Fri 13 Jul 2012
Filed under: Business / Trade
The recent easing of sanctions against Myanmar by Western countries could prove to be a cornerstone in the nation’s economic development.
The consultancy Frost & Sullivan says as the economy attempts to take off from its current position, the power sector holds the key to supporting fast economic growth in the energy-starved country.
Vishal Narain, an analyst for Frost & Sullivan’s Asia-Pacific energy practice, said Myanmar has an installed power capacity of 2,254 megawatts (MW) after growing at an annual rate of 10% since 2007.
“The demand for power shot up by 15% in 2012, which has led to the current power crisis,” he said.
“A lot of projects in the recent past have increased power generation capacity, but only 13% of the country’s entire population has access to electricity.”
Myanmar has per-capita power consumption of 104 kilowatt-hours compared with 2,000 kWh in Thailand and 600 kWh in Indonesia.
Up to 70% of generation capacity is from 18 hydropower plants producing 1,270 MW during the rainy season and 1,000 MW during the dry season. Gas-fired plants generate 350 MW.
In the current scenario of Myanmar reforms, the country is likely to attain higher consumption levels in less than two decades, meaning a capacity of 50 gigawatts in that time frame. This would entail an investment of US$50 billion in power generation 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 the power rental sector,” said Dr Narain.
Antiquated transmission and distribution (T&D) lines offer medium-term investment opportunities. With some cables as much as 40 years old and more than half the cables transmitting power at less than 230 kilovolts, power losses are significant.
“Massive investments in upgrading T&D infrastructure could help the government reduce power losses and thereby manage the power crisis more effectively,” said Dr Narain.
To increase the electrification ratio, he added, the Myanmar government plans to set up as much as 5,000 miles of 230-kV transmission line with eight substation projects to support the grid.
Other investment opportunities include distributed power generation, seen as a short-term solution to power shortages.
The increased flow of foreign tourists and expatriates looking to set up representative offices in Myanmar will boost demand for residential and office space.
The government will have to order generators from foreign firms to deal with the spike in power requirements.
Private real estate companies providing residential and office space to expats are more likely to depend on power rental solutions, said Dr Narain.
Demand for distributed power generation is likely to remain high until 2015 and then decline as new thermal, gas and hydro plants are commissioned.
In the wake of the government’s openness to reforms and private-sector participation, there are significant short-term and long-term investment opportunities for foreign firms across the power industry value chain, said Dr Narain.
But firms should exercise caution in the market by considering the interest of multiple stakeholders in major power projects that could upset investment plans.