Bridging power arrangement for Oyu Tolgoi

Posted by Paul Moore on 15th May 2017

Turquoise Hill Resources has announced that Oyu Tolgoi LLC has signed a new power purchase agreement (PPA) with the National Power Transmission Grid (NPTG) of Mongolia. The PPA was executed in connection with the power import arrangement between NPTG and the Inner Mongolia Power International Corporation (IMPIC). The new arrangement takes effect on July 4, 2017, subsequent to the expiry of the existing IMPIC agreement, for a term of up to six years, with possibility of early cancellation after the fourth year, if a domestic power plant is commissioned earlier.

Jeff Tygesen, Chief Executive Officer of Turquoise Hill, said, “Electrical power is a critical operational component for Oyu Tolgoi and we are delighted with the contract extension. IMPIC’s performance has been very good with high-level cooperation and reliability of pow er supply. This extension is essential for Oyu Tolgoi to have secure access to power while it is working with the Government of Mongolia on establishing a permanent domestic power source.” With the signing of the Southern Regional Power Sector Cooperation Agreement (SRPSCA) in August 2014, the Government of Mongolia and Oyu Tolgoi agreed to work together to source bridging power from IMPIC until a permanent domestic power source could be finalised. After approximately two years of collaborative work, the joint negotiation team from the Government and Oyu Tolgoi have secured this bridging power arrangement.

In accordance with the SRPSCA and the 2009 Investment Agreement, Oyu Tolgoi “remains committed to the domestic source of electricity and is engaged with the relevant Government authorities and the government selected investors to progress the development of a domestic power plant. Pursuant to the SRPSCA, while Government authorities and Oyu Tolgoi collaborate towards the development of an Independent Power Producer (IPP) plant at Tavan Tolgoi, Oyu Tolgoi’s obligation under the Investment Agreement to source power from within Mongolia is temporarily satisfied and the timing requirement of the obligation is suspended.

Both the Government and Oyu Tolgoi have the right to withdraw from cooperation on the IPP at Tavan Tolgoi, and if either party ceases to participate in the project, Oyu Tolgoi will then have four years from the official withdrawal date to secure an alternative domestic power source. Oyu Tolgoi is actively engaged with the Government preferred consortium led by Marubeni Corporation with participation from other domestic and foreign investors in delivering
a comprehensive energy plan for Oyu Tolgoi and South Gobi region of Mongolia.