Mongolia Seeks $828 Million From China for Largest Hydro Project

Mongolia asked China for $827.6 million to build a hydroelectric plant and dam, the largest such project in a country reliant on coal and Russian energy to power its burgeoning mines.

The loan for the planned 315-megawatt facility on the Eg River, part of the Egiin Gol Hydropower Plant Project, may be approved by year-end, EGHPP Director Odkhuu Durzee said Monday.

Mongolia’s rapid shift away from nomadic herding toward mining has swelled urban populations, straining the nation’s energy provision. While Soviet-era coal-fired plants provide most of the country’s power, the government is seeking to diversify resources and stem emissions by adding renewables.

The dam would help the government trim payments to Russia, which earns about $24 million a year exporting energy to Mongolia, according to Odkhuu. Mongolia’s 700-megawatt generation capacity falls short of demand by about 200 megawatts in winter, he said.

The financing from Export-Import Bank of China would make up the majority of a proposed $1 billion concession loan from China, Odkhuu said. The remaining $172.4 million would be spent on a highway from Ulaanbaatar to the new international airport.

Mongolia is seeking a 2 percent interest rate and a grace period of five to nine years, with repayment over 20 to 25 years, Odkhuu said. In addition to the China loan, Mongolia may get financing from other sources, he said, declining to elaborate.

Dam Studies

The idea of damming the Eg River in northern Mongolia dates back to 1964 when Russian scientists first researched the possibility. Further studies were conducted intermittently from 1991 to 2013 when Mongolia’s Ministry of Energy formally approved the establishment of the EGHPP.

Tractebel Engineering SA, a subsidiary of France’s GDF Suez SA, was contracted last year to update the feasibility study, which showed “everything is bankable and feasible,” Odkhuu said.

Preliminary work, including roads and transmission lines, will start this year and dam construction in 2016, he said.

The cost of production from the EGHPP will be 1.4 cents a kilowatt-hour. Every year the plant will save 200,000 metric tons of coal and 709,000 tons of carbon dioxide, according to the company’s prospectus. Mongolia, which opened its first wind park in 2013, seeks to get 20 percent of its energy from renewable sources by 2020, compared with about 7 percent now.