NORINCO provides $366 million PxF facility for 477 km Tavantolgoi-Manlai-Khangi Paved Road Construction Project

📋 Staff Comments

1. Erdenes Tavan Tolgoi LLC (ETT) — also known as Erdenes Tavan Tolgoi JSC — is a subsidiary of the Mongolian state-owned company Erdenes MGL. It is Mongolia’s largest coal-exporting state owned enterprise. It was founded on August 27, 2010. According to the Resolutions of Mongolian Parliament and Government, Erdenes Tavan Tolgoi JSC started to operate since December 23, 2010 as a subsidiary of Erdenes Mongol LLC to mine the Tavan Tolgoi coal deposit. The main operation of Erdenes Tavan Tolgoi JSC focuses on putting strategic mine deposits into economic activities, carrying out exploitation on the deposits and implementing infrastructure projects. Erdenes Tavan Tolgoi JSC has 588 employees, all of whom are Mongolians.
2. According to a report published by the IMF in October 2023, ‘[t]he [offtake] agreements [with Glory Town Holdings Limited] are expected to raise ETT, and Mongolia’s, external liabilities. The agreements are akin to collateralized debt instruments, since the contracted loans are collateralized by future coal export receipts, and the contracts allow for the repayment of the loan with cash or coal. […] The agreements have impacted ETT profitability and raised contingent liability risks for government debt. Since ETT is currently a profitable [state-owned enterprise] with no explicit guarantees involving the government, these contracts are not included in Mongolia’s public and publicly guaranteed debt stock aggregates at this stage. Nonetheless, the coal price discounts and sizeable cash payments included in the [offtake] contracts are likely to have impacted ETT’s profitability and reduced fiscal revenue, through lower dividends transferred to the [government] budget. Should ETT become unprofitable at a future date (e.g., due to a decline of international coal prices), its liabilities could become government debt. Furthermore, limited transparency in some of the contracts contribute to uncertainty.’3. A pre-export finance (PXF) facility is an arrangement in which a commodity producer gets up-front cash from a customer in return for a promise to repay the customer with that commodity (possibly at a discount) in the future. PXF funds may be advanced by a lender or syndicate of lenders to a commodity producer to assist the company in meeting either its working capital needs (for example, to cover the purchase of raw materials and costs associated with processing, storage and transport) or its capital investment needs (for example, investment in plant and machinery and other elements of infrastructure). PXF facilities are usually secured by (1) an assignment of rights by the producer under an ‘offtake contract’ (i.e., a sale and purchase contract between the producer and a buyer of that producer of goods or commodities), and (2) a collection account charge over a bank account into which proceeds due to the producer from the buyer of the goods or commodities under the offtake contract are credited. There are two key documents in prepayment finance transactions: a contract providing for the advance payment by the offtaker to the producer for the purchase of goods/commodities (the 'Prepayment Contract'), and a loan agreement between a lender and the offtaker (the 'Offtaker Loan Agreement') under which the advance payment is financed.
3. This project is also known as the Tavantolgoi-Khangi Paved Road Construction Project. The Chinese project title is “Tavantolgoi-Manlai-Khangi”重载公路. The Mongolian project title is ‘Тавантолгой-Манлай-Ханги’ чиглэлийн 470 км автозамын төсөл.

📚 Sources & References

• 北方国际合作股份有限公司 NORINCO International Cooperation Ltd. （北京市丰台区南四环西路188 号12 区47 号楼3 层（301,302）） 配股说明书, “MINING-INFRASTRUCTURE-INDUSTRY” DEVELOPMENT MODEL
• Cabinet meeting news in brief
• MONGOLIA 2023 ARTICLE IV CONSULTATION—PRESS RELEASE; AND STAFF REPORT (Country Report No. 2023/348), Д.СУМЪЯАБАЗАР ХАМГИЙН ХЯМД УНЭЭР HYYPC ГАРГАХ ГЭРЭЭГ ХЯТАДЫН ЗЭВСЭГ УЙЛДВЭРЛЭГЧТЭЙ ХИЙСЭН YY?, ХУДАЛДАН АВАГЧ КОМПАНИЙН ТЭЭВЭР ХАРИУЦСАН ТӨЛӨӨЛӨГЧДИЙН МЭДЭЭЛЭЛ, Эрдэнэс Тавантолгой ХК-ийн нүүрс худалдах, худалдан авах гэрээний мэдээлэл, НХХАГ-ИЙ МЭДЭЭЛЭЛ
• COMPANIES REGISTRY, Нүүрсний экспорт: Гэрээ шатаахгүйгээр жоомоо заавал устгаарай
• SCHEDULE I (Regulation 3(1) FORM OF APPLICATION
• NewsWire Issue 728, 'USD 1.5 billion factory and uncertainties surrounding raw materials'
• Mongolia Economic Update Robust but Unbalanced Growth, “Таван толгой-Манлай-Ханги” чиглэлийн 470 км авто замын төсөл хотын даргаас хамааралтай юу
• A new road link to be built in Mongolia, 755 km road to be built in 2023, Д.СУМЪЯАБАЗАР ХАМГИЙН ХЯМД УНЭЭР HYYP( ГАРГАХ ГЭРЭЭГ ХЯТАДЫН ЗЭВСЭГ УЙЛДВЭРЛЭГЧТЭЙ ХИЙЭН YY?, ХУУРАЙ АРГААР НҮҮРС БАЯЖУУЛАХ ҮЙЛДВЭР 7 ДУГААР САРД АШИГЛАЛТАД ОРНО
• Oil refinery construction project: Mongolia to no longer be dependent on gasoline imports
• Construction of Oil Pipeline for the First Oil Refinery in Mongolia Starts
• EuroChamber newsletter 22 December 2023, ҮББХ: Газрын тос боловсруулах үйлдвэрийн бүтээн байгуулалтын явцын талаар мэдээлэл сонсож, Байнгын хорооны тогтоол баталлаа, МОНГОЛ УЛСЫН ШАДАР САЙД С.АМАРСАЙХАН ТАНАА
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• 十五冶对外工程有限公司中标蒙古国ETT选煤厂钢结构及设备安装工程, 3 - Bid Forms For Technical Proposal, 2 - Instructions To Bidder
• 北方国际合作股份有限公司 NORINCO International Cooperation Ltd. （北京市丰台区南四环西路188 号12 区47 号楼3 层（301,302）） 配股说明书
• 蒙古国ETT选煤厂EPC总承包工程顺利交货
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• MONGOLIA PUBLIC FINANCE REVIEW Loan applications and disbursements are still being received and processed as the projects continue to evolve. Ongoing monitoring and evaluation are in place to ensure project continuity.