Institutional Framework and Business Models Approach and Methodology

Institutional Framework and Business Models Approach and Methodology Alfonso Guzman, November 22 2013

PRESENTATION OUTLINE § Context § Lessons learned from international experience § Approach and work plan § Preliminary understanding of institutional situation § Points for discussion 2

Myanmar has a major electrification challenge… The electrification rate 29%. . . 43 million out of 60 million people have no access. . . Most of these 43 million people live in rural areas 15 million are less than 14 years old …and nearly 3

. . and the challenge is significant … New household connections per year Need to connect close to 4 x as many households per year to reach universal access by 2030 ESE YESB Required 189, 000 Source: MOEP, ESE, YESB data and Castalia estimations Assumes 6. 5 people in a household 4

. . but lessons on institutional frameworks from other countries could help Myanmar 1. Responsibilities for service delivery need to be separated from policy setting, planning and regulation 2. Countries with an entity assigned and funded to expand access to electricity have achieved good results 3. Commercial viability of the utility or service delivery agents is key to sustainability 4. Significant increases in access to electricity requires support of public funds 5. Private sector can play a useful role by bringing innovation and capital—but will need incentives to focus in less profitable areas 5

% Households electrified Some of Myanmar’s neighbors have succeeded Constant GDP $ 1000 s per capita Source: World Bank, One Goal two Paths 6

. . mainly because they have clear institutional arrangements, Philippines Entity assigned to electrification? Thailand Laos Indonesia Yes, PEA Yes, NEA Yes, Ed. L Yes, PLN and MEA Cambodia Myanmar No ? Clear funding allocation Yes Yes No ? Electrification rate 83% 84% 70% 31% 29% Source: World Bank & Castalia 7

…and have involved private sector where it is feasible Honduras solar program PUBLIC Program design (lead) PRIVATE USER Program design (participate) Program management (promotion, accreditation) Marketing / Identification User Partial capital subsidy Price ceiling TA to solar companies Equipment Procurement / Installation Equipment Cost (minus subsidy): User owns • Initial down-payment equipment Loan to MFIs Microfinancing • Micro-loan monthly repayment O&M 8 O&M Cost (when needed; not a monthly fee)

Approach: Phase I and Phase II Phase I January 2014 Map out institutional arrangements Identify preliminary business models Identify institutional gaps and overlaps Identify preliminary institutional options Informal consultation with Go. M (proposed) Preliminary findings Preliminary Funding assessment Phase II March 2014 Workshop III Adjust options 9 Interim Road Map

Approach: Phase III and Phase IV June-July 2014 Phase III Initial results from Columbia University Review and update interim Institutional options Update business models and identify funding financing needs Workshop IV Draft Final Road Map and Prospectus Develop detailed financial model Phase IV August 2014 Updated results from Columbia University Revise and detail options Updated feedback from Workshop 10 Final Road Map & Prospectus

Preliminary understanding of institutional setup… NEMC & REPWC Strategic Guidance Segment Policy Funding Off grid On grid Generation Planning Services MEPE HGE JVs/ IPPs MOEP Transmission MEPE MOEP (ESE/YESB) (> 33 kv lines)? Distribution MOEP Mini-grid MOEP? Individual Household Systems MOEP ? Regional / Division Government / MOLFRD (<33 kv lines)? ESE? YESB? Private? Regional / Division Government? MOLFRD? ESE? Private? MOLFRD? MOI? 11 MOLFRD? MOI? Private?

Points for discussion § Which entity or entities will manage the implementation of the National Electrification Plan? § What are the roles and responsibilities for different agencies for: Adopting electrification plans? Setting the electrification policy and regulations? Monitoring and updating electrification plans? Coordinating and harmonizing on grid and off grid programs? § What would be suitable business models for engaging the private sector? 12

Contact us 1747 Pennsylvania Avenue NW, Suite 1200 WASHINGTON DC 20006 United States of America T: +1 202 466 -6790 Alfonso. Guzman@castalia-advisors. com www. castalia-advisors. com Paris Sydney 7 Rue Claude Chahu 75116 Paris France 36 -38 Young Street Sydney, NSW 2000 Australia Wellington Washington New York Bogotá Level 2, 88 The Terrace PO Box 10 -225 Wellington New Zealand 1747 Pennsylvania Ave NW Suite 1200 Washington DC 20006, USA 200 Park Avenue Suite 1744 New York, NY 10166, USA Carrera 7 No. 99 -53 Torre 1, Oficina 1424 Bogotá Colombia