The document summarizes a Mongolia Investment Summit that took place on May 1-2, 2014. It discusses the Mongolian power sector context including its growing demand, dated asset base, and loss-making state. It highlights the Salkhit Wind Farm project as a successful precedent of private sector investment and public-private partnership. It also provides an overview of Georgia's energy transition, including private investment projects and strategic initiatives to promote further private renewable development and regional energy integration.

1. Mongolia Investment Summit
1 May 2014

2. Contents
Power Sector Context
Mongolia Context
Key Considerations
Case Studies
Salkhit Wind Farm Project Case Study
Georgia Country Case Study
2 May, 2014 2

3. Power Sector Context
2 May, 2014 3
Public Sector
Involvement
Strong link with regulation and law
Requires strong policy/regulatory backing
Strong, transparent direction from government
Strong links with environmental outcomes
Long term, holistic perspective required
Long Lived Assets
Project life from 20 years onwards
Technological change
Environmental
Consequences
Long term debt tenors
Limited universe of financiers
Politically Sensitive
Tariff discussions
Budgetary decisions
Reform requires strong political will
Large Upfront Costs

4. Role of the private sector
Finance
• Infrastructure and other funds
• Capital markets
• Sponsors
Efficiency and innovation
• Projects delivered faster and more
efficiently
• Integration of best practice techniques
Risk transfer and resources
• Private provider is responsible for
delivery and takes the risks
Government
• Concentrates on
inputs, not
outputs
• Regulates
quality and
nature of supply
• Takes the risks it
can control

5. Mongolia Context
2 May, 2014 5
Resource Rich
12 billion tonnes proven coal reserves
100 billion tonne potential coal reserves
USD 20 mln loss annually
Cross subsidies
High losses
Growing Demand
Rapid urbanisation
6-7% annual growth in electricity demand
Long term GDP growth
Loss Making Sector
900 MW though 70% available
30 to 60 years old
Efficiency range of 20-40%
Economic Downturn
Foreign investment decline
Local currency depreciation
Liquidity crunch
Dated Asset Base
Urban Environment
SOX/NOX/Dust concentration levels
Most polluted capital based on PM
Health effects

6. Key Decision Point
Positives
• Quality of Private Sector Interest
• Quantity of Resources
• Growing demand
• Salkhit Precedent
2 May, 2014 6
Challenges
• Urgency of capacity increases
• Established legal framework
• Politics of tariffs
• Loss making sector
• Urban environment

7. Key Considerations
2 May, 2014 7
• Long term perspective on the part of GoM
• Ensure success of existing private power investments
• Prioritisation of large projects
• Improve long term viability of the sector
• Appropriate risk allocation between state and private sector

8. Salkhit : A landmark transaction
• Salkhit is the country’s first limited recourse project financing
• Salkhit is the first project financed power transaction in Mongolia
• Salkhit is the country’s first wind farm and privately owned power
producer
• Salkhit utilizes the first PPA in Mongolia
• CO2 reduction through the project of about 178,000 tonnes/year
• Salkhit will save 122,000 tons of coal and 1.6 million tons of water

9. Salkhit Wind Farm Timeline
2007 2008 2009 2010 2011 2012 2013
InvestmentPolicyDialogue
Equity: USD 700,000
Development Equity
Equity: USD 4.5m
Follow-on equity
Debt: USD 42m
Senior Debt
Environmental and
Social Impact
Assessment (ESIA)
Mongolia Renewable Energy
Assessment and Regulatory
Development Road Map
Amendment of
existing project PPA
Government of Mongolia
Letter of Support

10. Salkhit Experience
Investment Details
Borrower
Sponsor
Equity
Loan
Structure
Clean Energy LLC
Newcom LLC
EBRD USD 5 mln
FMO USD 5 mln
GE USD 8 mln
Newcom USD 19 mln
EBRD USD 42 mln
FMO USD 42 mln
Tenor of 15 years
Limited recourse project
finance loan
•The Project is an example the Bank’s
financial products, our role in policy
dialogue, and approach to transition
•Appropriate risk allocation between
private and public sector roles
•Precedent for future IPPs to follow
•Demonstration effect by GoM and for
private sector investors
•Successful outcomes of the Salkhit wind
farm key in attracting future investment

11. Site before…

12. … and after

13. … and after

14. Power Sector in Georgia
Market Structure
• Generation dominated by state-owned
Enguri HPP while majority of remaining
generation under fully regulated tariffs
• Generation dominated by hydropower
for baseload and thermal for peaking
power
• Transmission state-owned though
distribution is private
• Growing private interest in hydropower
development
2 May, 2014 14
Strategic Initiatives
• Promote private greenfield hydropower
development
• Act as energy hub for the Caucasus
region into Turkey/Europe
• Integration with Europe energy market

15. Georgia: Transition Story
1995 2000 2005 2010
InvestmentPolicyDialogue
Generation: Power
Rehabilitation Project
(EUR 14m Debt)
Generation: Enguri HPP
Rehabilitation Project
(EUR 57.2m, Debt)
Generation: Lopota
and Okami SHPP
(EUR 0.2m, Debt)
Generation: Paravani HPP
(EUR 48.5m, Debt)
(EUR 3.8m, Equity)
Generation: Intsoba
SHPP Rehabilitation
(EUR 0.4m, Debt)
Transmission:
Black Sea Energy
Transmission System
(EUR 80m, Debt)
Distribution: Telasi
Rehabilitation Project
(EUR19.3m, Debt)
Distribution: AES Telasi
(EUR 23.2m, Debt)
Transmission: Jvari-
Khorga Interconnection
(EUR 25.2m, Debt)
Transmission: ESIA and
regulatory reform linked to the
Black Sea Transmission Line
Distribution:
Tariff Gap Analysis
Generation: Strategic
Environmental Assessment of
Paravani and Aragvi River Basin
Distribution:
Tariff Study
Energy sector: Debt
Restructuring and Reorganisation
Generation: Feasibility Study
for Enguri Rehabilitation
Energy Sector:
Development of wholesale
electricity market
Generation: Enguri HPP –
Technical experts opinion
Generation: Support to
the development of SHPP
Generation:
Upstream Enguri HPP
Rehabilitation
(EUR 20m, Debt)

16. Recent Experience
• Key sector counterparts in Georgian public entities highly credible and
proactive
• Ease of Doing Business in Georgia
• Key area of focus is ensuring the legal and regulatory framework
facilitate private generation investment
• Allocation of responsibilities – public versus private

17. Contacts
2 May 2014 21
For all further enquiries, please
contact:
Philip Lam
Senior Banker
Power and Energy Utilities
+44 2073386669
lamp@ebrd.com
EBRD, One Exchange Square
London, EC2A 2JN
United Kingdom
www.ebrd.com