The urgent power need in Myanmar. Bjørn N Holsen NABS Bangkok, Yangon April 2014

Transcription

1 The urgent power need in Myanmar Bjørn N Holsen NABS Bangkok, Yangon April 2014

2 Contents SN Power Power Generation Sector Next moves SN Power s aspirations in Myanmar Conclusions 2

3 SN Power Key Facts - Established June Owned by Statkraft (60%) & Norfund (40%) - Business objective: Invest in clean, renewable energy on commercial basis in selected emerging markets Net installed capacity 2013: MW Mean annual generation: GWh/yr Operating revenue 2012: 274 MUSD Net profit 2012: 128 MUSD Equity 2012: MUSD 505 employees in twelve countries CDM projected credit volume: ~ 2 Mt/CO 2 per year 3

4 SN Power Global Organization Norway Nepal Panama Costa Rica India Vietnam Philippines Singapore Peru Brazil Zambia Mozambique Sri Lanka Chile 4

5 Electricity Demand Selected Countries Index: Year 2000= Highest growth in India and Peru Nordic Market and Germany (for comparison) India Peru Chile (SIC) Brazil Philippines (Luzon) Germany Nordic 03/05/2010 5

6 Myanmar Power Sector

7 Myanmar at Night

8 Electricity consumption (kwh) per capita Selected Electricity Consumption per Capita 131 kwh/a Myanmar ranks the lowest in Asia in terms of per capita electricity consumption Per capita electricity consumption gently grew from 45 kwh per capita in the last 80s to 131 kwh in 2011, an annual growth of around 3% per annum Even with higher 2011/12 output, estimated consumption in Myanmar is only about 160 kwh per capita, compared to 2009 consumption of over 250 kwh per capita in Bangladesh and nearly 600 in Indonesia. Vietnam had over 1,000 kwh per capita in ,000 4,000 6,000 8,000 10,000 12,000 Source: Key World Energy Statistics

9 Overview of Myanmar Power Market 4,035 MW Total installed capacity in MW New generating capacity added in ,331 MW Hydropower potential in 6 river basins 10,854 GWh Electricity generated in kwh Per capita electricity consumption in ,529 MW Capacity under construction, to be commission by % Annual load demand growth rate till % Electrification ratio in % Share of installed capacity for export to China Power Supply Development Installed capacity 2013 (MW) 9

10 Location of Power Plants Hydro power is the predominant source of electricity Some gas and coal power Larger units (+ 500 MW) being introduced in the grid Two power plants built for export to China Load centres different from location of generation huge investments in transmission is also required. KyeeOhnKyeeWa 74MW Hydro Power Plant Gas Power Plant Steam Power Plant Coal Fired Kyunchaung 54.3 MW Mone 75MW Man 36.9 MW Myanaung 34.7MW Thaphanseik 30 MW Shwetaung 55.35MW Kun 60MW Yenwe 25MW Hlawga 154.2MW 27.3 MW Ywama 70.3MW 52 MW Yeywa 790MW Kinda 56 MW Sedawgyi 25MW Nancho 40 MW Paunglaung 280MW Khapaung 30MW Zaungtu 20MW Thaketa 92 MW MW Ahlone 154.2MW8 4 MW Tapein 240MW Shweli-1 600MW Zawgyi-1 18MW Zawgyi-2 12MW Tigyit 120MW Bluchaung-1 28MW Bluchaung-2 168MW Shwekyin 75MW Thaton 50.95MW KengTawng 54MW Mawlamyaing 12MW 10

11 Next moves

12 A New Foreign Investment Law Passed on 2 Nov 2012 revising the framework of 1988 Automatic 5 years income tax exemption, may be extended Other benefits include: - Further tax relief on reinvested profits - Accelerated depreciation - Losses carry forward - Relief of custom duties The Government guarantees that foreign investment will NOT be nationalized Entitled to transfer their share and business interests to both foreign companies and Myanmar citizens Land use: Initial lease of up to 50 years ( years) Remittance of profits after tax abroad at market exchange rate Disputes will be settled in accordance to the relevant agreement however as Myanmar has not signed the 1958 New York Convention 12

13 Draft Electricity Law Expectations of the new law to pass in 2014 Retains the concept of a vertically integrated power sector with private and foreign investors participation Empower regional government to for licencing of small- and mid-sized power projects Regional government to set non-grid tariff The BOT structure will also continue The rates should be sufficiently high to cover investment costs The creation of an electricity regulatory commission 13

14 Electricity prices: Fiscal sustainability vs public acceptability Electricity remains heavily subsidised in Myanmar. Any talk of increasing electricity prices is a sensitive issue that has proved hugely unpopular in Myanmar. Previous attempts to increase electricity prices, including a proposal to raise prices in November 2013 by over 40 per cent, led to widespread protests. Increased electricity rates approved recently The new price structure is seen as a softer increase to the proposal made in November

15 Institutional support to Myanmar s power sector The World Bank, the Asian Development Bank ( ADB ) and other international donors have pledged large amounts of money and technical support to transform Myanmar s power sector a US$140 million interest free loan from the World Bank to replace an existing generator facility with a more efficient 106 MW gas turbine power plant in Mon a US$2.85 million grant from the Japan Fund for Poverty Reduction through the ADB to help Myanmar formulate a long term energy plan and improve its power grid a US$60 million loan from ADB to improve the power distribution network with the aim of cutting distribution loss by 4% a US$1 billion multi-year development program from the World Bank Group to support expansion of electricity generation, transmission and distribution support from the International Finance Corporation ( IFC ) to help progress the corporatisation of Yangon Electricity Supply Board technical assistance on hydropower development from the Norwegian Water Resources and Energy Directorate (NVE) 15

16 Latest News Related to Power Sector Signed PPA for Private Gas Power Developer Zeya and Associate, a Myanmar company, which has just commissioned a 55 MW Combined Cycle Gas Turbine, has signed a PPA with MOEP. The PPA is a take-or-pay contract at US$ 34 / MWh. Fuel (gas) will be provided by the Ministry of Energy at no cost Signed (?) PPA for Private Hydro Power Developer Golden Energy has started generation at Thaukyegat 2 (120 MW) HPP. PPA condition of this project under the BOT regulations for domestic producer is US$ 7 /MWh, Concession period of years, no free share, no free energy First international call for BOT concession in Myanmar MOEP has called for an international pre-qualification bid for a 380 MW CCTG project on a BOT basis. AF Consult is the technical advisor. Over than 300 expression of interest has been received. Agreement between Andritz, MOEP and Austrian government to be signed for hydropower development MOEP said that they will signed an agreement with Andritz, as private developer, and the Austrian government to develop two HPP projects in Shan State. Government has confirmed the development of 6 dams along Salween river On several occasion in 2013, the government has confirmed that they will enforce the MOUs for the development of hydropower along the Salween river despite the concerns raised by local ethnic groups and international NGO. Most of these projects, including Iwathit, Tasang (7,000 MW) and Hutgyi dams, are under development by Chinese and Thai developers through MoU with MOEP. 16

17 SN Power aspirations in Myanmar

18 Huge Hydropower Potential in Myanmar Hydropower projects are under the purview of the Department of Hydropower Implementation (DHPI), the Department of Irrigation (ID), and the Ministry of Agriculture and Irrigation The hydropower potential is estimated to be more than 100,000 MW MOEP has identified over 92 potential hydropower sites with a total installed generating capacity of over 46,000 MW Presently only 5% of the hydropower potential has been utilized MOEP plans to invest in 13 of the projects totalling 2,572 MW, domestic investors on BOT are reserved for 7 projects with MW, and foreign investors makes up the rest with 44 projects totalling 42,145.5 MW State/Region Numbers of Sites Capacity (MW) Kachin State 19 18,744.5 Kayah State Kayin State 9 7,064.0 Sagaing Region 6 2,830.0 Tanintharyi Region Bago Region Magway Region Mandalay Region 9 1,555.0 Mon State Rakhine State Shan States: Identified Hydropower Potential East South 8 7,569.5 North 5 4,000.0 Total 92 46,

19 Hydro Power Greenfield Opportunities Large potential for Norwegian investors Limited opportunities in ROT projects Medium size projects in the early stages of construction and good greenfield projects represents opportunities During the military regime, most identified projects were awarded to Chinese developers through MoUs Projects developed by the Chinese experienced strong local and international resistance due to lack of CSR MOEP wants best practice processes and projects welcomes Western investors Opportunities are still available MoUs are awarded on a first-come-first-serve basis While MOEP central to hydropower projects country-wide, the local government (in states) have a very high degree of involment in hydropower project development Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 MoU MoA License Contract Award COD Feasibility Tender Design Contract Construction Generation No. Project Name Installed Capacity (MW) Location 1 Upper Thanlwin (Mongton) 7110 Shan (East) 2 Myitsone 6000 Kachin 3 Ywathit (Thanlwin) 4000 Kayah 4 Chipwi 3400 Kachin 5 Kaunglanhpu 2700 Kachin 6 Hpizaw 2000 Kachin 7 Laza 1900 Kachin 8 Wutsok 1800 Kachin 9 Upper Thanliwn (Kunlong) 1400 Shan (North) 10 Hutgyi 1360 Kayin 11 Renam 1200 Kachin 12 Tamanthi 1200 Sagaing 13 Naopha 1000 Shan (North) 14 Lemro 600 Rakhine 15 Shwezaye 600 Sagaing 16 Taninthayi 600 Taninthayi 17 Mawlaik 520 Sagaing 18 Shweli Shan State(North) 19 Lawngdin 435 Kachin 20 Manipur 380 Sagaing 21 Tongxinqiao 320 Kachin 22 Belin 280 Mon 23 Nam Tamhpak (kachin) 200 Kachin 24 Mantong 200 Shan (North) 25 Nam Kha 200 Shan (South) 26 Nam Tamhpak (kayah) 180 Kayah 27 Bawlake 180 Shan (South) / Kayah 28 Dapein Kachin 29 Solue 165 Shan (South) 30 Upper Bu 150 Magway 31 Tha Hkwa 150 Shan (South) / Kayah 32 Hkan Kawn 140 Kachin 33 Htu Kyan 105 Shan (South) / Kayah 34 Palaung 105 Shan (South) / Kayah 35 Gawlan 100 Kachin 36 Middle Paunglaung 100 Mandalay Region 37 Keng Tong 96 Shan (South) 38 Lemro-2 90 Rakhine 39 He Kou 88 Shan (South) 40 Sinedin 76.5 Rakhine 41 Wu Zhongze 60 Kachin 42 Mong Wa 50 Shan (South) 43 Hseng Na 45 Shan (South) / Kayah 44 Keng Yang 28 Shan (South) 45 Wan Ta Pin 25 Shan (South) Total

20 We expect electricity demand in Myanmar to grow by 15% annually, similar to Vietnam Index: Year 2000= and then we have Vietnam.. India, Brazil, Chile, Peru and the Philippines Nordic Power and Germany 03/05/

21 Reforms, Ethnic Mosaic and Corruption Reforms are often seen as a way of beridding old corrupters to enrich new ones More reforms needed - still not proven foreign investor friendly 21

22 Risk is considerable Source: IHS Global Insight Country Risk Rating 2013 On a country level, Myanmar is high risk in particular corruption, and ethnic and religious conflicts The energy sector is particularly risk prone relative to the development of the other sectors due to the large sums of money involved, the fight for political control over the resources, the technical complexity, the environmental and social externalities, and a history of little transparency of information. Good management of the energy sector is about managing these risks Long term sale of electricity - credit risk of Myanmar government 22

23 Project Development MOEP Proposed Project: Middle Yeywa Project Profile and Proposal Capacity and salient features MW to 400 MW - RCC dam from 60 to 110 m high - Run of River (Limited reservoir capacity) Location: - Shan state along the Myitnge River, between Yeywa HPP and Upper Yeywa under construction Status: - Free of any MoU - Only preliminary desk study with limited data is available - Hydrology well known Action: Red Flag Assessment Planned Cascade Development on the Myitnge River Bangl adesh India Mandalay Nay Pyi Taw Chin a Bay of Beng al Yangon Yeywa Thai Middle Yeywa land 23

24 24

25 25

26 SN Power short term aspirations Sign an MoU with MOEP - Feasibility Study (FS) for a greenfield project Explore alternative avenues that will shorten time to market i.e. acquisitions and brownfield Screen for potential partners local and foreign Explore partnerships with institutional agencies Initiate a discussion with Norwegian government bodies regarding the toolbox facilitating investments in underdeveloped economies Continuous monitoring of market developments and risks people on the ground 26

27 Conclusions Post 2010, Myanmar s GDP growth is certainly expected to grow by at least 6% annually in the next decade, with soaring growth for electricity demand due as well to the presently low electrification ratio of 29% The neglected system resulted in T&D losses in the double digits which remains to be developed Hydropower potential is huge, more than 40,000 MW are slated for foreign investors As of 2011, at least 2,600 MW of new hydropower capacities are under varying stages of development. At least 24 GW have been licensed to the Chinese and Thais The Ministry is welcoming foreign investments. Opportunities for Norwegian companies in the development of hydropower to meet the pent-up demand, and to improve the State s revenue through exports SN Power has embarked on a careful entry strategy as certain risks still need to be addresed