Prophecy Coal to raise USD 800 million for Mongolia power plant

Apr 4 • Mining, News • 893 Views • No Comments on Prophecy Coal to raise USD 800 million for Mongolia power plant

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Reuters reported that Canadian energy firm Prophecy Coal Corporation expects to raise USD 800 million in debt and equity financing by September 2012 to build a coal fired 600 MW power plant in Mongolia and expects to conclude a power purchase agreement with the Mongolian government by May 2012.

Mr Joseph Li, a director and chief operating officer of Toronto listed Prophecy Coal, said that the price is expected to be slightly less than the 8 cents per kilowatt hour the government currently pays for importing electricity from neighboring Russia. The agreement is expected to last at least 25 years.

He added that “The power will be initially sold to Mongolia. Electricity demand in Mongolia is expected to grow very quickly.”

The power plant will be built next to and fuelled by Coal Prophecy Coal’s Changdana coal deposit, which has an estimated 140 million tonnes of coal.

An engineering, procurement and construction contractor will be selected from a group of six bidders by May 2012. The contractor will be responsible for building and operating the plant, and will also make an equity investment that will result in a 50% or 51% stake in the project.

Around 70% to 75% of the USD 800 million needed to fund the project will come from debt financing, another 15% to 20% from the EPC contractor’s equity investment, with Prophecy Coal raising the rest from its existing shareholders.

Construction is expected to start in early 2013, with the first 150 MW of the plant due to start operations in September 2015. Another 150 MW will be added every 6 months thereafter in three phases until the 600 MW of full capacity is reached.

Prophecy Coal has another mine at Ulaan Ovoo near the Russian border that sells coal to power producers in Mongolia and Russia.

While Chinese buyers have been keen to access coal supplies from its northern neighbor, Mr Li said the cost of transporting coal to China is too prohibitive.

Source – Reuters

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