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Economy / Featured News / Mining / Mongolia News / September 30, 2015

J.Erdembileg: Not having the need to import energy will become the biggest advantage

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The following interview is with CEO of Mogul Power LLC J.Erdembileg, whose company is currently preparing to build a power plant adjacent to Tevshiin Govi brown coal mine in Saintsagaan soum in Dundgovi Province.The parent company of Mogul Power is the USA’s Firebird Management.

According to J.Erdembileg, the new power plant will have a capacity of 600 megawatt and will be able to supply power to any direction, including Mongolia’s southern regions. 

What kind of work has Mogul Power achieved so far?

Our company received a special license at the Tevshiin Govi coal mine in 2010. In 2011, we started a project to build a power plant next to this mine because we considered it was best to utilize its coal.

We had RPS Aquaterra conduct water technology research in 2011 and Burns and Roe develop a pre-feasibility study in 2012. In 2013, we had environmental impact assessment done and had the Scientific and Technical Council at the Ministry of Energy approve our feasibility study. We finally received permission to construct a power plant from the Energy Regulatory Commission last year. Currently, our company is negotiating a build-operate-own form of concessional agreement.

It should be specified that our company will produce energy that will be able to recover investment after the power plant is built. Once the concessional agreement is approved, the power purchase agreement (PPA) will be established.

Amendments were made to the Energy Law last July. It was beneficial that authorities added provisions related to the establishment of the PPA with power stations, which operate using coal. Specifically, a new terminology, independent power producer, was created. This is a big step for making power system more market-oriented. 

Mogul Power announced to raise financing for the power plant from international investors. Why did it choose to partner with SEPCO-III, a sister company of one of China’s biggest multinationals-POWERCHINA?

We’ve taked with several investors from South Korea and China since 2013. Among them, SEPCO-III gave the most financially affordable proposal. Chinese companies implement tons of power plant projects globally. For example, SEPCO- III has completed over 40 projects. It has also commissioned power plants in many countries throughout Asia, Europe and Africa.

The first reason why we chose SEPCO-III is because it’s very experienced. It also manufactures and assembles equipment and devices. 

When can the construction work of the new power plant begin? 

SEPCO-III is negotiating to construct the plant under terms to hand over the key. As Mongolia’s construction season is short, it has agreed to complete the power plant in 48 months. It would’ve been possible to complete construction work within approximately 36 months if Mongolia’s construction season had been year-round. 

Will Mongolians participate in the construction process? 

Construction work has many structures, including infrastructure and networking. We will aim to have Mongolians work on these fields, but obviously, we’ll have Chinese experts execute technological works.

Nevertheless, workforce in Mongolia is insufficient. We’ll have to probably get foreign workforce to build the power plant on time.

After commissioning the power plant, 90 percent of workers will be Mongolians. According to feasibility studies, around 760 people will work at the power plant. Another 300 jobs related to mining projects to supply the power plant with coal will become available. In total, we will provide more than 1,000 jobs. 

How much investment is required for the power plant? 

The estimated investment amounted to 38 million USD, according to the feasibility study approved in 2013. Now, an additional 1.1 billion MNT will be needed. We’re planning to do an investment with a ratio of 70:30. The 30 percent of total investment will be provided by Mogul Power and the rest by bank loans. 

What kind of terms are Chinese banks demanding for loans? 

The terms for interest rate and time are very reasonable as it will be a long-term investment loan. The loan will continue for 20 to 25 years. The Chinese bank notified that it’ll provide financing as SEPCO-III will be constructing the power plant. 

Where will Mogul Power supply energy produced by the new plant?

 Power plants have to sell electricity to National Power Transmission Grid companies according to the Energy Law. It’s specified that although energy producers and distributors can be private, the organization to transmission must be owned by the state. If our company sets up a 25 km transmission line that can reach Mandalgovi, the capital of Dundgovi Province, we will be able to supply electricity to consumers there and even connect to the central power system.

Presently, there are transmission cables from Ulaanbaatar to Baganuur District and from Choir city in Govisumber to Mandalgovi. A line has been set up from Mandalgovi to Tavan Tolgoi. The government included a project to build a 330 kW cable for a distance of around 250 km from Ulaanbaatar to Mandalgovi in the Concession List less than a month ago. If this cable is set up, our plant will be able to supply electricity to Ulaanbaatar without having to transmission through Choir and Baganuur.

There is a distance of some 260 km between Ulaanbaatar to Mandalgovi, and nearly 280 km from Mandalgovi to Tavan Tolgoi. Our deposit is located right in between Ulaanbaatar and Tavan Tolgoi. It would be more efficient to get electricity from our power plant than supplying it from Ulaanbaatar.

Energy experts estimated that the southern region energy demand will reach approximately 1,500 megawatt. However, people in the sector are saying that apart from our power plant, other sources are being built such as Nar and Eg River hydro-electric power stations.

Our power plant and the Baganuur power plant, which has a capacity of 700 megawatt, will produce only energy. Mongolia imports energy from Russia during peak hours. Our power plant is aimed to stop this import. This will become a big advantage. 

How much will Mogul Power’s plant  charge per kW/ hour?

According to my projection, the price of per kW/hour produced by Mogul Power will be similar to the price of energy produced by Thermal Power Plant No.5 and Baganuur power plant, which will also be built soon. Thermal Power Plant No.5’s per kW/ hour has been set at 0.07 USD. Our pricing is still indefinite as the concessional agreement hasn’t been finalized.

 People are starting to focus on making environmentally friendly technologies that produce energy from coal. What kind of technology will the new power plant in Tevshiin Govi have? 

The most recently commissioned power plant in Mongolia is Thermal Power Plant No.4, which was commissioned in 1983. Since then, global plant technologies have improved considerably. We will use a special furnace to ensure eco-friendliness. As the power plant will be constructed in a desert region, it will use the minimum amount of water and have air coolers.

The feasibility studies developed by Burns and Roe estimates that the amount of disposal of toxic substances in the air will be twice as low as Mongolia’s standards.

 How good is the quality of coal in the Tevshiin Govi mine? 

It’s similar to Baganuur mine’s, but better than Shivee Ovoo’s. Mongolia doesn’t export brown coal because it’s unprofitable. Coal from Tevshiin Govi mine has low-calorie and high ash and moisture content. If we don’t use this coal, it will become an abandoned asset.

The closest road to our mine is located 200 km away in Choir. We’ll have to travel over 500 km to transport coal from Choir to the border. This is economically inefficient. Tavan Tolgoi faces loss by transporting coal only 240 kms. Yet the quality of our coal is two times lower than Tavan Tolgoi’s. 

How much reserve does the mine have?

The Minerals Council, under Mineral Resource Authority, determined that our company has 425 million tons of coal reserves at our licensed area. Accounting that around 3.5 million tons will be used annually, we have enough reserves to last over 100 years. Tevshiin Govi mine actually has nearly 1.8 billion tons of coal in reserve. 

Several thermal power plant and renewable energy projects have been approved. In your opinion, when do you think Mongolia will be able to export energy?

Honestly, Mongolia will have a surplus of energy in the future. Exportation of energy isn’t an issue that depends on one party. It also depends on the buyer. Mongolia’s main market is in China. China’s development plan is released every five years. Mongolia’s energy export issue  will depend on whether China wants to purchase energy from Mongolia and includes Mongolia in its development plan. In other words, this issue will be determined once we’ve negotiated with the buyer.

Mongolia will probably not be able to export energy in the next five years if it isn’t included in China’s development plan for energy. If Mongolia efficiently executes energy projects and prepares necessary transmission cables before the next Chinese development plan is drafted, China will definitely consider importing energy from Mongolia.

SOURCE: UB Post




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