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Universal Access Roadmap and Investment ProspectusInitial Results for the Investment Prospectus
Peter Hoogland, March 2014
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PRESENTATION OUTLINE
• What is an Investment Prospectus?
• The Financial Model that underpins the Investment Prospectus
• Interim Output from Chin and Kayin States
What is an Investment Prospectus?
3
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.
.
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It is the basis for raising funds to achieve a reliable financing flow so that the entire electrification rollout can be achieved in a single co-ordinated, least cost program
It gives donors, government and investors a coherent plan that identifies their role and contribution.
It will accelerate the current rate of connections by ensuring full alignment between the least cost plan, its implementation and the funding and financing It will show stakeholders how their
development objectives will be achieved.
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Grid Rollout Plan for Kayin and Chin States
Kayin Chin
Total new connections to 2030 300,495 101,800
Grid percentage 99.9% 97%
Mini-grid percentage (Diesel based) 0.02% 2%
Individual system (Solar Home Systems) 0.01% 1%
Average cost of connection/household 815,100 kyat 1, 211,000 kyat
Initial assumption of equal number of connections in each year…
2015 2016 2017 2018 2019 Total (in first 5 yrs)
Kayin 20,033 20,033 20,033 20,033 20,033 100,165Chin 6,787 6,787 6,787 6,787 6,787 33,935
Source: interim results of geospatial analysis by Earth Institute
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Financial Model
Overview of the financial model…
Existing Infrastructure (Cash Costs) Generation Transmission Distribution
New Infrastructure (full economic costs)
Generation &Transmission
Distribution Rollout (All costs) Capital cost/connection Operating cost/connection Return on capital (financing cost)
—interest rate Return of capital (depreciation)
—useful life Total Annual Costs Generation Transmission Distribution
Costs are for total sector
Forecasts and Assumptions Number of connections pa Average consumption Growth rates in connections and
consumption
Additional Distribution Infrastructure (full economic costs)
33kV lines
= Cost/kWh
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Transmission:
Distribution:
Generation:
Costs are a blend of cash costs with full economic costs…
Existing Infrastructure
Cash costs onlyReplicates current practice
New Build Infrastructure
Full economic costs including financing and amortisation of loans
Ensures sector is financially sustainable over time
+
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Initial Investment Needs for Rollout in Chin and Kayin
Initial Investment needs for the distribution rollout for Kayin and Chin for the first 5 years is:
Kayin Kyat Millions
Chin Kyat Millions
LV lines initial cost 9,866 3,343
Service and meter initial cost 19,733 6,685
Transformer initial cost 22,492 10,036
MV lines initial cost 18,304 5,231
Mini Grid and Individual HH systems 346 4,020
Less: Connection Charges (50,000 kyat/connection)
5,008 1,697
Total 65,763 27,618
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Total Sector-wide Unit Costs
2015Kyat/kWh
2016Kyat/kWh
2017Kyat/kWh
2018Kyat/kWh
2019Kyat/kWh
Distribution Rollout Financial Costs34 33 33 33 32
Distribution O&M costs 4 4 4 4 4
LRMC of additional 33 KV distribution 10 10 10 10 10
LRMC of additional transmission 15 15 15 15 15
LRMC of blended generation 45 46 48 49 50Total Sector wide Unit Costs 108 108 109 110 111
Assuming all distribution rollout investment needs are financed by concessional loans at 3.5% interest and 30 year term
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These annual costs must be funded by matching annual revenue Revenue comes from:
Customers through tariffs Customers through connection charges
Any difference—the Funding Gap—must be met by subsidies or grants
To estimate revenue in our Financial Model we have developed two tariff scenarios: The Government Proposed tariff; and The Benchmark tariff
Revenue
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Initial tariff scenarios using for funding gap analysis
Unit 2013 Current
Kyat/kWh
Govt ProposedScenario
Kyat/kWh
BenchmarkScenario
Kyat/kWhHousehold first
100kWh/month35 35 60
> 100kWh/month 35 50 90
Business first 5000kWh/month
75 100 120
> 5000kWh/month
100 150 180
Benchmark tariff scenario is used for modeling purpose only.
0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 0
50
100
150
200
250
300
Cambodia
Indonesia
Lao PDR
Malaysia
Myanmar (current)
Myanmar (Benchmark)
Pakistan
Philippines
Thailand Vietnam
GDP per Capita (Kyat)
Resid
entia
l Tar
iff
(Kya
t/kW
h)
Useful to compare to other countries with similar incomes
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Benchmark residential tariff against neighboring countries
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Cambodia
Indonesia
Lao PDR
Malaysi
a
Myanmar
(Current)
Myanmar
(Bench
mark)
Pakist
an
Phillipines
Thail
and
Vietnam
0
50
100
150
200
250
Busin
ess K
yat/
kWh
Benchmark business tariff against neighboring countries
Funding Gap for the First 5 Years: Interim Results
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Proposed Tariff Scenario
(million kyats)
Benchmark Tariff Scenario
(million kyats)
Kayin State 12,145 3,439
Chin State 4,920 1,989
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Funding gap using concessional finance: Kayin
22,122
30,828
11,013
1,1293,194
4,800
15,295
1,164
1,16412,145
3,439
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Costs Proposed Tariff Revenue Benchmark TariffRevenue
Kyat
mill
ion
Funding Gap
Connection Charges
Generation
transmission
Additional Dist costs
Dist O & M
Dist Capital
Revenue
Revenue
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Funding gap using concessional finance: Chin
Chin 2015-2020
7,520
10,451
4,564
3831,082
1,626
5,181
396
3964,920
1,989
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Coss Proposed Tariff Revenue Benchmark TariffRevenue
Kyat
mill
ion
Funding Gap
Connection Costs
Generation
transmission
Additional Dist costs
Dist O & M
Dist Capital
Revenue
Revenue
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If the distribution rollout was financed by grants—with no interest cost and no obligation to repay—then unit costs would be around 30 % lower than using concessional loans
If the distribution rollout was financed by commercial loans—high interest rate and short tenor—then unit costs could be double that of concessional loans
The funding gap is sensitive to the cost of financing
The Cost of Financing Matters….
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Next steps…
We will gather data for the remaining
states and refine cost information
We will fill the funding gap
(Budget funds and grants)
Final Prospectus for entire country
Syndicate the concessional finance
Sources include World Bank, ADB
Source Amount
Government kyat
Donor grants Kyat
Concessional finance (WB, ABD etc)
kyat
Customers—tariffs and connection charges
kyat
The Prospectus
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Australia
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Peter Hoogland
36-38 Young StreetSydney, NSW 2000
Australia
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