Smog in Ulaanbaatar, Mongolia

Black future for Mongolia

financed by the ADB
The Combined Heat and Power Plant Number 5 Project in Ulaanbaatar
In line with the ADB's Country Partnership Strategy (CPS) for Mongolia between 2012 and 2016
the Combined Heat and Power Plant Number 5 Project was proposed in order to meet the
electricity needs of the region of Ulaanbaatar. The plant will consist of three identical CHP blocks
located on an approximate 45 hectares of land within the
Khuliin Valley, 16 km southeast of Ulaanbatar. The capacity of
Project Details of CHP5
the plant is projected to comprise 463,5 MW of electricity and
587 MW of thermal heat (ADB, Nov. 2015). A Consortium of the
ADB Project Number:
companies Engie, POSCO Energy, the Sojitz Corporation and
46915-014
the Newcom Group will conduct the development and
Sponsor Consortium:
operation of the plant. Generated power will be sold to the
Engie, POSCO
National Power Transmission Grid pursuant to a Power
Energy, Sojitz Corp.,
Purchase Agreement (PPA) which will be valid for 25 years. 1
Newcom Group
The PPA determines that the Consortium will build and operate
Location: Khuliin
the coal-fired CHP 5 plant for the defined period, obligating the
Valley southeast of
Mongolian government to act as a consumer and assume the
Ulaanbataar,
facility after the expiration of the Agreement (Sourcewatch,
Mongolia
2015). Heat generated by the plant will be sold to the
Investment Cost of
Ulaanbaatar District Heating Grid in form of hot water pursuant
ADB: US$ 200.00
to a Heat Purchase Agreement (HPA), which follows the same
million
requirements as the PPA.

The Newcom Group defined the long-term validity of the government guarantee as a cornerstone
of the project (Gankhuyag, 2014). CHP5 is planned to be operational in 2020 and will comprise
an approximate amount of USD 1.3 billion of investment cost (Gankhuyag, Oct. 2014). According

contracts between an electricity generator and a power purchaser usually don't exceed a validity
of 20 years. It is the Mongolian government in this case, who bears the fully risk if the project doesn't
achieve the predicted revenues.

1 Legal

to a press release by the Sojitz Corporation

from 2012 the power station will be fully
equipped with pollutant control facilities
and
feature
thermal
efficiency
approximately 40% higher than existing
plants. Furthermore, the plant is projected
to reduce coal consumption by about 30%
in order to limit environmental pollution
(Sojitz, 2012). However, in line with their
Safeguard Categories the ADB rates the
project as a category A project in regard to
the environmental impact and as a
category B project in regard to involuntary
resettlement (ADB, Nov. 2015).

Our Evaluation of the CHP 5

In compliance with local NGOs, urgewald recommends a
The ADB's Safeguard
critical re-assessment of the CHP5 project. Experience
Categories classify projects
shows that thermal energy production does always have
into four categories concerning
a negative impact on environment and people. This
the environment, involuntary
impact is particularly sensible for residents of coal
resettlement and indigenous
burning areas. According to a report by the Physicians for
peoples. Besides category A
social responsibility of 2009, coal combustion releases
(significant impact), category
sulfur dioxide, particulate matter (Pm), nitrogen oxides,
B (limited impact) and
mercury, and dozens of other substances known to be
category C (insignificant/no
hazardous to human health. Furthermore, it
impact) there is the category
contributes to smog through the release of oxides of
FI, which means that the
nitrogen, which react with volatile organic compounds in
proposed project involves ADB
the presence of sunlight to produce ground-level ozone,
funds to or through a financial
the primary ingredient in smog (Lockwood, 2009: vi).

intermediary.

Experiences from the Naga project

In 2009 the ADB financed the construction of a 200 MW coal-fired power plant in the city of Naga
in the Philippines, also known as the Visayas Base Load Project. Similar to the CHP5 power plant
this project was propagated to be environmentally friendly, as it would apply so-called circulating
fluidized-bed combustion (CFBC) boilers. These boilers were denominated as a cleaner coal
technology by the ADB, because they would reduce nitrogen oxide and sulphur dioxide emissions
(ADB, Sep. 2015). According to the ADB categorization the Naga project like the CHP5 project was
a category A project in regard to the environmental impact and a category B project in regard to
involuntary resettlement. Local groups led by the Freedom from Debt Coalition (FDC) pointed out
that the CFBC boilers indeed generate low nitrogen oxide and sulphur dioxide emissions. They do
not reduce carbon dioxide emissions though, the latter being most notably harmful for the
climate (Pedrosa, 2010). Activists claimed that CFBC plants produce about four times more coal
combustion waste per megawatt hour of electricity than conventional coal burning plants.
Since power plants have been operational in Naga city, residents remark a high degree of air and
water pollution. Serious health problems like skin and respiratory illness have proliferated

according to a physician in the city (Pedrosa, 2010). These problems will presumably aggravate
and can be seen as direct consequences of burning coal in the area.
Moreover, the Visayas Base Load Project has led to involuntary resettlements, two expropriation
cases pending resolution in court (ADB, Sep. 2015).

Our claims to the ADB

Mongolia is a country which is highly vulnerable to local and regional environmental damage.
Nowadays already, Ulaanbaatar is one of the most polluted cities worldwide and particulate
matter in the air causes up to every fourth death in the region (Maidowski, 2012). Mongolia's
most severe environmental damages stem from burning coal in Ulaanbaatar.
On the other hand, Mongolia's renewable energies potential is very high. Solar and wind power
could generate 2000 times more energy than the current coal- and hydropower generation
(Zoright, 2015).
As the prices of renewable energy production are generally decreasing, any further promotion of
the coal industry in Mongolia is not justifiable.
The Netherlands Development Finance Company (FMO) recently committed to no longer finance
any projects on coal-based power generation and coal mining. In a Position Statement the FMO
stressed that there is no adequate mitigation for the main negative impacts of coal-based energy
production and coal mining (FMO, 2015). How can ADB comply with its mission to promote
sustainable development and alleviate poverty worldwide if it continues to finance harmful
projects like the CHP5 in Mongolia and the Naga project in the Philippines? Multilateral
Development Banks like the World Bank Group, the European Bank for Reconstruction and
Development (EBRD) and the European Investment Bank (EIB) have adopted at least some
restrictions on the international financing of coal during the last years (Bast, 2015). Urgewald
urges the ADB to follow suit and ban coal financing from its portfolio.

Sources
1. ADB. 2016. Mongolia: COMBINED HEAT AND POWER PLANT NUMBER 5 PROJECT (CHP5) 20.
November 2015 [cited 10.02. 2016]. Available from http://www.adb.org/projects/46915014/main#tabs-0-1.

2. Sourcewatch. 2016. Ulaanbaatar Thermal Power Plant No. 5 12. September 2015 [cited 10.
3.

February 2016]. Available from

http://www.sourcewatch.org/index.php/Ulaanbaatar_Thermal_Power_Plant_No._5.
Gankhuyag D. 2016. APPROACHES FOR ENERGY SAVING, AND RECOMMENDATION FOR
PROMOTION OF IPP IN MONGOLIA. Newcom Group October 2014 [cited 10. February 2016].
Available from http://www.cleanenergyministerial.org/Portals/2/pdfs/GSEP-PWG/GSEP-PWG06_global-superior-energy141028-30-d5.pdf.

4. Sojitz Corporation. 2016. Sojitz Acquires Preferential Negotiating Rights for Coal-Fired IPP Project
in Mongolia 6. July 2012 [cited 10. February 2016]. Available from
https://www.sojitz.com/en/news/2012/07/201207062.php.

5. Lockwood, Alan H. et al. 2016. Coals Assault on Human Health Physicians for Social

Responsibility November 2009 [cited 01.04.2016]. Available from

http://www.psr.org/assets/pdfs/psr-coal-fullreport.pdf.
6. ADB. 2016. Extended Annual Review Report: Loan. Visayas Base-Load Power Development Project
(Philippines) September 2015 [cited 20.02.2016]. Available from
http://www.adb.org/sites/default/files/project-document/175016/43906-014-xarr.pdf
7. Pedrosa, Aaron and Romil Hernandez. 2016. Visayas Base Load Project: As Usual NGO Forum on
the ADB 2010 [cited 01.03.2016]. Available from http://forum-adb.org/docs/BW2010Q1-7.pdf
8. Maidowski, Paul. 2016. Master's Thesis. How to create efficient, reliable and clean electricity
markets: A regulatory design for Mongolia and northeast Asia 13. September 2012 [cited
25.02.2016]. Available from
http://dl.tufts.edu/bookreader/tufts:UA015.012.081.00002#page/1/mode/2up
9. Zorigt, Solongo et al. 2016. Overview of Mongolia's energy development options Rivers without
Boundaries 10.-12. November 2015.
10. FMO. 2016. FMO Position Statement. Coal Power Generation and Mining 24. March 2015 [cited
10.03.2016]. Available from https://www.fmo.nl/l/en/library/download/urn:uuid:8d064eacc046-47db-91a96c2780fc9375/fmo+position+statement_coal.pdf?format=save_to_disk&ext=.pdf.
11. Bast, Elizabeth et al. 2016. Under the rug: How governments and international institutions are
hiding billions in support to the coal industry June 2015 [cited 10.03.2016]. Available from
https://www.nrdc.org/sites/default/files/int_15060201a.pdf.

Impressum
This briefing paper was written by Sophie Schindlbeck (sophie.schindlbeck@urgewald.org).
Further information about the project and our critique of the ADB can also be obtained from
Christina Beberdick (christina@urgewald.org).

Vi.i.S.d.P. Knud Vcking (knud@urgewald.org),

c/o urgewald, Von-Galen-Str. 4, 48336 Sassenberg