A prophecy of power

By bne IntelliNews August 2, 2012

Nicholas Watson in Prague -

A growing number of Mongolians may want to limit the amount of foreign control over their natural resources, but the country is in dire need of investment in its absent or crumbling infrastructure, and foreign investors will be crucial in achieving this.

Prophecy Coal, a diversified thermal coal production company that controls two large coal deposits in Mongolia, is one of these investors. In May, the Canadian-listed announced it had signed a deal with the Energy Authority of Mongolia to bring its planned 600-megawatt (MW) Chandgana Power Project online by 2016, and is currently trying to finalise an agreement over power purchases with Mongolia's national grid.

"It's taken us about two years to get to where we are, where the project is fully permitted... and we're very optimistic about reaching a power purchase agreement with the government this year, so we can start construction next year," John Lee, Prophecy Coal's CEO, tells bne.

Not a moment too soon, say analysts. Mongolia is facing a critical power crunch as domestic demand booms from combination of a growing and increasingly affluent population, rapid urbanisation and industrial production that has gone through the roof as giant mining projects are developed. Between 2007 and 2011, electricity consumption in Mongolia increased on average by 6% per year, but the Ministry of Mineral Resource of Mongolia estimates that demand will grow by 14% a year in the future. "The economy has grown at double-digits pretty much for the last decade, but no power infrastructure has been built - it's in dire need of power," says Lee.

It's for this reason that projects like Prophecy Coal's, designed to directly benefit the Mongolian people, differ from those that seek to exploit the country's resources for export, like the recent attempt by Aluminum Corporation of China (Chalco) to acquire a controlling stake in SouthGobi Resources, which so riled the politicians that parliament adopted a new law on foreign investment in May that limits foreign ownership in strategic industries such as mining to 49%, unless the buyer obtains parliamentary approval.

As such, projects like Prophecy Coal's remain largely outside the resource nationalism debate. "We're not saying that there aren't challenges to working in Mongolia, but our power plant project will be built in Mongolia for Mongolians," says Lee. "Domestic issues are going to receive a much greater share of politicians' time as they begin to understand the dire need of infrastructure improvements, particularly power."

Related Articles

COMMMENT: Great challenges for Eurasia call for decisive solutions

Juha Kähkönen of the IMF - The Caucasus and Central Asia (CCA) region continues to navigate a wave of external shocks – the slump in global prices of oil and other key commodities, the slowdown ... more

IMF calls for Central Asia to tighten monetary policy

Naubet Bisenov in Almaty -   Caucasus and Central Asian (CCA) countries need to tighten their monetary policy to anchor inflation expectations, but excess tightening may weaken financial ... more

Business leader-turned-technocrat ready to mine Mongolia's “treasures”

Terrence Edwards in Ulaanbaatar -   One of Mongolia's premier dealmakers has taken on the supreme task of putting the country's mining and infrastructure projects back on track after years of ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss