OBG talks to Daw Ei Phyusin Htay, Managing Director, Barons Group

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MD Photo 2_Easy-Resize.com_.jpgWhat is the ideal energy mix for Myanmar?

DAW EI PHYUSIN HTAY: We have a tremendous amount of capacity in hydroelectric power, and we are expecting 2000-2500 MW in generation from gas in five years’ time. Another option is solar, but integrating solar power into the energy grid is not very feasible given the grid’s current condition. To accomplish this, we need substantial investment in strengthening the electrical grid. Once the grid is stable, there is a government objective to have 200 MW of solar power per year, as per the Myanmar Energy Master Plan. However, I think this is a bit ambitious; 50 MW per year is more feasible at this time.

What direction do you think the government should take on electricity subsidies and tariffs?

EI PHYUSIN HTAY: The current subsidies greatly benefit companies connected to the grid. This isn’t good for the generation business. As a result, the state utility is not a financially healthy off-taker, and we need to change this in order to reduce risk. We need to ensure a healthy revenue stream to the power company.

We are having many problems with government offices, army offices and other facilities that do not feel the need to pay their electricity bills. This is the first thing that needs to be addressed. Another problem is that many users are adjusting the meters in their houses and factories in order to not pay their bills correctly. This is something that law enforcement must deal with and the state utility should take greater steps to eradicate.

The government needs to put together an analysis on how much revenue is being lost via these two channels and create a financial model for how much revenue is needed to cover generation and transmission costs. With these indicators, we can come up with a benchmark KWh cost for electricity, and a subsidy and tariff structure that will accommodate the various segments of consumers. Low-income people should have a subsidized rate, industries should have an incentivised rate and so on.

We don’t need to change the consumer tariff nationwide all at once. We can start with a high-consuming commercial area like Yangon in a pilot phase to find optimal solutions for the broader country.

Thermal power has been on the government’s list of objectives, targeting an increase from the current 2500 MW to 30,000 MW by 2030. Is this realistic and what factors will drive success in this regard?

EI PHYUSIN HTAY: I think this amount of generation it is too ambitious. This opinion is simply a summation of all the memoranda of understanding that have been signed – it does not add up. However, I appreciate that the government has looked to the future and estimated electricity demand up to 2030. By 2020 the target is around 20,000 MW, but I think it will be closer to 14,000 MW. After that, you can do another demand-side study to determine the next target.

All you need to hit 14,000 MW is one large, coal-fired power plant, but it is not a popular option and it will be very difficult to convince institutional investors to come on board. What needs to happen is a study to find out how much electricity we can realistically expect to be produced from gas and other options by 2020. If you take the expected demand and the fact that all the generation inputs don’t add up to it without coal, you have a very good case to go to investors and environmental activists and tell them we need a coal power plant.

With the wealth of discoveries being made in gas fields in Myanmar, where do you think the revenue generated from this should go?

EI PHYUSIN HTAY: If we can make additional discoveries and ensure a steady production line of gas, we can export it to countries like China, Japan or Thailand. For domestic production, there needs to be a blueprint for which industries can use the gas. Difficult questions will need to be asked – should cement plants be able to use gas? Should manufacturing facilities? We also need to focus on the value-added domestic processing of liquefied natural gas that can then be sold for additional revenues. 

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