Government to bear expenses of Tavan Tolgoi Power Plant project

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montastudio@montsame.gov.mn
2020-04-09 14:37:51

At its regular weekly meeting held today, the cabinet decided to build 450 MW Tavan Tolgoi Power Plant (TTPP) in Umnugobi aimag between 2020 and 2024, based on a ready-made feasibility study of 2013, analyses on its water and coal supply and infrastructure facilities, and environment assessments, without changing its current location in the Tavan Tolgoi coal mining area. 


The government is responsible for funding the TTPP project, which will be made available from every possible financial source, including foreign loans, said Minister of Energy Ts.Davaasuren to the press after the cabinet meeting. 


In 2018, the government reached an agreement with the Oyu Tolgoi LLC for the construction of the Tavan Tolgoi-based power solution for the Oyu Tolgoi copper-gold mine by June 30, 2023. 


In February 2020, Turquoise Hill Resources, an international mining company, who owns 66 percent of the Oyu Tolgoi mine in Mongolia, has submitted a TTPP Feasibility Study, based on a 300 MW coal fired power plant to be located approximately 150 kilometers from the Oyu Tolgoi mine in Tsogttsetsii soum of Umnugobi aimag, with a total project cost estimate of up to USD 924 million. 


However, according to Minister Davaasuren, the Oyu Tolgoi’s proposal on the TTPP project with development cost 2-3 times higher than world market prices is financially impossible to be realized. “It also has been considered that the date when Mongolia starts receiving dividends from Oyu Tolgoi could be postponed further due to the high cost of the TTPP construction” added the Minister. 


The TTPP project with a payback period of 5 years will cost 30 percent less than Oyu Tolgoi’s proposed investment and the cost of energy generation is estimated to be 50 percent cheaper. 


“Considering the fact that the annual spending on power purchase for Oyu Tolgoi from China to support its operations reaches USD 170-200 million and it is calculated to take around five years for the government of Mongolia to recover the cost of TTPP project investment, said Minister Davaasuren. 


Once it is built, the TTPP holds a number of advantages of ensuring reliable power supply for the mining industry in southern Mongolia and increasing the economic benefits of the Oyu Tolgoi project by saving coal transportation costs. The state-run TTPP, which will supply electricity to the Oyu Tolgoi mine, will be established at the Erdenes Tavan Tolgoi JSC, government-owned company, reports the Cabinet Secretariat. 

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