Yoma Micro Power demonstrates that ESCOs can successfully serve telecom, community and C&I off-takers

Yoma Micro Power are somewhat unique among the growing pantheon of successful renewable energy service companies (ESCOs). Not only do they exhibit organic growth as impressive as any TowerXchange has encountered, they are also proving that ESCOs can concurrently serve telecom towers, communities and commercial and industrial (C&I) off-takers.

TowerXchange: Please introduce Yoma Micro Power.

Given that 65% of Myanmar’s population lacks access to electricity, Yoma Micro Power has developed solar hybrid mini grids to provide power to rural communities, small businesses and telecom towers.

Yoma Micro Power deploys our own capex into the power equipment to build small scale, off-grid hybrid power plants. Each power plant has a telecom tower as the anchor customer as a minimum, but many serve communities and other small rural businesses. We have a parallel business providing grid-tied rooftop solar systems for commercial and industrial customers. 

Now that we have proved that our designs and business model work in practice, and can be rolled out at scale – we now have the capacity to deploy 50 power plants per month— and deliver on challenging Service Level Agreements (SLAs), our next quest is to convince every towerco and MNO who is running diesel generators for power that renewable energy based ESCOs would save them money while contributing to a better environment and society.

TowerXchange: When we last spoke, Yoma Micro Power had ten proof of concept sites. How has your business progressed in the last year and a half?

When we spoke in 2018 it was just after we had closed our previous funding round, raising a total of US$28mn to build 250 power plants. We have 233 operating power plants as of today and expect to have all 250 of those power plants operating by the end of this month (February 2020).

We have already closed with two and secured commitments from the third of our existing shareholders for the next phase of development, which illustrates their satisfaction in what we have achieved to date.

Our goal is to build more than 500 additional power plants this year. We have a commitment to build 600 for one customer, and we have other satisfied customers too with whom we have completed successful pilots: we have site lists for 1,000+ sites from these prospective customers.

Our target is to reach a total of 2,000 sites over the next couple of years.

TowerXchange: Who are your telecom anchor tenants, MNOs or towercos?

At the moment our telecom anchor on most sites is one of the various towercos.

We have achieved more traction with towercos than MNOs despite the fact that the cost of diesel is a pass through from the towerco to the MNO at most sites in Myanmar, which would appear to demotivate towercos to invest in reducing energy opex. Some of the towercos in Myanmar recognise that providing better value by reducing costs is good business.

One of the larger towercos in Myanmar explored a large scale ESCO RFP, but they just wanted an ESCO to take over the power assets they already had, agree to an SLA, and invest in cell site energy modernisation. However, that’s not our model; we build new plants, and guarantee the power, so our customers can remove the power equipment from their sites and redeploy it elsewhere.

TowerXchange: What are the challenges to working with Myanmar’s MNOs?

As MNOs ultimately bear the cost of power, you would imagine that they would be more motivated than towercos to work with ESCOs. But practically every stakeholder we’ve spoken to at an MNO has a different view based on where they stand, such that we have not be able to negotiate win-win partnerships with MNOs.

One of Myanmar’s MNOs operates with a principle of retaining all the assets and opportunities to create efficiencies for themselves, which it makes it very difficult for them to consider partnering with an ESCO. Another MNO has bigger issues to deal with than power opex reduction – they don’t see mini-grids as moving the needle. And a third MNO is hung up from an accounting perspective – they see the power systems as a sunk cost, so if they take power from us they see it as an increase in opex costs, they don’t see the bigger picture with savings in battery and DG replacement. 

We expect that the MNOs’ attitudes will eventually change, and we already have a small number of sites with one MNO, but to date we have tended to focus on working with Myanmar’s towercos.

TowerXchange: Given your focus on towercos, how have you designed your power plants to be scalable as the load increases with multiple tenants and technologies?

We have designed an innovative modular system. We build initial capacity only for known demand; the telecom load today might be two tenants, but if the towerco adds a third and a fourth tenant we can easily increase capacity, but we don’t build excess capacity up front. The same modularity is critical as we add load from villages, rural businesses, households, monasteries, pagodas, clinics et cetera.

Our power plants are solar hybrids. Solar is the primary generation, with energy stored in lead-acid or lithium-ion batteries to provide power at night. The plant also includes solar charge controllers, a battery management system, inverters and a seldom-used diesel genset (DG) backup to achieve uptime Service Level Agreements (SLAs) which equate to 99.95%, or a maximum of 14 minutes downtime per month. For example, if a critical site with 16 dependencies goes down, then our downtime is 17x the number of minutes we’re out, so that would quickly incur penalties. To avoid downtime, we have designed a robust system with redundancies such as the battery and DG. By design we don’t run the DG unless we get several rainy days or unplanned downtime.

We produce standard AC electricity for the tower and convert AC to DC onsite as the BTS equipment uses -48V DC, while the households and businesses use standard one- or three-phase AC electricity. 

Village demand is somewhat unpredictable. We make initial assumption about the anticipated load from the village, then monitor usage and increase capacity as demand grows. We build it when they come, not build and hope they come!

Yoma Micro Power is technology agnostic – we build our power plants with standard, commercially available products to leverage high volume production solar PV modules and batteries from multiple sources. At the heart of the system is our hybrid system controller, custom developed according to our specifications. That system is manufactured by three or four different vendors from China and India.

At present 100% of our plants are solar hybrids, but we will explore mini-hydro or small wind as we expand to other parts of the country where those generation sources may be more suitable. However, we’ll remain focused on renewables – we will never revert to 100% fossil fuel generation that our customers were dependent on.

TowerXchange: Your value proposition is about reducing costs - what have you been able to achieve in this respect?

We have achieved a 15-20% power opex reduction for our customers, while massively reducing carbon footprints, all the while achieving challenging SLAs.

While the expansion of telecom network coverage has been tremendously beneficial to rural Myanmar, you cannot overstate how quiet these rural villages are. As a result, villagers will often complain about noise pollution from towercos’ DGs. As a consequence, many sites are required to shut down DGs in the evening, which means a loss of revenue for MNOs. Our solar hybrid power plants resolve this problem, running on battery power overnight for most days of the year, with DG running for a few hours occasionally only on rainy days.

TowerXchange: To what extent has site acquisition been a challenge as you’ve accelerated your rollout?

One of our challenges has indeed been acquiring and converting sites for power plant use, as we build our power plant on a separate plot from the land leased by the towercos to build the tower.

When a towerco decides to get power from us they sign a Master Service Agreement, then they give us a site list of hundreds of off-grid sites. We then have a process to validate whether a given site will get grid power soon, in cases where they will, those sites are eliminated as we want to complement government efforts to connect and electrify rural Myanmar. Once we have derived a list of the sites that are suitable, we typically work batch by batch with a phased rollout, and site acquisition begins. 

Site acquisition is hard work: our ability to generate sites depends on an army of site hunters, but we can control it. The hang up is that after we identify the land we need, it can be a lengthy process to apply for change of use, for example from cultivation to a solar power plant. On other occasions if the tower was built on Ministry of Forestry land, we have to deal with the Ministry to try to acquire land close enough to the tower. In such cases it is an even lengthier process as we have to wait for them to send officers to survey, then negotiate the terms and at times they will decline the application to protect trees or for other issues.

While those local authority and government processes are the hardest phase of the rollout to control, we won’t take shortcuts – we proceed legally and lawfully, even though it takes more time.

TowerXchange: Let’s talk about operational delivery - with your acceleration of rollout, can your supply chain keep up with demand?

The biggest challenge in operational delivery is customs clearance: there is always a risk that imports can get caught up in customs. But again, we will only proceed legally and lawfully. The Myanmar Investment Commission has approved us as a foreign direct investor, and we are licensed to import an approved list of material which we have provided. The best way to mitigate import delays is simply to order well in advance.

Once our equipment has passed customs, we send them to our warehouses, where we have a site by site kitting process, then we deliver the equipment to each site. Of course, some remote sites can represent a delivery challenge – the last mile can be by boat, by ox cart or even hand carried. We have designed our systems with full awareness about delivery logistical issues – our power plant can be broken into smaller pieces that can be carried by local available mode of transportation. For example, a containerised hybrid power solution might need a 10-20 tonne crane on a truck – which will not be able to pass through many of Myanmar’s rural roads. In contrast, our system can literally be hand carried.

TowerXchange: What has been the balance of your business between telecom versus community versus larger C&I off takers?

We treat these as three distinct businesses, and each must stand on its own legs.

Across all three potential revenue streams, we stick to our principles of only deploying capacity for known demand, then leverage the modularity of our solar hybrid systems to adapt to increasing load. So, whatever the load is for a given site, whether it’s just a telecom load or if we’re serving the community and rural businesses too, the economics must work from the outset. The business case for each individual site must meet our target returns before we put in the necessary capex. 

TowerXchange: Do you amortise the capex across all three revenue streams, or just the telecom anchor tenant? And what efficiencies are unlocked when a site generates all three revenues?

Given that we have almost no excess capacity, and that our off-grid sites are typically initially optimised against the telecom load, the initial capex is amortised against the telecom cash flow. If the village becomes an off-taker, when we add PV, batteries and sometimes a second DG – that new capex goes against the village cash flow.

In terms of efficiencies, the primary benefit is operational: we can share the cost of caretakers and engineering staff across two or more different customers, but that is a relatively small portion of our total costs.

TowerXchange: Can you achieve the growth you are targeting - scaling from 250 to 2,000 sites - on the back of your existing Development Finance Institution (DFI) investors, or might you need to attract private equity investors to secure US$100mn cheques?

The DFIs are capable of writing $100mn cheques!

Our local joint venture partner the Yoma Group are joined as investors by AC Energy from the Philippines and DFIs IFC and Norfund. Our existing backers are keen to support our growth objectives. 

This business may not be attractive enough in terms of IRR for private equity investors to be interested, unless they’re willing to live with lower numbers with a triple bottom line approach of economic, social and environmental impact.

TowerXchange: Do you have ambitions to expand beyond Myanmar?

I started Micro Power with intent to operate in different countries. The Yoma Micro Power joint venture will remain focused on Myanmar, but some of our backers are keen to support Micro Power to expand internationally.

TowerXchange: What are you most looking forward to when speaking at the ESCO Roundtable in Johannesburg on October 13 and 14, 2020?

I am looking forward to sharing our story and what we have learned - I hope we can inspire other ESCOs and their customers and investors!

I’m also keen to learn from the leaders of ESCOs elsewhere in Asia and in Africa, and also to learn from Orange as an ESCO pioneer. One of the Myanmar MNOs put out an ESCO RFP, but the process was abandoned. The advisor to the CTO who ran the process said that they went through the process and the bids, but management lost attention and so the RFP stalled. I’m keen to learn how we can secure management buy in to get more ESCO contracts awarded.

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Alakesh Chetia will be among more than a dozen ESCO CEOs attending the ESCO Roundtable, co-hosted by TowerXchange and Orange, taking place on October 13 and 14, 2020 in Johannesburg. For agenda information and to register, click here.

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