(EnergyAsia, September 11 2012, Tuesday) — Prophecy Coal Corp, a Canadian company focused on coal and power projects in Mongolia, said wholly-owned subsidiary Prophecy Power Generation LLC has submitted its power purchase agreement proposal to the Mongolian government.
The proposed agreement details the terms under which Prophecy Power would be prepared to supply power to Mongolia’s National Transmission Grid Co.
The Vancouver, British Columbia company said it expects to receive a formal reply from the Mongolian government within 90 days.
The key details include the plant’s designated concrete-pour date of April 2013 and first phase start-up of Q1 2016, a long term power off take contract to ensure 24/7, uninterrupted dispatch power supply to the Mongolian grid, a competitive tariff that is lower than local wind farm tariff, and capacity and energy charge components in the tariff to cover fixed and variable costs respectively.
Also included are a levelised tariff designed to meet anticipated project debt service, and tariff indexation based on US CPI, Mongolia wage index, and oil price index to provide long term project viability.
Prophecy Power owns Mongolia’s leading 600MW mine-mouth, thermal power plant project, with a construction licence awarded by the government in late 2011.
Since fuel supply typically accounts for 60% of a power plant’s operating cost, Prophecy Power has the comparative cost advantage by sourcing coal from the Chandgana coal project, held by Prophecy’s wholly owned Chandgana Coal LLC. The Chandgana coal project includes three coal licences with a measured and indicated coal resource of 1.2 billion tonnes.
In the initial phase, the coal for the power plant will be sourced from two mining licences containing a measured and indicated resource of 131 million tonnes with a strip ratio of 0.5:1 and a starter pit. An NI 43-101 Preliminary Economic Assessment study is underway in connection with the coal project.
The PPA will be the cornerstone to attract and finalise joint venture power plant developer interest, and solidify project financing.