Mongolia set for non-mining investment
A group of foreign energy companies is set to invest $1.3bn in a Mongolian power plant, the biggest foreign investment in Mongolia outside the mining sector.
GDF Suez of France, Posco Energy of South Korea, Sojitz of Japan and Newcom of Mongolia are negotiating the final details of a $1.3bn coal power plant that will supply power to Ulan Bator, according to three people close to the transaction.
The consortium announced in July that it was the preferred bidder for the project but negotiations over the contract had to be postponed while Mongolia’s newly elected parliament formed a government, following nationwide parliamentary elections in June.
Now that the new government is up and running, the “final details” of the deal are being worked out and an agreement could be signed in one or two months, according to Bayanjargal Byambasaikhan, Newcom chief executive.
“The new power plant is a priority project for this country and the government wants to make it happen as soon as possible,” he said. The power plant is scheduled to begin operations by 2016 and will supply roughly half of Ulan Bator’s energy needs.
Mongolia is among the fastest growing economies in the world thanks to its vast natural resources, but its energy infrastructure has failed to keep pace with economic growth, leaving the country short of power despite its extensive coal resources. The new power plant will help alleviate the power shortage and reduce the need for electricity imports from Russia.
GDF, Posco and Sojitz will each hold a 30 per cent stake in the consortium, and Newcom will hold 10 per cent. GDF Suez will invest in the project through its subsidiary, International Power.
Of the $1.3bn price tag for the plant, $400m will be raised in equity by the four consortium partners and a further $950m will be raised in debt, according to Mr Byambasaikhan.
The imminent deal comes at a time when some foreign investors have started to pull back from Mongolia due to a new law on foreign investment. Earlier this year Mongolia passed new rules that mandate parliamentary approval for big investments in sectors including mining, banking and telecommunications. However, the power plant will not require parliamentary approval because the power sector is not covered by the foreign investment law.
Mongolia, a landlocked country with a $10bn economy, has seen a rush of foreign investment – accounting for two-thirds of GDP last year – as foreign mining companies rush to snap up mineral resources. Investment in the non-mining sector has been much slower, despite government efforts to diversify the economy beyond only natural resources.
Posco and GDF Suez declined to comment.
Additional reporting by Simon Mundy in Seoul
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GDF Suez of France, Posco Energy of South Korea, Sojitz of Japan and Newcom of Mongolia are negotiating the final details of a $1.3bn coal power plant that will supply power to Ulan Bator, according to three people close to the transaction.
The consortium announced in July that it was the preferred bidder for the project but negotiations over the contract had to be postponed while Mongolia’s newly elected parliament formed a government, following nationwide parliamentary elections in June.
Now that the new government is up and running, the “final details” of the deal are being worked out and an agreement could be signed in one or two months, according to Bayanjargal Byambasaikhan, Newcom chief executive.
“The new power plant is a priority project for this country and the government wants to make it happen as soon as possible,” he said. The power plant is scheduled to begin operations by 2016 and will supply roughly half of Ulan Bator’s energy needs.
Mongolia is among the fastest growing economies in the world thanks to its vast natural resources, but its energy infrastructure has failed to keep pace with economic growth, leaving the country short of power despite its extensive coal resources. The new power plant will help alleviate the power shortage and reduce the need for electricity imports from Russia.
GDF, Posco and Sojitz will each hold a 30 per cent stake in the consortium, and Newcom will hold 10 per cent. GDF Suez will invest in the project through its subsidiary, International Power.
Of the $1.3bn price tag for the plant, $400m will be raised in equity by the four consortium partners and a further $950m will be raised in debt, according to Mr Byambasaikhan.
The imminent deal comes at a time when some foreign investors have started to pull back from Mongolia due to a new law on foreign investment. Earlier this year Mongolia passed new rules that mandate parliamentary approval for big investments in sectors including mining, banking and telecommunications. However, the power plant will not require parliamentary approval because the power sector is not covered by the foreign investment law.
Mongolia, a landlocked country with a $10bn economy, has seen a rush of foreign investment – accounting for two-thirds of GDP last year – as foreign mining companies rush to snap up mineral resources. Investment in the non-mining sector has been much slower, despite government efforts to diversify the economy beyond only natural resources.
Posco and GDF Suez declined to comment.
Additional reporting by Simon Mundy in Seoul
Copyright The Financial Times Limited 2012. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
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