31.08.2012 Financing infrastructure in Mongolia, Development Bank of Mongolia

DEVELOPMENT BANK OF MONGOLIA

August 29, 2012

Financing Infrastructure in Mongolia

Development Bank of Mongolia

The Development Bank of Mongolia

Inaugurated on May 12, 2011 as the development policy bank to provide long-term financing for projects consistent with the Government Development Strategy.

100% state-owned bank under the Development Bank of Mongolia Law.

Key instrument for implementation of the State Policy.

DBM shall be for profit and state owned legal entity

DBM shall provide loans to finance large scale development projects and programs approved by Parliament on annual basis.

Board of Directors of the DBM shall approve the list of projects financed from other sources apart from those for which the GoM issued guarantee.

Total Equity 49.76bln MNT as of 2nd quarter of 2012.

Successfully issued USD 600 million international bond during 2011~2012.

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Highlights of Development Bank of Mongolia



Primary focus on infrastructure and industrial development

Quadrupling its rail network will allow Mongolia to fully capitalize in its commodity endowment

Strengthen Mongolia’s bargaining power for its resources

Access to currently untapped metal deposits in Mongolia

Creation of downstream industries would enable Mongolia to achieve a more diversified and balanced economic growth

Located in southern Mongolia with intersecting rail access on Tavan Tolgoi-Choibalsan railway

The industrial complex could include copper smelter, coking coal plant and water supply network and other plants

Current infrastructure capacities no longer meet increasing demand of quality basic public services

Improvements to current infrastructure would include:

Energy

Transportation

Telecommunications

Infrastructure for housing projects

Integrated Mining & Railway Strategy Infrastructure & Urban Development Sainshand Industrial Park

Projects and Programs

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Road Development Projects

DBM is mandated to provide its funds for the road projects which totals USD 749 million by Government Resolution #105 and 336 issued in 2011, #47 and 106 in 2012. Projects are expected to boost its regional socio-economic developments.

Projects consist of 17 road construction works in Ulaanbaatar city and 16 in the rural area, that connects regional centers together and to the border ports, and designing of 36 roads in Ulaanbaatar and rural areas.

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Length (km)

Amount (USD million)

Ulaanbaatar city road construction projects 48.7 95.6

Rural road construction projects 1590.0 646.8

Road designing in Ulaanbaatar city - 1.2

Road designing in the rural area - 7.7

749.4

Existing road Currently under construction DBM funded project

Shaamar – Tsagaannuur 135 km

Murun – Tarialan 79 km

Altai – Darwi 80 km

Bayankhongor – Baidrag bridge 129.5 км

Baidrag bridge – Altai 127 km

Dalanzadgad – Mandalgovi 83 km

Ulaanbaatar – Mandalgovi 104 km

Munkkhaan – Baruun Urt 132.6 km

Undurkhaan – Choibalsan 94 km



Uliastai – Tosontsengel 67km

Uliastai – Tosontsengel 114 km

Tsahir – Tosontsengel 127.1 km

Undurkhaan – Munkhkhaan – Baruun Urt 45.3 km

Ulaangom – Naranbulag 90 km

[Appendix] ROAD CONSTRUCTION PROJECTS

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Existing road Currently under construction DBM funded project

[Appendix] ROAD DESIGNING PROJECTS 4200 km

To be designed by DBM

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5

6

7

8

9

10 11

12 13

14

15

16

17

18

19 20 23

21

22

24 25

26

1

2

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Project Length (km)

1 Dalanzadgad – Mandalgovi 83.0

2 Baruun Urt – Munkkhaan 132.6

3 Khowd – Ulaangom 190.0

4 Dashinchilen - Bulgan 121.0

5 Ulaangom – Naranbulag 51.0

6 Songino – Khyargas 172.0

7 Numrug –Songino 167.0

8 Ugii lake – Battsengel – Ikh Tamir 113.0

9 Bayankhongor – Bayanbulag 237.0

10 Uliastai – Altai 139.0

11 Bayanbulag – Uliastai 233.0

12 Uliastai – Durwuljin 104.0

13 Durwuljin - Sarkhairkhan 159.0

Project Length (km)

14 Sarkhairkhan – Myangad bridge 158.0

15 Bayankhongor – Bayanlig 212.0

16 Bayanlig – Gurwantes 293.0

17 Undurkhaan – Norowlin 200.0

18 Baruun Urt – Erdenetsagaan - Bichigdt 290.0

19 Choibalsan – Ereentsaw 242.0

20 Norowlin – Bayan Uul- Ulikhan 100.0

21 Altai – Bugat 143.0

22 Bugat – Burgastai 166.0

23 Numrug- Bayantes – Artssuuri 199.0

24 Khutag undur – Teshig – Baga ilenkh 135.0

25 Dulaankhaan – Yeruu – Khuder 113.0

26 Bayangol - Mandal 48.0

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New Railway Project 1

In June, 2010 the State Great Khural (Parliament of Mongolia) has approved Mongolian State Policy on Railway by its Resolution No. 32. This resolution designates routes for the railway in 3 phases.

The new railway is important for the economic development of Mongolia. It will serve economic and industrial growth through connecting strategic coal and copper mines to the international market with competitive cost of logistic.

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1st PHASE – 1100 km Dalanzadgad – Tavan tolgoi – Zuunbayan (Sainshand) Sainshand – Baruun Urt Baruun Urt – Khuut Khuut – Choibalsan

2nd PHASE – 900 km Nariin Sukhait – Shivee Khuren Ukhaa Khudag – Gashuun Sukhait Khuut – Tamsagbulag - Numrug Khuut - Bichigt

3rd PHASE – 3600 km Western Railroad Network

Timeline of the Railway policy

Transportation of commodities from Strategic mines

Stimulating domestic industrial development such as Sainshand Industrial Park

Establishing domestic railway network

Incentive of the Railway policy



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According to New Government Resolution #93 dated on March 27, 2012 and #161 dated on May 9, 2012 Government of Mongolia approved New scheme.

New shareholding company with prevailing Government shares will be established to own railway base structure

At present, GoM gave concession right to three companies to implement railway

Sainshand – Tavantolgoi (225km) : Eastern Railway LLC, Mongolian Trans Line LLC

Ukhaa Kuhdag - Tavantolgoi – Sainshand(225km) : Infrastructre Development LLC

Ukhaa Khudag – Gashuun Sukhait (260km) : Energy Resource LLC, ER Rail LLC

SPC will take measures to incorporate Erdenes Tavantolgoi(“ETT”) in implementation of Railway Project in the direction of Sainshand-Tavantolgoi-Ukhaa Khudag-Gashuuin Sukhait to have state participation and monitoring

DBM provide MNT399billion to ETT

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[Appendix] Route of New Railway

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Ulgii

Khowd

Ulaangom

Uliastai

Altai

Bayanhongor Arvaiheer

Tsetserleg

Bulgan

Murun

Erdenet

Darhan

Zuunmod

Ulaanbaatar

Choir

Mandalgovi

Dalanzadgad

Undurkhaan Baruun Urt

Choibalsan

Ulaanbaishint

Khandgait

Arts suuri

Hanh

Altanbulag

Ulihan

Bichigt

Zamiin Ude

Burgastai

Yarantai

Dayan

Kharhorin

Sainshand

Ereentsaw

Tosontsengel

Khuut

Tavan tolgoi

Numrug

Gants Mod

Nariin Sukhait

Shivee khuren

Existing Route

1st Phase Route

2nd Phase Route

Oyu tolgoi

The policy states, after construction of 1st phase, the route will be connected to the borders by constructing 2nd phase.

The Railway Policy is intended to create eastward flow of coal and commodity freight. Making routes available through Russia and North-Eastern China.



Sainshand Industrial Park(“SIP”)

DBM role in SIP

• GoM designated DBM as the FA of the project by resolution #216

• Parliament Resolution #15 of 2011, has designated DBM to provide fund for the Sainshand Industrial Park

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Importance of SIP

• The complex is planned to support and diversify Mongolia’s export-oriented industry of value added products with state of the art technological solutions

• creates about 2.500 new permanent jobs for Mongolians at different levels including management, special expertise and daily operations



-P.M.U -F.A -L.A -C.A

Industrial Park

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Understanding of the SIP

Planned Factories: $ 5,873 M Coke Plant - $ 2,265 M Copper smelter - $ 1,775 M Iron Ore pelletizing plant - $ 379 M Iron plant - $ 576 M Cement plant - $ 315 M Coal Gasification - $ 563 M

Public/PPP facilities: $ 3,987 M

Power plant -$ 1,137 M

Public facilities -$ 2,850 M

(Logistic facility, Inter park rail, roads, utility etc)

Potential Project Structure

Project Overview

“SIP” LLC

Public Facility

PPPs

Private Facility

GoM

DBM

Private

Strategic Investor

Financial Investor

MLA, ECA, DBM

Commercial Lenders

State Budget, DBM, Donor organizations

Ad

viso

rs



List of concession items in the infrastructure

* Source: Government Resolution No 198. dated on July 21, 2010.

Role of DBM in PPP

Provide feasibility study fund in collaboration with donor financing institute and SPC

Provide Financial Advisory Service

Provide co-financing and/or syndicated loan with International financial institute on those project

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PPP (Public Private Partnership)

Concession item Type

245km road from UK-GS BOT

53km UB-Khusigt airport highway BOT

367km Altanbulag-UB highway BOT

630km UB-Zamiin uud highway BOT



Thank you for your attention…

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For further information please contact to:

Development Bank of Mongolia Government Building II, United Nations Street 5-1, Ulaanbaatar Mongolia

Phone. Fax. Web. Email.

(976) 7013 0513 (976) 7013 0602 www.dbm.mn [email protected]

http://www.dbm.mn/

mailto:[email protected]

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31.08.2012 Financing infrastructure in Mongolia, Development Bank of Mongolia