The UB Post
Cabinet announces decision for Tavan Tolgoi power station
Cabinet said it has reached a principal agreement with Rio Tinto on building a Tavan Tolgoi-based power station to supply the Oyu Tolgoi mine. The agreement is part of a larger memorandum of understanding between the government and Rio Tinto, said Cabinet Secretariat G.Zandanshatar.
“Beginning in January 2018, Cabinet has held extensive talks with Rio Tinto and Oyu Tolgoi. At the conclusion of these discussions, both parties have agreed to sign a memorandum of understanding based on five principals, which include hastening Mongolia’s dividends and reducing the economic pressure from the project. This creates the basis to help make the Oyu Tolgoi agreement more beneficial,” G.Zandanshatar said.
Also part of the agreement, the cabinet secretariat said that the interest rate that Mongolia pays for the 1.7 billion USD it borrowed to take part in the Oyu Tolgoi project as a 34 percent shareholder will be reduced. Originally, the 1.7 billion USD loan had a 6.5 percent interest rate.
“There have not been specific agreements to how much the interest rate will be reduced,” said the cabinet secretariat.
Regarding the power station issue, G.Zandanshatar said that Cabinet has reached a principal agreement to build a power station at Tavan Tolgoi in order to offset the 150 million USD that Oyu Tolgoi expends on energy imports from China. While the cabinet secretariat said that an agreement was made for the Tavan Tolgoi power station in principal, he added that the prospect of building a power station at Oyu Tolgoi is “still open”.
Arnaud Soirat, chief executive of Copper and Diamonds at Rio Tinto, has said that per the investment agreement, Rio Tinto has the obligation to source Oyu Tolgoi’s energy from domestic sources within four years. He added that if Cabinet says Rio Tinto must fulfill this obligation, the company will source power domestically within the four-year timeframe.
But in an interview with Unuudur in May, Soirat said that if the two parties opt for a Tavan Tolgoi based power plant, more time will be needed than the four-year deadline.
In January 2018, Rio Tinto was handed a tax bill of 155 billion USD by the government. In regards to this situation, G.Zandanshatar said that Rio Tinto has agreed to pay 35 million USD. But he said that the two parties disagree on the total amount that must be paid.
“Since the two parties disagree on the amount that will be paid as part of the tax bill, the final decision may be reached in an arbitration court,” said G.Zandanshatar.