Myingyan IppMyanine Ipp
The Sembcorp Group will have a 100% share in this venture. Completion of the photovoltaic system is scheduled for 2018 and the electricity will be supplied under a 22-year-PPA.
The Myingyan Independent Power Producer Program
Costs of the investment amount to approximately US$ 250 million and include a 250 MW CCGT power plant. Combining IFC funding advice and an IDA guarantee, the scheme minimizes select risk for Myanmar's retail and investment community. The CCGT (Combined Cycle Turbine ) is the most cost-effective way to quickly boost power generation from renewable energy sources while minimising CO2s.
The Myingyan is setting standards for Myanmar | Supplements
The Myanmar Energy System has proven to be one of the most exciting possibilities in the area for developing and funding energy related energy related activities, and the Myingyan Energy System is the most important of its kind on the current energy markets. Over the past four years, Myanmar has proven to be one of the most attractive areas in the area for the design and funding of large scale infrastructural investments, particularly in the energy area.
Without a dependable baseload energy supply, nothing else can move the country's economies forward, and Myanmar's significant and pressing energy needs cannot be overestimated. Myingyan energy development is the most important Myingyan energy development case in the industry, developed by Singaporean energy developers Sembcorp Utilities Pte Ltd (Sembcorp), which has recently reached full funding closure following a major commitment by all stakeholders, and has been a test case that has been carefully followed by the wider Myanmar investor communities to show how the energy markets could evolve.
It is a powerful reference for Singapore Inc - backed by a Singapore sponsored by a syndicate of Singaporian builders, a substantial portion of which is funded by Singapore domiciled industrial creditors and a number of major consultants in Singapore. Mr. Sembcorp recognized the site at the very early stages of the first tender by the Ministry of Electricity (MOEP) of Myanmar, now the Ministry of Electricity and Energy (MOEE), in November 2013.
At the end of 2013 Clifford Capital joined forces with the firm to contribute to the funding conditions and early releases of the document. This paper discusses the backgrounds of the Myingyan Energy Trust and some of the main challenges that had to be tackled in achieving our goal of achieving our annual energy deal and the issues that should make the Myingyan Energy Trust a milestone in Myanmar's electricity industry over the coming years.
Myanmar had around 5,380 MW of generating output in June 20171. The share of total output, however, is only about 50%, as certain combined cycle and coal-fired generating units need considerable amounts of energy to maintain, while hydroelectricity does not have enough hydroelectric energy during the drying time. In order to place this in a worldwide perspective, Myanmar's per person per year energy use in 2013 was 165 kWh, compared to an worldwide mean of 3,000 kWh per person.
Insufficient and untrustworthy power supplies coupled with the high costs of emergency power gensets are a great obstacle to industrial expansion and the country's economical and societal expansion. However, since 2011, the Myanmar authorities have initiated important macroeconomic and policy reform and significantly enhanced the conditions for FDI.
Among the main benefits are (i) the adoption of several important sector-friendly laws, such as the Electricity Act in 2014, the Arbitration Act in 2016 and most recently the revised Investment Act; (ii) the signature of the corresponding documents allowing policyholders of endowment insurers to put such policies on the markets; (iii) a general reinforcement of the country's environment and welfare regulations; and (iv) the granting of bank licenses to several major multinational financial institutions.
However, perhaps the most significant achievement was the winning tender for IPP Myingyan, a gas-fired CHP station with a net output of 225 MW, which was granted to Sembcorp in 2015 following a tender procedure launched at the end of 2013. Restructured as a build-operate-transfer (BOT) operation, the site is in Myingyan, some 500 km northern of Yangon and 90 km western of Mandalay.
The plants built by the design firm comprise the hydroelectric station itself, a 3 km long transfer line to link the hydroelectric station to the 230 kW Myingyan transformer station near by, which feeds the electricity into the network, and a 14 km long pipe from the riverside to the hydroelectric station.
In 2014, the Transactions Advice Department of IMCC was named as MOEP Transactions Advisor to help the bidder prepare and manage the tendering procedure for the MOEPs.
Prior to the pre-bid phase, Sembcorp' s and the initially appointed leads arrangers' thorough assessment of eligibility and due diligence helped to ensure the documentation and allocate risks. This work was co-ordinated by Sembcorp and Clifford Capital and Mayer Brown acted as the lender's global advisor and DFDL Myanmar as the lender's on-location advisor.
The contract was signed in April 2015 and a MOU was signed in December 2015. Renowned sponsors and financers - The venture capital firm is a recently established specialty corporation based in Myanmar, primarily held by Sembcorp, a world leader in the development, ownership and operation of power and plumbing systems.
Sembcorp' s expertise covers the prosperous design and operation of energy generation companies in Singapore, China, Vietnam, India, Oman, the UK and the UAE. It is funded by a consortium of developers and business lenders: the Asia Developement Banka (ADB), the International Finance Corporation (IFC), the Asia Infrastructure Investment Banka (AIIB), Clifford Capital, the Documentary Banks, the DBS Banks, the PRG co-ordinating banks, the DZ Banks, the Engineering Banks, the Carbon and Environment Banks, and the OCBC Banks, the Finance and Underwriting Banks.
After the call for tenders, the broader credit group then worked on the final design document and the entire funding portfolio. Funding was already significantly overdrawn in the pre-bid stage as proof not only of the banking capability of the banking industry's projects and supporting documentary evidence, but also of its great desire for a place in the emerging Myanmar electricity markets.
The formulation of a set of documentation with risks allocations that would be accepted by the global banking industry was the biggest challenges in a land like Myanmar. The fact that the MEPE ( "Myanma Electric Energy Generation Enterprise") (now Electric Energy Generation Enterprise (EPGE)) was successfully awarded a BOTA in March 2016 and the MOEE in January 2017 is proof of the effort of all parties concerned from the bid phase to the signature.
Completed in May 2017. PPA- Before the call for tenders, ADB submitted to the MOEP, through its tech support program, a preliminary outline electricity purchasing contract essentially taking the shape of an electricity purchasing contract currently used for local PPPs in a more advanced IPP in ASEAN.
MOEP's transactional advisors (IFC and Allen & Overy) then customized the PPA templates for the Myingyan transactions. The PPA is therefore well developed and highly sophisticated, with a level of plausibility that largely complies with local standards and is appropriate for a border markets such as Myanmar. MOEE concluded the MOEE contract on the Government of Myanmar, which provides the license certificate granting the development and operation permissions to the developer for the duration of the MOEE contract.
The EPGE is heavily reliant on state support as the electricity production costs are higher than the sales prices for this electricity to final customers. Whilst a subsidized energy supplier is not uncommon in Asia, the absence of a balance of EPGE funds (as opposed to e.g. EGAT in Thailand) means that the EPGE loan providers need to structure the project to offer convenience to them, and this is provided for Myingyan through it.
The support of the authorities through ADB and MIGA is also essential to ensure that business creditors can obtain policy credit guarantee from ADB and MIGA, as they need a clear line of reference to the state in the case of policy risks (including contractual breach) that lead to a payout under such policy credits.
Whilst many of the challenges associated with the Myingyan operation were the same as those of a gas-fired plant in any other country, some of them were brought to the forefront due to the conditions of the Myanmar electricity market: By approving the framework contracts, MYANMAR' s authorities will make sure that MOEE can use the state budgetary resources to meet its financial covenants.
An expert report by the Union Prosecutor General's Office, the first of its kind in Myanmar and an important landmark case, is also foreseen to corroborate, inter alia, that the MOEE's commitments under Myanmar's bid represent the Myanmar government's immediate commitments. Energy security - Gas-fired generation requires a safe and dependable energy resource for the duration of the contract with minimal price risks.
Operational and upkeep risks - The profitability of the investment depends on the system being run at the planned cost and properly serviced to ensure uptime. Operations and maintenances are performed under Sembcorp and General Electric contracts as they have a documented history of running and servicing generating facilities around the world.
Interconnected risk - While it is not unusual in the area for the local authorities to be responsible for the building of the transfer and nuclear energy systems, the Owner of the Myingyan facility has built the transfer systems linking the Myingyan 230 kWh Myingyan transformer station, which consists mainly of a 3 km long transfer line.
This reduces the risks of delays in interconnections as the contract is not dependent on third parties to build and complete the link. Upon com-pletion, the plants were handed over to EPGE, with a fee to be paid under the PPA to reimburse the developer accordingly.
As mentioned earlier, the Myanmar authorities have taken important measures to encourage greater liberalization of the markets and liberalization of the economy and are supporting energy initiatives, in particular the Myingyan initiative. But with this advancement comes a changing and changing legislation, so the risks of changes in legislation in the context of the document framework are transferred to the state.
Although goverment-backed funding was critical to the Myingyan operation, ongoing multilateral institutional funding and funding, involving EPGE and MOEE, will be an important element in strengthening capacities and safeguarding the long-term viability of megacities. Landrisk - Safeguarding the necessary property is often the most important issue in the development of an energy venture in Southeast Asia.
In Myanmar, country matters can be complicated and timeconsuming, and determining the name is not easy. In Myingyan, it was decided that it would be more appropriate for EPGE to safeguard the site of the EPGE development and to conclude a leasing arrangement with the development com-pany. In Myingyan, the ADB and MIGA will offer "four-point coverage" or "extended policy coverage " against (1) wars / riots (2) exchange rate fluctuations, convertability and portability and (3) expropriation/nationalization and (4) treaty violations by MOEE.
The first of its kind, it is the responsibility of those who do. Myingyan should be" in a number of ways" in this respect. This is the first electricity in Myanmar to be put out to tender worldwide. Tender documents published by the federal administration represent the government's first and highly effective effort to draw up standardized global tender documents for use in energy related applications in the state.
After the bank transfer, these will probably provide the foundation for the future call for tenders for future contracts, which increases the probability of bank-compatible contracts being launched. The open call for tenders resulted in a highly attractive and viable rate for the state. It appears that the scheme is regarded as an internal achievement by the administration, which should result in further assistance to Myingyan-based procurement procedures.
In turn, prospective winning tendering and the conclusion of more autonomous electricity generation contracts should help to reinforce the regulative and legislative conditions in this industry, indicate increasing instability to the markets and result in a portfolio of electricity contracts. It is a scheme for privately financed electricity on the foundation of a Myanmar based PVPP scheme.
ADB B's credit architecture and ADB and MIGA's policy assurances of credit risks have enabled long-term funding of the scheme by multinational merchant banking institutions, which will provide an important market-based yardstick for further funding in Myanmar. The call for tenders drew a wide range of internationally active candidates from Australia, South Korea, India, Malaysia, Singapore and Thailand, proving both the strong interest in the markets and a high degree of awareness of the global investor base on the possible contract conditions they can anticipate for upcoming electicity projects.
Measures for the protection of the environment and society are subject to best practices at world level. The new combined cycle facility will guarantee the system's robustness and dependability and help to prevent further bottlenecks in electricity production. Together with its position nearer to Myanmar's major cargo center than hydropower stations, the facility will deliver current and projected steady energy regardless of seasons and the much needed extra capacities through advanced, low emitting, low carbon natural-gas technology versus coal-fired facilities.
It demonstrates the continued growth of local supporters and their financers, which includes Singapore bank and specialised financial institution, as well as the capacity of Singapore's international and local multi-lateral developing countries, and their capacity to mobilize the full power and range of the local infrastructures funding eco-system and its supportive advisors for the benefits of the region's needs for development .
Whilst the establishment of a viable banking infrastructure against which global creditors are willing to bind and take first steps into this new markets is a significant accomplishment, there is still a long way to go for both the Myingyan and the Myanmar energy markets in general.
In the hydroelectric field in particular, far bigger and much more complicated hydroelectric plant developments are on the agenda, whose management will continue to be a major challenge until their amelioration. However, the likelihood of such prospective ventures being viable depends more than anything on their being on a safe and sound treaty basis, and Myingyan is a real milestone in Myanmar in this area.