Hong Kong listed company, VPower Group won Myanmar’s emergency power projects tender

Hong Kong-listed VPower Group said its consortium with Myanmar’s Zeya & Associates had been provisionally awarded four of the five emergency power projects tendered by the energy ministry in June.

The consortium said it won three projects that would use imported liquefied natural gas in Rakhine’s Kyaukphyu, Yangon’s Thanlyin and Thaketa, totalling 900 megawatts. It also secured a 20MW project that would use gas supplied by the government in Kyun Chaung.

Letters of acceptance for each of the projects have been issued by the Ministry of Electricity and Energy’s Electric Power Generation Enterprise, VPower said in a statement. “All the projects are expected to commence commercial operation in the first half of 2020.”

The consortium still needs to negotiate terms of the contract - including the power purchase agreement - with the government. Industry consultants suggest these negotiations will be challenging, given the tough terms set down by the ministry.

The energy ministry did not immediately respond to requests for comment by The Myanmar Times. It is unclear who won the tender for the fifth project -- a 120-MW plant in Ahlone township which would also use gas supplied.

VPower joint CEO Rorce Au Yeung said: “Together with our existing power projects of more than 360MW in operation, the addition of the 920MW projects is going to strengthen our leadership in the distributed power industry in Myanmar and Asia.”

As of 2018 Myanmar’s electricity generation capacity totalled 3539MW, according to ministry estimates, making VPower an important player in the power market.

The tender for the five projects was announced by the ministry in late June, with a window of merely a month. The LNG-to-power projects’ short implementation deadline (210 days) and heavy penalties for missing the deadline have been widely criticised by industry experts and observers. In addition, investors would be forced to charge a very high price to consumers in order to make any profit because the contract only lasts for five years.

“Most reputable companies that looked at the emergency power tenders walked away as it is nearly impossible to execute,” commented an industry consultant on condition of anonymity due to the sensitivity of the matter. From a financing perspective, executing these projects within the required timeframe would amount to considerable increases in cost and risk.

“Unless VPower has access to extremely competitive finance - perhaps from China - it is unlikely they will be able to execute these projects,” he added.

State-owned CITIC – Kyaukphyu port developer – is a shareholder in VPower which has also worked closely with Chinese rail giant CRRC and state-owned China National Technical Import and Export Corporation.

“From an engineering and logistics perspective, it is an extremely complex task to execute the project within such a short timeframe. A similar project would usually require a timeline two or three times as long as this. If VPower can do it I would be very surprised,” said the consultant.

After failing to attract private investment in power generation over the past few years, the government tendered these emergency projects to ensure Myanmar could avoid serious power shortages next hot season, which would be some months before the 2020 general elections.

Demand for power consumption in the country is increasing annually by 15-17 percent, while less than 40pc of the national population has access to electricity. Currently, electricity originates from 62 hydropower and 20 gas-fired stations and one coal-power plant.

VPower has already completed several emergency power projects in Myanmar and together with Zeya & Associates it started operating a 90MW plant in Myingyan in March under a five-year contract.

The Ministry of Electricity and Energy is currently under investigation by the Anti-Corruption Commission, which has yet to officially conclude. Last month, the Commission announced it had opened cases against two directors of the ministry’s Hydropower Implementation Department for abuse of power and accepting bribes from tender bidders.

(The Myanmar Times: https://www.mmtimes.com/news/vpower-group-wins-myanmars-emergency-power-tender.html )

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