Foreign investors appear hesitant to jump into Myanmar’s energy sector, given some of the problems faced particularly by Chinese companies and the setback posed by the halt on the US$3.6 billion Myitsone Dam project, plus an unclear investment playing field. But the World Bank is hoping their refurbishing of a gas turbine plant in southern Mon State will help send a message that power is needed for the people.
If one troublesome challenge had to be identified as the most serious hurdle to foreign investment in Myanmar, many might opt for the electrical shortfall. Close to 70 percent of Myanmar’s population do not have electricity. This may not be immediately apparent to visitors to the country’s commercial hub, Yangon, bar the frequent power outages. Yet, upcountry, most of the villages are plunged into the dark at night, only lit by kerosene lights, candles or small petrol or diesel generators.
Announcing their first investment as they re-engage with Myanmar, Kanthan Shankar, country manager of the World Bank said at a press conference on September 25 that the World Bank has approved a US$140 million zero-interest loan for the government to refurbish and provide a 106 MW gasfired plant at Thaton Township in Mon State to provide reliable electricity for the people of Myanmar.
Three times the power
The Thaton gas turbine station will be refurbished as Myanmar’s first modern 106 MW combined cycle gas turbine power plant, reducing noise and CO2 emissions and improving the plant’s health and safety standards. More to the point, it will provide close to three times as much power for the same amount of gas than is being used at the moment.
This natural gas-fired electricity generation plan will improve access to reliable electricity for Mon state, the greater Yangon area and the Ayerawaddy delta.
“Why the World Bank selected the Thaton power plant situated in Mon State comes down to the specific needs and proposal of the government of Myanmar, not the choice of the World Bank,” the country manager said. “The second point is that this particular project addresses certain needs of the Thaton township as well as the surrounding rural areas. Another reason is that there is the infrastructure of the national grid near the power plant, which will allow the project to not only supply Mon State but some areas of the country.”
The plant will provide electricity to both the national and local grids, covering 5 percent of peak demand in Myanmar and 50 percent of peak demand in Mon state.
The World Bank is helping the government improve economic governance and create conditions for growth and jobs by providing policy advice and technical assistance in three main areas : public financial management to transparently link budgets to development priorities, regulatory reform to provide access to finance for microfinance borrowers and small and medium enterprises, and private sector development to promote broad-based economic growth and job creation.
The loan will be paid off over 40 years, with a 10-year grace period.
The aim of the project is to increase capacity and efficiency of the gas-fired power generation plants and enhance the institutional capacity of the Ministry of Electric Power and the Myanmar Electric Power Enterprise.
Part of the problem with the existing power grid and distribution is that it caters for only about half of the demand – hence the frequent blackouts and rationing.
Myanmar’s per capita energy consumption level is one of the lowest in the world, with less than a third of the people having access to electricity.
Myanmar is one of the poorest countries in East Asia, with an estimated GDP per capita of between $800- $1,000 and a poverty headcount of 26 percent. The country’s GDP is estimated at US$50 billion. Most social indicators are very low.
Kanthan said the project helps with the government’s desire to address constraints in electricity supply, which poses a major obstacle to unleashing Myanmar’s economic potential and reducing poverty. “And more reliable electricity will create jobs and improve lives,” he said. Increasing the capacity and reliability of Myanmar’s energy supply is an important contribution to the country’s economic growth and improvement in the livelihood of its people.
“We now have the project approved by the board. We hope to sign the project credit agreement in October. After that, we’ll … prepare the bidding documents. This is the international competitor bidding which is open to everyone. After the selected company has been decided on, the company will take from 12 to 15 months for actual operation. Hopefully, by the end of next year, we should see the plant in operation,” he said.
What they are looking at is an upgrade of a working plant. “I don’t envisage any concern about the ongoing project because we analyzed the design of the project before going ahead. The project is already functioning now. They have just got a very old generator, and aren’t efficient. What we’re doing is putting a new generator in place.”
The World Bank Group has been in dialogue with the International Monetary Fund to ensure the Myanmar government has the capacity to repay the loan within the required time framework before they begin providing loans to the country again.
Kanthan said the process included an assessment of income from exports and the foreign exchange revenues. The process involved standard bookkeeping to check current savings and debts, how much revenue the country is deriving from resources, and how much money will be utilized to repay loans.
The World Bank has a plan to provide telecommunications, public financial management, and education.
Will it be a transparent tender?
A key role of the World Bank is to provide financing mechanism, technical assistance, and offering the relevant government ministry the framework of international best practice to implement the project.
Kanthan said, “We wouldn’t bid for a tender. The Ministry of Electrical Power is responsible to handle the tender. It is the project of the government of Myanmar but not the World Bank’s project. I wouldn’t be able to tell the exact timing because the Ministry is preparing it now. Hopefully, by the end of this calendar year, we should have a tender document. I don’t want to speak on the behalf of the government. Like I mentioned, it will be done soon.
We already give assistance bilaterally with the government of Norway to help the government of Myanmar finish tender process quickly.
He added that the tender procedures need to follow the World Bank’s procurement guidelines in accordance with international standards.
Kanthan told the Business Magazine that they want to be transparent and to take care to monitor the project. Monitoring and evaluation are very important components of the project.
After achieving an interim programme, we’re also starting looking up what types of program will be pursued next year. We’re still in discussion with the government, civil society groups, and other stakeholders. We’ll be ready to tell what we will be able to finance next year at this time, he said.
Kanthan said they have teams to monitor the progress of the project. And also the government of Myanmar will provide implementation report as part of their commitment. It is required to allow a financial audit check to make sure where the money goes on and to oversee the process of recruiting.
Source: Mizzima News