More FDI expected in power sector in five years

Myanmar’s power sector will spearhead growth in the infrastructure industry and draw the bulk of foreign direct investments (FDI) over the next five years, Fitch Solutions Macro Research said in a report released April 23.

With just 40 percent of all households enjoying access to electricity as at September 2017, which is amongst the lowest in Asia, the research firm said.

With power cuts still taking place often during the summer months, major impediment to economic development, and the government is aiming for full electrification by 2030.

In Myanmar, almost half of all uncompleted projects in the pipeline, valued at US$1 billion, are related to the power sector. This, although aligned with the government’s aim for full electrification by 2030, indicates that the country is likely to fall short of capacity requirements.

“Projects in planning or under construction only have a total of 7,319MW of capacity. As such, we expect more power projects to be undertaken in the next decade in order to boost generation capacity. We currently forecast Myanmar’s construction sector to grow at an annual average of 8.9pc in real terms, from 2019 to 2028, largely driven by infrastructure in the power sector,” Fitch Solutions said in its report.

The expansion of Myanmar’s power infrastructure sector will be spearheaded by the construction of natural-gas fired power plants. Just last year, the government announced four such projects, to be completed by 2021 and adding some 3100 MW in power generation capacity to the grid.

There are currently nine gas power projects in the pipeline, with the largest being the US$1.25 billion Ayeyawady Combined Cycle Power Plant, which is currently at planning stage.

More investments in transmission infrastructure can also be expected. “The poor state of transmission infrastructure means that we are likely to see more grid and transmission projects as electricity capacity expands,” Fitch Solutions said.

“Transmissions infrastructure will be needed to link newly constructed power plants to demand centers and to link more households and businesses to the national grid. Also, older transmissions infrastructure will need to be upgraded so as to improve transmission efficiency and reducing cost of electricity,” it added.

In that light, the research firm is forecasting more FDI over the next five years as Myanmar pursues further development of its power infrastructure. “We expect FDI levels to gradually pick up in the coming years as the government pushes ahead with several economic reforms,” it said.

Myanmar’s power sector is currently one of the largest beneficiaries of FDI, with a permitted amount of more than US$22 billion, or 27pc of total FDI.

Source: Myanmar Times

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