Tavan Tolgoi power station (Marubeni)

From Global Energy Monitor

The Tavan Tolgoi power station was a proposed 450-megawatt (MW) coal-fired power station in Mongolia by Marubeni.[1]

There are also plans for a 300 MW coal plant in Tavan Tolgoi by Rio Tinto, the Tavan Tolgoi power station (Rio Tinto). Plans by Rio Tinto appear to have supplanted the proposed project by Marubeni.

Location

The map below shows the location of the Tavan Tolgoi coal field, the approximate location where the plant will be built in Mongolia.

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Background

The 2009 agreement between the Government of Mongolia and the companies developing the Oyu Tolgoi copper project outlined two possible long term power options. One was a coal-fired power station which supplied power to the mine complex, and the other was a coal-fired power station within the mine lease area of the project. (See Oyu Tolgoi Investment Agreement and power supply for more details on the provisions of the agreement). Oyo Tolgoi is currently sourcing power from China and wants a domestic power supply by the second half of 2017.[2] Ahead of the full commissioning of the mine the Oyo Tolgoi consortium was importing power from the Chinese grid.)

In early 2012 Energy Director T. Tserenpurev of the Mongolian Ministry of Mineral Resources and Energy stated that a power plant at Tavan Tolgoi would not only supply the Oyu Tolgoi mine but "also provide electricity to the Tsagaansuvarg deposit, mines of SouthGobi Sands, Chinhua MAK, Mongolyn Alt and such. The demand will be so huge that importing electricity will be no solution. We must be self-sufficient and developing the domestic electricity sector will also create employment opportunities."[3]

In July 2013 the Oyu Tolgoi mine reached full production capacity.[4] In October 2013 Bloomberg reported that the Mongolian the Ministry of Energy had developed a short-list of companies for the project including Marubeni Corporation, Daewoo Engineering & Construction Company, Kansai Electric Power Company, GDF Suez, and Posco Energy Corporation. No date was announced by the Ministry of Energy for the announcement of the selected bidder.[5] The proposed plant was reported to be 450 MW for Phase 1, 600 MW in Phase 2, and possibly up to 1200 MW total.[6]

In April 2015, the parliament cancelled a deal with a consortium of foreign firms, including China's Shenhua Energy and Japan's Sumitomo Corp., interested in developing the Tavan Tolgoi mine. In July 2015 Mongolia representatives said it was considering the sale of its stakes in 10 state-owned companies, including part of its US$4 billion Tavan Tolgoi mine. Tavan Tolgoi has coking coal deposit used in steelmaking, with reserves estimated at 7.4 billion tonnes.[7]

It is unclear what this means for the proposed power station. In May 2015 the Mongolia government and Rio Tinto agreed to terms for moving forward with the Oyu Tolgoi gold and copper mine in Mongolia, which would include purchasing power from the Tavan Tolgoi power station, as the proposed Oyu Tolgoi power station was shelved as the Oyu mine negotiations stalled for two years.[8]

In February 2016 Japan’s Marubeni Corporation was awarded the 450 MW Tavan Tolgoi Power Plant project tender. Feasibility studies have been submitted.[9] The company will finance the plant, making it Mongolia's first IPP. The plant is planned for operation in 2023.[10]

In 2017 it was reported the plant may be eventually be expanded by an additional 150 MW unit to support the Oyu Tolgoi mine,[11] but in February 2018 it was reported the Government of Mongolia no longer viewed the Tavan Tolgoi Power Project as a viable option for Oyu Tolgoi, which will have to find its own domestic power source.[12]

In February 2018 it was reported that the Tavan Tolgoi project lacked a lead investor, which made it unable to secure financing.[13][14]

In December 2018 Rio Tinto announced the signing of a Power Source Framework Agreement (PSFA) between Rio Tinto and the Government of Mongolia, the Tavan Tolgoi power station (Rio Tinto). Under the agreement, a 300 megawatt coal plant will be majority owned by Rio's Oyu Tolgoi LLC and will be situated close to the Tavan Tolgoi coalfields. Construction is scheduled to start in 2020 following studies, with the commissioning of the plant by mid-2023.[15] [16]

The Tavan Tolgoi power station (Rio Tinto) likely supplanted plans for the original Tavan Tolgoi coal plant by Marubeni, although this has not been made official.

Location debate

Tserenpurev stated that the government wanted to quickly push ahead with building a coal-fired power station at Tavan Tolgoi to obviate the need for power imports from China for the mine as soon as possible. Tserenpurev indicated that, while a power station in the Tavan Tolgoi area was their preferred option, that they had been advised that "water could be a problem in Tavan Tolgoi."[3]

Odon Sainbuyan, the Executive Director of Erdenes MGL, a government-owned company with shares in both Oyu Tolgoi and Taban Tolgoi, explained that another factor in the government favouring the power station being located at Tavan Tolgoi was that it would avoid the need to transport coal. "If the power station is located at Oyu Tolgoi then the coal will need to be transported to the project site. If it’s at Tavan Tolgoi, there will be no need to ship any coal. It’s more economical, logical and efficient,” he said.[17]

Financing

On July 3, 2014, the Government of Mongolia resolved to provide US$50 million in the form of mezzanine financing to the project. Government financing will not exceed 1/3 of the equity of the project.[18]

In February 2016 Japan’s Marubeni Corporation was awarded the 450 MW Tavan Tolgoi Power Plant project tender. The company will finance the plant, making it Mongolia's first IPP. The developer has to provide 30 per cent of the USD 1 billion estimated costs while the other 70 per cent has to be secured from international finance.[11]

Following Rio Tinto's December 2018 announcement of its agreement with the Government of Mongolia for a 300 MW plant[15], Reuters reported that in July 2018 Rio Tinto had entered into "agreements with three Chinese contractors on designing a power station to supply Oyu Tolgoi". While Reuters reported a spokesman for Rio Tinto "declined to comment on the status of those tenders", the article was silent on the question of whether Chinese finance would be involved.[19]

Shortly after Rio Tinto's announcement, it was reported that Mongolia is proposing to raise up to US$3 billion in on the Hong Kong Stock Exchange by selling a 30 per cent stake of the publicly-owned coal mining company Erdenes Tavan Tolgoi. The company’s Chief Executive, Gankhuyag Battulga, stated the proceeds would be used to fund the Tavan Tolgoi coal plant.[20]

Water concerns

While building a mine-mouth power station would obviate the need to transport coal, there were concerns about the availability of water. Tserenpurev said:[3]

"There is underground water but this will be needed for the coal washing plant. There may still be enough for the power plant and we have not taken any firm decision to shift it from Tavan Tolgoi. Indeed, we would like to stick to the original plan but the whole water issue needs careful re-evaluation."

The Government of Mongolia, via the Ministry of Energy, has called for tenders on the option of building a 450 MW power station near one of the operating coal mines in the Tavan Tolgoi coal field and constructing a transmission approximately 150 kilometres to the Oyu Tolgoi mine. The website of the Tavan Tolgoi Power Plant project unit states that the Government of Mongolia has "entered into a Cooperation Agreement" with Oyu Tolgoi, Erdenes Tavan Tolgoi and the privately-owned Energy Resources , a subsidiary of MCS for the development of the Project. While the plant is initially aimed at having a capacity of 450MW, Oyu Tolgoi want the plant to have the option of being expanded to 600MW.[2]

Project Details

  • Sponsor: Marubeni
  • Parent company:
  • Location:
  • Coordinates: 43.625,105.474167(approximate)
  • Status: Cancelled (replaced by plans for Tavan Tolgoi power station (Rio Tinto))
  • Gross Capacity: 450 MW (Units 1-3: 150 MW)
  • Type: Subcritical
  • Projected in service: 2023
  • Coal Type:
  • Coal Source: An operating mine - not yet selected - in the Tavan Tolgoi field.
  • Source of financing: Marubeni (US$300 million - 30% project costs)[11]

Articles and resources

References

  1. "About project", Tavan Tolgoi Power Plant, accessed June 2014.
  2. 2.0 2.1 "About project", Tavan Tolgoi Power Plant project website, accessed June 2014.
  3. 3.0 3.1 3.2 "Energy Ministry prefers Tavan Tolgoi as site for power plant", Mongolian Mining Journal, March 3, 2012.
  4. Rio Tinto, "2013 Annual Report", Rio Tinto, March 2014, page 28.
  5. Michael Kohn and Yuriy Humber, "Marubeni, GDF Suez Among Final Bidders for Mongolia Power Plant", Bloomberg, October 15, 2013.
  6. "MONGOLIA - Wanted: Investors to fund OT power plant", Asia Miner, March 2013.
  7. Cecilia Jamasmie, "Mongolia to sell stake in its giant Tavan Tolgoi coal mine," Mining.com, July 6, 2015
  8. "Turquoise Hill Provides Additional Details on Oyu Tolgoi Underground Mine Development and Financing Plan," Market Wired, May 18, 2015
  9. "Japan’s Marubeni wins Tavan Tolgoi Power Plant investment tender," MAD, March 3, 2016
  10. Khaliun Chimeddorj, "Investment agreement signed for Tavan Tolgoi power plant," UB Post, June 27, 2016
  11. 11.0 11.1 11.2 "Mongolia's Energy Sector," Bankwatch, April 2017
  12. "Rio Tinto committed to domestic power solution for Oyu Tolgoi," Rio Tinto, February 16, 2018
  13. "Rio to build power station at copper, gold mine in Mongolia," FT, February 23, 2018
  14. "Oyu Tolgoi considering forgoing Tavan Tolgoi power," PressReader, February 26, 2018
  15. 15.0 15.1 "Oyu Tolgoi power solution progresses," Rio Tinto press release, December 31, 2018
  16. Oyu Tolgoi, "The TTPP Power Source Framework Agreement signed", Media Release, December 31, 2018.
  17. Michael Kohn, "Mongolia Seeks Investors for Thermal Plant to Power Oyu Tolgoi", Bloomberg, March 13, 2013.
  18. "Government of Mongolia and Oyu Tolgoi LLC to Establish an Agreement of Cooperation in Energy Sector in Southern Gobi Region," InfoMongolia.com, July 3, 2014
  19. Barbara Lewis and Munkhchimeg Davaasharav, "Rio Tinto, Mongolia sign power deal for Oyu Tolgoi copper mine", Reuters, January 1, 2019.
  20. Haliun Bayartsogt, "Mongolian state coal miner chooses Hong Kong for $3bn IPO", Nikkei Asian Review', January 10, 2019.

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