Local energy firms, investors weigh in on solar project tender

Local energy companies are pessimistic about a recent government tender for Myanmar’s biggest solar power project.

“There are some tall hurdles for local investors who wish to bid for the tender. The government should also consider local investors for the project but the terms and conditions rule out most Myanmar investors,” said U Kyaw Kyaw Hlaing, chair of the Smart Group.

Among the requirements investors must meet to qualify to bid for the 1060-megawatt solar plant project is an annual income of US$20 million for three consecutive years and experience carrying out a minimum of three independent power plant projects within the past ten years, of which at least one must involve solar power.

“These conditions rule out pretty much all the local businesses,” said U Kyaw Kyaw Hlaing.

He noted that although some local companies have solar technology, the lack of commercial-scale solar projects in Myanmar implies few would have the experience required to bid. Currently, there is only one large scale solar-powered plant signed with the government – the 40MW solar plant located in Minbu, Magwe Region.

Announced on May 18, the tender, which invites companies to bid for the construction of 30 ground-mounted solar plants capable of generating a total of 1060MW of power under a 20-year build, operate and own basis, must start commercial operations within 180 days after letters of acceptance are issued.

One businessman pointed out that while local companies could merge to meet the financial requirements, raising the necessary funds to launch within the 180-day timeframe will be difficult.

In Myanmar, it is common for energy businesses to borrow up to 80 percent of the capital expenditure required for a project from the banks. However, the loans are disbursed only after a Power Purchase Agreement (PPA) signed by the government and company is produced. This process typically takes 150 days.

“The deadline to complete the entire project is six months to be in time for summer 2021 but most can only begin construction after obtaining funds from the banks and this takes place only after signing the PPA. The winning bidder must have strong financial capacity to bear the cost of building in advance in order to meet the deadline,” said one business owner who is keen to bid.

The tough conditions aren’t just deterring local investors. Even after the ministry extended an initial one-month deadline for the tender to July 17, American, British and European chambers argued that with an existing flight ban, quarantine measures for in-bound travellers and other COVID-19 constraints, the tender needs to be extended by at least nine months in order to meet the conditions and accommodate other major land requirements.

As a result, few investors are expected to be able to participate in the tender. And, without sufficient competition in the market, consumers will likely end up with a higher electricity bill. This will not be short term. The PPA will lock the government in for 20 years, forcing consumers to

“As we will purchase power under this PPA not just for one year but for 20 years, it is the responsibility of the ministry calling the tender to ensure it gets the best price. If Myanmar is able to be more flexible on the requirements and ease tight deadlines, the country could attract more competition, leading to lower costs and more attractive electricity tariffs for consumers,” the businessman said.

U Soe Myint, Permanent Secretary of the Ministry of Electricity and Energy, said the tender was invited because foreign as well as local investors have shown interest in investing in solar power projects in the country and it was submitted for discussion to the ministry.

“Solar power is important and we encourage such projects in Myanmar. But the tender process should not be conducted hastily as locals as well as foreigners will face difficulties meeting with the conditions. Some investors aren’t able to make decisions due to the outbreak of COVID-19, and some are worried about their capability to carry out the projects even if they win the tender,” said a local businessman. – Translated

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Source : Myanmar Times

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