The Energy Regulation and Markets Review: Myanmar


The Myanmar energy market started legal reform in 2011, at a time when the country opened up to foreign investment after decades of isolation. An increase in optimism in Myanmar's economy is largely attributed to its abundant untapped resources, particularly oil, hydropower and natural gas. Presently, Myanmar's energy sector accounts for more than half of its export earnings and foreign direct investment.

Pursuant to the Myanmar National Electrification Plan (NEP), the Ministry of Electricity and Energy (MOEE), intends to extend electricity access to the entire population by 2030. In the meantime, benchmarks are set for 2021, with the aim of providing electricity to 55 per cent of Myanmar's population, rising to 75 per cent in 2026. We understand that the MOEE has been working towards arranging for international funding, and allocating a national budget for implementation of the objectives for electrification.

It was reported that as at May 2020, the total installed capacity is 6,034MW, 3,262MW of which is produced by hydropower (54 per cent) and 2,496MW of natural gas (41 per cent), 120MW of coal (2 per cent), 116MW of diesel (2 per cent) and 40MW of solar (1 per cent).2 The cost of electricity production was revealed to be 12 kyats per Kwh for government-owned hydropower plants, 72 kyats per Kwh for private-owned hydropower plants, 150 to 190 kyats for natural gas plants and 195 kyats for solar power plants.

Based on the study of the Asian Development Bank, Myanmar has an abundance of hydropower – in access of 100,000MW (which is 7.7 per cent of the hydropower resources in Asia – so the government's focus is naturally on upgrading and developing those plants).

The MOEE's announcement involving the NEP is a highly positive development for Myanmar citizens and both local and foreign sponsors, as poor infrastructure is impeding the country's economic development. Currently, only 58 per cent of the population of Myanmar is connected to the electricity grid compared to a world average of almost 88 per cent. As of January 2020, the average annual per capita electricity consumption is 264kWh/per person which is far less than the average global rate.3 Strengthening Myanmar's energy sector is crucial to reduce poverty and enhancing development prospects for the country. Social and economic progress depends on electrification, without which health, education and other key services will continue to suffer.

Other initiatives to bolster electricity efforts include bilateral cooperation with neighbouring countries. In January 2018, Myanmar and Laos signed a memorandum of understanding on power cooperation. Similarly, in March 2018, Myanmar, China and Bangladesh signed an agreement on trilateral power trade. Further, under the Myanmar Sustainable Development Plan 2018–2030, containing a long-term vision for Myanmar, the Myanmar Energy Statistics 2020 have been issued, which will help the government to estimate the volume of electricity required demographically.


i The regulators

With the consolidation of the MOEE in 2016, Myanmar's power sector remains regulated by a state-owned buyer model, with two key offtaking government entities:

  1. the Electric Power Generation Enterprise (EPGE), which operates and plans the Myanmar National Grid System, buys electricity from both public and private producers and then sells the electricity on to the Electric Supply Enterprise and Yangon City Electricity Supply Board. The Yangon City Electricity Supply Board and other regional and state electricity supply boards assist the EPGE in the purchase and distribution of power; and
  2. the Hydropower Generation Enterprise (HPGE), alongside the Department of Hydropower Planning and the Department of Hydropower Implementation, which operates and maintains large-scale hydroelectric facilities for the public sector.

In addition to the MOEE, investors must register a company with Directorate of Investment and Company Administration (DICA) and apply for a permit or endorsement from the Myanmar Investment Commission (MIC) in order to have a long-term lease and enjoy the tax incentives as well as permissions and licences from other ministries and state or regional governments, as the case may be.

ii Primary legislation

The primary legislation governing the energy sector includes the:

  1. Myanmar Investment Law 2016 (MIL);
  2. MIC Notification No. 15/2017 in respect of the restricted investment activities (Negative List);
  3. Myanmar Companies Law 2017;
  4. Electricity Law 2014 (EL);
  5. Electricity Rules 2016 (ER);
  6. Petroleum and Petroleum Products Law 2017 (PPPL);
  7. Land Acquisition, Resettlement, and Rehabilitation Law 2019;
  8. President Office Notification No. 2/2018 (Project Bank Notification); and
  9. Public Private Partnership Center Notification No. 1/2020 in respect of the tender process for unsolicited project proposals (PPP Center Notification).
iii Regulated activities and required governmental approvals

Pursuant to the Negative List, administration of the electric power system and inspection of electrical works is reserved for the government. The MOEE's approval must be obtained in order to carry out large-scale power projects (with a generation capacity of over 30MW) and all works of electricity to be connected with grid system.

Licences for activities in relation to electricity

In order to carry out exploration, construction, generation, transmission, distribution, trading and exchange of electricity, the following licences and permits must be obtained from the MOEE in accordance with the EL:

  • distribution licence;
  • great power line transmission licence;
  • special purposed granted transmission licence;
  • wholesale power supply licence;
  • retail power supply licence;
  • electric power import and export licence; and
  • distribution and retail power supply sub-licence.
  • Licences for activities in relation to petroleum and petroleum products

    In order to carry out import, export, transportation, transit, storage, possession, refinery, distribution, inspection and testing of petroleum (e.g., crude oil and natural gas) and petroleum products (e.g., LNG), the following licences and permits must be obtained, subject to limited exceptions:

    1. Exporter and Importer Certificate of Registration from the Ministry of Commerce (MOC);
    2. Import and Export Licence for each shipment from the MOC;
    3. Separate or combined licence for transit, transportation with pipelines of petroleum and petroleum products from the MOEE;
    4. Storage licences for warehouses and storage tanks from the Ministry of Natural Resources and Environmental Conservation (MNREC);
    5. Transportation permit for motor vehicles, watercraft and barges for the transportation of petroleum and any types of petroleum products from the MNREC; and
    6. Licences for motor vehicles, watercraft and barges for the carriage of petroleum and any types of petroleum products from the Ministry of Transport and Communications.

    Construction permit and completion certificate

    Should the intended business involve construction of building (including facilities for terminals and warehouse for storage of petroleum and chemical products), the construction permit and building completion certificate shall be obtained from relevant city or township development committees where the project is located (e.g., Yangon City Development Committee) in accordance with building rules and regulations enacted by municipal governments and special economic zone management committees (as the case may be).

    Approval for PPP projects

    The Project Bank Notification and the PPP Center Notification are the primary legislation regulating public-private partnership (PPP) regime, pursuant to which the Project Bank will monitor prioritised PPP projects with total values exceeding 2 billion Kyats. For PPP projects with a value exceeding US$100 million, approval must be obtained from the President's Office. In addition, unsolicited proposals with a value exceeding 2 billion Kyats must undergo the Swiss Challenge tender process, which allows third parties to make better offers or challenges for a project during a designated period with the simple objective of discouraging frivolous projects or avoiding exaggerated project development costs; while the original proponent has the right to match any superior offers given by the third party.

    iv Contractual framework

    Power projects in Myanmar are typically undertaken by way of a concession, which is documented by a non-binding memorandum of understanding, PPP agreement (e.g., BOT) and power purchase agreement, land lease agreement and joint venture agreement (as applicable) between the relevant department of the MOEE and investors. The suite of transactional documents is typically prepared by the authorities, subject to negotiation with the investors.

    v Ownership restrictions on immovable properties

    Given the foreign restriction on immovable property under the Transfer of Immovable Property Restriction Law 1987, as amended in 2005, foreign-owned companies (i.e., sponsors) without an MIC permit or endorsement are only allowed to enter into a lease agreement for up to one year. With an MIC permit or endorsement, a foreign sponsor may be permitted to lease or use land for an initial period of up to 50 years, which may be extended for two further periods of 10 years each.

    vi Particular requirements for trading activities (distribution services)

    Generally, domestic sale and distribution (i.e., wholesale and retail) will be construed as trading activities that require particular licences under the MOC Notification 25/2018. Pursuant to this notification, the wholesale and retail business licence may be granted to foreign-owned companies (with less than 20 per cent local ownership) or joint ventures (with more than 20 per cent local ownership), subject to the satisfaction of the respective capital requirements below:

    1. foreign-owned companies: US$3 million for the retail business licence and US$5 million for the wholesale business licence; or
    2. joint ventures: US$700,000 for the retail business licence and US$2 million for the wholesale business licence.

    In additional to the above restrictions and requirements, approval from the relevant department of the MOEE and the MIC must be obtained for any changes in the ownership of power projects and creation of charges and mortgage over the assets of power projects.

    vii Tariffs

    In practice, tariff determination is an essential component for the government, but there may be a different approach towards the commercial terms, which depend upon the economics for the relevant Ministry. Being a matter of negotiation, it can be difficult to benchmark the range of tariffs for any project. Agreement on tariffs is generally dependent upon the nature of project, type, location, end user price and investments needed. We understand the quoted tariffs in the 2020 solar project tender range from US3.48 cents per kWh to US5.1 cents, which were far below the Myanmar average tariff.

    The tariff applicable to residents and business is determined by the MOEE, and may be modified from time to time. The progressive tariff was largely increased in July 2019. The increase of tariff applied to residential consumption was 72.9 per cent (6,050 Kyats for 100 units) while the tariff applied to business consumption was increased from 75 Kyats to 125 Kyats for 1–500 units.4 In response to the covid-19 pandemic, relief has been granted by the government for electricity consumption.

    viii Investor protections


    The government has been reluctant to provide sovereign guarantees in power projects to date. Perhaps as a signal of change, or given external pressures from the international business community, the authors understand that the government is providing contractual sovereign guarantees for the Myingyan IPP deal (however, the creditworthiness of the EPGE will remain an issue when dealing with project financing, as the sovereign guarantees on payment are merely contractual in nature without additional security in the form of bank guarantees provided by the government).

    Myanmar became a member of the Multilateral Investment Guarantee Agency (MIGA) in 2013. MIGA provides political risk insurance (guarantees) for projects in a broad range of sectors in developing member countries, covering all regions of the world. In principle, this means political risk guarantees can be provided for investments in Myanmar, which can include MIGA coverage for breach of contract by the EPGE. As a guide, MIGA may insure up to US$220 million per project, and if necessary more can often be arranged through a syndication of different insurers. Under the standard MIGA contract of guarantee for shareholder loans, a guarantee holder shall, prior to or simultaneously with payment of compensation for a loss, assign and transfer to MIGA the right to a percentage of cover of the guarantee holder's pro rata share of the project enterprise's rights, as applicable, in the project agreement.

    As a side note, there is also no specific protection in Myanmar against material adverse government action. Having said that, under the MIL the government guarantees that a business that acquires an MIC permit shall not be nationalised during the term of the contract or during the extended term of the contract. Further, the government guarantees not to suspend any investment business carried out under the MIC permit before the expiry of the permitted term without sufficient cause. What constitutes 'sufficient cause' is not defined. The guarantee provided under the MIL is yet to be properly tested in any Myanmar court or arbitral tribunal, and thus there is no guiding jurisprudence or commentary.

    The Public Debt Management Law 2016 (PDML) was passed on 5 January 2016, essentially to regulate matters relating to the financial liabilities of the Myanmar government. Possible relevance to energy projects would be the provisions of the PDML relating to guarantees issued by the state, although the precise realm of the PDML in that respect remains somewhat unclear. The PDML provides that the Minister of Planning, Finance and Industry (MPFI) may issue guarantees for any person, entity or project on such terms and conditions as may be approved by the Myanmar government and the legislature. Prior to the issuance of a state guarantee and throughout the guarantee period, the MPFI shall assess the risk relating to that guarantee. If the guarantee is required to be issued in a foreign currency, the MPFI will consult the Central Bank of Myanmar (CBM). However, thus far, the authors are yet to witness guarantees issued by the state referring to the provisions of the PDML.

    Arbitration mechanism

    The Arbitration Law 2016 provides a domestic legal framework to fully implement and comply with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (the New York Convention), which Myanmar signed and ratified in 2013. The Myanmar Arbitration Centre was launched on 3 August 2019 in Yangon. Notwithstanding the foregoing, parties usually prefer Singapore and Singapore International Arbitration Centre (SIAC) as the international dispute resolution seat and mechanism, considering SIAC's well established institutional framework, capacity to handle international arbitration and geographic advantage.

    Transmission/transportation and distribution services

    See Section II.iii and vi for information on the licence requirements for these services.

    Energy market, renewable market and conservation

    i Potential downstream and power projects

    The downstream sector, inter alia, involves refining petroleum crude oil, treating and purifying natural gas, and marketing and distributing petroleum products. Recently, foreign investment has been liberalised by the Myanmar government for imports, storage and distribution of petroleum products in Myanmar under the PPPL. It has been a welcome move for potential downstream investors, and will create an opening in the downstream petroleum market for foreign investors in Myanmar.

    The PPPL replaces the Petroleum Act 1934 and provides clarity on aspects of imports and exports, transportation, storage, refining, distribution, inspection and testing of petroleum and petroleum products. The PPPL also earmarks the authority concerned with issuance of relevant licences. However, the implementation of the provisions of the PPPL is yet to be observed.

    The MOEE has been in discussion with entities on construction of new refineries and revamping of the existing refineries in Myanmar. Currently, there are three major refineries: Thanlyin, Chauk and Mann Thanpayarkan. With the promulgation of the recent regulations in the sector, foreign investment is possible in connection with loading, offloading, and operating and maintaining jetty facilities.

    ii Development of renewable energy

    It is reported that the MOEE is drafting a renewable energy law aiming to generate 8 per cent of the national electricity by 2021 and 12 per cent by 2025. Currently, hydropower plays the main role in the renewable energy sector. Pursuant to the NEP, the government aims to reduce the reliance on hydropower while increasing the market shares of solar and wind power in view of the huge potential of each. In May 2020, the MOEE launched a public tender for 30 solar power plants, with a target of generating a total of 1,060MW. In September 2020, 29 bids were awarded. It was announced that these solar projects were targeted to commence operation in April 2021. Likewise, in 2018, the MOEE entered into an agreement with a Chinese entity to develop the first wind power plant with capacity of 30MW which is located in Chaungtha, Ayeyarwaddy Region. We understand that the feasibility study report is under review by the MOEE.

    iii Energy efficiency and conservation

    Under Section 42(b) of the Environmental Conservation Law 2012, the Ministry of Environmental Conservation and Forestry (currently referred to as MNREC) has issued an Environmental Impact Assessment Procedure (the EIA Procedure), which states that:

    all projects undertaken by any . . . enterprise . . . which may impact on environmental quality . . . are required to undertake an EIA to develop a project document to avoid, protect, mitigate and monitor adverse impacts caused by . . . operation . . . of a project.

    In the power sector, issues concerning air quality and greenhouse gas (GHG) emissions are prevalent. An emphasis on reducing GHG emissions is vested in local regulations addressing control measures. International guidelines providing commentary on reducing GHG emissions highly recommend the use of less carbon-intensive fuels, combined heat, power plants, higher conversion efficient technology as well as high monitoring levels.

    Myanmar's EIA Procedure is gradually developing in the face of increasing public expectation. Health and climate change-related issues, impacts on biodiversity and sensitive habitats are among other matters of growing significance.

    Key takeaways

    i Bankable project documents

    Arguably, the project documents (e.g., memoranda of agreement, power purchase agreements, build-operate-transfer agreements, engineering, procurement and construction contracts, land lease agreements, security documents, fuel supply agreements) used for the Myingyan IPP deal should be adopted as good practice for other IPP projects in Myanmar going forward. This is critical for foreign sponsors because, before the Myingyan IPP deal, a power deal of this magnitude had not been seen before.

    If an energy deal is funded by way of project finance, the main challenge for foreign sponsors will be ensuring the documentation structure remains within the framework for limited recourse project financing. Sponsors need to consider in advance the requirements for having in place bankable collateral for meeting the lenders' requirements for the project. It has also been the authors' experience that foreign lenders usually push hard to enhance the recourse options by establishing liens on the interests or assets of the sponsors and shareholders of any project company. If the financing involves syndicated contributions from multilateral development financial institutions (multilaterals), this will create another hurdle. Sponsors need to be aware that multilaterals may show little inclination to negotiate any deviation from their standard project documentation.

    ii Project finance

    The difficulties involved in financing power projects to date mainly revolve around the CBM and MIC approvals (for companies with an MIC permit), and concern loan facilities and challenges in perfecting security interests, including:

    1. charges over shares (normally referred to as pledges of shares);
    2. fixed and floating charges (these typically include project accounts, movable plant and equipment, buildings and fixtures, and book debts);
    3. mortgages on immovable property. Typically, a separate land mortgage will be executed and this must be registered at the relevant Myanmar Office of Registration of Deeds; and
    4. assignments of contracts.

    To comply with Myanmar property laws, foreign lenders often engage a local bank to act as an onshore security agent (OSA) (or collateral agent) to enable holding of charge over immovable property).

    All the above securities are permitted under law; however, the registration of these security interests still remains enormously challenging owing largely to complicated Myanmar property laws and foreign ownership restrictions over land, as well as the lack of a modern legal mechanism allowing the government to facilitate registration of security. The first inroads were made under the Registration of Deeds Law 2018, which prescribes a more transparent two-way mechanism involving online registration with the DICA followed by registration with the Deed and Registration Office to properly record a security interest. However, there is no official land titles register or electronic database, making it difficult for investors to accurately determine the ownership of privately held plots of land. When locals sell land, they often do not change the name of the title deed holder. Therefore, locals rely primarily on legal contracts, which state the transfer of land ownership after a sale. This could be confusing for investors. Hence, investors need to conduct a careful due diligence process on landowners.

    Use of an OSA is highly recommended to streamline the perfection of security processes, as there are few restrictions regarding a Myanmar person (individual or corporate entity) taking the security interests listed herein. In terms of OSA responsibilities, it would be highly advantageous to request an annual declaration that the security interests remain perfected and that the OSA is not aware of other interests that would affect the security remaining perfected.

    Section 229(a) of the MIL provides for the granting by a Myanmar company of a fixed and floating charge (FFC) over its assets in favour of a lender, including book debts, cash flows, receivables, intangible assets, contractual rights and bank accounts. This is a flexible form of security that applies in common law jurisdictions and can cover the following assets:

    1. a mortgage or charge for the purpose of securing any issue of debentures;
    2. a mortgage or charge on uncalled share capital of the company;
    3. a mortgage or charge on any immovable property wherever situated, or any interest therein;
    4. a mortgage or charge on any book debts of the company;
    5. a mortgage or charge, not being a pledge on any movable property of the company except stock in trade; or
    6. a floating charge on the undertaking or property of the company.

    The FFC and any individual mortgage or charge over a company's assets must be registered with the DICA within 28 days of its creation, otherwise it is void against a liquidator and other creditors should a company be wound up. It may be pertinent to mention that the mortgage of immovable property can only be in relation to the long-term lease of the land on which the facility is built (i.e., the right to lease the land, not the land itself).

    CBM approval is required for all offshore financings. Once CBM approval has been obtained with the loan payment and repayment schedule attached, no further approvals are required for each payment made under the loan. For projects approved by the MIC, the creation of any charge or mortgage requires notification to the MIC.

    Given the uncertainties regarding onshore security, lenders will also require sponsors based overseas to provide 'offshore' security over their interests in the Myanmar-based project company in the usual manner.

    iii Tax considerations

    Investors need to account for local tax duties when costing out an IPP project in Myanmar. Stamp duty must be levied on all project documents and any security documents if third-party project financing is involved. Pursuant to the Myanmar Stamp Act 1899, as amended in 2019, stamp duty of 0.5 per cent of the total loan facility is applicable. Furthermore, certain tax reliefs may potentially be available under applicable tax treaties. Myanmar has double taxation avoidance agreements (DTAs) in force with eight countries including India, Korea, Malaysia, Singapore, the United Kingdom and Vietnam, with a number of other DTAs in the draft phase.

    The Income Tax Law provides that a DTA must be 'notified' before it is to override provisions of the Law. The details concerning whether a DTA has been notified are contained in the official government gazette. Accordingly, the terms of any DTA will be followed despite anything to the contrary contained in any other provisions of the Income Tax Law.5 The sponsor must follow an administrative procedure for claiming a tax exemption based on the DTA with the Internal Revenue Department (IRD). Under Myanmar law, application of the DTA is not automatic and is at the discretion of the governor of the IRD.

    In terms of the tax concessions available for an MIC company, a five-year income tax holiday for an MIC company starts from the first day of commercial production. Typically, a project company would only incur expenditure without having any taxable income during its construction period. A project company's corporate income tax would be nil if it has negative taxable income. However, if a project company has taxable income during its construction period, it would be liable to pay corporate income tax at 25 per cent on its net profits.

    iv Meetings with the regulators

    Meetings with any ministry, department, division or sub-department of the government will generally take place in Nay Pyi Taw. Aside from the MIC and the DICA, which have offices in Yangon, all principal ministerial offices are located in Nay Pyi Taw. Meeting requests typically are requested in letter form. Hard-copy originals must be sent to the relevant authority to arrange the meeting. Email communication remains uncommon in practice. In the authors' experience, meetings should be arranged at least seven business days in advance and the meeting request letters should state a preferred date and time and be accompanied by an agenda to allow the relevant authority to coordinate representatives from the MOEE, DEP and others.

    It is preferable to have a short agenda, as very frequently meetings are cut short, postponed or delayed. It is suggested, depending on the importance of the meeting, to stay overnight to afford the relevant authority more flexibility should unexpected changes occur on the first day of the meeting. Given these limitations, it is strongly suggested to have more frequent, shorter meetings as opposed to attempting a one-day marathon session with the government. Despite most meetings being conducted in English, having a translator in attendance can ensure the meeting will run more efficiently.

    Conclusions and outlook

    Myanmar has abundant energy resources – hydropower and natural gas in particular. Owing to underdeveloped legislation and a lack of financial and technical capacity, the energy sector is still underdeveloped. However, with the government's commitment to reform, foreign investment will have more access to this sector with simplified formalities. The recent regulatory and policy changes in foreign investment are indicative of the fact that the government is making greater efforts to create a more transparent atmosphere to attract foreign capital and technology. It is to be hoped that there will be significant growth in the energy sector in the near future.


    1 Krishna Ramachandra is a managing director, Priyank Srivastava is a director and Wang Bei and CN Bei Lo are senior associates at Duane Morris & Selvam LLP.

    5 The Income Tax Law provides that if the government enters into an agreement with any foreign state or international organisation relating to income tax, and if the agreement is notified, the terms of the agreement will be followed despite anything to the contrary contained in any other provisions of the Income Tax Law.

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