The South Korean company Byucksan Engineering, which was selected as the main contractor for the heating plant construction projects in 10 provinces, is now on the verge of bankruptcy
The “Heating System Improvement Project of 10 Province Centers” was launched as part of a bilateral agreement signed seven years ago between the governments of Mongolia and South Korea, and it was backed by a concessional loan of approximately 150 million USD from the Export-Import Bank of Korea. In 2019, consulting contracts were signed with South Korea’s KDHEC (Korea District Heating Engineering Company) and KDHC (Korea District Heating Corporation), as well as Mongolia’s Green Energy International (GEI), with the goal of bringing modern heating infrastructure to the centers of Arkhangai, Bayankhongor, Govi-Altai, Govisumber, Dundgovi, Zavkhan, Uvurkhangai, Sukhbaatar, Tuv, and Khentii provinces.
Despite navigating major challenges such as the COVID-19 pandemic, economic turbulence, and two parliamentary election cycles, the project—which was initially expected to be handed over within the next year—now faces a serious setback. Reports of Byucksan Engineering’s financial troubles only came to light in March, when South Korean media such as The Chosun Daily published news of the company’s bankruptcy proceedings. Until then, Mongolian officials appeared unaware of the situation.
Even after the collapse became public, the Ministry of Energy continued to claim that the project was moving forward, citing the global pandemic and rising construction costs as reasons for extending the contractor’s deadline until May 31, 2026. According to the Ministry, 32 work packages were planned in total, with implementation standing at 49 percent as of 2024.
The project was designed to construct 10 technologically advanced thermal power plants, supported by 88 heating distribution centers and roughly 65 kilometers of transmission pipeline. Detailed plans had already been drawn up for facilities with capacities ranging from 23 to 35 megawatts in Arvaikheer, Baruun-Urt, Bayankhongor, Chinggis, Choir, Mandalgovi, Uliastai, Yesunbulag, and Zuunmod towns.
With the fate of the contractor now in the hands of South Korean courts, it remains uncertain whether Byucksan Engineering will be declared bankrupt or granted a chance to recover. The Minister of Energy, B.Choijilsuren has admitted that the final outcome of the court proceedings will directly determine the future of the heating plant project in these provinces. Meanwhile, in Arkhangai Province, the tender selection process has not even been finalized, leaving that region’s progress at a complete standstill.
Tale of ‘Heating System Improvement Project of 10 Province Centers’ unfolded like this
As part of the Government of Mongolia’s 2020-2024 Action Plan, a major initiative was launched to meet the growing demand for thermal energy in provincial centers by constructing new sources and heating network infrastructure. In line with this goal, on December 27, 2021, Minister of Energy N.Tavinbekh, South Korea’s Ambassador to Mongolia Lee Yo Hoon, the resident representative of the Export-Import Bank of Korea in Mongolia, Dong Hoon Lee, and CEO of Byucksan Engineering Kim Dong-Won signed an agreement to begin construction in the first seven provinces.
Having carefully chosen auspicious dates and locations, groundbreaking ceremonies were held with great ceremony on May 13 to 14, 2022, in Khentii and Sukhbaatar provinces to kick off the construction of these major projects. This was soon followed by similar groundbreaking events in Bayankhongor, Dornod, Tuv, and Uvurkhangai provinces, held in quick succession and with considerable fanfare. The ceremonies were grand, but if laying the foundation stone truly meant progress, the project should have advanced smoothly. According to the original plan, the heating plants were to be completed within 26.5 months and operational by the start of the 2024 heating season. However, as time passed, the timeline kept getting extended, and the project turned into a tale of unfulfilled ambition—just like the proverb “Those who dream big often go many nights hungry”.
The heating plants under the project were not only intended to supply centralized thermal energy but were also promised to significantly reduce air pollution, environmental degradation, and greenhouse gas emissions—by 10 to 120 times. This promise struck a chord with the Mongolian public, as these are some of the nation’s most sensitive and pressing issues. The project was also projected to drive regional development by enhancing infrastructure and production capacity in rural areas, improving environmental conditions, reducing respiratory illnesses, and creating favorable conditions for people to live and work in the provinces. This, in turn, was expected to curb migration to the capital city. It was anticipated that around 1,000 new jobs would be created, 1,564 businesses and organizations, 2,035 residential buildings—both public and private—and 9,800 households (covering a total floor area of 50,000 square meters) would be connected to the new heating systems, with year-round access to hot water. Yet, this grand vision now seems unlikely to reach a happy ending.
The biggest obstacle has been the complications faced by the Korean company serving as the main contractor, which has left the Mongolian subcontractors and partner companies in a very difficult position. For instance, the “Mon Energy” group had previously reported optimistically: “We are applying the advanced Building Information Modeling (BIM) technology in line with both Mongolian and international standards to deliver engineering solutions. Currently, our group is actively constructing heating plants in Choir (Govisumber Province) and Baruun-Urt (Sukhbaatar Province).” However, today the company finds itself in a state of limbo and uncertainty. Even the Minister of Energy has publicly acknowledged the stalled situation.
What happened to contractor Byucksan Engineering?
South Korea’s construction sector, which accounts for around 15 percent of the country’s GDP and is considered a key barometer of the economy, has entered a downturn. Medium-sized and small enterprises have begun to face serious challenges, with 170,000 jobs cut in January alone. At the heart of the crisis are mid-sized construction companies plagued by severe cash shortages and mounting debts. Many of them, including the much-talked-about Byucksan Engineering, have filed for court receivership in hopes of securing financial restructuring.
According to South Korean media, a confluence of factors—rising construction costs, declining sales, a tightening real estate project financing market, and soaring interest rates—has pushed companies such as Shindonga Construction, Sambu Construction, Daezer Construction, Samjung Enterprise, Ankan, and Byucksan Engineering to the brink of bankruptcy, forcing them to seek court protection.
Now, the fate of this teetering company rests in the hands of the South Korean judiciary. And that, in turn, will determine whether citizens across 10 Mongolian provinces will experience a warm and comfortable winter next year. Should the court declare Byucksan Engineering bankrupt, a government-appointed representative from South Korea will be sent to Mongolia to oversee a re-tendering process and select a new main contractor. In other words, the entire project will have to start from scratch. Wasted time. Wasted money. Meanwhile, interest continues to accrue on the concessional loans—denominated in USD—that financed the project.
It is worth noting that Byucksan Engineering is not new to Mongolia’s infrastructure sector. Even after halting progress on the “Heating System Improvement Project of 10 Province Centers” they were involved in preparing the feasibility study for Ulaanbaatar’s “Sludge Drying and Incineration Plant” in 2023. This raises questions about the company’s underlying ties to Mongolian political and business interests—ties that are difficult to decipher.
In any case, a team led by Deputy Minister of Energy and Chair of the Project Steering Committee M.Bayarmagnai was said to be regularly inspecting the heating plant construction work in these provinces. And yet, two years after the groundbreaking ceremonies in 2022, the project has not only slowed to a crawl but is now plagued by the possibility of the main contractor’s bankruptcy. Why, then, did the deputy minister remain silent and seemingly indifferent in the face of such alarming developments? Was it because the election season was near, and no one wanted to admit the project had come to a standstill? One cannot help but think so.
The project’s completion deadline has now been extended to May 31, 2026. But how many more years will it be postponed, Minister B.Choijilsuren? And in the meantime, how many more winters must the residents of those 10 provinces spend believing in this fable of heating plants, only to be left out in the cold again?
