Desperate for increased power supplies, Myanmar is speeding up efforts to call international bids to get more electricity flowing into the national grid within 12 months. Authorities are also considering importing power from China and Laos.
Power shortages throughout the country have hit businesses and homes hard over the past two months. Many factories have had to reduce production and shorten shifts, while outages have caused havoc in hospitals. Major cities, especially Yangon, have experienced the worst blackouts in more than a decade.
The lack of a reliable power supply has become the single biggest barrier to business investment and is seriously impeding economic development, local and foreign executives agree.
"From a European investor's perspective, it is understood that a stable power supply and a level playing field for competitors are keys to attract investment," Marc de la Fouchardiere, deputy director of EuroCham Myanmar, told Asia Focus on the sidelines of the EuroCham economic forum in Nay Pyi Taw last week.
"To encourage foreign investment, the goal should be to achieve a constant and stable power supply that would reduce the risk for potential foreign investors wanting to come to Myanmar."
The CEO of the British Chamber in Myanmar echoed those views. "A stable and consistent power supply is one of the fundamentals needed for investors bringing business to Myanmar; it is even more important in the high-tech sector," Peter Crowhurst told Asia Focus.
The government has heard the complaints and is ready to act, according to top officials in the Ministry of Energy and Electricity (MOEE).
"Myanmar will call for international tenders by the end of the month for three power plants, each to produce 300 megawatts of electricity," Than Zaw, a senior ministry official, told Asia Focus.
The plants on barges would use liquefied natural gas (LNG), he explained. But they must be operational by the start of the hot season in February.
The plants will be based at Kyaukphyu in Rakhine, north of the strife-torn western region; farther south along the coast at Pathein in Ayeyarwady region; and at Thanlywin near Thilawa, on the outskirts of Yangon. "This is a short-term emergency plan to generate an increased electricity supply as quickly as possible," he said.
Contracts will be awarded within three months of the bids closing, with a view to having plants operational within six months after the licences are granted, Than Zaw added. Although the tender is aimed at foreign companies, he said, local companies could also participate.
The plan is to buy LNG from the international market, at the lowest possible prices. The barges will receive the LNG from tankers and then regasify the fuel on board to generate electricity for transmission to the onshore grid.
The three centres have been chosen because they have jetties close to existing power generation infrastructure, Than Zaw said.
Authorities last year had made a similar arrangement with the Turkish company Karadeniz Holding and a consortium comprising US-based APR and the local firm National Infrastructure Holdings to supply Yangon directly. However, the plan fell through because it proved to be impractical, there was a lack of transparency and a failure to agree on pricing.
The country plans to buy at least 600 megawatts of power -- roughly equal to the current shortfall -- from floating plants but prices are expected to be high. Ministry officials complain privately that they face budget constraints.
"We cannot afford to pay more than seven cents per kilowatt," Finance Minister Soe Win told journalists on the sidelines of the EuroCham forum. But regional power specialists believe the price of power produced at the LNG plants will be substantially higher than that.
The current low cost of electricity to consumers is regarded as one of the main impediments to increasing production. Ministry officials say households pay only 3 US cents a kilowatt/hour, said to be the lowest rate in the world, and commercial users 18 cents. The subsidies cost the country US$500 million a year, a sum that would only increase if more power was produced at the current tariffs.
"The consumer tariffs for electricity have to be increased if we are to afford to increase power production," said Than Zaw. "Only then would buying electricity from other countries or generating power from LNG plants -- which is estimated to cost more than three times the lowest current residential rate -- be viable."
He declined to say what the optimum price for consumers might be. But senior ministry officials and the finance minister have been working on a revised tariff schedule for more than two years, according to sources on the national economic coordinating committee.
Electricity prices have not risen since 2014, despite an increasing use of power from more expensive, privately owned, diesel-fuelled generators.
While officials agreed in principle more than two years ago that tariffs needed to rise, then finance minister Kyaw Win rejected going ahead for fear of causing public anger and social unrest.
A new staggered schedule of rates has been worked out, with poorer people -- who use little electricity -- given preferential rates, Investment Minister Thaung Tun told Asia Focus back in late January. But the rates have not yet been made public or enacted.
"This is largely because of bureaucratic inertia and a lack of political will," said an international financial adviser, who asked to remain anonymous.
Part of the reluctance on the energy ministry's part to push forward with the new pricing is corruption, according many Myanmar businessmen who deal regularly with the ministry.
But Soe Win, the current finance minister, insists the new pricing policy is about to be finalised and could be implemented in months, if not weeks.
"It's a progressive schedule favouring the poorest, with gradual increases according to usage," he told Asia Focus. Those who use the lowest amount, under 30 kilowatts, will continue to pay roughly the current rate, with costs gradually increasing according to usage after that.
"This is good news, and the ministry must now get on and issue new PPAs (power purchase agreements) and solve the country's desperate need for electricity," said Kyaw Kyaw Hlang, chairman of the Smart group of companies, an energy expert and political commentator.
But Mr Crowhurst of the British Chamber is less upbeat. "Investment will take into account the new tariff in its calculations and work out its forward projections before investing," he said. "But the price of electricity is not the real issue, if the government still cannot provide a consistent power supply: this is the important matter that needs to be addressed."
In the meantime, the ministry is exploring other emergency options to generate more power, including taking a loan from Thailand and buying power from China.
The deputy permanent secretary for energy, Soe Myint, told a news conference last month said that the ministry planned to purchase 1,000 MW over the next two years under a proposal from China Southern Power Grid.
Negotiations are ongoing, but ministry sources hold out little hope of a deal because Myanmar lacks the necessary high-voltage transmission lines to Mandalay and Yangon. The Chinese have offered to install them, but Myanmar is reluctant to allow that, as a matter of sovereignty.
So it seems the power barges maybe the only solution to Myanmar's desperate short-term power needs, especially in Yangon. "But power barges can only be viewed as a temporary stop gap to fill in the immediate power shortfalls, and could not possibly address the entire needs of the nation," Mr Crowhurst said.
Mr de la Fouchardiere of EuroCham agreed, saying: "We believe that in order to have a healthy and inviting market in Myanmar there is a need to shift the focus to long-term solutions.
"What is needed are standardised, sustainable solutions that will ensure the stability of power generation for the years to come. Uncertainties discourage investors and add a significant reputational economic risk to the country."
Mr Crowhurst also said the government needed to pay greater attention to both supply and demand. "The government should develop more hydropower schemes, increase the use of renewable sources of energy … and above all speed up the process," he said.
But by the same token, the government should also take steps -- with public campaigns -- to encourage households and factories to reduce unnecessary consumption, as there is obvious waste throughout Yangon in particular.
