Analysis: Competitive bids received in solar tender, uncertainties remain

The Electric Power Generation Enterprise’s (EPGE) has selected preferred bidders for 29 out of 30 sites for its 1,060MW solar tender, the Myanmar Times reports.

The controversial tender seems to have procured competitive pricing across the majority of the projects, exceeding expectations from when it was first called. However the tender has also resulted in a concentration of projects among relatively few winners, potentially increasing the risk of late delivery.

According to the paper, the Ministry of Electricity and Energy (MoEE) shared the shortlist of preferred bidders after the price proposals were opened on 9 September. 

The preferred bidders as follows:

  • 9 sites to Sungrow Power Supply Company
  • 8 sites to China Machinery Engineering Corp (CMEC)
  • 4 sites to State Power Investment Corporation (SPIC) Yunan International Power Investment Company and Khaing Lon Gems
  • 3 sites to China Gezhouba Group Company (CGGC), Future Energy and Xi’an Longi Clean Energy
  • 2 sites to a Shwetaung Development and GCL System Integration Technology
  • 1 site to Shwetaung Development, Future Energy and Xi’an Longi Clean Energy
  • 1 site to Gold Energy and Universal Energy
  • 1 site to IB Vogt and Kyaw Su Thway Group

Chinese companies are involved in 28 out of the 29 successful bids.

A table clarifying which sites each bidder is attached to is included at the bottom of this story, along with a map of locations.

No bids were submitted for the Belin site in Mandalay. 

As per the explanation in the tender, the preferred bidders are the “responsive bidders” whose proposals met the technical requirements of the tender who offered the lowest tariff for each site. 

A closer look at the project pricing

Ultimately it is quite impressive that the EGPE was able to attract viable proposals with competitive pricing for so many of the targeted sites given the short tender window open during travel restrictions earlier this year, which attracted widespread criticism. 

The average tariff offered was reportedly $0.0508, while the average tariff proposed by the winning bidders was $0.0422. Proposals ranged from $0.0366 to $0.1051. 

This pricing is roughly on par with other tariffs achieved for projects elsewhere in the region, such as India and Vietnam. 

It is also relatively close to the $0.03877 tariff that Cambodia was able to achieve late last year for a 60MW project, which was then widely publicised as the lowest tariff in the region, with a tender process that was generally regarded as well managed.

In the case of the Camodian tender, the winning bidder was not responsible for covering the cost of project land, as is the case with the Myanmar tenders. This makes the average pricing all the more impressive. 

Many expected the tariff proposals to be higher, due to the challenging terms of the tender, including the tight bidding and implementation timelines, the need for companies to supply their own land, and uncertainties regarding the technical specifications for the projects.

A number of specifications in the current tender will still need to be negotiated in the next few weeks, and these will impact bankability. 

For example, it is still unclear from the draft PPA terms if developers will need to meet certain requirements to limit generation fluctuations which could then create a need for them to include storage in their projects. This, in turn, would likely drive up costs.

Myanmar’s weak transport infrastructure also frequently makes project implementation more expensive than in other countries in the region. 

The tariff for Myanmar’s only existing large-scale solar project at Minbu, Magway Region is $0.1275, and the price agreed upon for Convalt’s as-yet unbuilt 300MW Mandalay solar project is the same. 

This price was settled in the last days of the previous Union Solidarity and Development Party-led government. The general perception is that the high tariff for these projects was a major factor in the current government’s long-standing reluctance to allow them to be built or to greenlight more solar power. 

If the new plants are successfully implemented at these prices, it is hoped that this will cement the government’s new receptive view of solar power and pave the way for renewables other than hydro to play a larger role in Myanmar’s future energy mix. 

In a 10 September briefing on the tender, counsel for law firm VDB Loi Charles Magdelaine said the proposals indicate that “sponsors are now eager to develop solar IPPs [in Myanmar] at a tariff which is accepted in other regional jurisdictions”. 

He suggested that investors have more confidence that they can overcome the challenges and complications of developing solar projects in Myanmar than they did five years ago. Though, Magdelaine also acknowledged that due to the various uncertainties around the projects, the preferred bidders are still taking a “leap of faith” that their projects will be viable. 

Others in the industry have already expressed scepticism over the tariffs.

The Myanmar Times quoted the Managing Director of Quasar Resources U Lin Tun as saying “The proposed energy prices appear to be far below market expectations… We believe it is highly questionable if these solar generation projects can be adequately constructed and financed at these low proposed energy rates. Most prices are around 4 cents per kilowatt-hour”. 

We note that Quasar, a local solar company, reportedly submitted three unsuccessful bids for the tender as part of a consortium including Yoma Strategic Holding, AC Energy and Myanmar-Thilawa SEZ Holdings. 

A closer look at the preferred bidders

Of the 155 bids submitted, 108 which came from 34 companies passed the technical evaluation and were deemed responsive. Most bidders submitted proposals for three sites. 

The vast majority of responsive bidders were consortia, most of which included at least one Myanmar company. 

Only four companies bid without any partners: Sungrow, CMEC, a Japanese firm and a French firm. 

The success of Chinese firms reflects their overwhelming participation in the tender, as they submitted roughly 55% of all bids received. 

Even so, they have still outperformed the competition, achieving preferred bidder status for almost all sites. 

The most successful bidders were also the most active in the tender process, with Sungrow bidding on 24 sites and CMEC on 15. 

A consortium led by China’s Datang power reportedly submitted 11 bids, the third-highest number, but the companies were unsuccessful in their efforts. 

It is believed local firm KT Services and Logistics submitted 10 unsuccessful bids, while all other participants submitted four or fewer proposals. 

Other countries with companies that participated in the tender include Thailand, Singapore, the Philippines, Germany, Japan, the United Arab Emirates and India. 

Many reputable firms, embassies, chambers of commerce and other stakeholders complained that the tender window was too small to permit the preparation of quality proposals with competitive prices. 

Considering this pushback, it is surprising that Sungrow and CMEC were able to submit so many successful bids without the aid of a local partner, while other companies struggled to prepare one. 

To some extent, it raises concerns the companies may have cut corners in their proposal preparations which might not have been immediately disqualifying, as the EPGE has already stated it would automatically award each site to the qualifying bidder who met basic technical requirements and offered the lowest price for each site. 

The decision not to include further evaluation of proposal quality is most likely why some bidders which clearly have more experience, such as the consortium including the Philippines' AC Energy, were not successful. 

Such a review also might have raised concerns about a given bidder’s ability to deliver their projects as planned. 

Industry watchers are likely to be particularly concerned about Sungrow’s potential to follow through. While the company is well known as a manufacturer of solar inverters and other power supply products, it does not appear to have any significant experience implementing power plants.

It is not even immediately clear how Sungrow met the experience qualifications outlined in the tender. To be eligible, companies needed to have completed three similar power generation projects within the last 10 years, with at least one being a PV project. 

The power development experience of CMEC and SPIC is more clear cut. We do expect the decision to award projects to SPIC to raise the hackles of some NGOs and civil society organisations, in particular, as the company is the majority owner of the controversial Myitsone dam project. 

Shwetaung has experience as a hydropower developer in Myanmar, though it would have needed to lean on its consortium members for solar credentials. 

Germany’s IB Voigt is a solar developer with extensive experience in several countries, though this, of course, is the company’s first project in Myanmar.

Some critics have suggested that Chinese companies received favorable treatment in the tendering process.

Outlets have pointed out that China was the only country which managed to broker with Myanmar a special business entry and quarantine plan during the tender bidding window. As this was not announced until roughly two weeks before the submission deadline, though, it is not certain many companies would have been able to benefit.  

In reality, it is likely the challenging and generally anti-competitive terms of the tender which disproportionately benefited Chinese companies. 

Most notably, the tight implementation timeline and land requirements gave an edge to larger companies with established connections in Myanmar which were willing to assume the risk of implementing the projects as proposed in a difficult operating environment while still offering a low price. 

Chinese solar manufacturers and developers seeking new opportunities abroad as their domestic market slows down are more likely to fit this bill than experienced solar developers entering the market for the first time.

Essentially, the MoEE is taking a risk by choosing to adhere to its own difficult tender terms and narrow evaluation process. So far, this choice has led the ministry to award many projects to only a few companies. The tender process has procured competitive pricing, however, only time will tell if this risk pays off. 

Expectations for negotiations

The preferred bidders announced on 9 September will now engage in limited negotiations on initial PPA terms and project design before receiving official letters of acceptance (LoA) for the projects within 45 days of the tender deadline. 

If the EPGE cannot reach an agreement with the shortlisted developer for each site within 15 days, it is to begin negotiations with the bidder which proposed the second-lowest price. 

However, it is likely that this window for negotiation will be extended, as has been the case with previous tenders. An extension is even more likely given that the EPGE will be negotiating with so many companies at once. 

VDB Loi has noted that while individual negotiations will probably be held with Sungrow and CMEC, it is likely that the other preferred bidders will participate in at least a few rounds of group negotiations. All of these are expected to be conducted via Zoom meetings and written comments due to Myanmar’s ongoing flight ban and new domestic travel restrictions caused by the ongoing COVID-19 spike. 

As the winners will not have a signed PPA with the EPGE until construction of each project is nearly complete, it will be necessary to negotiate to include protections related to project delays, permitting issues and force majeure in the LoAs. 

Additionally, little clarification has been given about what PPA and project features that can be negotiated, which suggests that the list of bidders and their proposals could change quite a bit in the next one or two months. 

Whether the EPGE or the preferred bidder will have the upper hand in these negotiations in part depends on how popular each project site was in the tendering process.

For two sites -- Letpanhla and Myingyan in Mandalay Region -- only one bid was received. Only two bids were received for Shwetaung in Bago, Aungchantar and Ohntaw in Sagaing, Shwemyo in Naypyitaw, and Pathein in Ayeyarwady. 

If the EPGE wants to push these projects forward, it will need to dedicate more time to working with the first and possibly second bidders. With other sites, the enterprise has more options, and companies will be under more pressure to stay competitive during negotiations. 

On the whole, the sites in Magway Region received the most bids and the lowest tariffs. This is logical given that the division is in the heart of Myanmar’s dry zone. 

Ayeyarwady received the least attention, also not surprising, given the harsh rainy season in the region. The national grid is also less extensive in Ayeyarwady, which increases the likelihood that bidders would need to propose a higher tariff to cover the cost of a longer transmission line. 

A challenging implementation timeline

Once the official winners are declared, they will have 180 days from the LoA issuance to implement their projects, and the final PPAs will be negotiated and signed within 150 days. 

Due to the time constraints, shortlisted companies will also need to begin making a number of preparations even before they receive an LoA.

For example, project sponsors should finalise the creation of JVs if applicable, select their environmental consultants, arrange to sign their land lease agreements and begin land conversion (if applicable) as soon as they have received an LoA, and prepare to begin the permitting process. 

It will be crucial for firms to receive Myanmar Investment Commission (MIC) approval as quickly as possible, as this is necessary to receive benefits such as tax exemptions on equipment imports. The process typically takes two months. 

For many aspects of this process companies will also likely need to pursue shortcuts to get approvals faster than necessary or receive extensions. 

Senior Counsel for VDB Loi Edwin Vanderbruggen noted in their recent presentation, for example, that if any of the winners are planning to rezone farmland for their projects, the timeframe in which this is typically done would technically render the six-month implementation window impossible.

We have seen the impacts of these shortcuts and extensions in the implementation process for the emergency LNG and gas power projects tendered out last year. 

Almost all of the projects failed to meet their summer deadlines, and the three large LNG-to-power projects are all either unfinished or operating at partial capacity, and it is still unclear when they will be fully online. 

Meanwhile, all of the shortcuts taken for these projects have contributed to a lack of transparency around their implementation. 

For example, China Energy Engineering Group’s 151MW gas plant in Ahlone still has not received MIC approval, despite reports that it has been at least partly operational for several months. It is also unclear if environmental impact assessments have been completed for any of the projects. 

An extensive redesign was also undertaken which partly combined the Thanlyin and Thaketa projects, but this only became apparent to the public as the result of investigative journalism conducted by Frontier Myanmar.

If the 29 new solar projects are all implemented to a high quality standard and at the prices announced this week, it will be a major victory for the government, helping to close Myanmar’s growing power gap in a cost-effective manner and inspiring new interest in renewable energy projects in the country. 

However, there are numerous challenges and uncertainties which must be overcome before victory can be declared. 

As VDB Loi’s Edwin Vanderbruggen said this week, “I think to call the tender a success, I would actually like to wait until we get to [commercial operation] because the objective of the tender was not to create awards but to create electricity, and we are not there yet”. 

Project sites



Blue dots = 33kV substation

Red dots = 66kV substation

No.

Substation / power station at connection point

Location 

To be connected bus-bar (kV)

Accessible installed capacity (in MW AC)

Preferred bidder
1

Chauk substation

Chauk Township, Magway Region

66

40

CMEC
2

Taungdwingyi substation

Taungdwingyi Township, Magway Region

66

40

CGGC, Future Energy, Xi'an Longi Clean Energy
3

Ta Nyaung substation

Salin Township, Magway Region

66

40

CGGC, Future Energy, Xi'an Longi Clean Energy
4

Buddhakone substation

Pakokku Town, Magway Region

66

40

CMEC
5

Chaungku substation

Pauk Township, Magway Region

66

40

Sungrow Power Supply
6

Kyunchaung power plant

Magway Region

66

40

Sungrow Power Supply
7

Belin substation 

Kyaukse Town, Mandalay Region

33

30

-
8

Letpanhla substation 

Singu Township, Mandalay Region

33

30

IB Vogt GmBH, Kyaw Su Thway Group
9

Myingyan substation

Myingyan Township, Mandalay Region

33

30

Sungrow Power Supply
10

Tharzi substation

Tharzi Township, Mandalay Region

33

30

Shwetaung Development, Future Energy, Xi'an Longi
11

Thapyaywa substation

Tharzi Township, Mandalay Region

33

30

Gold Energy, Universal Energy
12

Taungoo substation

Oaktwin Township, Bago Region

33

30

SPIC Yunnan International Power Investment, Khaing Lon Gems
13

Tharyaragone substation

Kyaukdagar Township, Bago Region

33

30

SPIC Yunnan International Power Investment, Khaing Lon Gems
14

Thephyu substation

Yaytarshay Township, Bago Region

33

30

Sungrow Power Supply
15

Kamarnat substation

Bago Township, Bago Region

66

40

CMEC
16

Minhla substation

Minhla Township, Bago Region

33

30

Sungrow Power Supply
17

Oakshitpin substation

Padaung Township, Bago Region

66

40

Sungrow Power Supply
18

Shwetaung power plant

Pyay Township, Bago Region

66

40

Sungrow Power Supply
19

Aungchanthar substation

Monywa Township, Sagaing Region

33

30

Shwetaung Development, GCL System Integration Technology
20

Ngapyawdine substation

Kanbalu Township, Sagaing Region

33

30

Sungrow Power Supply
21

Nyaungpingyi substation

Salingyi Township, Sagaing Region

33

30

Shwetaung Development, GCL System Integration Technology
22

Ohntaw substation

Sagaing Town, Sagaing Region

66

40

CGGC, Future Energy, Xi'an Longi Clean Energy
23

Wartaya substation

Shwepyithar Township, Yangon Region

33

30

SPIC Yunnan International Power Investment, Khaing Lon Gems
24

Naypyitaw-1 substation

Naypyitaw

33

30

SPIC Yunnan International Power Investment, Khaing Lon Gems
25

Naypyitaw-2 substation

Ottarathiri Township, Naypyitaw

66

50

CMEC
26

Shwemyo substation

Tatkon Township, Naypyitaw

33

30

Sungrow Power Supply
27

Pathein substation

Kangyidaunt Township, Ayeyarwady Region

66

40

CMEC
28

Kyaiklat substation

Kyaiklat Town, Ayeyarwady Region

66

40

CMEC
29

Athoke substation

Yaykyi Township, Ayeyarwady Region

66

40

CMEC
30

Myanaung power plant

Ayeyarwady Region

66

40

CMEC