Turquoise Hill Resources announced on May 12 that Oyu Tolgoi LLC has signed a new six-year power purchase agreement (PPA) with the National Power Transmission Grid (NPTG).
The new PPA was signed in connection with the power import arrangement between NPTG and the Inner Mongolia Power International Corporation (IMPIC). As IMPIC’s agreement with Oyu Tolgoi to provide power expires on July 4, 2017, the new agreement with NPTG will come into effect. There is a clause in the agreement that allows for an early cancellation after the fourth year of purchasing, as plans are being discussed for the construction of a new power plant in the region.
Jeff Tygesen, CEO 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 power 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.”
In August 2014, the government and Oyu Tolgoi signed the Southern Regional Power Sector Cooperation Agreement (SRPSCA). In accordance with the SRPSCA, the two sides agreed to work together to source bridging power from IMPIC until a permanent domestic power source could be established.
Oyu Tolgoi has stated that they remain committed to working with the government to commission a domestic power source.
“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,” the company stated.
While discussions of ways to develop an IPP at Tavan Tolgoi are ongoing, in accordance with their agreement, both parties have the right to withdraw from cooperation on the IPP. If either party withdraws from development, Oyu Tolgoi will then have four years from the official withdrawal date to secure an alternative domestic power source.
The company stated, “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.”