“ Mongolian power - 2012 ” conference Ulaanbaatar , Mongolia May 15-16, 2012

1. IMPORTANCE AND IMPACT OF THE AMENDMENT MADE TO THE ENERGY LAW OF MONGOLIA AND THE RESOLUTION #72 ISSUED BY THE STATE GREAT HURAL (THE PARLIAMENT ) OF MONGOLIA Ts.Tsengel Member of State Great Hural (MP) “Mongolian power - 2012” conferenceUlaanbaatar , Mongolia May 15-16, 2012

2. Resolution # 72 of the State Great Hural (The Parliament of Mongolia) and its results About the amendment made to the Energy Law of Mongolia Importance and impacts of the amendment made to the Energy Law of Mongolia Contents

3. The resolution # 72 “Some measures on Fuel and energy sector” issued by the State Great Hural(the Parliament of Mongolia) • The resolution was issued on December 9, 2010 by the State Great Hural. • The main objective is to improve reliable operation and financial-economic capability of the fuel and energy sector. • The government has issued an action plan related to the resolution and is implementing it. RESOLUTION # 72 OF THE State Great Hural (THE parliament OF MONGOLIA) and its results

4. In order to resolve the accumulated arrears between coal mines and energy companies also among energy licensees the and to improve the financial-economic capability of the fuel and energy companies following measures have to be taken through rendering financial assistance: • To give subsidy out of the state budget, • To alleviate from the burden of long term foreign debts, • To finance some rehabilitation works from the state budget, • To intensify process transferring the sector into the market oriented relation • To increase the efficiency of generation, transmission and distribution through improving the management, • To reduce costs and expenses, • To apply the real cost-based electricity tariff for household consumers with consumption more than 150 kWh/month and for entities. RESOLUTION # 72 OF THE State Great Hural (THE parliament OF MONGOLIA) and its results

5. The resolution # 72 has became a policy document which is enabled in creating the legal basis for the energy sector to operate without a financial loss by means of indexing energy tariffs and setting tariffs based on real costs from 2014 Before issuance of the resolution # 72 the energy companies within the central region have operated with a financial loss of 52.8 billion however, there is a positive result that the financial loss was decreased up to 24.7 billion and it was reduced by 46% in 2011. RESOLUTION # 72 OF THE State Great Hural (THE parliament OF MONGOLIA) and its results

6. RESOLUTION # 72 OF THE State Great Hural (THE parliament OF MONGOLIA) and its results Payables of thermal power plants to the coalmines

7. The State Great Hural has adopted a Law on making an amendment to the existing Energy Law of Mongolia on December 9, 2011. • Following amendments were made to the Energy Law: • To re-organize the Energy Regulatory Authority as Energy Regulatory Committee and to provide its independent functioning, • To make clear the rights and obligations of organizations, to develop and approved some required rules and regulations. • Created a new article for indexing electricity and heat tariffs and the methodology to calculate and set those tariffs • To develop policy documents for norms and standards to be followed in the energy sector’s functioning • To create a legal environment and to resolve a fund resource for establishing the energy security • To clarify terms and definitions and make them understandable • Added a new article concerning international contracts, agreements and conventions. Law on Amendment to the Energy Law

8. The main importance of the amendment was that it creates the legal environment necessary for attracting foreign and local investments into the energy sector and intensifying the process to transfer the energy sector into the market oriented economic principle. The resolution # 72 of the Parliament has created the possibility for the energy companies to operate in a financially self-sustainable manner in the future. The amendment made to the existing Energy Law of Mongolia has legalized and validated the above-mentioned issues in the law. Importance and impacts of the amendment made to the energy law of mongolia

9. Through establishing a reserve (emergency spare parts) for energy sector companies and the state, the number of technical failures and interruption in the energy supply will be decreased, the time required for restoring the damaged or broken parts will be reduced and the level of reliable operation will be increased in the energy sector The main conclusion - the amendment made to the Energy Law in 2011 has become the legal basis for the future development of the energy sector, and enabling the transition of the energy sector into the market oriented economic relation, increasing the private sector participation into the energy sector, creating possibilities to develop in accordance with the international standards, and improving the financial-economical capability of the energy sector companies. Importance and impacts of the amendment made to the energy law of mongolia

10. Thank you for your kind attention!