By Fitch Solutions
- We expect hydropower capacity in Myanmar to have a weakened growth over the coming years, due to uncertain prospects of projects, investors withdrawing from the market and continuous protests from locals and environmental activists.
- Despite uncertain prospects for new hydropower projects, we forecast hydropower generation to surpass thermal generation, following announcements of gas power plants reducing operations.
- We anticipate Chinese companies to continue involvement in Myanmar’s hydropower sector, leading the sector’s limited growth.
We expect hydropower capacity in Myanmar to have weakened growth over the coming years due to uncertain prospects of projects, investors withdrawing from the market and continuous protests from locals and environmental activists. Following the February 1, 2021 military coup, the junta leader, Min Aung Hlaing, announced the resumption of stalled hydropower projects. We have not factored this development into our forecast as we note foreign companies pulling out of power projects. Notably, the Electricite de France SA (EDF) suspended the development of the 671MW Shweli III hydropower project in March 2021, which was estimated to be a USD1.5bn project. Additionally, ongoing hydropower projects have been met with delays, with uncertain realisations of most projects in the pipeline. Major hydropower projects, like the 308MW Upper Yeywa and 111MW Tha Htay dams have been delayed into 2022 and 2026 respectively following the coup. We also note that the 622MW Laymyo Myit hydropower project, which has been in the works since 2020, has yet to announce any updates of its progress as of Q421.
Furthermore, we expect delays to be a trend among ongoing hydropower projects as they face local and environmental protests. In spite of the market’s longstanding dependence on hydropower, locals and environmentalists have been opposing the construction of new hydroelectric dams, due to safety and environmental concerns. Notably, the 6.0GW Myitsone Dam project continues to be a topic of contention, though it has been stalled since 2011. The Chinese-backed dam faced significant opposition, due to the impacts it will have on citizens’ livelihoods and the environment. Protests against the dam resurfaced again in 2019, when China proposed the reinstatement of the dam’s construction, prior to Aung San Suu Kyi’s 2019 visit to China.
Despite uncertain prospects for new hydropower projects, we forecast hydropower generation to surpass thermal generation, following announcements of gas power plants reducing operations. Alongside hydropower, thermal power is the other main source of electricity in Myanmar. We note two main factors that will facilitate hydropower’s overtaking of thermal generation’s dominance amid the ongoing civil unrest.
- Electricity bill boycotts as part of a civil disobedience movement against the military government have resulted in the power sector’s revenue taking a dip, reportedly an estimate of USD1bn in losses. This limits the sector’s cash inflow for the purchasing of feedstock for generation. In this case, it will affect thermal generation more than hydropower as thermal generation relies on purchasing of fuel through imports, while hydropower’s resources are located domestically.
- Depreciation of the kyat (Myanmar’s currency) has been continuous since the military coup. Our Country Risk team forecasts the kyat to depreciate persistently to the end of 2021, which will limit the sector’s purchasing power to import fuel as relative prices increases.
With these factors, thermal power plant operators will find profitability of operations increasingly challenging as costs rise while revenue decreases. As of July 2021, VPower Group, a major gas power plant operator in the market, had stopped operations of its 400MW Thaketa gas power plant and reduced output of its 350MW Thanlyin gas power plant to 50MW. Both plants only recently came online in 2020, following successful emergency tenders of the civilian government before the coup. VPower Group also announced in August 2021 that it will be pulling out of two unnamed power projects in Myanmar (we believe this to be the Kyauk Phyu II plant and Myingyan I plant). As a result, we expect thermal power generation, which was the largest contributor to Myanmar’s power mix, to contract by 29% y-o-y in 2021 and account for 44% of the power mix. Hydropower will be Myanmar’s top contributor at 56% of 2021’s power mix and retain its dominance in the power mix over the coming decade.
We expect Chinese companies to be persistent in involving themselves with development of Myanmar’s hydropower sector and advancing the Belt and Road Initiative, leading the market’s limited hydropower growth. China has been receiving electricity imports from Myanmar and will look to ramp this up. China has also been pushing for the reinstatement of the 6.0GW Myitsone Dam. Reportedly, Chinese and Thailand companies have been making plans with Myanmar to develop seven dams along Myanmar’s Salween River. Two major dams out of the seven have expected capacities of 1.4GW (Hatgyi Dam) and 7.0GW (Mong Ton). As a result, we consider Chinese investor involvement as an upside risk to our current forecast for hydropower capacity growth.
This article has been sourced from Fitch Solutions and can be accessed here