Electrifying the nation, interrupted

A Myanmar man looks at a solar panel. The Myanmar Times

The government has promised to fully electrify Myanmar by 2030. Yet, insufficient public funds have been allocated to power generation and there are no immediate plans to restructure loss-making tariffs or charge more for electricity.

One of the government’s top promises since it came into power is to supply electricity to the entire country by 2030. Yet, supply has consistently lagged behind demand. At the same time, the government continues to fund tariffs at a loss, and there are no immediate plans to raise electricity prices.

Currently, there are around 6.5 million households, or some 40 percent of the population, which has no access to electricity. With more foreign investments needed to boost growthin power-intensive industries such as manufacturing and technology, electricity consumption will only increase in the years to come.

Despite mounting pressure to meet growing demand though, public funds allocated towards developing and expanding the power sector has so far been insufficient. In fact, public spending has fallen over the last few years.

According to a report by the Public Accounts Joint Committee, spending on power generation when the NLD-led government first took office in 2016-17 totalled K5.1 trillion, or about a quarter of the budget for that fiscal year.

In 2017-18 however, spending in the sector is estimated to have fallen to K4.4 trillion, or about 22pc of the total budget. In 2014-15 and 2015-16, the previous government had allocated around 28pc of the budget per year, respectively, to power generation.

For the six-month interim period between April 1 and the start of the 2018-19 fiscal year on October 1, the government plans to spend just around K116.7 billion on generating electricity.

“There hasn’t been muchpriority on allocating more funds to support growth in the power sector,” said U Zaw Pe Win, advisor to the Public Accounts Joint Committee.

One of the consequences is that numerous hydropower projects have been put on hold. “Many of these projects can be completed within five years but due to insufficient budget allocations they have been delayed indefinitely, which actually adds to costs,” said U Khin Maung Win, managing director of state-owned Electric Power Generation Enterprise (EPGE).

Importantly, the delays may derail the government’s plans for full electrification by 2030. “This sector needs yearly investments to generate more megawatts (MW) of electricity. We need more transmission lines and more sub-stations within the next 10 years to deliver our promise of 100 percent electrification,” said Dr Tun Naing, deputy minister at the Ministry of Electricity and Energy (MOEE).

Budget deficit

The government is constrained in its ability to spend because of the widening budget deficit, which rose to 3.5pc of GDP in 2017-18 compared to 2.5pc in 2016-17. “The government has had to curb public spending on power to keep the budget deficit under control. As a result, some hydropower projects have been delayed to make more room for spending in other areas, such as healthcare and education,” U Aung Than Oo, former deputy minister at the MOEE, said at a recent energy talk.

The budget deficit is expected to widen further to 4pc of GDP in 2018-19, according to estimates provided by the Asia Development Bank.

In fact, the government is already spending more than it can afford on energy infrastructure. Of the eight loss-making state-owned enterprises in Myanmar, the EPGE, which was formed under a 2016-17 merger between Myanmar Electric Power Enterprise and Hydropower Generation Enterprise, is chalking up the steepest losses.

That year, EPGE made a loss of about K370 billion. In 2017-18, the loss widened to by more than 16pc to some K430 billion, according to government data.

“There is lesser public funds available for power generationbecause our state-owned enterprises are making huge losses which have contributed to the budget deficit. So, the amount available for us to spend is less. This is according to financial regulations,” said U Khin Maung Win.

Power lines seen in the outskirts of Yangon. Myanmar must double its electricity supply by 2020 to meet demand. The Myanmar Times

Loss-making tariffs

Meanwhile, the government continues to generate losses of more than $300 million every year by subsidising tariffs to the public. “The only way to reduce losses and free up more room to spend on infrastructure, is by raising tariffs,” said U Khin Maung Win. “But we are constrained on that front as we have to consider the needs of the people.”

Last year, the MOEE said it will restructure the tariffs and reduce subsidies to the public to free up more room for additional spending. This month though, ministry officials told The Myanmar Times there are no plans to raise electricity prices until after 2020.

That’s when the MOEE is targeting completion of a string of service improvements to existing infrastructure, such as repairing old transmission lines, reducing the risk of electrocution through replacement of old wires and optimising existing power stations to improve capacity.

It is also when the next general election is scheduled to take place.

By 2020-21, the aim is to curb all losses made on tariffs to the private sector. Meanwhile, subsidies will be reduced for those who can afford to pay higher electricity prices, such as the middle-class and above, an MOEE official said.

“We will still continue subsidising the poorest people but those running businesses for profit should not expect the same treatment,” he said.

Currently, for residential use, K35 is collected per unit if the electricity used is between one and 100 units; K40 is collected per unit if it is between 101 and 200 units and K50 collected per unit for over 201 units.

For businesses, K75 is collected per unit if the electricity used is between one and 500 units and K100 collected per unit for over 3,001 units, The Myanmar Times understands.

Selective spending

The government isn’t sitting idly by with just three years left to its term though. By working with the private sector, it has committed to doubling the volume of power from 3,000MW currently to 6,000MW by 2020-21.

In January, the MOEE announced that the shortfall will be met with imported liquefied natural gas (LNG). It also issued a Notice to Proceed for the construction of three LNG-to-electricity projects in the country.

France’s Total and Germany’s Siemens will invest $2.1 billion in a 1,230 MW LNG power plant in Kanbauk, Tanintharyi Region, while Zhefu Holding Group from China and Supreme Trading from Myanmar will invest $2.5 billion for the 1,390 MW plant in Mee Laung Gyaing, Ayeyarwady Region. Thailand’s TTCL Public Company will invest $321 million to implement 356MW of power in Ahlone, Yangon Region.

A fourth project utilising natural gas from an offshore gas field will be implemented at Kyaukphyu in Rakhine State.

Last month, as scheduled, a 106MW combined-cycle gas power plant commenced operations in Thaketa township, Yangon region, two years after a Power Purchase Agreement was signed between the MOEE and China’s Union Resources & Engineering Co (UREC). The plant will generate enough electricity for around 42,000 households.

There are now 52 power plants in Myanmar with total installed capacity of 5,000 MW. Around 60pc of those plants are hydro-powered plants, while about a third is powered by natural gas. The remaining 10pc generates electricity through solar and other sources of power.

The government has also revived several stalled hydropower projects and given orders for development to resume on projects in Kachin, Rakhine, Chin and Kayin states, which badly require electricity.

For example, development of the halted Tha Htay hydropower project in Rakhine Stateand Lay Myo hydropower project in Chin State have resumed, said U Aung Kyaw Htoo, an MOEE official.

If all goes to plan, the projects are expected to start supplying electricity to the Special Economic Zones by 2020-21, he said.

The next three years will be crucial for the government as it strives to deliver what it has promised.

Source: Mmtimes