Myanmar – Power Is The Key

Keywords: Myanmar, economic development, electricity, project finance

Myanmar's emergence in the last 24 months as South-East Asia's most exciting business opportunity has rarely been out of the press. It has a large, youthful population, a strategically advantageous geographical location within the ASEAN community and, most importantly following decades of authoritarian rule, a renewed desire to undertake the political and economic reforms necessary to position itself as a key economy in the region.

Like any developing economy, one of the most important building blocks for Myanmar's economic development will be access to electricity. Without power, Myanmar's industry will not reach its full potential. In this article we outline some of the reasons why Myanmar's power sector has attracted the interest of the international project finance community and provide an overview of the key challenges that the power sector is facing.

OPPORTUNITIES

Strong Demand And Potential Growth

Presently, only 30% of Myanmar's population have access to electricity (with that percentage decreasing to around 6% in rural areas) and there were demonstrations last year in Yangon against rolling power cuts. Power cuts and brown-outs are an unfortunate feature of daily life, as anyone who has visited the city this year will be aware. The power sector is therefore a top priority for the government, and the latest announced goal is to increase capacity to 20,000MW by the year 2030 - a monumental plan given the current installed capacity of only 4,000MW.

The government also plans to revise the existing electricity law (dating from 1984, it was enacted during the years of isolation), and is working with the Asian Development Bank to understand the scope of this challenging task. The government is also in the process of drafting a new energy policy, through the National Energy Management Committee.

In terms of fuel sources, gas-fired power projects have seen the most initial activity. The 120MW Ahlone power project, being developed by Toyo Thai, is one of the most progressed power projects involving international sponsors, with 80MW already being dispatched. Other significant projects under development include a 500MW gas-fired power project in Thakayta province, being developed by a South Korean consortium, and three locally developed power projects of 50MW each.

Myanmar also has significant hydropower potential of about 100,000MW, with around 40,000MW of hydropower having so far been identified for possible development. Hydropower projects have their own challenges, however, due to seasonality of power supply and significant resettlement issues. The distance of the hydropower resource from the main demand centre of Yangon is also an issue, with significant upgrading of the transmission network required to avoid substantial transmission losses. As such, there is a recognition by the government that hydropower (which currently accounts for the bulk of the country's base-load) may be better suited to peak load supply, with thermal power capacity being stepped up to provide base-load.

Other renewables could also play a significant role, particularly micro power projects for smaller off-grid systems in rural areas. Suitable sites for solar and biomass power projects have been identified throughout the country. However, a successful renewables sector typically requires a solid underlying regulatory framework, which Myanmar does not yet have - a feed-in tariff for example.

Government Funds Limited

Like many emerging markets, and indeed some more developed markets, government funds are currently over-stretched. There is simply not the cash available in the public purse to make the substantial investments required to upgrade Myanmar's power infrastructure in order to keep pace...

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