Electricity plant work halts for purchase plan

Work on power plants slated to generate some 300 megawatts of electricity in the Yangon area has halted awaiting government approval of a standard power purchasing agreement (PPA) for the industry, according to U Zeya Thura Mon, CEO of power plant developers Myanmar Central Power Company.

The construction stoppage comes as Myanmar projects a significant gap between electricity supply and demand, with the four plants together able to add some 7.5 percent to the country’s current capacity of 4012 megawatts, figures from the Ministry of Electric Power (MOEP) show.

U Zeya Thura Mon expressed frustration that his firm thought it had an agreement in hand with authorities when it began constructing its plant, only to see the government not offer a PPA as the plant neared completion.

“We brought in [foreign investors], built the project, and we are ready. Everybody agreed on a deal,” he said. “Then it came time to sign the deal, and nobody signed.”

He added it is a similar situation for three other plants spearheaded by investors from Japan, Malaysia and Indonesia, who all responded in 2011 to an easing of rules governing foreign investment in the sector as a means to supply much-needed electricity to Myanmar.

U Khin Maung Win, MOEP deputy director general, said the delay in producing a PPA for the four plants came as the government attempts to produce a standardised agreement for the industry with international support.

“We should produce an agreement at an international standard,” he said.

“Right now we’re looking at how it should be handled.”

Implementing the four projects came with a large degree of risk, and the developers should be compensated appropriately – but creating a PPA standard agreement that would work for all future projects as well as the currently stopped plants is important to developing the industry in the years ahead, he said.

The Asian Development Bank – which supports MOEP’s efforts to develop regulations through technical assistance projects – told The Myanmar Times that it is natural the government is examining whether the contracts are in the long-term best interest of the country and in line with international practices.

“It is responsible and prudent for the government to carefully study the terms and conditions of these unsolicited contracts, some of which extend for 30 years,” it said.

Although U Zeya Thura Mon said his firm had agreed on a tariff with MOEP for the power it generated, he added it is unreasonable for government to subsidise electricity prices by forcing producers to charge less.

“If the government wants to subsidise prices that’s fine, but the market price should be [about] 12 cents a kilowatt hour [kWh],” he said, claiming Myanmar’s current prices of US$0.06 a kWh paid by consumers as far lower than other regional economies.

Myanmar consumers are currently charged $0.06 a kWh while the government pays about $0.12 a kWh to producers, in effect subsidising the difference.

U Zeya Thura Mon said a price of about $0.12 would strike the right balance between low rates for Myanmar consumers and incentivising investment in the sector, though media reports have indicated some agreements with private power in Myanmar have offered higher rates of $0.13 to $0.15.

He said the price for the plant was about $0.035 a kWh without fuel costs, though with fuel the costs of operation rise to about $0.10.

He contrasted this rate favourably with those of other regional economies, such as Singapore where power can cost $0.26.

source: The Myanmar Times
http://www.mmtimes.com/index.php/business/8266-electricity-plant-work-halts-for-purchase-plan.html