Fifth Combined Heat and Power Plant development project is the first of the Public and Private Partnership (PPP) in Mongolia. Moreover, this project will be marked as the first project to develop combined power and heating plant since 1984.
The concession agreement holders have signed the Electricity Purchase Agreement with the representatives of the Government of Mongolia today.
CHP 5 development concession agreement holders are:
- Engie (Formerly known as GDF Suez - 30 percent owner),
- Sojitz Corp (30 percent owner)
- POSCO Energy (30 percent owner)
- Newcom Group (10 percent owner).
Today the representative of the concession owners and National Dispatching Center, National Electricity Transmission Network management have been present at the agreement signing.
The agreement imposes the above entities for the purchase of the electricity and power from the CHP 5.
Once the agreement has signed the consortium will be responsible for the financing of the project which is USD 1.5 billion. Due to the lower credit rating of Mongolia the financing loan interest rates could be higher than expected.
MAIN FEATURES OF CHP 5
- 3 stoves with capacity of 150 MW each
- Each stove features double combustion technology
- Capacity to produce 450 MW electricity, 587 MW heat
- 70 percent of total coal to be procured from Shivee-Ovoo and 30 percent from Baganuur deposits
- Annual water consumption - 3 million cubic meters, which is 3 times less of the current CHPs
- 2,700 jobs to be created during the project implementation
- Only domestic companies to be selected as suppliers
- Construction will take 4-5 years
- Total investment needed USD 1.5 billion
- Concession agreement duration - 25 years
- Consortium is estimated to have returns in 15 years
- No financial committment from the Government of Mongolia
- 1 kWh cost 7 cents, while Salkhit costs 9 cents
- Concession agreement - build-own-operate-transfer
- 2016 will the start of the construction
- Location is at Khuliin valley, east of Ulaanbaatar city
- Total territory - 43 hectares
If the consortium is to build the CHP 5, Government of Mongolia is responsible for the construction of the infrastructure such as railroad, heat and electricity transmission lines, therefore making the CHP 5 a PPP.
ABOUT CONSORTIUM
ENGIE- French multinational electric utility company, headquartered in La Défense, Courbevoie, which operates in the fields of electricity generation and distribution, natural gas and renewable energy, formerly know as GDF Suez
SOJITZ Corporation-engaged in a wide range of businesses globally, including buying, selling, importing, and exporting goods, manufacturing and selling products, providing services, and planning and coordinating projects, in Japan and overseas.
POSCO Energy-the largest private energy producer in South Korea. It is a member of the POSCO consortium.
NEWCOM Group-is a Mongolian investment company. Its portfolio includes MobiCom Corporation, the first and the largest mobile telecommunications company in Mongolia. Newcom built the first wind farm in Mongolia, with a capacity of 50MW.
POSITIVE ENVIRONMENTAL IMPACT
Although the CHP5 is a coal-fired facility it features monitoring and management system to control the CO2 waste at each stoves, which adheres to the international standards. Moreover the CHP 5 is to be equipped with the air-conditioning condensation, to reduce the water usage to the lowest possible point.
Хамгийн том, хамгийн чухал гэрээ болох арилжааны нөхцөлүүдээ тохирсон, Цахилгаан худалдах, худалдан авах гэрээг үзэглэлээ. Бичиг цаасны ажлынхаа 70 хувийг хийчихлээ гэсэн үг.
The construction period will be 5 years and the operations are estimated to start in 2020. P.Tovuudorj, Head of the Strategic Policy and Planning Department at the Ministry of Energy, expressed his hopes that by the time CHP 5 starts its operation energy tariffs will be based on market demand.
-Current CHPs are located at the western part of the city just 2-3 km away from each other. It requires to build 25km of infraastructure for the eastern part of the city in order to deliver energy, which is costly. Therefore, the location of CHP 5 was purposefully chosen to be in the eastern part. Land issues are finalized with the order of the Capital City Governor.
Financing of the energy sector is one of the problematic issues we are facing currently. Therefore, we are estimating that by 2019 and 2020, when CHP5 will be ready for operations, the purchasing power of the consumers to increase and have projected the prices for 1 kWh to be at 7 cents. Although this projection might change by 2020. The reviews are inevitable.
D.Gankhuyag, Director of Energy and Infrastructure at Newcom Group:
-Total of 36 companies expressed their interest in the project when GoM announced it in 2011, of which 10 were national companies. Second phase of the consortium bids left 11 companies, where 4 national companies have been selected and at the final selection Newcom Group was selected as a member of the consortium of four companies. The successful implementation of the project requires signing of 4-5 important agreements. Today we have managed to sign the most important agreement of energy purchase with the GoM, which can be said as 70 percent of the paper work has been done. Next step will be the agreement on heat supply, which is at its final stages. Coal and water agreements are in the negotiation stage and advancing quickly. As the consortium involves foreign entities, it restricts from owning the land. Therefore, the Ministry of Energy is to act as the land owner under the CHP5 and hopefully we won't face any issues.
Energy resources for the CHP 5 will be Shivee-Ovoo and Baganuur coal deposits, which are part of the Erdenes MGL, so that Erdenes MGL is involved in all the negotiations as well. Today's agreement was the result of the half year negotiations.
As the project is dubbed as Mega Project, it is impossible to implement without foreign investments and it is inevitable to approach to the foreign financial institutions. Foreign investors are more interested to cooperate with reliable domestic company in terms of easing the procedures of legal compliance. This is the way how mega projects are implemented.
Energy sector is risky as it has state involvement. Ministry of Energy has set the price for 1kWh at 7 cents for the CHP5 as the base price.
Photo credit: B.Unubold
Fifth Combined Heat and Power Plant development project is the first of the Public and Private Partnership (PPP) in Mongolia. Moreover, this project will be marked as the first project to develop combined power and heating plant since 1984.
The concession agreement holders have signed the Electricity Purchase Agreement with the representatives of the Government of Mongolia today.
CHP 5 development concession agreement holders are:
- Engie (Formerly known as GDF Suez - 30 percent owner),
- Sojitz Corp (30 percent owner)
- POSCO Energy (30 percent owner)
- Newcom Group (10 percent owner).
Today the representative of the concession owners and National Dispatching Center, National Electricity Transmission Network management have been present at the agreement signing.
The agreement imposes the above entities for the purchase of the electricity and power from the CHP 5.
Once the agreement has signed the consortium will be responsible for the financing of the project which is USD 1.5 billion. Due to the lower credit rating of Mongolia the financing loan interest rates could be higher than expected.
MAIN FEATURES OF CHP 5
- 3 stoves with capacity of 150 MW each
- Each stove features double combustion technology
- Capacity to produce 450 MW electricity, 587 MW heat
- 70 percent of total coal to be procured from Shivee-Ovoo and 30 percent from Baganuur deposits
- Annual water consumption - 3 million cubic meters, which is 3 times less of the current CHPs
- 2,700 jobs to be created during the project implementation
- Only domestic companies to be selected as suppliers
- Construction will take 4-5 years
- Total investment needed USD 1.5 billion
- Concession agreement duration - 25 years
- Consortium is estimated to have returns in 15 years
- No financial committment from the Government of Mongolia
- 1 kWh cost 7 cents, while Salkhit costs 9 cents
- Concession agreement - build-own-operate-transfer
- 2016 will the start of the construction
- Location is at Khuliin valley, east of Ulaanbaatar city
- Total territory - 43 hectares
If the consortium is to build the CHP 5, Government of Mongolia is responsible for the construction of the infrastructure such as railroad, heat and electricity transmission lines, therefore making the CHP 5 a PPP.
ABOUT CONSORTIUM
ENGIE- French multinational electric utility company, headquartered in La Défense, Courbevoie, which operates in the fields of electricity generation and distribution, natural gas and renewable energy, formerly know as GDF Suez
SOJITZ Corporation-engaged in a wide range of businesses globally, including buying, selling, importing, and exporting goods, manufacturing and selling products, providing services, and planning and coordinating projects, in Japan and overseas.
POSCO Energy-the largest private energy producer in South Korea. It is a member of the POSCO consortium.
NEWCOM Group-is a Mongolian investment company. Its portfolio includes MobiCom Corporation, the first and the largest mobile telecommunications company in Mongolia. Newcom built the first wind farm in Mongolia, with a capacity of 50MW.
POSITIVE ENVIRONMENTAL IMPACT
Although the CHP5 is a coal-fired facility it features monitoring and management system to control the CO2 waste at each stoves, which adheres to the international standards. Moreover the CHP 5 is to be equipped with the air-conditioning condensation, to reduce the water usage to the lowest possible point.
Хамгийн том, хамгийн чухал гэрээ болох арилжааны нөхцөлүүдээ тохирсон, Цахилгаан худалдах, худалдан авах гэрээг үзэглэлээ. Бичиг цаасны ажлынхаа 70 хувийг хийчихлээ гэсэн үг.
The construction period will be 5 years and the operations are estimated to start in 2020. P.Tovuudorj, Head of the Strategic Policy and Planning Department at the Ministry of Energy, expressed his hopes that by the time CHP 5 starts its operation energy tariffs will be based on market demand.
-Current CHPs are located at the western part of the city just 2-3 km away from each other. It requires to build 25km of infraastructure for the eastern part of the city in order to deliver energy, which is costly. Therefore, the location of CHP 5 was purposefully chosen to be in the eastern part. Land issues are finalized with the order of the Capital City Governor.
Financing of the energy sector is one of the problematic issues we are facing currently. Therefore, we are estimating that by 2019 and 2020, when CHP5 will be ready for operations, the purchasing power of the consumers to increase and have projected the prices for 1 kWh to be at 7 cents. Although this projection might change by 2020. The reviews are inevitable.
D.Gankhuyag, Director of Energy and Infrastructure at Newcom Group:
-Total of 36 companies expressed their interest in the project when GoM announced it in 2011, of which 10 were national companies. Second phase of the consortium bids left 11 companies, where 4 national companies have been selected and at the final selection Newcom Group was selected as a member of the consortium of four companies. The successful implementation of the project requires signing of 4-5 important agreements. Today we have managed to sign the most important agreement of energy purchase with the GoM, which can be said as 70 percent of the paper work has been done. Next step will be the agreement on heat supply, which is at its final stages. Coal and water agreements are in the negotiation stage and advancing quickly. As the consortium involves foreign entities, it restricts from owning the land. Therefore, the Ministry of Energy is to act as the land owner under the CHP5 and hopefully we won't face any issues.
Energy resources for the CHP 5 will be Shivee-Ovoo and Baganuur coal deposits, which are part of the Erdenes MGL, so that Erdenes MGL is involved in all the negotiations as well. Today's agreement was the result of the half year negotiations.
As the project is dubbed as Mega Project, it is impossible to implement without foreign investments and it is inevitable to approach to the foreign financial institutions. Foreign investors are more interested to cooperate with reliable domestic company in terms of easing the procedures of legal compliance. This is the way how mega projects are implemented.
Energy sector is risky as it has state involvement. Ministry of Energy has set the price for 1kWh at 7 cents for the CHP5 as the base price.
Photo credit: B.Unubold