8 Things You Should Know About Power Regulatory Reform in Myanmar

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8 Things You Should Know About

Power Regulatory Reform in Myanmar Oliver Massmann – Partner

DUANE MORRIS SELVAM

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Infrastructure &

Major Projects

ASEAN and South Asia

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What are power regulatory reforms for?

– To protect against monopolistic abuses by natural

monopolies

– To provide power supply assurance

– To ensure coordination of power sector operations

– To increase financing available for investment

– To improve quality of power services

– To introduce and reinforce competitive

market structures

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How does power sector regulatory reform

work?

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How does power sector regulatory reform

work?


Myanmar Power

Sector Regulatory

Reform: Early

Steps


Meet national power needs

Enable safe and broader use of electric power

Establish and impose standards on electricity-related businesses

Protect consumers

Encourage local and foreign investment

Ensure adherence to Myanmar’s international environmental

protection obligations

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ERC: A step in the right direction, but…

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3. How does licensing work?

Permitting authority divided between :

‒ MOEP and “Other Relevant Ministry”

‒ Relevant Regional or State governments

‒ Leading bodies of relevant self-administrated regions and zones

Applications evaluated on the basis of transparency, fairness, competitiveness and sustainability.

Duration provided by Permitting authority.

At the end of Permit term, the permitted person is to transfer business in its original form or in accordance with conditions agreed to at time of Permit issuance.


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4. How does tariff determination work?

MOEP may prescribe an appropriate rate for “consumers” depending upon the region.

The rates may be adjusted from time to time.

Decentralized level may, through coordination with MOEP, prescribe rates under their own arrangements.

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Tariff: The grey areas…. MOEP’s authority to regulate tariffs appears to be limited to

retail tariffs.

Only standard specified to govern tariff determinations is that

electricity rates should be ―reflective of modern times‖.

Electricity Law does not yet provide any processes or

procedures for:

‒ processing tariff applications; or

‒ determining tariffs.


– Issues around allocation of regulatory responsibilities and

functions

Further emphasis needed on competition and power

sector structural reforms

– Desired market structure.

– Requirements on competitive power solicitations.

– Revisions of service obligations.

– Greater clarity around encouraging foreign

investments in the power sector


5. What’s next? Supporting regulations…


6. What about foreign investors?

In general, foreign energy companies are allowed to act as

Independent Power Producers (IPP) in Myanmar

Few restrictions under FIL Rules:

‒ Electricity generation under 10 megawatts – usually

restricted to local investors

‒ Foreign investors in <10 megawatt projects—

only up to 80 % equity



Administration of foreign investors in the power sector:

‒ All power deals by foreign investors have to be through the

relevant government entity under Ministry of Electric Power

(MOEP).

‒ Normally, Myanmar Electric Power Enterprise

(MEPE) submits the MIC proposal as a promoter.

‒ Myanmar Investment Commission (MIC).



• Notification 49/2014:

Reduced list of activities prohibited to Foreign Investors (now

only 11): administration of electric power systems, inspection

work related to electric power

Small scale and medium scale electric power generation work

must be done in joint venture with Myanmar nationals

– Formerly, hydro and coal power plants were listed as having

to be in a JV BOT with a government entity –

does not seem to be the case anymore


7. What are the other power development

issues to be aware of?

Access to land – example of

telecoms towers

Community consent

Project financing

Challenges in rural areas

Environmental requirements


Some other major legal issues • Offshore Arbitration

Neutral venue to solve commercial disputes

• New York Convention of 1958

• Choice of Foreign Law

Contract Act of 1872 allows the choice of a foreign law.

• PPA Template

One well-drafted PPA template, and

Roll out same form for each project.

Translates into minimal changes and consistent positions.

• AGO’s Legal Opinion

Opinions provide sponsor and lenders confirmation on relevant laws so assumptions/plans

are confirmed/clear.

Alleviates legal risks.


8. Power sector legal reform : only one

part of the process New Competition Law (2015)

Draft new combined Investment Law (merged FIL and MCIA) – IFC-funded project, consultation process begun

Draft new Companies Act – ADB-funded project, draft under public consultation

Dispute resolution – NYC accession, not fully implemented yet

Employment – new minimum wage and other changes to labor law coming through

Foreign Bank activity – limited licenses now issued to 9 foreign banks

Subsidiary legislation and directives for the new Electricity Law

Further development of Environmental Conservation Law and Rules (issued June 2014), including stakeholder and community consent to projects


Now – how to get the deal done!

To start, every foreign energy company must meet with MOEP.

It is likely that all future power projects will go through a bidding procedure via MEPE.

Negotiation process between the relevant department and the foreign investor for any of the Project Documents.

Submission of the Project Documents to the Union Attorney General's Office, the Ministry of Finance and the Ministry of National Planning and Economic Development for their review and comments.

Application process for the required notifications, permits and approvals.

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Thank you!

Oliver Massmann – Partner

DUANE MORRIS SELVAM