Home Business A single domestic small and medium-sized company worked… Won an order for the project of Article 22 in Mongolia

A single domestic small and medium-sized company worked… Won an order for the project of Article 22 in Mongolia

by news dir

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A small and unknown domestic small and medium-sized development company called BKB won a coal-fired power plant construction and business project with a total project cost of 22 trillion won in Mongolia. Korea and China jointly build a power plant in Mongolia and sell the electricity produced there back to China. However, the Korean government is trying to ban public financing for overseas coal-fired power plants. Some point out that it is necessary to see if the business will be able to speed up if domestic and foreign funding is blocked.

◆“A consortium of Korean mid-sized companies did it”

BKB Chairman Jeong Si-woo said on the 18th, “We received final approval from the Mongolian government for the construction of a 6600MW Volol Jutin coal-fired power plant on March 15th.” Chairman Chung said, “We plan to start construction as soon as we sign a power purchase contract (PPA) with China Outlook.”

This Mongolian coal-fired power plant is a very large project that costs 22 trillion won in Korean won. The core of the project is to build a power plant in southeastern Mongolian capital of Ulaanbaatar by 2026, produce electricity, and send it to China.

10% of the project cost is raised by domestic consortiums such as BKB and BHI and raised capital, and the remaining 90% is financed through project financing (PF). The BKB consortium plans to raise most of its PF funds from China. Among domestic financial companies, Hana Financial Investment submitted a letter of intent (LOI) to the Mongolian government in February, hoping to participate. Construction is handled by dividing 3300MW each by Korea and China. The BKB Consortium was guaranteed business rights for 50 years after the power plant was put into operation. BKB explains that the expected annual rate of return is 15~17%, and that the initial investment will be able to be recovered 8 years after the power plant is operated.

The start of the Volol Jutin Power Plant project dates back to 2005 with the’China-Mongolian coal power sector cooperation agreement’. The contract, which was made when Hu Jintao was former Chinese President, contains the content that “China will buy electricity produced in Mongolia”. In China, where electricity usage is increasing by 7-8% every year, it is essential to secure a stable power supply. In Mongolia, coal reserves are abundant, but most have the disadvantage of being low-quality coal. BKB plans to reduce environmental pollution and increase efficiency by producing’Liquid Coal (DME)’ using the technology of a Korean construction company.

◆The success of the coal-free government is unknown

It is known that the network that Chairman Chung has built abroad for more than 20 years was the basis for winning a large-scale coal power plant business in Mongolia. He turned his eyes abroad early and focused on infrastructure development projects in Southeast Asia, and he also paid attention to Mongolia. This was because Mongolia had abundant resources, and it was close to China, which had great demand for electricity, so it had great business potential. Chairman Chung said, “It took several decades to build up ties in Mongolia,” he said. “So far, efforts have come to fruition with the approval of the power plant project.”

He is also active as the representative of the’Africa-Korea Economic Development Cooperation Commission (AKEDA)’. AKEDA is an organization under the Ministry of Strategy and Finance and is chaired by former Deputy Prime Minister Kwon Oh-gyu. It examines the economic feasibility of African development projects and provides a glimpse of opportunities for Korean companies to participate.

However, some point out that it is not known whether the Mongolian power plant project will succeed. It is said that we have to see if we can easily raise funds. After the Korean government declared ‘2050 carbon neutral’ in the second half of last year, it has virtually stopped supporting public financing for overseas coal power plants.

Chairman Chung said, “The financial support for overseas development projects has been blocked for a long time due to the negative evaluation of the Lee Myung-bak administration’s resource diplomacy.” They expressed regret. In 2012, the project to build a combined gas power plant in Myanmar (500MW class) worth $700 million was virtually suspended due to the reduction of the investment scale of public companies participating in the consortium. Chairman Chung said, “Overseas infrastructure development is a business that opens endless opportunities for Korean companies,” and argued that “the government should not ban coal financing by private financial companies in consideration of this point.”

Reporter Jihoon Lee [email protected]

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