Accord for $1.4 Billion Mongolia Power Plant Could Reduce Pollution

An Engie-led group of companies has agreed with Mongolia on a Power Purchase Agreement for a $1.4 billion power station in Ulaanbaatar, a project that could help reduce smog plaguing the nation’s capital.

Engie, formerly known as GDF Suez SA, and partners Sojitz Corp. of Japan, South Korea’s Posco Energy Corp. and Mongolia’s Newcom Group signed the PPA with two government agencies on Wednesday in Ulaanbaatar, according to a statement issued by the four companies.

The 450-megawatt combined heat and power facility will help meet the capital’s growing electricity needs amid an economic expansion driven by coal and copper mining. The city on the steppes of eastern Asia has doubled in size to around 1.3 million people over the past 15 years, or almost half of landlocked Mongolia’s total population.

Half of Ulaanbaatar’s residents live in unplanned neighborhoods where people heat their homes in winter mainly with raw coal. The smoke from some 180,000 households in these ‘ger districts’ causes some of Asia’s worst air pollution, according to the World Bank.

“The new plant will help to meet the rising electricity demand in Mongolia, which is largely driven by the mining sector and a growing population,” according to the statement.

The electricity and steam plant, to be located 15 kilometers (9 miles) east of downtown Ulaanbaatar, will be operational by 2020, Bolor Jargalsaikhan, Newcom’s chief executive officer, said Wednesday by phone from the city.

The facility, called CHP5, will add to an energy mix that includes Newcom’s 50-megawatt Salkhit wind farm built in 2013. Mongolia’s total installed power capacity is 1,080 megawatts. A Heat Purchase Agreement and accords for coal and water supply are still needed before construction can start, Bolor said.

Under a 2014 concession agreement, the Engie-led group will pay for and build the plant, operate it for 25 years, sell its power to the central grid and then transfer the facility to the government.

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