Indigo Energy is a solar company installing PV rooftop systems for businesses and factories in Myanmar. The company also provides engineering services for regional solar developers.
Indigo originally entered the market in 2012 operating pilot solar mini-grid systems in Ayeyarwady Region. It relaunched in 2017 and now focuses on the commercial and industrial (C&I) space.
In recent years, Indigo has completed solar rooftops for C&I customers, such as Junction Square Shopping Mall located in Yangon, and a number of projects for hotels, hospitals, factories and offices located throughout Myanmar. The company notably installed the PV rooftop at the World Wildlife Fund (WWF) Myanmar’s office in Dawei, Tanintharyi Region, and has completed systems for other NGO clients.
Myanmar Energy Monitor recently spoke with Zin Mie Mie Htun, Indigo’s business development manager, about how the company has been operating throughout the challenges of the last two years and her outlook for the market.
Our conversation has been edited for length and clarity.
Indigo was an early player in Myanmar’s C&I solar market. Can you talk about how the market has changed in recent years? What factors have helped it to grow?
I joined Indigo in 2017, and over the years C&I solar has definitely become more popular. One major development occurred in 2019 when the government raised the electricity tariff. Our calculation for one factory that were talking with at the time indicated that their power bills had increased around 43% per month. The tariff was still lower than in many other countries, but it was more expensive than in the past, and after that, every business owner started thinking about solar.
But, in 2020 COVID happened, and the market slowed down. Even in 2020, though, we were still running, and we finished our ongoing projects. We thought the situation would be better in 2021 because people were adjusting to the COVID situation, but in February there was the military takeover.
Before we discuss the current situation, let’s talk a little more about how the C&I market in Myanmar has operated in the past. How do Indigo’s PV systems typically work?
Almost of all of our projects are designed to work with a client’s existing power source, so-called on grid systems and a few hybrid systems. We design our systems to work with the national grid to reduce a client’s electricity cost. If a client has a diesel generator, the system is designed to reduce their diesel consumption.
At least right now, we aren’t really seeing people who want to completely replace their existing system, meaning disconnecting from the grid or removing their diesel generator. A lot of businesses and factory owners like the idea of being independent from the unstable grid and the diesel generator until they see the price of the system. An independent solar system is a lot more expensive because it needs to include a battery.
Solar backup power is more popular on the residential side and among offices. I think the idea of solar backup power has also become more popular recently because of the higher fuel prices, the increased blackouts, and some people in the Civil Disobedience Movement not wanting power from the grid.
How do Indigo's customers typically purchase their solar systems?
So far, all of our customers have purchased their systems outright. We have been trying to implement a power purchase agreement (PPA) model since 2017, but people have been reluctant to commit to 20- or 25-year contracts. Instead we have developed a capex model in which the business owner invests directly in the solar system.
We don’t have an installment plan for customers, but we can offer some flexibility with the payment terms. Usually we can accept partial payments at different milestones, when we sign the contract and order the equipment, for example. Usually we try to align the final payment with the commissioning of the system.
What are the financing options available in Myanmar to help C&I customers purchase solar rooftop systems?
There are a few loan programs available for this in Myanmar. They are mainly SME loan programs, which are not specifically for solar projects. Some local banks have their own SME loans, and there are also programs that they offer in partnership with Germany’s KfW bank and the Japan International Cooperation Agency (JICA). With the JICA two-step and KfW loans, small businesses can borrow money and use it for different construction projects, but they must meet certain criteria. For example, around 80% of the loan must be spent on fixed assets and 20% can be used as working capital for a project.
Another program is called Tha Ba Wa, which is funded by the EU and supported by the World Wildlife Fund in Myanmar and the German Savings Banks Foundation for International Cooperation. The way the program works is that it connects SMEs with banks and local suppliers like us. Suppliers in the program prepare proposals and competitive price offerings for SMEs that want to implement a solar project or wastewater treatment system, for example. Then the bank will lend the money of the project to the business. Tha Ba Wa has been slow to start, though, I think because of COVID and the political situation, so we haven’t built any projects through this program yet.
In these programs, Indigo Energy is just the service provider, not the borrower. We provide our proposal, contract price, and payment terms to the bank. Then they will transfer us the money on behalf of the client. There are some other lending and financing programs that have been discussed, but these are the two main ones.
Can you tell us a bit more about how Indigo’s business has been affected by the events of the past two years? How have you adapted your business in light of the pandemic?
During COVID, importing was definitely an issue for us and everyone else. Logistics were very difficult generally. The lockdown rules were different for every city and township. To travel to sites, we had to follow the rules imposed in Yangon and also at the destination town.
Before COVID and the military takeover, we could educate people about solar energy in person. We would contact a factory, speak with their engineers and explain our solar technology. Afterward, we started posting regularly and communicating on social media. As a business development person who likes to meet people and talk about projects, I still reminisce about the days before 2020.
What about the military takeover? How has your business changed since February?
Before February, we had been exploring new business opportunities in and out of Myanmar. After the military takeover, we decided to shift to a business model that would let us use our existing capabilities to work on projects that are not affected by the situation in the country.
What defines Indigo Energy is that we are a team composed of solid engineers. Even my background is in engineering. We also have more than nine years of experience with solar technology, and we are able to adapt to new software and technology quickly. With this in mind, we have begun providing engineering services to regional companies implementing solar projects elsewhere in Asia Pacific. This business model has made it possible to keep our people employed, and we have even expanded since February.
So, we are still active in the Myanmar C&I market and are just expanding our business models during this challenging time.
That is a very resourceful approach to an incredibly difficult situation. What is your outlook for Myanmar’s C&I market in the next few years, though? The operating environment will likely remain very challenging, but do you see potential for the market to continue developing?
The solar market is slowing down because of the political instability in the country. However, we’ve been contacted by companies that want proposals for solar systems for their factories. There are still some companies, such as in the fast-moving consumer goods space, that are operating their factories, and there is potential there.
Even with COVID and the military takeover, it is still true that Myanmar people don’t have stable electricity. In some areas, people don't have access to the national grid. They were paying $0.30 or $0.40 per kWh before February, and now the cost is above $0.50 per kWh in some places.
Overall, Myanmar has huge market potential for C&I solar. The market is much younger than in other countries in the region, like Vietnam or Thailand. Very few factories have installed solar systems so far, and many could benefit from it. However, with the current situation in the country, I don’t think the C&I solar market will really pick up until the middle of next year at the earliest. Even if the conflict in the country were to end tomorrow, it will take time for things to settle down. This is just my view from speaking with business owners.
Other than the political situation in the country, what are the greatest barriers to growth for Myanmar’s C&I solar market?
The first challenge is people’s concerns over the PPA business model. As I said before, though, people in Myanmar are hesitant to make long term commitments. And this makes sense now, right?
Second, people are not familiar with long-term investments, and they have limited knowledge about solar. They doubt the payback plan and that the solar system will work with their existing electricity supply. A lot of people will choose a diesel generator over a solar system because of the lower cost up front, even though they will have to spend on fuel in the future. Sometimes people will also choose diesel simply because they are more familiar with it. This is why educating customers about solar is crucial.
What is your advice for outside investors or organizations who might want to support Myanmar’s C&I market right now, or to invest in this market as a way of helping businesses? What is the most effective way to do this?
I have met with a few private equity firms since February. Some have rejected us nicely, some more abruptly, saying they cannot invest in Myanmar right now. I know investors are concerned about instability in the country. They have to be conscious of risks, but as I’ve said, the market has a lot of potential, and there are sectors in Myanmar that are durable.
Regardless of the political situation or COVID, Myanmar people will still need to eat rice, for example. Rice mills are still running, and the owners might be interested in solar. Hospitals will also keep running no matter what. Investors should look more closely at the nature of the business. Don't write off the whole country because of the political situation.
For those who do want to support the C&I market, I think developing simple financing options is very important. Attractive interest rates and flexible terms are important too. We have found that people are wary of complicated paperwork and long-term agreements. This is a barrier to market growth, and it needs to be considered when organizations want to offer financing to support C&I solar in Myanmar.