Khot Infrastructure Holdings Ltd. (CNSX:UTM, CNSX:KOT) said on Tuesday it is to increase its stake in Ashid Munkhiin Zam LLC (AMZ) to 100% and provided shareholders with an operational update on the future infrastructure opportunities under the newly elected majority Mongolian government.
Khot intends to acquire the final 25% interest in AMZ from a company controlled by affiliates of Firebird, Khot's largest shareholder, in a non-cash transaction; this acquisition will bring Khot's holdings to 100% of AMZ at a time when significant concession opportunities are planned by the government.
The June 29 federal elections saw the Mongolian People's Party win 67 of 76 seats, an impressive majority. This will help ensure political stability for the next four years and enable government to implement new economic policies designed to attract foreign capital and stimulate domestic growth. The Mongolian People's Party has a mandate to fast-track critical Mongolian infrastructure needs and the new government has acted swiftly to address the delays in executing key concessions.
At an extraordinary meeting of parliament on Aug. 26 the government officially announced its four-year master economic development plan. This official operational document addresses the government's priorities, which include a major infrastructure focus, including sections outlining building out extensions to the electrical grid network, expanding paved roads connecting all provincial centres and continuation of the announced massive Millennium road project, and, finally, a section announcing further rail and rail bed projects linking major trading partners in Russia and China.
In addition, the government has formed the Mongolian Development Agency (MDA). This superagency assumes complete control and oversight of plan implementation with the MDA director reporting directly to the prime minister. A key responsibility of the MDA will be communication with international investor and business communities, as well as ensuring clarity and efficiency in the bidding process. These relationships are increasingly critical given the financial challenges facing the country.
The Mongolian in-country management team quoted: "The infrastructure opportunity for Khot and our strategic partners is now more clearly defined than ever. The new majority government and its rapid response to past economic uncertainty are huge steps forward for the business community."
Khot also announced the receipt of a 110-kilovolt power line construction permit awarded by the Mongolian government. This permit allows AMZ to further increase the scope and scale of bidding opportunities in the power line construction sector.
On June 23 the leaders of Mongolia, China and Russia agreed to co-operate on the development of an economic corridor, including investments in upgrading the Ulan Bator rail line and focus on road transportation infrastructure.
AMZ previously announced the acquisition of three other important licences in the rail bed, road construction and asphalt provision sectors. All three of these are critical for continuing relationship negotiations under way with major financial and construction entities that will enable the company to fully exploit these major infrastructure opportunities.