At its regular weekly meeting on Wednesday, Cabinet decided to build the 450 MW Tavan Tolgoi Power Plant (TTPP) in Umnugovi Province between 2020 and 2024, based on a feasibility study of 2013, analyses of water and coal supply and infrastructure facilities, and environment assessments, without changing its current location in the Tavan Tolgoi coal mine area. 

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

In 2018, Oyu Tolgoi signed an agreement with the government for the construction of a 300 MW power plant by June 30, 2023, but the project has been surrounded by uncertainties. The company has offered to build the power plant at a cost of 1.1 billion USD, which is two to three times higher than the global average for a plant of this size.

On February 2020, Turquoise Hill Resources, which owns 66 percent of the Oyu Tolgoi mine in Mongolia, submitted a feasibility study for TTPP, based on a 300 MW coal fired power plant to be located approximately 150 kilometers from the Oyu Tolgoi mine in Tsogttsetsii soum of Umnugovi Province, with a total project cost estimate of up to 924 million USD. 

Minister Ts.Davaasuren said Cabinet believes the Turquoise Hill’s proposal on the TTPP project is too costly. “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,” said the minister. 

The TTPP project with a payback period of five 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, the minister said.

“The Oyu Tolgoi project spends annually 170 million to 200 million USD on power purchase from China to support its operations. Therefore, the government estimates that it will be able to recoup the cost of building the Tavan Tolgoi plant within five years,” said Minister Ts.Davaasuren.

TTPP will ensure 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 government believes.