Narrative
Full Description
Project narrative
On March 15, 2019, a memorandum of cooperation was signed by Government of Mongolia and China Water Resources Beifang Investigation, Design and Research Co. Ltd. (BIDR) to conduct a feasibility study for the Erdeneburen Hydroelectric Power Plant Project. The feasibility study was approved in November 2019. Then, in 2020, the Government of Mongolia announced that China Eximbank would provide a $271.1 million loan for the Erdeneburen Hydroelectric Power Plant Project and draw upon the proceeds from a $1 billion preferential buyer’s credit (PBC) agreement (captured via Umbrella Record ID#49148). The borrowing terms of the PBC (loan) are unknown. However, it is known that the borrower originally expected to use the loan proceeds to finance 95% of the cost of a $271,484,825.32 commercial contract [№ЭХА-14/2021] with PowerChina and Powerchina Chengdu Engineering Corporation Limited (also known as Power China and Power China Chengdu Joint Venture), which was signed on September 17, 2021. However, the total cost of the EPC contract was reduced to $266,457,328.55 through an amendment to contract ID №ЭХА-14/2021, which was signed on April 28, 2023. Multiple sources indicated that a financing arrangement would be finalized during Wang Yi's visit to Mongolia August 2022, and one source claimed the financing was decided on August 7, 2022 during a meeting with Wang Yi. However, the preferential buyer's credit agreement for the project was ultimately signed and countersigned by the lender and the borrower in October 2023. It carried the following borrowing terms: a 2% interest rate, 20-year grace period, and a 7-year grace period. The borrower was authorized to use the proceeds of the loan to finance 95% of the total cost of a $266,457,328.55 commercial contract with PowerChina and Powerchina Chengdu Engineering Corporation Limited. The purpose of the project is to construct a 90MW hydroelectric power plant in Erdeneburen Sum within Mongolia's Khovd Province (exact locational coordinates: 48.6614, 91.3402). PowerChina and Powerchina Chengdu Engineering Corporation Limited are the contractors responsible for project implementation. Construction was originally expected to commence in April 2022 and reach completion within 61 months (May 2027). In November 2021, the project’s environmental impact assessment (EIA) report was approved by the Ministry of Environment. Then, in April 2022, a contract was signed with the Institute of Archeology at the National Academy of the Sciences of Mongolia to complete an archeological survey. Construction began in April 2022. However, the project has encountered multiple implementation challenges and obstacles. There was difficulties compensating and relocating herdsmen who live in the area and were expected to be affected by flooding near the dam site. In addition, the project has been met with protests concerned about potential environmental damage and the relocation of the pastoral people.
Staff comments
1. The Mongolia project title is Эрдэнэбүрэнгийн усан цахилгаан станц төсөл. The Chinese project title is 额尔登布仁水电站项目. 2. This project is similar to Record ID#49412. However, they are not duplicate records. Nor are they linked records/transactions. 3. One source indicates that the project will be financed through a build-operate-transfer agreement (BOT). This source claims that the government is not spending any of its own money on the project, which is inconsistent with other sources. This issue warrants further investigation. 4. The April 2023 amendment agreement to the EPC contract can be accessed in its entirety via https://www.dropbox.com/scl/fi/ym8ta0rnp1dhl3nz43789/28-April-2023-Amendment-to-EPC-Contract-for-Erdeneburen-HPP-Project.pdf?rlkey=t3g5xs7i8b5bukd3unqvydh2g&dl=0