Bjørn Holsen: Pow­er­ing Myan­mar’s growth

Norway-Asia Business Review - - Contents - By Ezra Kyrill Erker

With the coun­try’s en­ergy needs ex­pected to grow by 15% a year, de­mand for re­new­able sources such as hy­dropower will soar, says SN Power’s Bjørn N. Holsen With telecom­mu­ni­ca­tions and other sec­tors cur­rently be­ing revamped, and man­u­fac­tur­ing set to boom, it is ev­i­dent that Myan­mar needs a re­li­able power grid in or­der to sus­tain its de­vel­op­ment.

“Myan­mar’s en­ergy needs are ex­pected to grow by 15% a year,” Bjørn N. Holsen said, “sim­i­lar to Viet­nam, which has quadru­pled de­mand in 10 years.”

Lo­cal hy­dropower po­ten­tial is huge, Mr Holsen said, and the World Bank, Asian De­vel­op­ment Bank and other donors have pledged con­sid­er­able funds and tech­ni­cal support to trans­form the power sec­tor. Mr Holsen, coun­try man­ager for SN Power in the Philip­pines and re­spon­si­ble for the company’s business de­vel­op­ment ac­tiv­i­ties in Myan­mar, was speak­ing at the Norway-Asia Business Sum­mit in Yan­gon on how to help pro­vide that need in a sus­tain­able, en­vi­ron­men­tally and so­cially friendly man­ner. SN Power is a re­new­able en­ergy company that in­vests in emerg­ing mar­kets. Es­tab­lished in 2002 as an off­shoot of Nor­we­gian state en­ti­ties Statkraft and Nor­fund, SN Power aims to gain footholds in emerg­ing mar­kets with sub­stan­tial hy­dropower po­ten­tial and en­ergy needs and thus build a lead­ing po­si­tion and con­trib­ute to eco­nomic growth and sus­tain­able de­vel­op­ment. The company is present in 14 coun­tries and em­ploys over 500.

“After the new For­eign In­vest­ment Law, a draft elec­tric­ity law might pass this year so we know what frame­work we can op­er­ate in,” Mr Holsen said.

Hy­dropower is the main source of elec­tric­ity in the coun­try, sup­ple­mented by gas and coal. Larger units are be­ing in­tro­duced in the grid, but some are only for ex­port, such as two large plants de­signed for ex­port to China. “We’ll prob­a­bly fo­cus on the do­mes­tic mar­ket,” he said. “There is huge hy­dropower po­ten­tial, and projects are tech­ni­cally and eco­nom­i­cally fea­si­ble. Only 5 per cent of po­ten­tial is now be­ing utilised. There is large po­ten­tial for in­vestors.” One prob­lem is lo­cal sen­si­tiv­ity to elec­tric­ity prices, which are heav­ily sub­sidised. Any rise of­ten draws pub­lic protests, such as the at­tempt to in­crease prices by 40 per cent in Novem­ber last year. Slightly in­creased rates have been ap­proved for this year, in what is seen as a com­pro­mise.

“Higher prices are very sen­si­tive sub­ject here,” he said. “It’s a prob­lem of fis­cal sus­tain­abil­ity ver­sus pub­lic ac­cept­abil­ity.”

With the need to pay for the new plants, in­vest­ment is needed, not only for power gen­er­a­tion but also trans­mis­sion. The coun­try had a to­tal in­stalled ca­pac­ity of 4,035MW last year and elec­tri­fi­ca­tion ra­tio of only 28.9 per­cent in 2012. Per capita elec­tric­ity us­age is the low­est in Asia.

Hy­dropower po­ten­tial is es­pe­cially high, with 100,000MW in po­ten­tial. Some 40,000 MW of hy­dropower are slated for

“Myan­mar’s en­ergy needs are ex­pected to grow by 15% a year, sim­i­lar to Viet­nam, which has quadru­pled de­mand in 10 years.”

for­eign in­vestors. The em­pha­sis by the Min­istry of Elec­tric Power (MOEP) is on di­ver­si­fy­ing in­vest­ment.

Most projects un­der the pre­vi­ous mil­i­tary regime were awarded to Chi­nese de­vel­op­ers, which ex­pe­ri­enced strong lo­cal and in­ter­na­tional re­sis­tance due to a lack of cor­po­rate so­cial re­spon­si­bil­ity. The MOEP is now award­ing mem­o­ran­dums of un­der­stand­ing (MoU) on a first-come, first-served ba­sis. And while the MOEP is the cen­tral au­thor­ity, lo­cal gov­ern­ments also have a high de­gree of in­volve­ment in hy­dropower project de­vel­op­ment. Mr Holsen gave a project de­vel­op­ment in the mid­dle Yeywa in Shan State as an ex­am­ple. As part of a red flag as­sess­ment to see if it was so­cially and en­vi­ron­men­tally fea­si­ble, they con­sulted with lo­cal lead­ers. They were amenable, as long as lo­cal roads and ir­ri­ga­tion im­proved, and liveli­hoods were not lost. “It is im­por­tant to get lo­cal con­tri­bu­tion,” Mr Holsen said. “You need to make sure that ev­ery­one is aligned, and that it im­proves the liveli­hood of lo­cals.” With much na­tion­wide re­form still needed, cor­rup­tion still en­demic and with its com­pli­cated and po­ten­tially volatile eth­nic and cul­tural mo­saic, Myan­mar has yet to prove it­self to be “for­eign in­vestor friendly”, Mr Holsen pointed out.

“Risk is con­sid­er­able,” he said. “Myan­mar ranks low on the se­cu­rity scale. But op­er­a­tions in Nepal, also con­sid­ered high risk, have been prof­itable.”

The en­ergy sec­tor is at par­tic­u­lar risk rel­a­tive to other sec­tors in Myan­mar due to the large sums of money in­volved, the fight for po­lit­i­cal con­trol over the re­sources, the tech­ni­cal com­plex­ity, the en­vi­ron­men­tal and so­cial ram­i­fi­ca­tions and a lack of a his­tory of trans­parency of in­for­ma­tion, not to men­tion credit risks. “Good man­age­ment of the en­ergy sec­tor is about man­ag­ing th­ese risks,” Mr Holsen said. SN Power’s short term as­pi­ra­tions in­clude sign­ing an MoU with the MOEP on a fea­si­bil­ity study for a green­field project (ie one on pre­vi­ously un­de­vel­oped land), or al­ter­na­tives such as ac­quir­ing ex­ist­ing fa­cil­i­ties in or­der to shorten the time to mar­ket. They will screen for po­ten­tial part­ners and con­tin­u­ously mon­i­tor mar­ket de­vel­op­ments and risks by hav­ing peo­ple on the ground. In short, Myan­mar has huge hy­dropower po­ten­tial. The Myan­mar gov­ern­ment through re­forms and lib­er­al­i­sa­tions is mak­ing the coun­try in­creas­ingly at­trac­tive to for­eign in­vestors. With an elec­tri­fi­ca­tion ra­tio of only around 30 per cent, an­nual GDP growth ex­pected to ex­ceed 6 per cent, 95 per cent of hy­dropower po­ten­tial yet to be re­alised and elec­tric­ity de­mand ex­pected to soar, it is a po­ten­tially lu­cra­tive mar­ket de­spite the con­sid­er­able risks.

Photo: TNCC

SN Power’s Bjørn Holsen ad­dresses the ur­gent en­ergy needs in Myan­mar.

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