Frost & Sullivan: Is it Time to Energize the Power Market in Myanmar?

~ Investment Opportunities in the Myanmar Power Market

Jul 11, 2012, 03:37 ET from Frost & Sullivan

KUALA LUMPUR, Malaysia, July 11, 2012 /PRNewswire/ -- The recent easing of sanctions by Western countries against Myanmar could prove to be a cornerstone in the nation's economic development. As the economy attempts to take off from its current position, the power sector holds the key to support rapid economic growth in the currently power starved country.

According to Vishal Narain, Industry Analyst for Frost & Sullivan's Asia Pacific Energy Practice, Myanmar has an estimated installed power capacity of 2,254 MW that has grown annually at a rate of 10% since 2007.

"The demand for power shot up by 15% in 2012 which has led to the current power crisis. A lot of projects in the recent past have increased the power generation capacity but only 13% of the country's entire population has access to electricity," he said.

Myanmar has a per capita power consumption of only 104 KWh compared to a consumption of over 2,000 KWh in Thailand and around 600 KWh in Indonesia. Up to 70% of the power generation capacity is from the 18 hydropower plants which generate up to 1,270 MW during the rainy season and 1,000 MW during the dry season. The gas fired plants generate up to 350 MW.

In the current scenario of reforms, the country is likely to attain higher consumption levels in less than two decades, which means a capacity of up to 50 GW in that time frame. This would entail an investment of roughly US$50 billion in the power generation sector alone.

"The scope to bridge the impending power demand-supply gap offers huge investment opportunities for both the multinational and domestic companies across the power industry value chain from generation to transmission and distribution and in distributed power generation including power rental sector," said Narain.

He continued, "Myanmar has so far relied heavily on hydropower projects which puts power generation at the mercy of rains. In the future, we may expect a conscious decision to move away from hydropower and encourage a diversified mix in power generation. This could pave the way to more investments in conventional thermal power plants."

Antiquated transmission & distribution (T&D) lines offer medium-term investment opportunities. With some cables as old as 40 years and more than half the cables transporting power at less than 230KV, power losses are significant.

"Massive investments in upgrading power T&D infrastructure could help the government reduce power losses and thereby, manage the power crisis more effectively. To increase the electrification ratio, the Myanmar government plans to set up as much as 5,000 miles of 230KV transmission lines with eight substation projects to support the grid. This is capable of generating investments worth US$1 billion over the next ten years," said Narain.

Other investment opportunities include the distributed power generation sector, seen as a short-term solution to power shortages.

The increasing inflow of foreign tourists and expatriates looking to set up representative offices in Myanmar is likely to boost the demand for residential and office spaces. With an immediate mandate to welcome foreign investments in as many sectors as possible, the government would have to order generators from foreign firms to deal with the impending spike in power requirements. 

"Private real estate companies providing residential and office spaces to expatriates are more likely to depend on power rental solutions. Demand for distributed power generation is likely to remain high till 2015 and later likely to reduce as new thermal, gas and hydro power plants are commissioned," added Narain.

In the wake of government's openness to reforms and private sector participation in nation-building, there are significant short-term and long-term investment opportunities for foreign companies across the power industry value chain.

"However, investing firms should exercise caution in this highly risky market by taking into consideration the interest of multiple stakeholders in major power projects that could upset investment plans," said Narain.

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SOURCE Frost & Sullivan