Mott MacDonald is one of the few engineering firms to fully understand how to analyse and report on bankability issues, as demonstrated on the Salkhit project.
Opportunity
As a pioneering project on three fronts, Salkhit presented unique first of a kind challenges. The Mongolian environment is quite extreme, with winter temperatures dropping to -50°C and summer temperatures rising to 50°C, while there can also be large diurnal temperature variations. The environment created challenges with respect to turbine technology, constructability and operability of the project.
Turbines were built in China, and transport from the Chinese/Mongolian border to site was challenging due to the poor quality of roads in the south of Mongolia. The project was also the first renewable power project to connect to the Mongolian grid, representing a challenge to the grid operator, which was able to benefit from international capacity building efforts.
Solution
We provided the lenders with a detailed holistic assessment of project risk to confirm financial model assumptions were appropriate. Site visits by our team confirmed that it was a suitable location for a wind power project and also that construction progressed acceptably.
We delivered a detailed assessment of the features and track record of the GE 1.6XLE turbine’s capabilities to withstand the extreme conditions at site and also assessed contractor plans to manage transportation risks. We had comprehensive involvement in monitoring the construction of the project, confirming that actions taken to manage risks were in line with lender interests.
Outcome
Our team was instrumental in the financing of Salkhit, providing technical advisory services to the lenders to enable the project to reach financial close in 2012 - when it was named ‘Asia Pacific Renewables Deal of the Year’ by Project Finance magazine. Salkhit will generate about five per cent of the country’s electricity needs. The investment has been hailed as a major step forward in the country’s new green energy strategy.
Mongolia’s president has said that the country aims to become a regional renewables hub, producing a quarter of its energy from renewable sources and potentially exporting both wind and solar generated electricity. Our involvement continues in operations to confirm Salkhit will perform as intended.