Dhaka, Bangladesh (BBN)– The Asian Development Bank (ADB) and the Bangladesh government on Wednesday signed an agreement for $300 million energy infrastructure loan to help Bangladesh address critical power shortages which are undermining the economy and slowing poverty reduction efforts.

Iqbal Mahmood, Secretary, Economic Relations Division (ERD) and Thevakumar Kandiah, Country Director of ADB’s Bangladesh Resident Mission, signed the agreement on behalf of Bangladesh and ADB respectively, at a ceremony at ERD, Sher-e-Bangla Nagar in the capital Dhaka.

The loan for the Power System Efficiency Improvement Project will help meet Bangladesh’s urgent need for more energy-efficient generating plants and greater use of renewable power sources.

Aging thermal plants, inadequate natural gas supplies and lack of diverse power sources have left the country with a large gap between electricity supply and demand, estimated at over 1,200 megawatts (MW) for 2011.

Only 49 percent of people have access to electricity, and frequent shortages and unreliable supplies have perpetuated underdevelopment with nearly half the population living below the extreme poverty line of $1.25 a day.

“Energy shortage is the most critical infrastructure constraint on Bangladesh’s economic growth,” said Country Director Thevakumar Kandiah. “Greater access to clean, reliable power will bring multiple benefits such as increased economic activity and new opportunities in agriculture, manufacturing and other businesses which will benefit the poor, including women,” he said.

The project will fund the replacement of five aging generation units at Ashuganj power station with a new energy-efficient combined cycle power plant using natural gas as the fuel source.

It will also finance a 5MW solar photovoltaic generating system that will connect to the national grid, along with a hybrid wind, solar and diesel system on the island of Hatiya. Streetlights will be installed or retrofitted with solar and light emitting diode technology in the cities of Barisal, Chittagong, Dhaka, Khulna, Rajshahi and Sylhet.

BBN/SSR/AD-04Jan12-3:16 pm (BST)