When bids were opened in Myanmar''s 1.06 gigawatt solar power tender on 9 September, a few names were repeated over and over: Sungrow Power Supply Co Ltd and China Mechanical Engineering Corporation, State Power Investment Corporation, China Gezhouba Group and Xian Longi Clean Energy Co Ltd.
In the end, all but one of the winning bids for the 30 sites involved Chinese companies. The winners were decided based on price alone from among those that passed the technical criteria. Sungrow claimed nine sites and CMEC eight, while the most successful Myanmar firms were Shwe Taung Group and Khaing Lon Gems, which both worked with Chinese partners.
The ministry has already started negotiations on the power purchase agreement (PPA) with the first-ranked bidders, and letters of acceptance should be issued by early October according to the schedule in the tender documents.
The PPA only has to be signed within 150 days of the letter of acceptance being issued, but the tender rules also say that if the ministry cannot finalise the PPA with the first-ranked bidder within 15 days, it will start negotiating with the second-ranked bidder.
The result had been widely anticipated since it emerged Chinese companies had submitted the majority of proposals received by the 17 July deadline, but it is understood this left even Ministry of Electricity and Energy officials uncomfortable.
An official from the ministry''s Hydropower and Renewable Energy Section said the ministry had been expecting bids mainly from companies that had previously submitted direct proposals, particularly firms from Western countries, Japan and Thailand.
Unusually, most of the winners do not have significant experience as independent power producers: Sungrow is an inverter manufacturer, for example, while Longi makes solar panels. CMEC specialises in engineering, procurement and construction (EPC). "How can we compete with our own panel suppliers?" questioned one person, whose consortium''s proposal was significantly higher than the winning bid.
"The tender selection committee also didn''t expect so many Chinese companies to bid and then they were aware of their lack of experience building and operating power projects," he said. "I think the committee delayed the announcement because they needed more time to look into the background of the companies that passed the technical criteria."
"In the case of liquified natural gas tenders [in 2019], the ministry knew the winning companies very well because it had worked with them before," he said. "But the lowest bid prices [for the solar projects] are from companies that don''t have much experience building or operating power plants. It made the selection committee nervous."
Under the terms of the draft PPA, the consortium cannot transfer more than 49% of the project to another entity within four years of commencing operations. The official suggested that the ministry might show some flexibility when negotiating the final PPA.
"I don’t think this will be a problem. In our country, you can''t follow the rules and regulations all the time, you act according to the situation. In this case, the ministry wants cheap electricity. The Chinese firms have offered it the ministry would have preferred Western companies if the prices were the same, but they are very expensive," added the official.
An industry insider working for a Chinese energy conglomerate said the bidding result "shows that Chinese companies are responsive and risk-taking in renewable energy ventures. It reflects the mature supply chains and business models behind the Chinese renewable energy industry’s overseas expansion."
"As more Southeast Asian countries open their markets for renewables development, Chinese companies will have more opportunities to get involved in the region’s low carbon energy transition," he added.
Nevertheless, the background of the bidders is likely to fuel accusations that they are seeking to offload old inventory. A slowdown in solar installations in China had led to a supply glut for components that has prompted the Chinese authorities to propose restrictions on the further expansion of manufacturing capacity.
Chinese firms may not have huge experience in foreign solar markets, according to Tim Buckley, director of energy finance studies at the Institute of Energy Economics and Financial Analysis (IEEFA), but "China has been the world''s largest investor domestically in solar every year since overtaking Germany at the start of the decade. And it is not like a solar project is a complex engineering feat," he said.
He added that smaller, modular renewables projects such as solar farms "tend to bring competitive tension and transparency, all but squeezing out the endemic corruption evident in major traditional fossil fuel power projects." However, "this lack of bidder diversity is far from ideal for Myanmar in terms of building capacity for subsequent, even lower cost, renewable energy tenders."
The large number of bids submitted was surprising in part because of the tender design, which did little to encourage competition. Electric Power Generation Enterprise announced the tender in May at the height of the Covid-19 pandemic, and gave prospective bidders just a month to prepare bids. The requirement that they procure land, at a time when many parts of the country were inaccessible due to travel restrictions, drew sharp criticism.
According to three sources familiar with the situation, including one ministry official, the aim of the tender was to solicit new bids from companies that had previously proposed projects directly to the ministry. The ministry did not anticipate that anyone would be able to challenge those bids, the sources said.
It wasn''t just the deadlines and land acquisition requirements that put off prospective investors. The draft PPA is also unworkable for Western investors pursuing traditional project finance, due to ambiguities over take-or-pay provisions and other issues. The project timeline, including a 180-day deadline to commence full operations, is also considered hard to meet. It would require investors to build their solar plants at the same time as they are negotiating the PPA, making it almost impossible to access normal project finance.
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