Deal Insight: Inside Tsetsens Mining and Energy’s US$300 Million Landmark Bond

Tsetsens Mining and Energy LLC (TME) has quietly executed the first Mongolian corporate bond transactions of 2026. A US$300 million 11.375% senior secured issuance due 2031, listed on the Singapore Exchange (SGX).

For a market where offshore funding has historically been dominated by sovereign, quasi-sovereign and banks, the transaction signals a different credit story and raised immediate questions. Who is the issuer? How robust is the credit structure? And what does this transaction signal about Mongolia’s evolving project finance landscape?

We unpack the asset, the ownership, and the structural features underpinning the deal.

A Strategic Asset at the Core of Mongolia’s Grid

At the center of the credit narrative sits the Buuruljuut Power Plant — a 600 MW coal-fired thermal facility located approximately 120 kilometers southeast of Ulaanbaatar in Tuv Province.

The project is positioned as a national energy-security asset. Once fully operational, it is projected to supply:

• Up to 20% of Mongolia’s total electricity demand
• Over 35% of Ulaanbaatar’s civilian electricity consumption

In a country facing recurring winter peak shortages and structural generation deficits, incremental baseload capacity of this magnitude materially strengthens grid reliability and reduces import dependence.

Scale alone, however, does not make a bankable project. Structure does.

Phased Execution with Contractual Discipline

The development is structured across two phases, comprising four 150 MW generating units. Engineering, procurement, and construction (EPC) responsibilities rest with Sinosteel Equipment & Engineering Co., Ltd under a fixed-price, date-certain contract — a critical risk mitigant in frontier markets where cost overruns can rapidly erode project economics.

Phase 1 (Blocks 1 & 2) has already transitioned into operations:

• Block 1 successfully completed its 72-hour integrated full-capacity trial and commenced commercial operations in January 2025.
• Block 2 reached commercial operation in November 2025.

With Phase 1 online, the project is no longer purely a construction story; it is generating contracted revenues.

Phase 2 (Blocks 3 & 4) began construction in April 2025.

• Block 3 is targeted for completion by December 2027.
• Block 4 is expected by December 2028.

The staggered commissioning schedule aligns capacity ramp-up with demand growth while moderating execution risk.

Fuel Security: Vertical Integration as a Credit Strength

One of the project’s defining features is its vertically integrated fuel model. The power plant and the Buuruljuut coal mine are owned by the same issuer.

The mine holds JORC-standard approved thermal coal resources of approximately 6.8 billion tons. Within its active licenses, 298 million tons of confirmed reserves are available sufficient to fuel the plant for more than three decades at full four-block capacity.

The plant requires approximately 3.0–3.1 million tons of coal annually when fully operational.

Logistics further strengthen the model: the mine is located just two kilometers from the plant, and coal is transported via a dedicated 1.8-kilometer conveyor belt system. This eliminates trucking exposure, reduces operating costs, and insulates the plant from external supply chain disruptions — a non-trivial advantage in Mongolia’s harsh winter environment.

From a credit standpoint, long-term reserve life combined with physical proximity translates into exceptional fuel supply visibility.

Managing Environmental Externalities

Coal-fired generation inevitably invites environmental scrutiny. Buuruljuut’s design incorporates modern mitigation systems aimed at reducing emissions intensity and resource consumption relative to legacy plants.

The facility utilizes circulating fluidized bed (CFB) boiler technology, characterized by lower combustion temperatures that suppress thermal NOx formation.

• NOx emissions are approximately 2.5 times lower than Mongolian regulatory thresholds.
• An integrated limestone injection system reduces SOx emissions by half.
• Dual cyclone separators ensure near-complete fuel combustion.
• Electrostatic precipitators cut dust emissions to roughly one-quarter of regulatory limits.

Water management is equally deliberate. Air-cooling condenser systems and full recycling of industrial and domestic wastewater allow the plant to operate with effectively “zero water loss.”

While coal remains carbon-intensive, these measures materially improve the project’s environmental profile within its generation category.

Transmission Infrastructure and Dollar-Based Revenue Certainty

Generation capacity is only valuable if it can be dispatched reliably. Transmission infrastructure was therefore embedded into the project’s capital base.

Phase 1 evacuates power through a newly completed 71.3 km, 220kV overhead line to the Baganuur substation. Phase 2 includes an 84.4 km line to the Sergelen substation, supporting the development of Ulaanbaatar’s planned satellite cities, including New Zuunmod and Maidar.

Revenue stability is anchored by 28-year take-or-pay Power Purchase Agreements (PPAs) with the state-owned National Dispatching Center and National Power Transmission Grid.

Critically, tariffs are fixed in U.S. dollars — a decisive structural advantage given the bond’s U.S. dollar denomination.

• Phase 1 tariff: approximately US$0.0895 per kWh
• Phase 2 tariff: approximately US$0.0888 per kWh

Dollar-based revenues significantly reduce currency mismatch risk and enhance debt service predictability.

Ownership and Structural Credit Support

Tsetsens Mining and Energy LLC is wholly owned by Tsetsens Holding LLC, which is 51% owned by Bodi International LLC and 49% by Mr. Bayasgalan Danzandorj. Mr. Bayasgalan Danzandorj is the ultimate controlling shareholder, who is also the majority shareholder of the Golomt Bank JSC.

Importantly, Bodi International LLC serves as the unconditional and irrevocable guarantor of the bonds. With reported total assets exceeding US$400 million and equity above US$200 million, the guarantor provides additional balance sheet depth beyond project-level cash flows.

For bondholders, this dual layer — contracted project revenues plus parent-level guarantee — materially strengthens the recovery framework.

Transaction Structure:

The bonds were issued at 99.534% with a fixed 11.375% coupon and mature on February 5, 2031. Interest is payable semi-annually.

The security package reflects international project finance conventions and includes:

• First-ranking pledge over 49% of issuer shares
• First-ranking liens over mining licenses (effective following refinancing of DBM facilities)
• Security over PPA assignments and related investment agreements
• First-ranking security over designated revenue and working capital accounts
• Liens over key movable assets, including the conveyor system
• Security over insurance proceeds

Proceeds are primarily used to refinance existing JPY- and EUR-denominated facilities from the Development Bank of Mongolia, extending maturities and simplifying currency exposure.

A Mandatory Cash Sweep mechanism beginning in 2029 requires a portion of EBITDA to be applied toward early principal repayment, reducing refinancing pressure ahead of maturity.

A Broader Signal for Mongolia’s Capital Markets

This transaction is not merely about one issuer raising capital. This transaction extends beyond a single issuer’s capital raise. It demonstrates that non-traditional and first-time issuers can successfully access international markets, thereby diversifying funding sources and expanding the structural framework of Mongolia’s private infrastructure financing model.

But the risks remain macroeconomic volatility, regulatory shifts, and environmental transition dynamics are inherent in frontier markets. Yet the successful placement of a US$300 million secured instrument offshore demonstrates that well-structured, asset-backed Mongolian credits can attract international capital when risk is clearly defined and contractually mitigated.