Monday, September 25, 2017

Private investment to spark electricity boom

Poor power supply continues to plague Myanmar.

Most estimates claim less than one-third of the country’s population has regular access to electricity, and those that do still experience frequent power cuts. Businesses have difficulty operating with uncertain power supply – generators are expensive, and downtime translates directly to lost revenue for too many companies.

Effort is clearly being made to tackle the gargantuan task of righting the domestic electricity industry. Several important steps were made in 2014 to improve generation, transmission and distribution capacity.

Importantly, the long-delayed electricity law was finally passed last year, and the Ministry of Electric Power is now working on the detailed rules and regulations that are to follow. These regulations can provide a solid foundation to improve electrification, but much more needs to be done.

The government is attempting to address the energy shortfalls, though financing the necessary expensive projects continues to be a major problem. Most domestic power projects are currently carried out through funding from the state budget and international loans, and increased foreign investment provides an attractive conduit to improve domestic energy infrastructure.

At the moment, though, foreign investment is largely confined to several high-profile generation efforts.

Nowhere is foreign involvement more controversial than in hydropower. The large-scale Myitsone dam project was frozen by Presidential order in 2011 following public opposition. In 2014, officials from the Ministry of Electric Power have said they would like to see more Western involvement in hydropower, though Chinese investment was the industry’s largest driver during the last years of the military government.

Hydropower still produces the majority of the country’s electricity. A swath of agreements to establish some 60 hydro projects – some fanciful and others much more realistic – were signed during the military government era, mostly with Chinese firms as well as other companies from areas like India and Thailand.

More than half of those 60 projects are still to be implemented, with some put on hold and others likely to proceed.

Ministry of Electric Power deputy minister U Maw Thar Htwe has said the government is now only working with companies of an international standard with reliable quality and financing.

“The trend in hydropower project implementation is to turn to Western companies,” he said.

A number of Western firms have signed up for domestic hydro projects. Shweli (3) is to be implemented by English and French companies, the Middle Yeywar and Bawgata projects with Norwegian firms and the Middle Paung Laung project by Austrian or English projects. At least four hydro projects signed with Chinese and Thai companies have been delayed due to public opposition.

Coal generating projects also faced public opposition in 2014, with complaints often targeted at their environmental footprint. Some were cancelled and others were delayed, though a few are on track. Coal-fired projects may not be environmentally friendly, but they are generally easy to build and provide cheap electricity – particularly compared to gas.

While efforts to generate electricity from natural gas have not attracted quite the amount of controversy as coal and hydro, gas plants are also often more challenging.

“What’s happening right now is that gas-fired power plants have become expensive, and people don’t want to accept hydro and coal,” said U Khin Maung Win, director general of the Department of Electric Power. “We don’t have any other options – but we want positive suggestions.”

“We are in a very tight corner to implement these power projects,” he added. Although often more expensive, there has been significant foreign interest in Myanmar gas-fired power projects.

Companies from countries like the US, Hong Kong and Korea have won or are competing for tenders.

In 2014, American firm APR Energy won an industry award for its Kyaukse project, while Hong Kong’s V Power won a tender for a gas-fired plant for the Kyaukphyu special economic zone. A gas-powered plant was also set up in Thaketa in 2013 by a Singaporean firm.

While efforts to attract foreign interest in gas-fired plants appear to be bearing the most fruit, Myanmar is also experimenting with green technologies.

Agreements to develop solar power projects near Mandalay and Magwe regions were signed in 2014.

Still, U Khin Maung Win said it is Rakhine State which was perhaps the most significant step for Myanmar’s electrification efforts last year.

“The most exciting news in 2014 is lighting up Rakhine State, where it’s been very hard to get electricity. This is a real milestone for us,” he said. “We are also now working on power transmission to Hakha in Chin State, a very remote area.”

“These projects are not necessarily profitable from a business standpoint but are important for regional development,” he added.

Transmission, getting power from power plants to sub-stations, and distribution, getting power from sub-stations to homes, are equally important to generation efforts. After all, enough power can be generated, but if it doesn’t get to Myanmar’s homes, the country will still be in the dark.

These areas have been slower in attracting foreign investment. So far there has been minimal involvement from foreign, private enterprises, but foreign development agencies have been stepping up to the plate.

The Export-Import Bank of Korea and Myanmar Electric Power Enterprise signed a US$100 million deal to establish the 500-kilovolt Taungoo-Kamanat transmission project. Meanwhile, the World Bank Group and the Japanese government have also announced plans to support Yangon with upgrading its electricity distribution system.

All these changes offer large potential rewards, but the ultimate judge will be the end user.

Consumers will be paying the price for upgrades – electricity rates increased by 40 percent in 2014. The government has not yet released figures indicating how much revenue the move generated for state coffers, despite several requests from The Myanmar Times.

Last year also saw several steps not taken. Officials were coy on potential privatisation of Yangon Electricity Supply Board, claiming there are no immediate plans to allow private equity participation in the board, which governs distribution in Yangon, home to about half the country’s electricity consumption.

On the whole, steps were taken in 2014 to address electrification, one of Myanmar’s most pressing issues. Much more needs to be done in 2015 if the issue is to be solved.