Tsetsii Windfarm

Location:

Mongolia

Project number:

47949

Business sector:

Power and energy

Notice type:

Private

Environmental category:

B

Target board date:

20 Jul 2016

Status:

Disbursing

PSD disclosed:

10 Jun 2016

Translated version of this PSD: Georgian

Project Description

A senior loan of up to USD 25 million to Clean Energy Asia LLC (the "Company") to support the development, construction and operation of the Tsetsii Wind Farm, a 50MW wind power plant to be located 542 km south from Mongolia's capital Ulaanbaatar in the Gobi desert.

Project Objectives

The Tsetsii Wind Farm will be the second wind energy project developed in Mongolia, following the 50 MW Salkhit Wind Farm project, which the EBRD financed in 2012. The operation will contribute to reducing Mongolia's carbon intensity as well as meeting its increasing power demand. In addition, the project will also strengthen the private sector presence in the energy sector in the country.

Transition Impact

The transition impact stems from three factors: (i) as the second private power generation and wind farm project in Mongolia, the Project will be highly visible. Its demonstration effects will be essential in attracting new investors into the sector; (ii) power sector assets in Mongolia are almost entirely state-owned.The Project will result in a new private entrant in the Mongolian power generation sector; and

(iii) the Project will assist Mongolia in diversifying its coal-dependent power sector and reducing CO2 emissions by up to 151, 280 tons per year.

Client Information

CLEAN ENERGY ASIA LLC

The borrower is a special purpose limited liability company incorporated in Mongolia. The Company is 51% owned by Newcom LLC, the HoldCo of a Mongolian conglomerate with activities in telecommunications, property and energy. The remaining 49% is owned by a subsidiary of

SB Energy Corp., the renewable energy subsidiary of SoftBank Group Corp., the Japanese telecommunications and technology conglomerate. Newcom is the majority-owner of the Salkhit Wind Farm Project, to date the first and only windfarm and private power generator in Mongolia.

EBRD Finance Summary

USD 25,000,000.00

Senior secured loan of up to USD 25.0 million (EUR 21.7 million equivalent) to the Company on a limited-recourse project finance basis.

Total Project Cost

USD 120,000,000.00

Environmental and Social Summary

Category B (2014). The Bank's Environmental and Social Due Diligence (ESDD), which was supplemented with a review from an independent environmental and social consultant (IESC), confirmed that the project has been structured in accordance with EBRD's Performance

Requirements and relevant EU Directives. The ESDD included a site visit by the IESC and a review of the Project's Environmental and Social Impact Assessment (ESIA) for the wind farm and associated transmission line, Non-Technical Summary (NTS), Stakeholder Engagement Plan (SEP), Environmental and Social Management Plans (ESMPs) and Land Acquisition Framework (LAF).

These documents, along with an Environmental and Social Action Plan (ESAP) have been disclosed in English and Mongolian on the Company's website.

The 50 MW wind farm project is located in the Tsogttsetsii soum of Umnugovi aimag in the South Gobi. The closest settlement is Tsogttsetsii soum, which is located approximately 22km to the north. The land for the Project is government owned and has been leased by the project company. In addition to satisfying local environmental requirements, an ESIA was prepared to address potential

construction, operations and decommissioning related risks and impacts. Key issues addressed in the ESIA included potential impacts to air (e.g. dust, noise), water, waste management, traffic management, visual landscape (wind turbines and shadow flicker), community health and safety, contractor management, biodiversity, cultural heritage and the potential for economic displacement to

local herders (e.g. loss of grazing areas). As part of the ESIA, a supplemental bird survey, including collision risk modelling, was carried out to confirm that the project will not result in adverse impacts to any bird species of conservation importance or critical habitat. Finally, an additional stakeholder mapping survey was completed to better understand potential impacts to herders within the project area (including transmission line corridor), which further concluded that the project will not result in

any physical displacement and that the potential for any economic displacement is unlikely. CEA carried out four public meetings in 2015-2016 during the ESIA scoping phase to explain the project to the local community and to better understand their concerns and expectations of the Company. A fifth meeting will be carried out during EBRD's disclosure period.

In order to ensure implementation and effective management of the planned mitigation measures included in the ESIA during the life of the Project, Environmental and Social Management Plans (ESMPs) have also been prepared. The ESMPs provide a framework for wider environmental management systems (EMS) that will be created during the construction and operation phases by the Engineering, Procurement and Construction (EPC) contractor and site operator respectively.

CEA have also employed an environmental and health and safety professional as well as community liaison officer to oversee the implementation of the Project's environmental and social management commitments.

In addition to the ESMPs, an ESAP has been agreed with the Company to ensure compliance with the Bank's PRs and includes various measures such as (i) development of a human resources policy in line with core ILO requirements, (ii) installation of bird flight diverters on overhead transmission lines and (iii) on-going stakeholder engagement with the project affected community and herders.

Finally, the company and its activities will be subject to regular monitoring by the Bank's specialists or appointed consultants.

Non-technical summary

Technical Cooperation

The Project is expected to benefit from a USD 746,125 grant to be provided by the Government of Japan through the "Japan-EBRD Cooperation Fund". The grant would be used to support the state-owned National Transmission Power Grid company (NPTG) to upgrade the Tavan Tolgoi substation. This substation will connect the Tsetsii Wind Farm to the Mongolian central grid.

Company Contact Information

Saruul Damdinbal

976-11-313183

http://newcom.mn/en/company/55

Naiman Zovkhis Building, 10th Floor, 21 Seoul Street, Sukhbaatar District, Ulaanbaatar 14251

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