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