, the peak hour demand was estimated at 10,400mw. But the power generation capacity was just 9,479 mw, it mentioned.
The net peak hour demand is expected to exceed 13,300mw by 2020 and 19,900mw by 2025, while the existing power generation facilities will gradually retire and need replacement.
Recognising the need to sustain Bangladesh's economic momentum, the government has prepared an investment plan to increase the power generation capacity and improve the transmission and distribution network. This is aimed at achieving universal access to grid-connected electricity by 2021, it said.
The ADB-financed project design will ensure that the Rupsha plant uses the latest combined cycle technology, which offers the highest efficiency to convert gas to electricity.
It will also use the most advanced water treatment processes to purify and recycle liquid waste at the end of the industrial process, leaving zero discharge.
To supply gas to the Rupsha power plant, the project will construct gas distribution pipelines measuring 12 kilometres (km), according to the press release.
The project will also finance construction of a 230-kilovolt switchyard at the power plant and 29 km of high capacity transmission lines to transfer electricity from Rupsha to the grid.
To ensure adequate institutional capacity, the project will conduct overall institutional strengthening of the executing agency, the North-West Power Generation Company Limited.
This includes business processes upgrade and training for implementation and operation of the system, maintenance, monitoring, and environment and social safeguards.
The total cost of the project is $1.14 billion, with the Islamic Development Bank contributing $300 million and the government contributing $338.5 million. The project is due to be completed by the end of June 2022, said the press release.
Grant financing worth $1.5 million will also be provided by the ADB's Japan Fund for Poverty Reduction, funded by the Government of Japan, to improve living standards in nearby communities, it said.
Focusing on vulnerable households and women, activities will include awareness about safe and efficient use of electricity, training on livelihood and job opportunities, and providing school laboratory facilities, it added.