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SLP Consulting - Asian Rural Development Fund

The document discusses providing off-grid electricity access in Myanmar through sustainable solutions like solar home systems and micro-hydro plants. It outlines plans to create an Asian Rural Development Fund that would indirectly finance such projects by working with local banks, microfinance institutions, and power suppliers. The business model involves the Fund providing debt financing to local partners to invest in energy systems, which would then be distributed and serviced in rural villages with customers paying monthly fees. Metrics and data are presented on potential project costs, repayment timelines, and pricing under the model. The goal is to increase electricity access, foster economic growth, and improve living standards across Myanmar.

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Off-Grid Electricity in Myanmar: Asian Rural Development Fund (ARDF) Consulting Leon Spruth, Philip Ter Meer, Sem de Moel
Consulting Agenda 1. Overview & Problem Identification 2. Our Plan 4. Business Model 3. Financing Streams  Myanmar Overview  Electrification Problem  Electrification Problem - Financing  Financing Streams  Donors, Investors & Intermediaries  Investees  Mission & Objectives  Our Approach: Developing off-grid  Previous cases & Learnings 5. Conclusion  Business Model  Data  Outcome  Impact Measurement - Metrics  Conclusion
Overview & Problem Identification • Mynamar Overview • Electrification Problem • Electrification – Financing 1
FiM Regional Market Presences Office Europe: • Armenia • Bosnia and Herzegovina • Georgia • Kenya • Kosovo • Luxembourg • Macedonia • Moldova • Montenegro • Serbia • Turkey • Ukraine South-America: • Colombia Africa: • Egypt How about Myanmar?
Consulting Myanmar Overview • 50 years of isolation and military rule • Midst of progressive political reforms 1) Micro Hydro Workshop Proceedings: Dr. Xiaoping Wang, World Bank 2) United Nations: Human Development Reports 3) Asian Development Bank: Development Economics and Indicators • Promising results, improvement expected in: a) economic b) social indicators c) regulatory and institutional frameworks5) 0% 5% 10% 15% Myanmar East Asia & Pacific (developing only) • High Impact, rapid growth potential1) • Wealth of natural resources, young workforce, and good strategic position as trading hub5) • GDP per capita (2011): $8572) • HDI (2015): 148/1872) • Poverty margin: 26%3) 4) World Bank: Global Economic Prospects 5) PWC: Myanmar Business Guide 6) Khin Seint Wint, Ministry of Electric Power, November 24th, 2014 • Annual GDP (Δ) expected around 8%4), • Economy will quadruple by 20307) • Very low electrification rate: 32%6) • Much lower in rural areas • National Electrification Program (NEP) • Improvement of life quality • Fostering long-term economic growth • Significant investments needed in energy and infrastructure sector 7) McKinsey Report, 2013 New Government (Civilian rule)1) Economic and Impact Potential Electrification Problem
Consulting Electrification Problem 59%20% 11% 4% 4% 2% Remaining Villages Generators National Grid Solar Micro-Hydropower Biomass/Biogas 1) Ministry of Livestock, Fisheries and Rural Development, Department of Rural Development, January 2015 2) www.geni.com Global Energy 3) Center for Strategic and International Studies: Myanmar's Path to Electrification, Rachel Ross Rural Electrification Program 1) National Grid System2) • Only minority of 51m people have access to grid • Electricity access concentrated in cities 4) : Yangon (78%), Kayah (46%), and Manadalay (40%) in contrast to Kayin (6%), Tanitharyi (9%), and Ayeryawady (11%) • Only 40% of rural villages (26.000) have access to electricity and 13,000 use generators1) • Of electrified villages, less than half of households receive electricity sufficient to charge electronics for several hours a day2) 4) Ministry of Electric Power: Electrification rates as of December 2013
Consulting Electrification Problem - Financing Further funding is needed to fully electrify Myanmar: ▪ NEP only financed $550m of total $700m required for first 5 years1) ▪ Ministry of Livestock, Fisheries and Rural Development seeking private investment for off-grid projects2) • €5.4bn total investment potential on off-grid electricity, measured by SLP • Currently only €58m planned expenditure by NEP until 20303) 1) Department of Rural Development & MOLFRD, Rural Electricity Access, 2015 2) World Bank, Myanmar: Achieving Universal Access to Electricity, 2015 3) Castalia Advisors, Myanmar National Electrification Program (NEP) Roadmap and Investment Prospectus, 2014 NEP Financed 79% Additional Investment Needed National Electrification Plan Financing1) Off-Grid Investment Potential Electrification Plan Financing (FY ‘16-’19) Investment Potential in off-grid (FY ’18 – ’30) NEP Committed Funds Private Investment Opportunity 99%
Our Plan • Mission & Objectives • Our Approach: Developing off-grid • Previous cases & Learnings 2
Consulting The Asian Rural Development Fund (ARDF) aims to provide access to electricity to (poor) people in rural areas in Myanmar and other developing countries in South East Asia, through indirect long-term financing of sustainable off-grid electricity solutions such as solar home systems and micro hydro-plants to villages & SMEs. In corporation with local banks and MFIs, providers of renewable off-grid energy solutions will identify, realize and supervise suitable investment projects in rural areas that will be financed by the Development Fund. Increasing the access to electricity by promoting renewable energy solutions leading to higher living standards, creating jobs and new business opportunities and fostering economic growth while decreasing emissions.” Mission & Objectives
Consulting Developing Off-Grid Projects Determine willingness/ ability to pay Feasibility testing (design, resources) Arrange funding Implementation and training Potential and demand assessment Maintenance and after-sales 1 2 3 4 5 6 Suggested Approach 1 – 3: Technical and Commercial DD, 4: Financing, 5 – 6: Technical Support Foster collaboration for DD (1 – 3) • Cross-functional cooperation between local loan officers and local power suppliers Become a market maker (4) • Fund (FiM) brings local financial intermediaries, power suppliers, and local villages together Provide technical support (5 – 6) • Power supplier lays foundation for future growth and better life conditions Steps
Consulting Previous Cases / Lessons Learned 1) Overseas Development Institute, Turning on the Lights, 2014 2) Meyers et al., Prospects for the Power Sector in Nine Developing Countries, April 1993 Myanmar GDP Growth: 8.5% Electricity Growth: 12.8% Vietnam1) 1990 – 2010 GDP Growth: 5.6% Electricity Demand Growth: 12.5% Turning the Lights On (97% coverage from 14%) • Sustained Policy Commitment • Local-Level Implementation • Donor Support Indonesia2) 1980-1990 GDP Growth: 3.6% Electricity Demand Growth: 13.4% Only achieved 54% coverage • Environmental Regulations • Ignored rural communities (Diesel generators)
Financing Streams • Financing Streams • Donors, Investors & Intermediaries • Investees 3
Consulting Financing Streams Pub Donors/Investors Creator of Fund MFIs PACT Global Microfinance Fund Dawn Microfinance Banks Rural Development Bank Myanmar Agriculture Development Bank Power Suppliers Local Rural Villages Investees Donors and Investors Private Investors Churches Municipalities Private investors Financial Intermediaries
Consulting Donors, Investors & Intermediaries • Already involved in rural development in Myanmar • Provided €7m grant to NEP1) • Involved in rural electrification programs Asia wide • Provided $172m in off-grid electrification for NEP2) • Focused on off-grid renewable energy development • Provided grants for technical assistance on solar/hydro sys.3) • Grants for consulting on mini- hydro and solar power • Committed €8m to NEP3) • RDB already provides loans to rural villages for electricity • Fund technical assistance3) • Countrywide network with regional offices • Provide agriculture credit to rural villages4) • Biggest MFI fund in Myanmar funding solar system purchases • Work with 9 Myanmar NGOs to develop ops. in remote areas5) • Leading for-profit MFI developed by Triodos Bank6) • Goal to become large financial services provider to low income 1) KfW, Myanmar: A country undergoing transition, 2016 2) World Bank, Myanmar: Achieving Universal Access to Electricity, 2015 3) Department of Rural Development & MOLFRD, Rural Electricity Access, 2015 4) Myanmar Agriculture Development Bank, Law 5) Center for Strategic and International Studies: Myanmar's Path to Electrification, Rachel Ross 6) Triodos Bank, Investing in Myanmar, 2015
Consulting Investees Local villagers coming together to work on projects. Receive technical assistance from donors. Install and service systems in their region1) Provide and service solar home systems in Myanmar. Agents located throughout the country. Actively aim to participate in nation development.2) Vietnamese small Hydropower Systems company providing affordable and reliable energy to developing countries and remote locations. Shown high interest in working with Finance in Motion on off-grid electricity development3) Provider of hybrid power solutions to mobile base stations. Orders in Myanmar worth 17m Euro. 500 energy systems for expansion of mobile network4) Private Companies VEC Village Electrification Committee 1) Department of Rural Development & MOLFRD, Rural Electricity Access, 2015 2) Asia Solar Co Ltd, Company Profile, 2013 3) Powerpal, Affordable Technology for all Countries 4) Heliocentris Energy Solutions AG, 2016 1. Local Rural Villages 2. SMEs
Business Model • Business Model • Data • Outcome • Impact Measurement - Metrics 4
Consulting Business Model • FiM creates ARDF • Receives interest repayment Finance in Motion FiM Asian Rural Development Fund Local MFIs / Banks Set-Up Distribution / Service Network Rural Households • Provides debt to MFIs/banks Receives interest repayment margin • Invests in solar/hydro systems • Collects 23% cap monthly revenue • Distribute and service systems • Paid for initial product instalment and monthly payments for service • Pay set monthly fee for use of electricity Grants: Technical Assistance and Service Costs
Consulting Business Case - Data Solar Home System Micro Hydro Powerplant Price for 0,5kw inc. installment mark up (20%) in EUR 331 477 Payback period for 0,5kw off grid power plant in years 7,0 7,0 Monthly repayment inc. installment mark up (20%) in EUR 3,9 5,7 Monthly repayment inc. installment & expected cumulated 7-year inflation (35%) in EUR 5,3 7,7 Monthly repayment inc. installment, inflation & profit margin and risk mark up (100%) in EUR 10,6 15,3 Total repayment (in EUR) 893 1.063 No. Of technicians 25 25 Installation rate per village per technician per year 10 6 No. Of households supplied per year 29.523 17.714 Cummulated investment potential from 2018- 2030 (in EUR) 222.139.737 192.333.535 Total no. of households that gained access to electricity through project until 2030 383.795 230.277 Market Potential No. villages in rural areas without/expensive and dirty access to electricity 51.648 Average households per village 118 No. Households in rural areas without access to (or clean/affordable) electricity 6.1m Total market potential for off-grid solutions in 2018 (in EUR) 3.2bn Total market potential for off-grid solutions in 2030 (in EUR) 5.4bn 0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 EUR Annual Investment Volume Data
Consulting Business Case - Outcome =((0,5*500+4,18+14+35)/1,1)*1,2 Battery 12v 200Ah for Solar FOB Price: $4.182) Solar Panel 500W FOB Price: $2502) Solar off-grid inverter FOB Price: $142) LED TV/DVD, 11.6” FOB Price: $353) Cost of solar system (0.5kW) per household = 331€ ≙ 3.28€ per month (7 year repayment period) 9.3€ 0 5 10 15 Cost for candles & torches1) 1) UN development program, Human Development report 2015, 2) www.Alibaba.com, 3) Sanook, Thailand, 4) Appendix – Powerpal Email Cost for solar system2,3) Costs for hydro system4) Average monthly payment 15.3€ 4,7€ 1,0€ 2,0€ 7,7€ 0 5 10 15 100% Profit and risk margin 35% Inflation costs Installment-mark up (20%) Monthly payment for system 10.6€ 3,3€ 0,7€ 1,4€ 5,3€ 0 5 10 15 100% Profit and risk margin 35% Inflation costs Installment-mark up (20%) Monthly payment for system
Consulting Impact Measurement - Metrics Access to Electricity No. of households/SMEs that gained access to electricity Reducing Emissions Amount of fossil fuel/CO2 saved by new sustainable energy solutions Job Creation No. of created jobs related to planning, excecuting and maintaing energy systems Renewable Energy No. of newly created off-grid energy systems Social Impact Environmental Impact Targets 2030 • 600,000 households gained access to electricity • Increased access to electricity in rural areas by 10%
Conclusion 5
Consulting Summary Electricity shortage in Myanmar Little focus on off-grid solutions in rural areas Scalability Potential to expand into Mobile Payment Network, work with local entrepreneurs Provide off-grid solutions to 600,000 households or 10% of rural area, until the completion of National Electrification Plan grid network Finance in Motion creates ARDF fund to finance solar/hydro systems in rural villages Engage with local MFIs/banks as intermediaries to roll-out the systems
Appendix 6
Consulting Rollout plan - Scalability Rollout Plan for the next seven years 1) Asian Development Bank, Myanmar: Energy Sector Initial Assessment 2) Center for Strategic and International Studies: Myanmar's Path to Electrification, Rachel Ross 3) Myanmar Times: Stay tuned for mobile banking services from Yoma and Telenor Installed >1000 rice-husk gasifiers to power rice mills 1. Local entrepreneurs1) Planned Planned Is- Is- % Acitvitiy Start Time Begin Time Done 2016 2017 2018 2019 2020 2021 2022 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Identify investment opportunity 1 2 1 1 100% Analysis & due diligence 2 3 - - 0% Investment structuring 2 3 - - 0% Technical and commercial DD for off-grid energy 3 26 - - 0% Arrange Funding 4 25 - - 0% Monitoring & reporting 4 25 - - 0% Additional investment opportunities Local entrepreneurs 6 23 - - 0% Larger industrial power suppliers 7 22 - - 0% Fintech companies (mobile payment) 10 21 - - 0% Marked time range: 1 Planned Is %done Heliocentris (GER), Gen- eration (US), Flexenclosure (SW) set up in Myanmar 2. Large power suppliers2) Yoma and Telenor are setting up mobile banking services 3. Mobile payment providers3)
Consulting Risk Exposure – PPP Structure Notes Senior Shares Junior Shares Churches Municipalities Private investors RiskExposure Institutional and private investors International Financial Institutions Donors
Consulting Risk Assessment Political Risk • Risk of changing regulations – little/no regulation in rural areas • Changes in government • Corruption • Relations with China – Energy deal between the nations Economical Risk • Inflation • Repayment risks • Default risk of power suppliers • Default risk of financial intermediaries
Consulting Local Solar Firms1) Name of Company Type of product/ service offered Number of staff solar sector experience SHS built to date Sourcing of components for DRD SHS Revenues (Thousand US$/year) Expected increase FY2014-5 Moe Ko San Solar SHS and mini-grids 33 2 years 780 Korea, China 160 200% T & t Co. Ltd SHS and mini-grids. Solar street lamps 20 1.75 years 2722 China 80 1000% Asia Solar From pico-solar products to projects > 10 kW 170 5 years 7822 China >1,000 >200% Earth Renewable Energy Company SHS, 1-3 kW systems 25 12 years 3700 China 1,000 40% Myanmar Mahar Htun SHS 6 involved in PV. (60 total) None 0 China 233 N/A SolaRiseSys PV for telecom, SHS, mini- grids, lanterns 50 4 years 10208 China not divulge not divulge 1) Department of Rural Development & MOLFRD, Rural Electricity Access, 2015
Consulting Powerpal Email Dear Sem, Leon and Philip. Thank you for your thought-provoking email about a possible venture to provide electricity to remote rural households in Myanmar, a country where I have worked as a mineral exploration geologist some years ago. By sheer coincidence we are currently involved in discussions in Papua New Guinea (PNG) with an Australian company in an attempt to find support from Government sources to install some of our micro-hydro systems in remote settlements that will never be served by the national grid due to their inaccessible locations. However, I can see that your direction with regard to funding is unlike our own as it would call upon the likes of ourselves as the supplier of the generation systems to carry some significant level of risk and also to become active in matter of fee collection in order to repay loans to local banks/MFI (I am unfamiliar with the term MFI – please clarify). But first to your questions: We are a small company and do not have access to the funds necessary to take on the credit risk involved in supplying the equipment free to the local communities. In order to find the necessary funding for projects of the type you are considering, on occasion we have enlisted the assistance of NGOs, Missionary groups, local Government agencies and even agencies of the World Bank. Then our role is simply to supply the necessary equipment, usually at a discounted rate, to the funding source who then finds knowledgeable local people to oversee the installation and maintenance. So you can see that our role has little or no risk involved and that is the way we have to operate. For example, we recently supplied a T2H micro-hydro system for a remote site in northern Laos that was paid for and installed by the French aid group “Electriciens sans Frontieres”. If the risk was underwritten by local banks, then we could become involved as we have done elsewhere quite successfully. To give you some idea of our specially discounted prices for less developed nations, I have attached a current price list, but please be aware that these prices are all set at the gate of the factory in Hanoi, Vietnam, and there would be additional delivery costs by ocean freight to Yangon, plus local import duties and associated port clearance costs at the Myanmar end of the journey from Hanoi. I have never heard of Finance in Motion, yet I assume that they have had some experience in less developed countries like Myanmar where the locals would have had virtually no previous exposure to the business side of paying for the use of some electricity. A lot of time will have to be spent on education with regard to equipment maintenance, and also to fee collection, and this once more is not the sort of activity that in which we get involved. I doubt if any of you have ever spent much time in the remote parts of Myanmar, and I do happen to know the primitive conditions in which the locals usually live, many of whom are uneducated to any but the lowest levels. Poverty is widespread. It may even emerge that their subsistence levels of income will not allow payment for the power that they would choose to consume. Fortunately, in parts of PNG there are thriving agricultural sectors, namely coffee, copra and palm oil, plus employment in mining activities, which translate into some levels of disposable income among the local growers and mining company employees. This letter is probably not very helpful to you all, but, nevertheless I am trying to find a way that we could become involved for our primary objective when we started this company in 1998 was to try to help the disadvantaged people living in remote parts of developing countries by introducing some relatively inexpensive electric power from a renewable energy source into their lives. The near fatal flaw in our business plan was, put purely and simply, the fact that these good people just do not have enough money to buy even our smallest micro-hydro generator, nor had they ever seen any of the low head propeller turbines that are so widespread in Vietnam – see photo. Kind regards, David Seymour

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SLP Consulting - Asian Rural Development Fund

  • 1.
    Off-Grid Electricity inMyanmar: Asian Rural Development Fund (ARDF) Consulting Leon Spruth, Philip Ter Meer, Sem de Moel
  • 2.
    Consulting Agenda 1. Overview & Problem Identification 2.Our Plan 4. Business Model 3. Financing Streams  Myanmar Overview  Electrification Problem  Electrification Problem - Financing  Financing Streams  Donors, Investors & Intermediaries  Investees  Mission & Objectives  Our Approach: Developing off-grid  Previous cases & Learnings 5. Conclusion  Business Model  Data  Outcome  Impact Measurement - Metrics  Conclusion
  • 3.
    Overview & Problem Identification • MynamarOverview • Electrification Problem • Electrification – Financing 1
  • 4.
    FiM Regional MarketPresences Office Europe: • Armenia • Bosnia and Herzegovina • Georgia • Kenya • Kosovo • Luxembourg • Macedonia • Moldova • Montenegro • Serbia • Turkey • Ukraine South-America: • Colombia Africa: • Egypt How about Myanmar?
  • 5.
    Consulting Myanmar Overview • 50years of isolation and military rule • Midst of progressive political reforms 1) Micro Hydro Workshop Proceedings: Dr. Xiaoping Wang, World Bank 2) United Nations: Human Development Reports 3) Asian Development Bank: Development Economics and Indicators • Promising results, improvement expected in: a) economic b) social indicators c) regulatory and institutional frameworks5) 0% 5% 10% 15% Myanmar East Asia & Pacific (developing only) • High Impact, rapid growth potential1) • Wealth of natural resources, young workforce, and good strategic position as trading hub5) • GDP per capita (2011): $8572) • HDI (2015): 148/1872) • Poverty margin: 26%3) 4) World Bank: Global Economic Prospects 5) PWC: Myanmar Business Guide 6) Khin Seint Wint, Ministry of Electric Power, November 24th, 2014 • Annual GDP (Δ) expected around 8%4), • Economy will quadruple by 20307) • Very low electrification rate: 32%6) • Much lower in rural areas • National Electrification Program (NEP) • Improvement of life quality • Fostering long-term economic growth • Significant investments needed in energy and infrastructure sector 7) McKinsey Report, 2013 New Government (Civilian rule)1) Economic and Impact Potential Electrification Problem
  • 6.
    Consulting Electrification Problem 59%20% 11% 4% 4% 2% RemainingVillages Generators National Grid Solar Micro-Hydropower Biomass/Biogas 1) Ministry of Livestock, Fisheries and Rural Development, Department of Rural Development, January 2015 2) www.geni.com Global Energy 3) Center for Strategic and International Studies: Myanmar's Path to Electrification, Rachel Ross Rural Electrification Program 1) National Grid System2) • Only minority of 51m people have access to grid • Electricity access concentrated in cities 4) : Yangon (78%), Kayah (46%), and Manadalay (40%) in contrast to Kayin (6%), Tanitharyi (9%), and Ayeryawady (11%) • Only 40% of rural villages (26.000) have access to electricity and 13,000 use generators1) • Of electrified villages, less than half of households receive electricity sufficient to charge electronics for several hours a day2) 4) Ministry of Electric Power: Electrification rates as of December 2013
  • 7.
    Consulting Electrification Problem -Financing Further funding is needed to fully electrify Myanmar: ▪ NEP only financed $550m of total $700m required for first 5 years1) ▪ Ministry of Livestock, Fisheries and Rural Development seeking private investment for off-grid projects2) • €5.4bn total investment potential on off-grid electricity, measured by SLP • Currently only €58m planned expenditure by NEP until 20303) 1) Department of Rural Development & MOLFRD, Rural Electricity Access, 2015 2) World Bank, Myanmar: Achieving Universal Access to Electricity, 2015 3) Castalia Advisors, Myanmar National Electrification Program (NEP) Roadmap and Investment Prospectus, 2014 NEP Financed 79% Additional Investment Needed National Electrification Plan Financing1) Off-Grid Investment Potential Electrification Plan Financing (FY ‘16-’19) Investment Potential in off-grid (FY ’18 – ’30) NEP Committed Funds Private Investment Opportunity 99%
  • 8.
    Our Plan • Mission& Objectives • Our Approach: Developing off-grid • Previous cases & Learnings 2
  • 9.
    Consulting The Asian RuralDevelopment Fund (ARDF) aims to provide access to electricity to (poor) people in rural areas in Myanmar and other developing countries in South East Asia, through indirect long-term financing of sustainable off-grid electricity solutions such as solar home systems and micro hydro-plants to villages & SMEs. In corporation with local banks and MFIs, providers of renewable off-grid energy solutions will identify, realize and supervise suitable investment projects in rural areas that will be financed by the Development Fund. Increasing the access to electricity by promoting renewable energy solutions leading to higher living standards, creating jobs and new business opportunities and fostering economic growth while decreasing emissions.” Mission & Objectives
  • 10.
    Consulting Developing Off-Grid Projects Determine willingness/ ability topay Feasibility testing (design, resources) Arrange funding Implementation and training Potential and demand assessment Maintenance and after-sales 1 2 3 4 5 6 Suggested Approach 1 – 3: Technical and Commercial DD, 4: Financing, 5 – 6: Technical Support Foster collaboration for DD (1 – 3) • Cross-functional cooperation between local loan officers and local power suppliers Become a market maker (4) • Fund (FiM) brings local financial intermediaries, power suppliers, and local villages together Provide technical support (5 – 6) • Power supplier lays foundation for future growth and better life conditions Steps
  • 11.
    Consulting Previous Cases /Lessons Learned 1) Overseas Development Institute, Turning on the Lights, 2014 2) Meyers et al., Prospects for the Power Sector in Nine Developing Countries, April 1993 Myanmar GDP Growth: 8.5% Electricity Growth: 12.8% Vietnam1) 1990 – 2010 GDP Growth: 5.6% Electricity Demand Growth: 12.5% Turning the Lights On (97% coverage from 14%) • Sustained Policy Commitment • Local-Level Implementation • Donor Support Indonesia2) 1980-1990 GDP Growth: 3.6% Electricity Demand Growth: 13.4% Only achieved 54% coverage • Environmental Regulations • Ignored rural communities (Diesel generators)
  • 12.
    Financing Streams • Financing Streams •Donors, Investors & Intermediaries • Investees 3
  • 13.
    Consulting Financing Streams Pub Donors/Investors Creatorof Fund MFIs PACT Global Microfinance Fund Dawn Microfinance Banks Rural Development Bank Myanmar Agriculture Development Bank Power Suppliers Local Rural Villages Investees Donors and Investors Private Investors Churches Municipalities Private investors Financial Intermediaries
  • 14.
    Consulting Donors, Investors &Intermediaries • Already involved in rural development in Myanmar • Provided €7m grant to NEP1) • Involved in rural electrification programs Asia wide • Provided $172m in off-grid electrification for NEP2) • Focused on off-grid renewable energy development • Provided grants for technical assistance on solar/hydro sys.3) • Grants for consulting on mini- hydro and solar power • Committed €8m to NEP3) • RDB already provides loans to rural villages for electricity • Fund technical assistance3) • Countrywide network with regional offices • Provide agriculture credit to rural villages4) • Biggest MFI fund in Myanmar funding solar system purchases • Work with 9 Myanmar NGOs to develop ops. in remote areas5) • Leading for-profit MFI developed by Triodos Bank6) • Goal to become large financial services provider to low income 1) KfW, Myanmar: A country undergoing transition, 2016 2) World Bank, Myanmar: Achieving Universal Access to Electricity, 2015 3) Department of Rural Development & MOLFRD, Rural Electricity Access, 2015 4) Myanmar Agriculture Development Bank, Law 5) Center for Strategic and International Studies: Myanmar's Path to Electrification, Rachel Ross 6) Triodos Bank, Investing in Myanmar, 2015
  • 15.
    Consulting Investees Local villagers comingtogether to work on projects. Receive technical assistance from donors. Install and service systems in their region1) Provide and service solar home systems in Myanmar. Agents located throughout the country. Actively aim to participate in nation development.2) Vietnamese small Hydropower Systems company providing affordable and reliable energy to developing countries and remote locations. Shown high interest in working with Finance in Motion on off-grid electricity development3) Provider of hybrid power solutions to mobile base stations. Orders in Myanmar worth 17m Euro. 500 energy systems for expansion of mobile network4) Private Companies VEC Village Electrification Committee 1) Department of Rural Development & MOLFRD, Rural Electricity Access, 2015 2) Asia Solar Co Ltd, Company Profile, 2013 3) Powerpal, Affordable Technology for all Countries 4) Heliocentris Energy Solutions AG, 2016 1. Local Rural Villages 2. SMEs
  • 16.
    Business Model • BusinessModel • Data • Outcome • Impact Measurement - Metrics 4
  • 17.
    Consulting Business Model • FiMcreates ARDF • Receives interest repayment Finance in Motion FiM Asian Rural Development Fund Local MFIs / Banks Set-Up Distribution / Service Network Rural Households • Provides debt to MFIs/banks Receives interest repayment margin • Invests in solar/hydro systems • Collects 23% cap monthly revenue • Distribute and service systems • Paid for initial product instalment and monthly payments for service • Pay set monthly fee for use of electricity Grants: Technical Assistance and Service Costs
  • 18.
    Consulting Business Case -Data Solar Home System Micro Hydro Powerplant Price for 0,5kw inc. installment mark up (20%) in EUR 331 477 Payback period for 0,5kw off grid power plant in years 7,0 7,0 Monthly repayment inc. installment mark up (20%) in EUR 3,9 5,7 Monthly repayment inc. installment & expected cumulated 7-year inflation (35%) in EUR 5,3 7,7 Monthly repayment inc. installment, inflation & profit margin and risk mark up (100%) in EUR 10,6 15,3 Total repayment (in EUR) 893 1.063 No. Of technicians 25 25 Installation rate per village per technician per year 10 6 No. Of households supplied per year 29.523 17.714 Cummulated investment potential from 2018- 2030 (in EUR) 222.139.737 192.333.535 Total no. of households that gained access to electricity through project until 2030 383.795 230.277 Market Potential No. villages in rural areas without/expensive and dirty access to electricity 51.648 Average households per village 118 No. Households in rural areas without access to (or clean/affordable) electricity 6.1m Total market potential for off-grid solutions in 2018 (in EUR) 3.2bn Total market potential for off-grid solutions in 2030 (in EUR) 5.4bn 0 10,000,000 20,000,000 30,000,000 40,000,000 50,000,000 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 EUR Annual Investment Volume Data
  • 19.
    Consulting Business Case -Outcome =((0,5*500+4,18+14+35)/1,1)*1,2 Battery 12v 200Ah for Solar FOB Price: $4.182) Solar Panel 500W FOB Price: $2502) Solar off-grid inverter FOB Price: $142) LED TV/DVD, 11.6” FOB Price: $353) Cost of solar system (0.5kW) per household = 331€ ≙ 3.28€ per month (7 year repayment period) 9.3€ 0 5 10 15 Cost for candles & torches1) 1) UN development program, Human Development report 2015, 2) www.Alibaba.com, 3) Sanook, Thailand, 4) Appendix – Powerpal Email Cost for solar system2,3) Costs for hydro system4) Average monthly payment 15.3€ 4,7€ 1,0€ 2,0€ 7,7€ 0 5 10 15 100% Profit and risk margin 35% Inflation costs Installment-mark up (20%) Monthly payment for system 10.6€ 3,3€ 0,7€ 1,4€ 5,3€ 0 5 10 15 100% Profit and risk margin 35% Inflation costs Installment-mark up (20%) Monthly payment for system
  • 20.
    Consulting Impact Measurement -Metrics Access to Electricity No. of households/SMEs that gained access to electricity Reducing Emissions Amount of fossil fuel/CO2 saved by new sustainable energy solutions Job Creation No. of created jobs related to planning, excecuting and maintaing energy systems Renewable Energy No. of newly created off-grid energy systems Social Impact Environmental Impact Targets 2030 • 600,000 households gained access to electricity • Increased access to electricity in rural areas by 10%
  • 21.
  • 22.
    Consulting Summary Electricity shortage inMyanmar Little focus on off-grid solutions in rural areas Scalability Potential to expand into Mobile Payment Network, work with local entrepreneurs Provide off-grid solutions to 600,000 households or 10% of rural area, until the completion of National Electrification Plan grid network Finance in Motion creates ARDF fund to finance solar/hydro systems in rural villages Engage with local MFIs/banks as intermediaries to roll-out the systems
  • 23.
  • 24.
    Consulting Rollout plan -Scalability Rollout Plan for the next seven years 1) Asian Development Bank, Myanmar: Energy Sector Initial Assessment 2) Center for Strategic and International Studies: Myanmar's Path to Electrification, Rachel Ross 3) Myanmar Times: Stay tuned for mobile banking services from Yoma and Telenor Installed >1000 rice-husk gasifiers to power rice mills 1. Local entrepreneurs1) Planned Planned Is- Is- % Acitvitiy Start Time Begin Time Done 2016 2017 2018 2019 2020 2021 2022 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Identify investment opportunity 1 2 1 1 100% Analysis & due diligence 2 3 - - 0% Investment structuring 2 3 - - 0% Technical and commercial DD for off-grid energy 3 26 - - 0% Arrange Funding 4 25 - - 0% Monitoring & reporting 4 25 - - 0% Additional investment opportunities Local entrepreneurs 6 23 - - 0% Larger industrial power suppliers 7 22 - - 0% Fintech companies (mobile payment) 10 21 - - 0% Marked time range: 1 Planned Is %done Heliocentris (GER), Gen- eration (US), Flexenclosure (SW) set up in Myanmar 2. Large power suppliers2) Yoma and Telenor are setting up mobile banking services 3. Mobile payment providers3)
  • 25.
    Consulting Risk Exposure –PPP Structure Notes Senior Shares Junior Shares Churches Municipalities Private investors RiskExposure Institutional and private investors International Financial Institutions Donors
  • 26.
    Consulting Risk Assessment Political Risk •Risk of changing regulations – little/no regulation in rural areas • Changes in government • Corruption • Relations with China – Energy deal between the nations Economical Risk • Inflation • Repayment risks • Default risk of power suppliers • Default risk of financial intermediaries
  • 27.
    Consulting Local Solar Firms1) Nameof Company Type of product/ service offered Number of staff solar sector experience SHS built to date Sourcing of components for DRD SHS Revenues (Thousand US$/year) Expected increase FY2014-5 Moe Ko San Solar SHS and mini-grids 33 2 years 780 Korea, China 160 200% T & t Co. Ltd SHS and mini-grids. Solar street lamps 20 1.75 years 2722 China 80 1000% Asia Solar From pico-solar products to projects > 10 kW 170 5 years 7822 China >1,000 >200% Earth Renewable Energy Company SHS, 1-3 kW systems 25 12 years 3700 China 1,000 40% Myanmar Mahar Htun SHS 6 involved in PV. (60 total) None 0 China 233 N/A SolaRiseSys PV for telecom, SHS, mini- grids, lanterns 50 4 years 10208 China not divulge not divulge 1) Department of Rural Development & MOLFRD, Rural Electricity Access, 2015
  • 28.
    Consulting Powerpal Email Dear Sem,Leon and Philip. Thank you for your thought-provoking email about a possible venture to provide electricity to remote rural households in Myanmar, a country where I have worked as a mineral exploration geologist some years ago. By sheer coincidence we are currently involved in discussions in Papua New Guinea (PNG) with an Australian company in an attempt to find support from Government sources to install some of our micro-hydro systems in remote settlements that will never be served by the national grid due to their inaccessible locations. However, I can see that your direction with regard to funding is unlike our own as it would call upon the likes of ourselves as the supplier of the generation systems to carry some significant level of risk and also to become active in matter of fee collection in order to repay loans to local banks/MFI (I am unfamiliar with the term MFI – please clarify). But first to your questions: We are a small company and do not have access to the funds necessary to take on the credit risk involved in supplying the equipment free to the local communities. In order to find the necessary funding for projects of the type you are considering, on occasion we have enlisted the assistance of NGOs, Missionary groups, local Government agencies and even agencies of the World Bank. Then our role is simply to supply the necessary equipment, usually at a discounted rate, to the funding source who then finds knowledgeable local people to oversee the installation and maintenance. So you can see that our role has little or no risk involved and that is the way we have to operate. For example, we recently supplied a T2H micro-hydro system for a remote site in northern Laos that was paid for and installed by the French aid group “Electriciens sans Frontieres”. If the risk was underwritten by local banks, then we could become involved as we have done elsewhere quite successfully. To give you some idea of our specially discounted prices for less developed nations, I have attached a current price list, but please be aware that these prices are all set at the gate of the factory in Hanoi, Vietnam, and there would be additional delivery costs by ocean freight to Yangon, plus local import duties and associated port clearance costs at the Myanmar end of the journey from Hanoi. I have never heard of Finance in Motion, yet I assume that they have had some experience in less developed countries like Myanmar where the locals would have had virtually no previous exposure to the business side of paying for the use of some electricity. A lot of time will have to be spent on education with regard to equipment maintenance, and also to fee collection, and this once more is not the sort of activity that in which we get involved. I doubt if any of you have ever spent much time in the remote parts of Myanmar, and I do happen to know the primitive conditions in which the locals usually live, many of whom are uneducated to any but the lowest levels. Poverty is widespread. It may even emerge that their subsistence levels of income will not allow payment for the power that they would choose to consume. Fortunately, in parts of PNG there are thriving agricultural sectors, namely coffee, copra and palm oil, plus employment in mining activities, which translate into some levels of disposable income among the local growers and mining company employees. This letter is probably not very helpful to you all, but, nevertheless I am trying to find a way that we could become involved for our primary objective when we started this company in 1998 was to try to help the disadvantaged people living in remote parts of developing countries by introducing some relatively inexpensive electric power from a renewable energy source into their lives. The near fatal flaw in our business plan was, put purely and simply, the fact that these good people just do not have enough money to buy even our smallest micro-hydro generator, nor had they ever seen any of the low head propeller turbines that are so widespread in Vietnam – see photo. Kind regards, David Seymour

Editor's Notes

  • #12 14% to 97% coverage One of the highests rates of sustainable energy production (around 29%) Based predominantly on large success of rural electrification Regulation of electricity prices Environmental sustainability continuing lack of access was unavailability (59%), while for 21% of those without access the reason was affordability. Local level distribution systems – private institution leases systems and purchases electricity and recovers revenues from consumers. Japan International Cooperation Agency, the World Bank and the ADB, as a key driver for rural electrification. This support has taken two main forms, finance through grants and concessional loans, and technical assistance.
  • #15 KfW: already involved in rural development project in Myanmar (limited to supporting the construction and expansion of a road network system) provided a 7 million EUR grant to achieve sustainable improvement of electricity supply for rural population. Support / Leverage and Adapt existing efforts of DRD in line with the National Electrification Plan (NEP) (KfW 2015, Powerpoint)
  • #20 14% to 97% coverage One of the highests rates of sustainable energy production (around 29%) Based predominantly on large success of rural electrification Regulation of electricity prices Environmental sustainability continuing lack of access was unavailability (59%), while for 21% of those without access the reason was affordability. Local level distribution systems – private institution leases systems and purchases electricity and recovers revenues from consumers. Japan International Cooperation Agency, the World Bank and the ADB, as a key driver for rural electrification. This support has taken two main forms, finance through grants and concessional loans, and technical assistance.