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Rushing for the sun in Myanmar

SAGAING and YANGON – Myanmar is rushing ahead with a major solar power initiative amid the Covid-19 pandemic, giving potential investors just a month to submit bids and raising questions about the tender’s intent and viability.

The Ministry of Electricity and Energy published a notice on its official Facebook page dated May 18 inviting companies to submit pre-qualifying bids to construct solar energy plants on a 20-year concession basis.

The ministry will buy power from 30 “designated connection points” on a build-operate-own basis, according to the announcement.

The tender deadline is June 18, giving investors one month to assemble and submit their bids, a fast-tracked time table that is raising concerns about non-competive bidding and possible related land-grabbing.

The tender document, reviewed by Asia Times, includes 30 solar plants ranging from 30 to 50 megawatts (MW), with a combined capacity of 1060 MW. That’s equivalent to one third of the country’s current dry season available capacity of 3,100 MW.

That capacity, the ministry says, is generated by 20 gas-fired, 62 hydropower and one coal-fired plant. Developers are required to start operating the plants within 180 days after an official letter of acceptance is issued, with stiff financial penalities for non-production after the deadline, according to the document.

More controversially, bidders are required to include evidence of prior land acquisition for solar plant sites in their proposals. 

The tight tender schedule increases the risk of land grabbing because investors will not have sufficient time to negotiate with local communities to legally secure land, according to the Myanmar Center for Responsible Business, a monitoring group.

The tender’s terms also raise questions about the government’s intent, including its purported commitment to attract responsible foreign investment in environmentally friendly solar power.

The application’s one-month window, launched at a time when potential foreign investors abroad cannot enter Myanmar due to flight restrictions and while companies everywhere are scrambling to cope with Covid-19’s impact, risks a foreign backlash.

Business bodies, including the American and European chambers of commerce, say they are considering to raise their joint concern directly with the ministry, according to sources involved in the discussion. At a minimum, they say, the tender’s deadline should be extended.

As Myanmar heads towards parliamentary elections expected to take place later this year, the long-awaited solar tender marks a disappointing end to the National League for Democracy-led government’s record on ending the underdeveloped nation’s energy shortages.

State Counsellor Aung San Suu Kyi’s administration has developed little new generating capacity since assuming office in 2016, while sitting on dozens of hydropower and utility-scale solar proposals and failing to end chronic power cuts despite a spike in tariffs. 

Only 40% of Myanmar’s population has access to the national grid. Electricity is generated by 20 gas-fired and 62 hydropower plants and one coal-fired project.

Crippling power shortages in the dry season consistently cause disruption of business activities and financial losses for the retail and manufacturing industries. Those who can turn to diesel-run generators shoulder additional high costs.

The Myanmar government’s planned scaling up of energy and other infrastructure projects is key to accelerating economic growth, according to an International Monetary Fund report published in late March. A 2019 World Bank study estimates that Myanmar needs to double the historical level of investment spending – both public and private – to meet its rapidly growing electricity demand.

Although it is difficult to gauge to what extent the powerful bureaucracy rather than elected politicians has stalled progress, the NLD government’s glaring failure to ease the nation’s power dilemma could potentially feature on the election campaign trail.

Suu Kyi’s government increased Myanmar’s power tariffs in July 2019, a move widely applauded by investors and economists because supply was heavily subsidized, while at the same time pledging to end crippling power shortages by 2020.

It hurried through five controversial “emergency” tenders, four of which ended up given to consortiums led by Hong Kong-listed VPower Group, of which Chinese state-owned CITIC is a major shareholder. The fifth one was won by state-run China Energy Engineering Group (CEEC), also known as Energy China, and its consortium partners.

The rushed solar notice mirrors those previous controversial energy tenders, in which companies were similarly given only a month to design complex liquefied natural gas (LNG) to power projects totalling around 1,000 MW.

The emergency tender requirements, including short implementation deadlines of 210 days, tough penalties for missing deadlines and short contractual terms of five years, came under fire from local and foreign energy firms as non-competitive.

Nor have the concessionaires immediately delivered. None of the five emergency plants to date have actually signed a power purchase agreement or entered into commercial operation, even though the deadlines passed more than a month and a half ago. Developers and authorities attribute the delays to the pandemic.

Suu Kyi and her ministers are firmly behind the solar power push.  

Speaking at a solar plant’s launch in Manaung, Rakhine state in December, Suu Kyi said Myanmar’s electricity consumption is increasing by 15-19% per year and that her government is working to meet that rising demand through “mixed-electricity generation methods” and “creating a strong power grid.”

As such, Myanmar’s nascent renewable energy sector has attracted strong investor interest from abroad because of the enormous market potential, said Tim Dobermann, an energy expert who has worked with the energy ministry in Naypyitaw.

“The real question is why private sector interest hasn’t materialized into actual investments. The potential still remains large and there is an appetite to take risks, though perhaps that is now falling a bit,” he commented.

While investors wait for greater regulatory and policy clarity on big energy projects to feed the national grid, the private sector is quickly rolling out small-scale solar-hybrid plants to narrow Myanmar’s rural electrification gap.

Yoma Micro Power, a joint venture between the World Bank’s International Finance Corporation, Norway’s Norfund and Yoma Strategic led by Sino-Burmese tycoon Serge Pun, launched in March a US$100,000 solar mini-grid in Sagaing that now produces 31.2 kilowatts (KW) of power during peak hours for around 1,000 villagers and a telecom tower.

The mini-grid, located in Thit Seint Gyi village of Wetlet township, is the firm’s 250th solar-hybrid power plant in rural Myanmar designed to distribute energy to telecom towers and an estimated 25,000 who are not connected to the national grid.

“The Sagaing government has been trying our best in electrification via solar and hydropower projects,” the regional electricity minister Than Nyunt Win said.

It will take around seven to eight years for the mini-grid to break even, Yoma Micro Power CEO Alakesh Chetia said. “These are long-term projects. It is at least 15 years before we can generate reasonable profits to encourage our investors.”

The foreign-local joint venture aims to scale up to 750 plants this year and to over 2,000 plants by 2022, totalling $200 million of investments, Chetia said. With initial capital of $28 million in 2018, it secured an additional $40 million this year from shareholders that now include Philippine conglomerate Ayala Corporation via its AC Energy subsidiary.

Mini-grids are particularly attractive in Myanmar, where 60% of the population does not have access to the national grid. Because of the country’s varied topography, remote mountainous and island communities could have to wait for up to a decade before they are connected to the grid, analysts say. 

Those delays are what make Yoma Micro Power’s mini-grids economically viable, said Norfund investment director Pål Helgesen, who added that hybrid grids are highly reliable and make a smaller environmental footprint than bigger plants.

Technology improvements including higher efficiency and lower cost solar panels, and new business models that leverage mobile payments, means that the traditional way of generating and delivering electricity to consumers is changing, Helgesen said.

Yoma Micro Power is not alone in the market. Others like EAM Myanmar, a joint venture between Oslo-listed EAM and Myanmar Eco Solutions, Parami Energy and Mandalay Yoma, are all now also actively building mini-grids.

Energy expert Dobermann warns that mini-grids alone will not be sufficient to fully electrify the still largely rural nation and that ultimately on-grid projects such as those recently tendered are the only way to holistically solve the nation’s persistent power problems.

“Lighting a house requires much less than powering a mill, and meeting a growing demand for electricity is difficult if you are constrained by the size of your local solar panel or mini-grid,” he said. 

“On-grid solar is increasingly cost competitive, cleaner and faster to deploy and should therefore play a key role in feeding the national grid to make sure the benefits of electrification are realized,” he added.

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