Myanmar Gets a Corporate Power Surge; IFC estimates that for every $1 invested in the power sector, 30 cents are lost due to poorly run plants with aging equipment

Myanmar Gets a Corporate Power Surge

SHIBANI MAHTANI

Feb. 25, 2014 8:35 p.m. ET

YANGON—An arm of the World Bank agreed Wednesday to help turn a government-owned power distributor into a corporate entity and to take an equity stake aimed at improving Myanmar’s woeful electricity service.

The agreement signed with the Myanmar government by the International Finance Corporation is part of a larger effort to modernize the power sector in Myanmar, where only 30% of households have access to electricity.

“One of the biggest challenges for economic growth is a lack of sustainable power,” said Karin Finkelston, vice president for Asia-Pacific for the IFC, a part of the World Bank Group that focuses on private sector development.

Ms. Finkelston said the IFC, which aids development in countries by providing financial advisory services and acting as a bridge between the government and private companies, is working to make the existing infrastructure more efficient by helping turn the Yangon City Electricity Supply Board—one of the city’s largest power distributors, with 900,000 customers—into a “sustainable, self-financing institution.”

She didn’t specify how much money would be committed to the project.

Currently, the board is wholly owned by the Myanmar government, but is inefficiently run with system losses that run as high as 27%, Ms. Finkelston said. The IFC estimates that for every $1 invested in the power sector, 30 cents are lost due to poorly run plants with aging equipment.

Even as foreign investors flock to the Southeast Asian country since a civilian government took over in 2010 after decades of army rule, blackouts remain common and the lack of infrastructure is commonly cited as a major impediment to business.

The government is in the process of enticing companies, through an open tender process, to invest in the power sector, relying on foreign expertise to revamp and upgrade existing gas-fired power plants.

The IFC estimates that the process of turning the board into a private corporation could take up to three years, but it will be willing to support the board and provide financing before the full corporate transformation.

Modernizing Myanmar’s power sector is a key priority for the World Bank, which re-engaged with the nation in 2012 after closing its office for 25 years in protest of the military dictatorship. In a visit in January, World Bank President Jim Yong Kim pledged $2 billion in development aid, targeting health care and energy.

The World Bank has also been advising the government on a number of crucial sectors, including telecommunications, one of the country’s least-developed industries. Last year, Myanmar opened the sector to foreign investors, offering two telecommunications licenses in what was praised as a well-run, open and transparent tender process.

“A big part of our goal is to bring in private sector partners,” said Ms. Finkelston. Pointing to the telecommunications licenses, she hopes that the IFC’s help in working with government-owned power distributors will help boost transparency and attract competent foreign investors.