The Irrawaddy Business Roundup (Feb. 20, 2015)

By Simon Lewis 20 February 2016

Power Development Could Fall Short, Say Analysts

Delays and suspensions to hydropower dams and coal power developments mean that Burma will not realize its energy-producing potential in the next decade, according to analysis by BMI Research that will raise concerns about continued power shortages.

With state media this week predicting serious droughts as the effects of the El Niño cyclical weather events hit the country in coming months, some fear that annual power shortages could worsen. Hydropower dams, which are relied upon to provide energy to the major cities, cannot run at full capacity toward the end of Burma’s long dry season.

BMI Research, in an industry trend analysis sent out this week, predicts that electricity consumption in Burma will grow by an average of 8.5 percent a year until 2025. But while this creates a big opportunity for companies to come in and offer power supply options to the state-run power supply company, the analysts noted that many projects are currently being delayed by suspensions or even canceled.

Numerous hydropower projects have been announced on rivers around the country, with many not progressing past the planning stage. The Chinese-backed Myitsone dam in Kachin State, which was suspended in a highly political move by President Thein Sein in 2011, remains in limbo.

Local conglomerate Asia World recently said it was divesting entirely from a project to build a coal-fired power plant at Kyun Gyan Gon in Rangoon Division.

BMI Research said that power projects with an electricity-producing potential of 18.56 gigawatts were technically in the pipeline. However, it said, “there are still a number of barriers to project realisation, and if projects that are currently suspended or cancelled are not accounted for, the project pipeline shrinks to 6.4GW.

“This aligns with our view that the potential in Myanmar’s power sector will not be fully realised, based on regulatory hurdles, limited financing availability, local opposition to projects and grid infrastructure inefficiencies.”

The outlook was better for gas-powered power generation, it said, adding that a slowdown was expected in new investment in coal and hydropower.

“Myanmar is significantly ramping up its domestic gas usage,” the analysis said. “[A]lthough we believe natural gas reserves will decline strongly over the next decade, as low oil prices slow investment in upstream activities—we expect gas to gradually gain share in Myanmar’s power mix, rising to a 36% contribution in 2025, from a current level of just below 30%.”

Nissan to Assemble the ‘Sunny’ Sedan at New Pegu Plant

Japanese auto company Nissan Motor Co Ltd announced this week that it will soon be assembling as many as 10,000 ‘Sunny’ compact sedans at a new factory in Pegu Division.

The move was announced in a company statement issued after a ceremony with local government officials and Nissan’s Malaysian partner Tan Chong Motor Group.

“Nissan will initially use an existing Tan Chong facility to assemble the Sunny compact sedan, before transferring production to the new plant with a work force of approximately 300 and a production capacity of 10,000 units at full production,” the statement said.

Nissan was already training 200 employees at a Tan Chong factory in Malaysia, it said.

“Nissan’s expansion in Myanmar forms part of the company’s wider growth in emerging markets, which includes production in countries including India, Brazil, Russia and Nigeria,” the statement said. “Demand in Myanmar is expected to grow rapidly following economic and political reforms in the country.”

Food Imports From Thailand Up By Almost a Quarter

Burma’s imports of foodstuffs from Thailand increased by 24 percent last year, according to figures quoted in a report in The Nation newspaper, which said Thai companies were being encouraged to target Burma as a growth market.

The statistic came from Thailand’s National Food Institute, a quasi-autonomous body under the country’s Ministry of Industry. The report said the increase makes Burma the fourth largest importer of Thai food products, after Japan, the United States and China.

In August, the Federation of Thai Industry’s club of food processors cut its growth target for 2015 by almost 2 percentage points to 6.9 percent, citing ongoing drought, currency volatility and the poor global economic outlook, according to the Bangkok Post.

The Thai food industry has also been hit by a series of scandals of late about the abuse of labor in supply chains, particularly in the fishing industry.

An investigation by the Associated Press last year revealed that migrant workers from Burma and Cambodia were regularly employed in slave-like conditions on Thai fishing boats. Other labor abuses have also been alleged in other parts of the food-production industry that also rely on migrant workers.

Regardless of these concerns, Burma is importing more and more Thai-made foodstuffs. The Thai institute predicted that the imports would continue to grow as Burma’s economy grows.

Thai small- and medium-sized enterprises producing food should look to the Burmese market for more growth, The Nation quoted National Food Institute President Yongvut Saovapruk as saying, citing data purportedly from London-based market research firm Euromonitor International.

“Euromonitor predicted that the average growth of the market for processing foods in Myanmar between 2014 and 2018 will be about 15 per cent per annum,” Yongvut told The Nation.

“However, the market growth of non-alcohol beverages in Myanmar is as high as 23 per cent per year over the period.”

Woodside and Daewoo Strike Gas off Arakan Coast

Australian and South Korean partners Woodside and Daewoo have discovered gas in one of Burma’s offshore exploration blocks, according to a statement.

An announcement to the Australian Stock Exchange from Woodside Petroleum this week said that a gas column approximately 64 meters long had been found in Block AD-7, off the coast of Arakan State.

The discovery came in an area where the sea is some 836 meters deep, the statement said. The firms had drilled to a total depth of more than 3 kilometers, it said, where the presence of natural gas was confirmed by “pressure measurements and gas sampling.”

Woodside is a minority partner in the project, holding 40 percent to Daewoo International Corporation’s 60 percent interest.

Woodside announced a separate discovery just last month in a different exploration block, A-6, in which it is working with local firm MPRL E&P and France’s Total.

Woodside CEO Peter Coleman said in the announcement that the two finds were “very encouraging” for the company’s chances of finding significant amounts of gas in Burmese waters.

“These discoveries provide evidence of the high quality of offshore Myanmar as an exploration focus area,” he was quoted saying.

Siam Cement Group Investing in Burma Concrete Business

Thai cement giant the Siam Cement Group is reportedly setting up a concrete production business in Rangoon, putting some $5.8 million into the project.

Citing the Burmese government’s Directorate of Investment and Company Administration, the website Deal Street Asia reports that SCG Myanmar Concrete and Aggregate Co Ltd, a local subsidiary of the large Thai conglomerate, could begin production by the end of the year.

“The investment is in the production and marketing of concrete including readily mixed concrete, precast, reinforced and pre-stressed concrete as well as post-tensioned products of SCG brand,” a government spokesperson told Deal Street Asia.