National Electrification Program Investment Prospectus (2015–2019)
Draft Final Results
Alex Sundakov, September 2014
PRESENTATION OUTLINE
• Roll out program for 5 years
• Financing need
• Donor support rationale
• Potential Tariff Paths
• Funding Gap and Government Support Needed
1
Roll-out plan for universal electrification by 2030

Total Planned Connections (2030)
Earth Institute estimates that
the total number of
connections required for
universal electrification by
2030 is apprx 7.2 million
 Majority of connections on
the grid by 2030

About 11,000 households
permanently off-grid and
around 250,000 possible
pre-electrification
2
Source: Earth Institute
National least-cost roll-out
This means that the cheapest connections, wherever they
happen to be in the country, are made first.
Biggest “bang for the buck”
Resulting Connections in Each State 2015-2019
Central corridor
prioritized in the
first 5 years for
grid connection.
Mini-grids and
household
elsewhere
Connected earlier
3
Connected later
Source: Earth Institute
Projected connections targets over entire roll-out
Projected National Electrification Rate
100%
After 2019, over 517,000
connections have to be
made each year to reach full
electrification by 2030
76%
47%
30%
4
Why consider pre-electrification connections?
No. of Households Electrified
NEP Program Years
Temporary electrification
solution while waiting for
the grid (e.g. mini-grids,
micro-grids, SHS) may be
efficient and provide social
inclusion to household
slated for grid connection at
the end of the roll-out
We estimate that approximately 250,000
households will use pre-electrification
solutions in the first 10 years of the program
5
Although it will add some costs
to the roll-out program, some
pre-electrification in the early
part of NEP may be efficient
because:

There will be time to
amortize the costs of
investments in temporary
solutions
(for e.g. diesel mini-grid)

Some renewable generation
sources serving off-grid
solutions can remain viable
on the grid
How many connections are feasible in the first 5 years?
Technically and physically feasible to
implement about 1.7 million additional
connections from FY2015-19
2012
Actual
Pace of ramp-up limited by:
 Institutional weaknesses
 Available skilled labor
 Procurement practices
ESE
New
Conns
Required
6,993,539
59,000
75,000
150,000
225,000
337,500
517,170
YESB
207,752
130,000
130,000
77,752
0
0
0
205,000
227,752
225,000
337,000
517,170
Total

2015
2016
2017
2018
2019
Approximately 125,000 total mini-grid and off-grid
household solution connections can be made. Includes both
permanent and estimated pre-electrification
connections
6
What is the financing need to achieve 1.7 million connections?
With national least-cost roll-out, US$650
million of loans will be needed from FY 2015-19.
This amount will cover the expansion program’s gross capital
expenditures.
Additionally the implementation of the Institutional Roadmap will require Technical Assistance of
$24 million
Type of investment
Grid Investment
2015
In US$ Million
2016
2017
2018
$72.5
$80.6
$79.8
$0.6
$0.6
$2
Off-grid Investment
2019
$139.9
$232.2
$0.6
$0.6
$0.6
$3
$4.5
$6.5
$8.5
$2.2
$2.2
$2.2
$3.2
$3.2
Annual Investment
$77.3
$86.4
$87.1
$150.2
$244.5
Technical Assistance
$10.3
$6.8
$2.2
$3.1
$1.4
Mini-grid Investment
Pre-electrification
Investment
Numbers are in constant US$, does not include inflation
7
Strong development rationale to meet financing need from donor sources
Low interest, long tenor donor-backed loans will:

Enable Myanmar to achieve the targeted 1.7 million connections in next 5 years. This
will:
Contribute to Myanmar’s economic development by giving those households
access to electricity
Underwrite the ramp-up in both technical and institutional capability required to
achieve full electrification by 2030

Ensure that the burden on consumers and on Government is consistent with ability to
pay. Long tenor loans ensure that future electricity users—who will be better off than
the current users—pick up a fair share of the burden

Over time, as the economy becomes integrated with the global financial system and as
local banking system matures, commercial finance will become available on tenors and
other terms that can replace concessional finance without a material shock to tariffs.
8
Size of funding gap depends on decisions about tariffs
Funding gap = (Revenue + Loan Amount Received) – (Capex + Opex + Loan Repayment)

Reduced to $1.1 billion
with an existing system
cash neutral tariff
$2.500
Myanmar current tariff
Myanmar current tariff
$2.000
Funding Gap $ billion

Funding gap is $2.2
billion over a 40-yr period
at the current tariff
Funding Gap US$ Billion

Reduced to $0.25 billion
with maintaining a
residential tariff equivalent
to Vietnam
$1.500
$1.000
Vietnam
Vietnam
tariff
$0.500
Existing system
cash
neutral
tarifftariff
Existing
system
cash neutral
$$0.037
Note: Assumes all loans are concessional, at 1.25% with 25 year
repayment and 5 year grace period
$0.038
$0.040
$0.041
$0.042
$0.043
$0.045
Average Residential Tariff $/kwh
9
$0.046
Average Residential Tariff $/kWh
$0.047
$0.049
What tariffs are needed to make the existing system cash neutral?
Steady tariff increases in real terms would be needed to accommodate rising generation
costs….
Comparison of Various Tariff Paths for National Least Cost Connections Scenario
10
Effect of tariff choice on PV of funding gap
If tariffs are increased such that
the existing system is made
cash neutral, the PV of the
funding gap about US$1.1
billion.
If tariffs kept constant in real
terms, the PV is US$2.2 billion
Cash Outflows
Cash Inflows
Tariffs maintained
in real terms
Cash Inflows
Tariffs increased to
make existing system
cash neutral
Funding gap period 2015-2070, 10%
discount rate for PV calculation, figure is
for National Least -cost
11
Government support is needed to close the funding gap
Government will need to subsidize operating losses (revenues-opex) and pay debt service
(principle repayment & interest) every year to close the funding gap over time.



Current total budget support to
MOEP is US$567 million per year
Access to financing reduces need for
support
12
Support needed
starts low and quickly
ramps up
Conclusions

Assuming that financing can be secured, initial pace of ramp-up in roll-out is
determined by institutional and technical constraints

To achieve the target of nearly 100% electrification by 2030, annual new
connections must be ramped up to more than 550,000 per year five years
from now: a more than two-fold increase

Donor commitment to meet the financing need of the 5-year program is
essential to achieve the ramp up

The Government must make difficult decisions about future tariffs. The
funding gap will depend on the tariff path

The roll-out program is financially viable. Institutional weakness is the
biggest risk to the roll-out
13
Contact Us
Alex Sundakov
36-38 Young Street
Sydney, NSW 2000
Australia
Alex.Sundakov@castalia-advisors.com
www.castalia-advisors.com
Paris
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