It is one of the longest-running sagas in Mongolian infrastructure history. In 1990, as the democratic revolution swept away the Soviet-era order and left the country’s energy sector dangerously exposed, then Prime Minister D.Byambasuren stood up and said what everyone already knew that Ulaanbaatar needed a thermal power plant (TPP) No. 5. That was 36 years ago. What followed was a masterclass in institutional inertia, feasibility studies that went nowhere, foundation stones in Baganuur, land designations in Uliastai and enough ministerial promises to wallpaper the State Palace. This year, the Government says it is different. And this time, at least, the bulldozers have arrived.
The long-awaited TPP No. 5 has been officially greenlit for construction on 15.3 hectares of land in Bayangol District’s 20th khoroo, on the ash storage site of the existing TPP No. 2. The site was cleared last week. If the timeline holds, the plant will be commissioned by the third quarter of 2028, giving Mongolia a facility capable of generating 300 megawatts of electricity and 340 Gcal/h of heat, which is enough to power 100,000 households and businesses, and provide a heating source for an additional 40,000 to 50,000 homes in Ulaanbaatar’s chronically underserved northwestern districts, including Tavan Shar, the 21st khoroo, Khilchin and Bayankhoshuu.
The price tag is 600 million USD, or approximately 2.1 trillion MNT at the current exchange rate. The financing structure is a public-private partnership - 20 percent from the capital city’s budget and 80 percent from the private sector. Cambodia’s Mitime International was selected in 2025 as the private partner and project implementer, and construction is now officially underway with the 2028 target locked in.
On paper, it is an impressive package. In practice, the numbers raise more questions than they answer. The Ulaanbaatar city administration’s 20 percent share, just over 400 billion MNT, is itself a formidable sum for a municipal budget to absorb. Last month, the Ulaanbaatar Mayor’s Office issued a three-year “Niislel” bond at 14 percent interest, raising 200 billion MNT. That covers roughly half of the city’s committed share, and barely 10 percent of the plant's total cost. Where the remaining funds will come from - and precisely what financial stake Mitime International is putting on the table - remains, for now, unanswered.
Both the Ministry of Energy and the Ulaanbaatar Mayor’s Office declined to respond when asked directly about the outstanding financing. The Energy Regulatory Commission, for its part, offered a statement that shed little additional light, saying “The Ulaanbaatar City Administration is responsible for the entire power plant project. According to the information we have, the remaining portion of the project financing will be provided by Mitime International through a public-private partnership and put into operation.”
It is, to put it charitably, a confidence-inspiring project with a less than confidence-inspiring financial disclosure. A 600 million USD plant serving a city of nearly two million people deserves a clearer accounting of who is paying for what and when. Ulaanbaatar has been waiting 36 years for this power plant. It can wait a few more weeks for a straight answer.
In addition, a feasibility study and environmental impact assessment have been completed, with the project’s potential effects on the surrounding area, such as ecosystem, soil, water resources, air quality and flora and fauna, all accounted for. Officials say TPP No. 5 will be built with environmental safeguards that set it apart from its ageing predecessors. In particular, ash from the plant will either be repurposed as a building material or disposed of through dry storage rather than wet dumping, and a flue gas filtration system is designed to capture up to 99.9 percent of volatile ash before it reaches the atmosphere. The plant is also expected to reduce the nation’s dependence on energy imports and improve the overall stability and flexibility of the national energy system. During construction, 1,600 jobs will be created, and once operational, approximately 370 permanent positions will follow.
On its own terms, the project makes a compelling case. A city that chokes on coal smoke every winter, that blacks out under peak load, and that has patched and re-patched the same Soviet-era infrastructure for three and a half decades, clearly needs this plant. The question is not whether to build it, but whether Mongolia can actually see it through.
The financing gap is the elephant in the room. With capital expenditure exceeding 2.1 trillion MNT, TPP No. 5 ranks among the largest infrastructure projects in the country’s history. Even under the rosiest scenario, where Mitime International delivers its committed share in full and on time, a significant financing hole remains. If that hole cannot be plugged, officials and analysts have outlined what comes next: a scramble for loans from the Development Bank or foreign creditors, attempts to negotiate a concession agreement, a reduction in the plant’s designed capacity to cut costs, phased construction that stretches the timeline, or some combination of all four. None of these are painless options. And each day the financing remains unresolved, the bill grows because Mongolia manufactures almost nothing. Every piece of equipment, every component, every nail, as one analyst put it bluntly, will have to be purchased from abroad.
Economist and investment consultant Ch.Batsaikhan did not mince words. “In the 2010s, companies from South Korea, Japan and China were all interested in building TPP No. 5. We were unable to make the right decision at the time and lost the interest of well-funded, experienced partners. We could not build it ourselves, and we could not close a deal with foreign companies. That has been going on for years, and a large-scale project that requires serious capital, hamstrung by policy instability,” he said. He warned that the 2.1 trillion MNT figure currently being cited is almost certainly a floor, not a ceiling. “If this stretches to four or five years instead of three, costs will increase by 30 to 50 percent. Exchange rate movements and freight costs alone will see to that.”
His sharpest warning, however, was directed at the opacity surrounding Mitime International’s role. “If the Cambodian company that won the tender has not signed a clear investment agreement and has not stated exactly how much it is responsible for, it should be required to put its money on the table immediately,” Ch.Batsaikhan said. Without that clarity, he argued, the risk of the project being quietly frozen is very real as has happened before. “There is a bitter lesson from the oil refinery. That project has been limping along on borrowed money for nearly 10 years. The Government and the capital need to sell assets if necessary, stop non-essential spending, and direct everything toward finishing this plant on time,” he expressed.
‘Energy war will occur’
Energy engineer G.Argabileg puts the trajectory in a global context, and the picture is sobering. “Energy consumption will increase not only in our country but around the world. The use of AI, data centers and mining activities has already tripled globally compared to 10 years ago. All of these eat energy. In the next decade, data centers and AI alone are expected to grow three to four times, and the energy demand to run them will increase four to five times. That means energy war will occur,” he shared.
His prescription is equally direct. “We need to build power plants before we build roads and bridges and replace curbs,” G.Argabileg said. He is careful to argue that TPP No. 5 alone is not the answer. Mongolia needs to develop its energy industry across three parallel tracks simultaneously.
The first is exactly what TPP No. 5 represents: a combined heat and power plant capable of handling peak loads at temperatures below minus 30 degrees Celsius. It is a low-profit, long-term investment, but it is the backbone of a reliable system and the kind of unglamorous infrastructure that keeps the lights on when everything else fails. The second track is renewable energy paired with battery storage. Solar and wind can generate electricity cheaply during daylight hours, and stored overnight, that power can serve evening demand. Mining companies could purchase directly from such facilities, creating a sustainable revenue stream that makes the model commercially viable. The third track is the one that tends to be overlooked entirely, which is the transmission network. “Our problem is not just a single source. It also has weak transmission and distribution capacity. A country can build all the power plants it wants, but if the grid cannot move electricity from where it is generated to where it is needed, those plants are stranded assets. High-voltage lines, substations and smart grid management are not optional extras, they are the connective tissue without which everything else fails. If we do not invest in these, we will not be able to build new plants, establish a renewable energy center, or make a profit as a whole. It will fail,” he underlined.
Against that backdrop, Ulaanbaatar Mayor Kh.Nyambaatar has been characteristically ebullient about TPP No. 5’s launch. “I got ‘hated’ by having the courage to solve the pressing problems of the capital, launching mega projects and issuing bonds. I will resign out of envy for doing so much work,” he said. It is the kind of line that lands well at a press conference. Whether it ages as well as the plant itself remains to be seen.
Because Mongolia has formed exactly this pattern. Mega projects announced with fanfare, construction started with ceremony and then quietly, incrementally frozen, underfunded, delayed, or abandoned as political winds shift and financing gaps widen. TPP No. 5 has already survived 36 years of that cycle. The site is cleared. The bonds are issued. The excavators are running.
And here, finally, is a detail worth sitting with: according to sources with knowledge of the agreement, Mitime International did not enter this project on the understanding that the Mongolian side would foot the bill and hand it a construction contract. The Cambodian company reportedly committed to financing, building and delivering the plant itself, handing over the keys upon commissioning, and will then remain as operator, selling power and heat to recover its investment over time. The model is DBFOM: Design, Build, Finance, Operate, Maintain. If that arrangement holds, it is a meaningfully different proposition from the half-baked public financing structures that have sunk previous attempts. If it holds. Mongolia has heard that word before.
