The European Investment Bank (EIB) will provide an €82m loan to the Government of Bangladesh for two specific projects to support more efficient power generation in the country and reduce emissions.
The specific projects (collectively the project), which are part of a wider investment programme in the energy sector include the conversion of gas-fired plants in Baghabari and Shagibacar to combined-cycle plants.
The loan amount, which is being provided under EIB's Climate Change Mandate (2011-2013) for non-EU countries, will be used for conversion that will improve efficiency by 75% and generation capacity by around 50% without any rise in the amount of fuel used.
As such, the new configuration will significantly reduce CO2 emissions and improve power generation economics in the country, which is particularly vulnerable to the impacts of climate change.
The EIB introduced the mandate for non-EU countries in 2011 to support climate change mitigation and adaptation projects across regions.
The $1.6bn (€1.2bn) programme is aimed at expanding power generation, transmission and distribution as well as capacity-building in the country.
Co-financed by other organisations including the Asian Development Bank, the Islamic Development Bank, the Agence Française de Developpement and the Bangladeshi Government, the programme's capacity-building plan is being partly financed with €5.7m by the EU Asia Investment Facility.
EIB vice-president Magdalena Alvarez said the latest development represents the bank's commitment, together with other financial Institutions, to improve access to energy, which is essential to strengthen economic growth.
Alvarez said: "Sustainable access to the energy supply will also help avoid bottlenecks and will enable the more efficient and rational use of energy resources, thus reinforcing the positive effects in terms of climate change mitigation and adaptation."