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The World Bank
FOR OFFICIAL USE ONLY
Report No: 38067-CN
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$50 MILLION
TO THE
PEOPLE’S REPUBLIC OF CHINA
FOR A
SHANDONG POWER PLANT FLUE GAS DESULFURIZATION PROJECT
April 18, 2008
China and Mongolia Sustainable Development Unit East Asia and Pacific Region
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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dB GW GWh ha
kJ km2 kWh Ib. mz m3 m3d MBtu Mtce Mcal mg MW MWe
kg
AAOV ADB APL CaO CaC03 CEM CFB CNAO CNY co CPS CRESP
DA DO EA EIA
EMP
EPA
ERR
CURRENCY EQUIVALENTS (Exchange Rate Effective December 30, 2007)
Currency Unit = RMB/yuan Y7.30 = US$l
FISCAL YEAR January 1 - December 31
UNITS OF MEASURE
Decibel Gigawatt Gigawatt-hour Hectare Kilogram Kilojoule Square Kilometer Kilowatt-hour Pound Square Meter Cubic Meter Cubic Meters Per Day Million British Thermal Units Million Tons of Coal Equivalent Mega-Calorie Milligram Megawatt Megawatt-Electrical
MWh MWth mu Nm3 PMlO
PM2.5
t/a til l Tcal ton-km
TPH TWh
tPd
Megawatt-hour Megawatt-thermal 15 mu = 1 ha Normal cubic meter Particulate matter that i s 10 micrometers in diameter Particulate matter that i s 2.5 micrometers or smaller in diameter Ton per year Ton per hour Tera-calorie Ton-kilometer Tons per day Total petroleum hydrocarbons Terawatt-hour
ACRONYMS AND ABBREVIATIONS
Annual Average Output Value Asian Development Bank Adaptable Program Loan Calcium Oxide Calcium Carbonate Continuous Emission Monitor Circulated Fluidized Bed China National Audit Office Chinese Yuan Carbon Monoxide Country Partnership Strategy China Renewable Energy Scale-up Program Designated Account Development Objective Environmental Assessment Environmental Impact Assessment Environmental Management Plan Environmental Protection Agency Economic Rate of Return
FGD FLI FMR FMS FRR FY GDP GGH GHG GOC ICR
IFC
IP KPI LIMB
M&E MOF NDRC
Flue Gas Desulfurization Furnace Limestone Injection Financial Management Report Financial Management System Financial Rate of Return Fiscal Year Gross Domestic Product Gas-Gas Heater Greenhouse Gas Government o f China Implementation Completion and Results Report International Finance Corporation Implementation Progress Key Performance Indicator Limestone Injection Modified Burners Monitoring and Evaluation Ministry of Finance National Development and Reform Commission Nitrogen Oxide
FOR OFFICIAL USE ONLY
NPC NPV 0 3 O&M PDO PH PIE PLG PM PMO RAP RLG SBD SEPA
SIL so2
National People’s Congress Net Present Value Ozone Operation and Maintenance Project Development Objective Potential of Hydrogen Project Implementing Entity Project Leading Group Particulate Matter Project Management Office Resettlement Action Plan Resettlement Leading Group Standard Bidding Documents State Environmental Protection Administration Specific Investment Loan Sulfur Dioxide
SOE SPDRC
SPEPB
SPFB
SPG
TA TSP TTL UNDB
VAT
Statement o f Expenditure Shandong Provincial Development and Reform Commission Shandong Provincial Environmental Protection Bureau Shandong Provincial Finance Bureau Shandong Provincial Government Technical Assistance Total Suspended Particulate Task Team Leader United Nations Development Business Value Added Tax
Vice President: James W. Adams Country Director: David Dollar
Task Team Leader: Jianping Zhao Sector Manager: Ede Jorge Ijjasz-Vasquez
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
CHINA
SHANDONG POWER PLANT FLUE GAS DESULFURIZATION PROJECT
TABLE OF CONTENTS
Page N o . STRATEGIC CONTEXT AND RATIONALE .............................................................................. 1
Country and Sector Issues ....................................................................................... 1 Rationale for Bank Involvement ............................................................................. 3 Higher-Level Objectives to Which the Project Contributes ................................... 3
PROJECT DESCRIPTION ............................................................................................................ 4
Lending Instrument ................................................................................................. 4 Project Development Objective and Key Indicators ............................................... 4
A . 1 . 2 . 3 .
B . 1 . 2 . 3 . 4 . 5.
1 . 2 . 3 . Sustainability ........................................................................................................... 8 4 . Critical Risks and Possible Controversial Aspects ................................................. 9 5 . Loan and Credit Conditions and Covenants ......................................................... 10
APPRAISAL SUMMARY .......................................................................................................... 10
Economic and Financial Analyses ........................................................................ 10
Project Components ................................................................................................ 4 Lessons Learned and Reflected in the Project Design ............................................ 5 Alternatives Considered and Reasons for Rejection ............................................... 6
Institutional and Implementation Arrangements .................................................... 6 Monitoring and Evaluation of Outcomes and Results ............................................ 7
C . IMPLEMENTATION ..................................................................................................................... 6
D . 1 . 2 . Technical ............................................................................................................... 12 3 . Fiduciary ............................................................................................................... 12 4 . Social ..................................................................................................................... 13 5 . Environment .......................................................................................................... 14 6 . Safeguard Policies ................................................................................................. 14 7 . Policy Exceptions and Readiness .......................................................................... 15
TECHNICAL ANNEXES
Annex 1: Country and Sector Background ....................................................................... 16
Annex 2: Major Related Projects Financed by the Bank and Other Agencies ................. 21 Annex 3: Results Framework and Monitoring .................................................................. 22 Annex 4: Detailed Project Description ............................................................................. 24
Annex 5: Project Costs ...................................................................................................... 33 Annex 6: Implementation Arrangements .......................................................................... 34 Annex 7 . Financial Management and Disbursement Arrangements ................................. 36 Annex 8: Procurement Arrangements ............................................................................... 44 Annex 9: Economic and Financial Analysis ..................................................................... 49
Annex 1 OA: Safeguard Policy Issues (Resettlement Aspects) .......................................... 58
Annex 10B: Safeguard Policy Issues (Environment) ....................................................... 66 Annex 11: Project Processing ........................................................................................... 80
Annex 12: Documents in the Project File ......................................................................... 81 Annex 13: Statement o f Loans and Credits ...................................................................... 82 Annex 14: Country at a Glance ......................................................................................... 87
Annex 15: Map ................................................................................................................. 89
CHINA SHANDONG POWER PLANT FLUE GAS DESULFURIZATION PROJECT
Source Borrower IBRD Others Total
PROJECT APPRAISAL DOCUMENT
Local Foreign Total 17.23 0.00 17.23 0.00 50.00 50.00
18.91 0.00 18.91 36.14 50.00 86.14
East Asia and Pacific Region
FY 2007 Annual - Cumulative -
China and Mongolia Sustainable Development Unit
2008 2009 2010 201 1 13 -90 25.50 7.95 2.65 13.90 39.40 47.35 50.00
Date: April 18, 2008 Country Director: David Dollar Sector ManagerDirector: Ede Jorge Ijjasz- Vasquez Project ID: PO93882 Lending instrument: Specific Investment
Team Leader: Jianping Zhao Sectors: Power (1 00%) Themes: Pollution management and environmental health (P) Environmental screening category: B Safeguard screening category: S2
Loan
El Loan 0 Credit 0 Grant 0 Guarantee 0 Other: Project Financing Data:
Does the project depart from the CAS in content or other significant 0 Yes El N o respects? Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD 0 Yes El No D. 7 Have these been approved by Bank management? O Y e s O N o I s approval for any policy exception sought fkom the Board? O Y e s H N o Does the project include any critical risks rated “substantial” or “high”? H Yes 0 N o Re$ PAD C.5 Does the project meet the Regional criteria for readiness for El Yes O N o implementation? Re$ PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3
The development objective o f the proposed project i s to reduce SO2 emissions in the heat and power sector and enhance the capacity o f regulatory authorities to monitor and enforce compliance with their SO2 emissions reduction program.
Project description [one-sentence summary of each component] Re$ PAD B.3.a, Technical Annex 4
(a) Investment Component, to finance the installation o f FGD facilities at four coal-fired heat and power plants; and (b) Technical Assistance Component, to strengthen the technical and institutional capacity related to SO2 emission control and reduction in Shandong.
Which safeguard policies are triggered, if any? Re$ PAD 0.6, Technical Annex 10 0
0 Involuntary Resettlement (OPBP 4.12) Significant, nonstandard conditions, if any, for: Re$ PAD C.5 Board presentation: None
Environmental Assessment (OPBP/GP 4.0 1)
Loadcredit effectiveness: None
Covenants applicable to project implementation: None
A. STRATEGIC CONTEXT AND RATIONALE
1. Country and Sector Issues
1. Since 1980, China’s gross domestic product (GDP) has increased at an annual average rate o f 9 percent, the highest sustained growth o f any country ever. To support such high economic growth, China’s primary commercial energy consumption has more than tripled from 600 million tons o f coal equivalent (Mtce) in 1980 to about 2,220 Mtce in 2005. All forecasts indicate that China’s economy wi l l continue to expand at a relatively high rate for the coming decade. Accordingly, energy consumption wi l l continue to grow rapidly even with increased and sustained energy efficiency efforts.
2. China’s rising energy demand has been met largely by coal from domestic sources. Coal consumption has increased from 1.08 billion tons in 1980 to 2.1 billion tons in 2005. More than 50 percent o f the coal consumed in 2005 was used for electricity generation. China’s electricity generation capacity and electricity generation had reached a level o f 508 GW and 2,475 TWh, respectively, in 2005. O f this, coal-based generation capacity and electricity generation accounted for 69 percent and 80 percent, respectively. Even with an aggressive fuel diversification policy to develop nuclear power, hydropower, gas, and other renewable energy, coal wi l l continue to be the dominant energy source for the foreseeable future, and at least half o f the future additions to the power generation capacity wi l l be coal based. The electricity generation capacity i s projected to increase to more than 1,100 GW by 2020, o f which more than 700 GW would be coal-based.
3. The rapid expansion o f the power generation system and i t s primary reliance on coal has contributed to China’s severe air pollution. Sulfur dioxide (SO$ i s the main pollutant caused by coal combustion and can lead to various environmental problems, including acid rain, urban SO2 pollution, and local and regional pollution with PM2.5 particles as the main factors. These pollutants can have a serious impact on human health, buildings, cultural heritage, and crop production. According to reports released by the State Environmental Protection Administration (SEPA), a total o f 25.5 million tons o f SO2 was released in 2005, o f which more than 90 percent was contributed by coal combustion. I t i s estimated that air pollution in major urban areas has contributed to 178,000 premature deaths and 346,000 respiratory hospital admissions per year, to which SO2 is a major contributor. Acid rain has occurred in more than half o f China’s 696 cities. About one-third o f China’s territory, mainly the densely populated and industrial south, has been affected by acid rain. The direct economic losses from air pollution through reduction o f timber growth and crop production alone are estimated to be more than US$12.5 billion annually.
4. Shandong Province ranks second among al l Chinese provinces in coal consumption (159 million tons o f coal in 2004) and produces the highest amount o f SO2 emissions. Coal accounted for 82 percent o f the primary energy consumption in the province, compared to the national average o f about 67 percent. Furthermore, Shandong has limited resources o f low-sulfur coal, and under the current supply-constrained
- 1 -
conditions in the coal industry, it cannot obtain sufficient low-sulhr coal from other sources, even if it i s willing to pay a significant premium. Coal-fired power plants account for 99.7 percent of the 37.6 GW total power capacity, and they consume 51.6 percent of the total coal used by a l l sectors in Shandong. As a result, they are the main sources of SO2 emissions. In 2005, SO2 emissions in Shandong Province amounted to 2.03 million tons, of which 1.17 million tons, or 52.4 percent, were contributed by the power and heat industry.
5. The Chinese authorities are f i l ly aware of the need to address the environmental problems, and their recent strategy and policy calls for sustainable economic development proceeding in tandem with environmental protection. Efforts are being made both to increase the supply of cleaner energy and enhance the efficiency of energy use. The Government i s making aggressive efforts to diversify i t s energy sources, which include an accelerated nuclear power development program, an ambitious gas development, and a significant hydropower and renewable energy development scheme.
6. However, it i s commonly accepted that China has no realistic alternatives to substantially reduce its heavy dependence on coal as the primary source of energy in the short and medium term. Mitigation of the environmental impact caused by coal consumption i s a principal element in its clean air policy. The Government of China (GOC) has developed National Ambient Air Quality Standards comparable to international standards. The revised Standards on Emissions of Air Pollutants from Coal- fired Plants are quite stringent, requiring the most recent power plants to limit SO2 emission below 400 mg per Nm3. In addition, the GOC has adopted a classification commonly known as the “Two Control Zones” (acid rain control zones and sulfur dioxide control zones), which cover 1.09 million square kilometers and 61 large cities. The provinces falling within the two zones are required to comply with a SO2 emission cap. Most recently, the 11* Five-Year Plan approved by the National People’s Congress (NPC) sets a target to reduce the country’s SO2 emission by 10 percent from the 2005 level by the year 2010. Accordingly, SEPA has signed agreements with the seven largest SO2-emitting provinces (including Shandong) and the six major power-generating companies with specific SO2 emission control targets. In addition, the Government has provided economic incentives to support and encourage SO2 removal. Power plants with SO2 control facilities are allowed to increase their electricity sale price by 1.5 fen per KWh, and the SO2 emission fee has been increased to Y 633 per ton. If these policies are h l l y implemented, the financial benefits from the installation of SO2 control facilities in increased sales revenues and avoided emissions fees could adequately compensate the financial costs.
7. The Shandong Provincial Government (SPG) has embraced the Central Government’s SO2 control policies and targets by developing i ts own even more stringent SO2 emission control targets and compliance plan. The SPG’s plan calls for an overall 20 percent SO2 emission reduction by 2010 on the 2005 emission level. The emission reduction for the electric power industry i s set to be reduced by 27.9 percent on the 2005 level. However, achievement of these targets represents a tremendous challenge for the SPG. To achieve these targets, the SPG needs to develop detailed implementation rules
2
and plans, mobilize adequate financing, upgrade environmental monitoring facilities and information systems, strengthen environmental governance and institutional capacity to ensure compliance, and create emission certificates and emission rights trading schemes.
2. Rationale for Bank Involvement
8. Implementation o f China’s environmental control policies i s a huge undertaking and would require mobilization o f financial resources by both the private and public sectors. Consistent with the power sector reform program in China, the five large national power generation companies would undertake SO2 control projects with their own resources or with commercial financing. However, a large segment o f the power and heat sector has boiler units with a capacity o f less than 1,100 t/h range. These units are owned by provincial and local governments, which have neither the access to commercial financing nor adequate internally generated resources to finance SO;! control projects. The Bank and other multilateral financial institutions are called to support this niche segment o f the power sector.
9. The Bank has actively supported China’s environmental sustainability objectives for many years. The most recent Country Partnership Strategy (CPS), approved by the Board on May 23,2006, focuses on supporting China’s efforts to build a people-centered harmonious society that balances economic development and distributional and ecological concerns. One important theme o f the CPS i s to manage resource scarcity and environmental challenges, especially through the mitigation o f air pollution. The proposed project wi l l directly contribute to achieving these objectives through financing SO2 control facilities and strengthening effectiveness o f environmental institutions.
10. The Bank involvement wi l l bring international experience and best practices in least-cost environmental planning and implementation, and help develop the local institutional capacity required for monitoring and enforcement o f environmental regulations. Without such capable and effective institutions, there would be a lack o f enforcement and a situation where some plants would comply with the regulations and others would not. Hence, the Bank involvement i s critical for the sustainability o f the GOC’s SO2 control strategy.
3. Higher-Level Objectives to Which the Project Contributes
1 1, The project contributes to the following higher-level objectives:
(a) To improve air quality by significantly reducing a key air pollutant; (b) To support environmental sustainability through strengthening the
effectiveness o f environmental institutions.
3
B. PROJECT DESCRIPTION
1. Lending Instrument
12. This project will be financed by a Specific Investment Loan (SIL). Other lending instruments, such as a Sector Loan or an Adaptable Program Loan (APL), were considered, but rejected as unsuitable for the proposed project, especially because of constraints in the current project approval system in China. The borrower has expressed preference for a single-currency, variable-spread loan during project preparation. The choice will be confirmed during the Bank loan negotiations.
2. Project Development Objective and Key Indicators
13. The development objective of the proposed project i s to reduce SO2 emissions in the heat and power sector and enhance the capacity o f regulatory authorities to monitor and enforce compliance with their SO2 emissions reduction program. Measures of project output during project implementation include physical progress in procurement, construction, and commissioning of the Flue Gas Desulhrization (FGD) facilities, availability and SO2 removal efficiency of the FGD facilities, and progress in implementation of the Technical Assistance (TA) Component, including Continuous Emission Monitor (CEM) installation rate and the level o f SO2 emission fee collection. Measures o f project outcome are the reduction of SO2 emissions in Shandong Province and the direct contribution of the project to these reductions.
14. Project performance indicators are set out in Annex 3.
3. Project Components
15. two components:
The proposed project, described in detail in Annex 4, consists of the following
(a) Technical Assistance Component: To strengthen the technical and institutional capacity related to SO2 emission control and reduction in Shandong. I t includes (i) capacity building and enhancement in emission monitoring and regulation enforcement, including upgrading o f online monitoring equipment and information systems; (ii) technical and managerial training; and (iii) development of related regulations, procedures, and policies.
(b) Investment Component: To finance the installation of FGD facilities at four coal- fired heat and power plants. These plants include existing coal-fired cogeneration units and cogeneration units that are under construction or planned for construction. All plants have selected to install limestone-gypsum wet FGD technology (see Annex 4 for a discussion of the choice of technology).
16. The total financing required, including interest during construction, i s estimated at US$86.14 million equivalent. The financing i s expected to be generated from three sources: (a) an equity contribution from the project sponsors (about 20 percent of the total
4
financing required), (b) the Bank loan (about 58 percent), and (c) a local commercial bank loan (about 22 percent).
17. The project cost estimate i s summarized in Annex 5.
4. Lessons Learned and Reflected in the Project Design
18. Successhl implementation o f the SO2 emission reduction program over the long term requires (a) existence of enforceable environmental regulations and standards; (b) adequate institutional capacity to implement and enforce laws and regulations; and (c) adequate policies and schemes to encourage and facilitate investment in SO2 control facilities or penalize noncompliance. Administrative means may be essential in the early stage of the program implementation, but market-oriented approaches should be adopted for long-term sustainability. These lessons have been incorporated into the project design and should benefit the project implementation.
19. At the project level, the following lessons have been learned from previous Bank- financed energy projects in China and are incorporated in the design of the proposed project :
Consensus among and commitment from all concerned agencies i s critical to project success.
0 Adequate and early procurement planning i s crucial to rapid and effective project implementation. The implementation of some energy projects has been delayed considerably because o f slowness in the procurement of major equipment. The procurement process for sophisticated equipment, such as the FGD package, i s complicated and inherently lengthy; thus, it should be started early in the preparation period, so that contract awards correspond with loan effectiveness. In addition, most procurement delays have arisen from problems related to the qualification of bidders and their subcontractors. Another difficulty that has resulted in delays in installation relates to interfaces between packages. Procurement packaging therefore needs to be designed to reduce the number of packages to the minimum practical level.
Adequate resettlement planning, consultation, and monitoring are vital to smooth project implementation. Some recent Bank projects have experienced difficulties during implementation from inadequate resettlement planning and consultation. These lessons are being brought to bear in the limited resettlement associated with the project.
Realistic project cost estimates should be made to avoid large cancellations o f the Bank loan proceeds and to minimize negative financial implications for the sub-borrowers. Adopting conventional cost estimation methods has resulted in overestimated costs on earlier Bank-supported power projects in China. Local design institutes and project implementing companies have
5
conducted careful cost estimates to ensure that the project costs are as close to market rates as possible.
5. Alternatives Considered and Reasons for Rejection
20. The alternative scenarios are the continued emission o f SO2 directly into the atmosphere or the use o f extremely low-sulfur coal all across the province. Although the first option may avoid the large capital investments associated with SO2 control facilities, it would continue to incur a huge economic cost on the economy and society as a whole through production loss and damage to health. In the second option, i t i s an unrealistic expectation that all coal would have a sufficiently low sulfur content to meet the Government’s SO2 emission requirements.
21, An interactive selection process was adopted to ensure project ownership and the ability o f each subproject to contribute to the project development objective. The criteria include (a) subprojects that have met, or can reasonably be expected to meet, all the internal GOC approvals; (b) subprojects that can meet the Bank’s safeguard requirements; and (c) subprojects that meet the technical, economic, and financial standards. The final selection o f the subprojects reflects the above criteria and also the reality that these plants have diff iculty raising financing locally for SO2 control and that they do not have adequate self-generated finance.
22. Extensive analysis o f alternatives was conducted for each proposed subproject. At the feasibility stage, the design institutes carried out comprehensive analysis to evaluate all available technologies. The factors taken into account in the selection o f technology include the capacity o f the power plant; space available to retrofit; sulfur content o f coal used; emission standards; maturity and efficiency o f a technology; cost o f FGD installation and operation; availability o f absorbent, utilization, or disposal o f by- products, among others. The final SO2 control option selected for each subproject represents the most cost-effective option to meet SO2 emission standards and control targets, as set by government environmental regulations, in a sound and reliable manner.
C. IMPLEMENTATION
1. Institutional and Implementation Arrangements
23. implementation:
There will be three levels o f institutional arrangements for project preparation and
0 A Pro-iect Leadinp Group (PLG) has been established at the provincial level. The PLG i s headed by the Provincial Vice Governor in charge o f environmental protection and consists o f members from al l the related provincial departments (such as development and planning, finance, and environmental protection). The PLG will provide overall guidance and coordination.
6
0 A Project Management Office (PMO) has been formally set up through a decree jointly issued by Shandong Provincial Finance Bureau (SPFB), Shandong Provincial Development and Reform Commission (SPDRC), and Shandong Provincial Environmental Protection Bureau (SPEPB) on March 20, 2006. The PMO i s hosted by SPEPB and headed by a Deputy Director General o f SPEPB. Four deputy directors have also been appointed. The routine work o f the PMO i s to be performed by several staff from SPEPB. The PMO wi l l be the focal point for the Bank and wi l l provide the necessary coordination for project preparation and implementation. The TA component wi l l be implemented mainly by SPEPB, assisted by international and local consultants.
0 Each subproiect suonsor has in place i ts own institutional arrangements for all aspects related to the project preparation and implementation including, technical, engineering, environmental, social, financial, and procurement.
24. Flow o f Funds: The Bank loan wi l l be made to the People’s Republic o f China on the IBRD’s standard terms and conditions. The GOC wi l l then onlend the proceeds o f the loan to Shandong Province on the same terms and conditions. For the FGD subprojects, depending on whether the project sponsors are directly affiliated to the Provincial Government or affiliated to the municipal or county government, Shandong Government would onlend the respective amounts o f the loan to the project sponsors at rate not less than the interest rate o f the Bank loan. All project sponsors would bear the respective costs o f the front-end fee and foreign exchange risks. The loan allocation for the TA component would be passed on to SPEPB on a “grant” basis by the Provincial Government.
25. Retroactive Financing: Eligible civil works, and goods and service contracts awarded from November 1, 2007, until loan signing, up to a limit o f US$ lO million, could be financed retroactively from the loan.
2. Monitoring and Evaluation of Outcomes and Results
26. The PMO wi l l monitor progress against the agreed performance indicators specified in Annex 3. The PMO wi l l provide, on a semiannual basis, 45 days after the end o f each half year, consolidated reports on project implementation progress in the Bank’s Financial Management Format (FMR). The Bank wi l l conduct regular supervision missions twice a year. Upon project completion, the PMO wi l l help prepare the Borrower’s contribution to an Implementation Completion and Results Report (ICR). The ICR would contain a complete assessment o f project costs and benefits, project execution, and performances o f the parties involved, as well as the lessons learned.
27. Monitoring o f the performance o f each subproject wi l l be based mainly on CEMs to be operated according to SEPA guidelines with data quality assurance and control by local environmental agencies or independent organizations. The TA component wi l l support the development and implementation o f rules, procedures, and standards on the
7
installation of CEMs, the collection and analysis of data to identify irregularities and errors, and to ensure that the data will be of high quality.
28. Strengthening the capacity of organizations throughout the operating chain (including the power plant owner or operator, CEM maintenance organization, and SPEPB monitoring center) for emission monitoring i s another important objective o f the project for which both components provide resources. Progress on the implementation of TA will be monitored through the number o f staff trained and the rules, procedures, and policies developed and implemented.
29. The main indicators include (a) the percentage of CEMs installed and operated in power plants; (b) the number of staff trained; (c) the preparation and implementation of rules and regulations; (d) the SO2 emissions rate (mg per Nm3), and (e) the amount of SO2 removed. These will be monitored through reports provided by SPEPB. Details are provided in Annex 3.
3. Sustainability
30. The overall commitment at all levels of Shandong Province to reduce and control SO2 emissions indicates a high probability that the project and its outcomes would stay sustainable. This i s specifically because of the following:
0 The prevailing environmental regulations require installation of SO2 control facilities in all new power plants; there i s clear commitment from the GOC to ensure that they are implemented. The regulations also require most of the existing power plants (including those supported by the project) to be retrofitted with SO2 control facilities. Successful implementation of this project will enhance the successful and cost-effective implementation of future projects.
0 The SPG has committed to SO2 control by having signed with the Central Government, represented by SEPA, a binding contract with specific targets.
0 The TA component of this project aims at enhancing the capacity of SPEPB to monitor and enforce environmental regulations in an efficient and effective manner. The institutional development will facilitate long-term sustainability of the SO2 control program.
0 In addition, the project supports strengthening of other relevant institutions that are critical for the sustainability of SO2 control projects. For example, local environmental agencies or independent organizations will be responsible for maintaining the CEMs and ensuring the data quality before transmittal to the environmental monitoring centers. The project will provide training to these agencies to ensure that they are capable of performing their duties. Also, training will be open to power plant operators, SO2 control manufacturers, engineering companies, and other organizations involved in SO2 control projects.
8
0 Finally, the project supports the development of high quality SO2 control equipment. International competitive bidding and adequate minimum qualification requirements will ensure that the SO2 control equipment financed under the project will be of high quality, efficiency, and reliability. This i s an important element for long-term sustainability of SO2 control in China, where many suppliers are available in the market, but with limited experience and hence product quality may not be guaranteed.
SO2 reduction objective not achieved because o f lack of SPG commitment.
4. Critical Risks and Possible Controversial Aspects
Reduction of key air pollutants, including SO2, i s an important M Government objective during the 1 1 ~ Five-Year Plan period. The SPG has shown its commitment to the objective by signing an agreement with the Central Government to meet specific targets and by developing detailed compliance plan.
31. In view of the non-fulfillment of the SO2 control target during the loth Five-Year Plan Period (2001-05), the main risk that would affect the achievement of the project’s development objective i s the implementation effectiveness of environmental regulations by the State Government and provincial authorities during the 1 I* Five-Year Plan Period (2006-1 0). However, the GOC has emphasized repeatedly the importance of SO2 control to the country’s sustainable economic development and has demonstrated its commitment to implement the relevant regulations. The GOC has also recognized that lack of financing and ineffective monitoring and enforcement are the main weaknesses, and it i s taking steps to address them, as also demonstrated by asking the Bank for support for this project.
SO2 reduction objective not achieved because of weakness in monitoring capability, institutional governance and capacity.
Total SO2 emissions not reduced because of failure by other power plants to install SO2 control facilities as required.
32. following table.
The main risks associated with the realization of the results are shown in the
The SPG has earmarked funds of about US%200 million equivalent for the next several years to improve and upgrade environmental monitoring and enforcement capability. The TA component under the project i s carefully designed to introduce the best national and international experience ahd practice in environmental planning and enforcement to Shandong and to fill the capacity gap through training.
ensure SO2 emission control and compliance across the entire heat and power sector. The TA component under the project wil l increase the chance o f the plan’s successful implementation through enhancing SO2 emission monitoring and fully implementing SO2 emission fee collection.
M
The SPG has developed a detailed time-bound implementation plan to M
To Proiect Develoment Obiectives
To Component Results Procurement delays. Process started early, with adequate procurement planning and
rational packaging. Procurement training has been provided to key PMO and implementing company staff and more training will be provided as needed. A qualified and experienced procurement agent has been engaged to facilitate the procurement process.
M
9
Risk
Low availability of FGD equipment because of technical defects and lack of technical ski l ls of the plant operators. Low utilization rate of FGD facilities because o f plant owner’s tendency to reduce operation cost.
Mitigation Measure Risk Rating
Limited effectiveness o f the TA component.
Poor attention to and compliance with the safeguards requirements.
Adequate technical specifications and minimum qualification requirement for suppliers and performance guarantees will be introduced. Adequate training for FGD operators and technicians will be embedded in supply and installation contracts. Effective monitoring utilizing high-quality CEMs, professional CEM maintenance organization, and strengthening of the Monitoring Center will mitigate this risk significantly. In addition, enforced full collection of SO2 emission charges should also facilitate the utilization of FGD facilities. SPEPB and others have shown adequate capacity and eagerness to further enhance their capabilities. The scope o f the TA i s designed to fit to the soecific needs o f receiving agencies. EMPs and RAPS have been developed in line with the Chinese standards and Bank policy and fully disclosed in a timely manner. External and internal monitoring will be in place to monitor progress and compliance.
N
N
Overall Risk Rating I I M H = High; S = Substantial; M = Modest; N = Negligible or Low
33.
5.
No controversial aspects have been identified.
Loan and Credit Conditions and Covenants
34. Loan effectiveness conditions: There are no nonstandard loan conditions or covenants. Standard effectiveness conditions will apply. That is, execution and delivery of the loan agreement and project agreement must be duly authorized; legal opinions that the agreements are legally binding must be furnished; and a subsidiary agreement satisfactory to the Bank between the GOC and the SPG must be signed. Furthermore, execution of subsidiary agreements between the SPG and the implementing project sponsors would be a condition of disbursement.
35. Implementation covenants: (a) The provincial PMO (adequately staffed) shall be maintained throughout the project implementation period; (b) the Bank loan shall be onlent on terms and conditions satisfactory to the Bank; and (c) the provincial PMO shall submit to the Bank semiannual progress reports within 45 days after the end of each half year in line with the Bank’s FMR format.
36. Financial and audit covenants: Annual audit reports o f project consolidated accounts and statements will be due for submission to the Bank within six months after the end of each fiscal year.
D. APPRAISAL SUMMARY
1. Economic and Financial Analyses
37. conducted to examine i ts economic viability.
Economic Analysis: A cost-benefit analysis for each proposed subproject was
10
38. Economic benefits and costs of the FGD project were identified and quantified as much as possible. The main economic benefit i s the avoided environmental damage cost achieved by the SO, emission reductions, plus some additional benefit from the sale of by-products of the FGD process (such as gypsum for the limestone systems). The economic costs include fixed capital cost (at economic prices), operation and maintenance (O&M) costs, and the (very small) global environmental damage of increased GHG emissions attributable to the electricity required for FGD operation.
39. The aggregate economic rate of return (ERR) of the project i s estimated at 24.5 percent, falling to 23.3 percent when increased COS emissions are valued at US$10 per ton C02. ' This high return reflects the high environmental cost associated with uncontrolled emissions. The ERR by subproject varies widely from 19.9 percent (Huangtai) to 32.1 percent (Laiwu). The wide variation i s primarily a result of the sulfur content of coal used at different subprojects, and the high ERR correlates strongly with high sulfur content: Huangtai uses 0.51 percent sulfur coal, whereas Laiwu uses 1.32 percent sulfur coal. Al l subprojects have ERRS above the hurdle level acceptable to the GOC (for example, the 10 percent discount rate for investment projects recommended by the National Development and Reform Commission (NDRC) ) in 2002 and therefore they are economically justified for investment. Sensitivity analysis further shows that the favorable economic returns are robust, given the range of uncertainty in important input assumptions.
40. The average tariff increase for domestic consumers that results from FGD systems is very small at 0.3 percent and i s far outweighed by the health benefits of reduced SO, emissions. The tariff impact on the poor (who consume small amounts of electricity) i s negligible; the additional cost i s an almost immeasurable Y 0.2 per poor household per year. Indeed, the poor will benefit disproportionately from environmental quality improvement, especially in those subprojects where new facilities replace old small coal- burning district heating plants in urban areas.
41. Financial Analysis: Unlike the economic analysis, the project financial analysis assesses the impacts of the project on the financial flows of project entities, rather than the economic returns to society as a whole. The analysis uses constant 2006 prices and takes into account all the elements of project cash flow.
42. The project has the following financial benefits to operators: (a) the avoided pollution levy payments for SO, emissions at a rate of Y 633 per ton of S02; (b) the sale o f by-products produced in the desulfurization process (for example, gypsum in the case of limestone FGD at the selling price of Y 40 per ton in Shandong); and (c) the incremental power tariff revenue for electricity generated at plants with FGD, which represents a price increment o f Y 0.015 per kWh (about 5 percent of the typical generation price o f Y 0.25-0.3 per kWh).
' C02 emissions increase marginally because o f the increased power consumption to operate the FGD systems.
11
43. The financial costs are (a) fixed or capital cost of retrofit (construction), including any taxes and duties; and (b) variable costs of O&M, including labor, water, and absorbent (limestone and lime) costs, and the forgone revenue loss attributable to the extra energy required for FGD system operation (typically 1-2 percent of gross generation).
44. percent for different sub-projects.
The financial rates of return (FRRs) are satisfactory, and range from 10 to 20
45. returns for the project proponents.
The overall project therefore has good economic returns and good financial
2. Technical
46. The rationale for the technical design and approach i s based on the requirements of China’s environmental regulations and i s consistent with international practices with regard to technology. China’s environmental standards reflected in Shandong’s SO, Implementation Plan and the specific design of each subproject are consistent with international standards and practices. Also, the FGD technology being offered in China has matured and reflects technology transferred from overseas, as most Chinese FGD suppliers have licensing agreements with international suppliers.
47. The technical evaluation of the project was very thorough and utilized experts with extensive expertise in SO, control technology worldwide. First, Shandong’s SO, Implementation Plan was reviewed to ensure consistency and compliance with China’s environmental standards (GB 13223-2003) and requirements (“Two Control Zones’’). Then, each subproject was reviewed and evaluated in detail based on the feasibility study prepared by the sub-borrowers (subproject companies). The review team included SO, control experts from the U.S. EPA, China, and Europe, as well as an international environmental economist who carried out the cost-benefit analysis. Detailed project descriptions and FGD technologies are presented in Annex 4.
48. The project cost estimates have been derived from the feasibility studies. They are considered appropriate and include reasonable contingencies. The detailed project cost estimates are provided in Annex 5.
3. Fiduciary
49. Financial Management: The adequacy of the project financial management system was assessed based on guidelines issued by the Financial Management Sector Board on November 3, 2005. The assessment concluded that the project meets the Bank’s minimum financial management requirements as stipulated in BP/OP 10.02. I t found that the project will have in place an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information on the status of the project in a reporting format agreed with the Bank. More details on financial management aspects are provided in Annex 7.
12
50. Procurement: The procurement capacity assessment concluded with an “average” procurement risk rating. Procurement will be managed by two experienced and qualified procurement agents. A procurement plan has been developed. For some subprojects, a single-responsibility supply and installation contract arrangement will be adopted. Initial procurement training has been provided during project preparation, and more training will be provided to further enhance the procurement capacity of the PMO and subproject sponsors. Moreover, advisory support, guidance, and supervision will be provided on a regular basis from the Bank office in Beijing to facilitate smooth procurement process and capacity building. Further details on procurement arrangements are provided in Annex 8.
4. Social
51. Two of the four subprojects (Yantai Bajiao and Laiwu) involve land acquisition and resettlement. A total of 100.6 ha o f land area (including 67 percent farmland) will be acquired. Along with land acquisition, a total of 274 households and 743 persons will be physically relocated. Following national laws and regulations, appropriate compensation will be provided for acquired land and lost properties, based on replacement values. The related subproject sponsors have developed their own Resettlement Action Plans (RAPs), which has been reviewed by the Bank. The revised RAPs reflecting the Bank comments have been submitted to the Bank.
52. With economic rehabilitation, different approaches will be adopted for different subprojects. In Yantai Bajiao, following local policies, al l land loss farmers will be converted into non-farm status and provided with a retirement pension, medical insurance, and job training and employment. In Laiwu, the basic approach will be to expand non-farm employment for most of the affected villagers and provide special assistance to the vulnerable, so that their basic livelihood can be restored or improved.
53. The resettlement implementation will be carried out by subproject sponsors, along with the relevant city government agencies. To ensure successful resettlement implementation, a Resettlement Leading Group (RLG) will be established in each project city, under which a resettlement unit will be set up in each subproject sponsor to be responsible for planning and implementing the RAP. In the process o f resettlement planning, extensive consultations have been organized by the subproject sponsors. More efforts will be made during the resettlement implementation to encourage further participation by the resettlers. Following both the Chinese law and Bank policy, the subproject sponsors have already disclosed the RAPs (prior to implementation) to inform the affected people about the impacts, compensation policies, rehabilitation options, and grievance procedures. Furthermore, both internal monitoring and external monitoring and evaluation (M&E) will be carried out during the resettlement implementation. More details on resettlement aspects are provided in Annex 10.
13
5. Environment
54. The project is in f i l l compliance with all environmental regulations and procedures of the People’s Republic of China, Shandong Province, and the Bank. In accordance with the Bank policies and procedures for Environmental Assessment (EA, OP/BP/GP 4-01), the project has been assigned Category B. To meet Chinese requirements, Environmental Impact Assessment (EIA) reports were prepared for each subproject either for the FGD unit alone or for the combined FGD unit and associated boiler(s). To meet the Bank requirements, Environmental Management Plans (EMPs) were prepared for each FGD subproject. Annex 10 provides a summary of the nature and status of the Chinese and World Bank EA documentation, the chief environmental issues, the dates and locations of the consultation, and in-country disclosure of the EMPs for each subproject. English language versions of the EMPs were received by the Bank between October 3 1 and November 16,2006, and disclosed in the Infoshop on November 27, 2006.
55. The project i s expected to provide overall positive environmental impacts with potentially minor negative impacts. Installation of FGD systems on coal-fired boilers will result in significant reductions of SO2 and dust emissions. In turn, these reductions are likely to lead to overall improvements in air quality. The Government has established that both SO2 and dust are in serious violation of Chinese air quality standards in many regions of Shandong Province. The potential negative impacts are primarily associated with the disposal of the gypsum by-product that i s the chief component of the spent sorbent. Generally, this material will be utilized by construction industries. The amount will depend on its physical and chemical quality and market demand. Any excessive material will be disposed of in accordance with Chinese regulations at sites officially approved by either provincial or local environmental authorities, or both. The material i s not hazardous.
56. During construction, potentially adverse impacts are of short duration, limited in area, and wholly reversible. They are primarily associated with the movement of workers, machinery, and materials (such as dust, noise, and waste construction materials). Mitigation measures are standard procedures constituting good engineering and construction practice.
6. Safeguard Policies
57. Safeguard screening category i s S2, and environmental screening category i s B.
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.0 1) El 0 Natural Habitats (OP/BP 4.04) 0 El Pest Management (OP 4.09) 0 Ei Cultural Property (OPN 1 1.03, being revised as OP 4.1 1) Involuntary Resettlement (OP/BP 4.12) El 0 Indigenous Peoples (OD 4.20, being revised as OP 4.10)
0
0
Ei
El
14
Forests (OP/BP 4.36) 0 ixi Safety o f Dams (OP/BP 4.37) 0 ixi Projects in Disputed Areas (OP/BP/GP 7.60)' 0 El Projects on International Waterways (OP/BP/GP 7.50) 0 ixi
a. Does the project require any exceptions from Bank policies? If so, what are they and how are they justified? b. Have they been approved by Bank management? c. I s approval for any policy exception sought from the Board?
7. Policy Exceptions and Readiness
No
N/A N/A
Compliance with Readiness Criteria
* By supporting the proposedproject, the Bank does not intend to prejudice thejnal determination ofthe parties' claims on the disputed areas
Annex 1: Country and Sector Background CHINA: Shandong Power Plant Flue Gas Desulfurization Project
1980 Coal Oil Gas Hydro Total 435.1 125.2 18.7 24 603
72.24% 20.76% 3.1% 3.99% 100%
Heavy Reliance on Coal
2005 Coal Oil Gas Hydro Total 1565 471 62 162 2220
68.7% 21.2% 2.8% 7.3% 100%
1. Since 1980, China’s gross domestic product (GDP) has increased at an annual average rate o f 9 percent, the highest sustained growth o f any country. To support such a high economic growth, China’s primary energy consumption more than tripled from 600 Mtce in 1980 to about 2,220 Mtce in 2005 (Table 1.1). All forecasts indicate that China’s economy wi l l continue to expand at a relatively high rate for the coming decade. As a result, energy consumption wi l l continue to grow rapidly despite increased and sustained energy efficiency efforts. China’s rising energy demand has been met largely by domestic coal. Coal consumption increased from 1.08 billion tons in 1980 to 2.1 billions tons in 2005. Even with an aggressive fuel diversification policy, coal wi l l remain the dominant energy source for the foreseeable future.
Coal 348
68.5%
Table 1.1: China Primary Commercial Energy Consumption
Oil Gas Hydro Nuclear Biomass/Wind Total 24.7 9 116 7 3.3 508
4.86% 1.77% 22.83% 1.38% 0.65% 100%
Coal Oil Gas Hydro Nuclear Biomass/Wind 1980 17.3 19.8 395.2 52.3 10.1 80% 0.7% 0.8% 16% 2.1% 0.4%
2. China’s power generation capacity and electricity generation reached 508 GW and 2475 TWh respectively in 2005. O f this, coal-based generation capacity and electricity generation accounted for 69 percent and 80 percent, respectively. About 50 percent o f the coal consumed in 2005 was used for electricity generation. China’s electric generating capacity i s projected to increase to over 1,100 G W by 2020. Even if exceptional efforts were made to develop nuclear power, hydropower and other renewable energy sources, at least half o f the future generation capacity wi l l need to come from coal. Coal-based generation capacity i s expected to increase to more than 700 GW; and coal-based generation wi l l remain dominant beyond 2020 (Table 1.2).
Total 2474.7 100%
Table 1.2: Installed Capacity and Electricity Generation in 2005
16
Severe Air Pollution
Coal Oil Gas Hydro Nuclear 700 20 40 240 40
63.64% 1.82% 3.64% 21.82% 3.64%
3. The rapid expansion of the power generation system and its primary reliance on coal has contributed to China’s severe air pollution. Sulfur dioxide (SOz), through its transformation into sulfate small particles, i s identified as one of the most serious pollutants impacts on human health, buildings, cultural heritage, and crop production. According to the environment reports released by SEPA, a total of 25.5 million tons of SO2 was released in 2005. Combustion of coal contributed to more than 90 percent of the SO2 emissions in China. I t i s estimated that air pollution in major urban areas contributed to 178,000 premature deaths and 346,000 respiratory hospital admissions a year, to which SO2 i s a major contributor. Acid rain has occurred in more that half of China’s 696 cities. About one-third of China’s territory, mainly the densely populated and industrial south, has been affected by acid rain. The direct economic losses through reduction of timber growth and crop reduction alone are estimated to be more than US$12.5 billion annually.
Biomass Wind Total 30 30 1100
2.73% 2.73% 100%
Government Strategy
4. The Chinese authorities are fully aware of the need to address environmental problems, and its recent policy calls for economic development proceeding in tandem with environmental protection. Efforts are being made to enhance both the supply of cleaner energy resources and the efficiency of energy use, which underpins the country’s energy strategy and policy. The Government i s taking aggressive action to diversify i ts energy sources, including an accelerated nuclear power development program, an ambitious gas development, and a significant hydropower and renewable energy development scheme (Table 1.3).
5. However, it i s commonly accepted that China has no realistic alternatives to fundamentally change its heavy dependence on coal as its primary source of energy in the short and medium term. Mitigation of the environmental impact from the use of coal i s a principal element o f its clean air policy. The Government has developed the National Ambient Air Quality Standards, which are comparable to international standards (Table 1.4).
17
Table 1.4: Ambient Air Quality Standards
(Milligrams per cubic meter, mg/m3)
-Not available.
* Eight-hour average.
6. The regulations designate three categories for different types o f areas: (a) Class 1 standards are the most stringent standards and apply to national nature reserves, tourist and historic areas, and conservation sites; (b) Class 2 standards apply to residential and rural zones; and (c) Class 3 standards apply to industrial and heavy traffic areas.
7. The Class 2 standards, as shown in Table 1.5, are similar to (and in some cases more stringent) than the US. standards and the guidelines of such organizations as the World Bank and the World Health Organization.
8. The revised Standards on Emissions of Air Pollutants from Coal-Fired Plants (GB 13223-2003) are quite stringent, requiring the most recent power plants to limit SO2 below 400 mg per Nm . In addition, the GOC created the policy commonly known as the “Two Control Zones” (acid rain control zones and sulfbr dioxide control zones), which cover 1.09 million square kilometers and 61 large cities. Provinces within these zones are required to limit SO2 below an emission cap.
18
Table 1.5: Emission Standards for Thermal-Fired Power Plants (mg/Nm3)
Pollutant Total suspended particulate (TSP)
Sulfur oxides (for example SO2)
Nitrogen oxides
China Period I: 200-300 Period 11: 200 up to 2005 Period 11: 50 after 2010 Period 111: 50 (except plants with FGDs: 100) 2,100 Period I & I1 by 2005 1,200 Period I by 20 10 400 Period I1 by 2010 and Period 111
VM>20%: 450 100<VM<20%:
- 650 for Period I1 and 111 - 1,100 for Period I
- 1,500 for Period I - 1,300 for Period I1 - 1.100 for Period 111
VM<IO%:
United States In most cases:
30-50
400-800
210 (0.15 IbsMBtu)
World Bank 50
For the first 500 MW: 0.20 tons per day (tpd) per MWe of capacity Greater than 500 MW: Concentration of SO2 in the flue gas should not exceed 2,000 rngmm3 Maximum SOz emission o f 500 tpd Coal: 750 Coal w N M <lo%: 1,500 Oil: 460 Gas: 320 Combustion turbine units:
Gas: 125 Diesel: 165 Fuel oil: 300
9. These new standards introduce the following three categories:
0 First period: Power plants approved prior to December 3 1, 1996. 0 Secondperiod: Power plants approved between January 1, 1997, and
December 3 1,2003. 0 Thirdperiod: Power plants2 approved after January 1, 2004.
10. The SO2 emission target set for the loth Five-Year Plan period (2001-05), however, was not achieved. This was partly a result o f a lack o f financing and incentives for the plant owners to install SO2 control facilities, but more importantly i t was caused by ineffective monitoring and enforcement o f the environmental regulations, mainly at the local level.
11. Most recently, the llth Five-Year Plan approved by the National People’s Congress (NPC) sets a target to reduce the country’s 2005 level o f SO2 emission by 10 percent by the year 2010. Under State Council guidance, SEPA has signed binding contracts with the seven largest SO2-emitting provinces (including Shandong) and major power-generating companies with specific SO2 emission control targets. New financial
Including the new construction, extension, or reconstruction o f the construction projects whose environmental impact reports were examined and approved during the second period, but it has been five years since the approval date, and they have not yet been commenced to build before the implementation o f this standard.
19
incentives have also been provided, and enforcement i s being strengthened. Financial incentives include the following:
a. Electricity generated by plants with FGD facilities can be sold to the grid at a tariff of 1.5 fen per kWh higher than without FGD installations.
b. The SO2 emission fee was increased to Y 633 per ton. c. SEPA i s empowered - more effectively than previously - to reject new
projects, suspend production of ongoing projects, and impose heavy penalties on noncompliant firms.
Shandong Province
12. Shandong Province ranks second of al l Chinese provinces in coal consumption (159 million tons of coal in 2003) and produces the highest amount o f SO2 emissions of all the provinces. Coal accounted for 82 percent o f primary energy consumption in the province, against the national average of 67 percent. Shandong’s electric power generating capacity consists of 99 percent coal-fired units against the national average of 69 percent. Furthermore, Shandong has limited resources of low-sulfur coal, and under current supply-constrained conditions in the coal industry, cannot obtain sufficient low- sulfur coal from other sources even if it i s willing to pay a significant premium. Coal- fired power plants account for 99.7 percent of the 37.6 GW total power capacity and they consume 5 1.6 percent of the total coal consumption by all sectors in Shandong, and as a result, are the main sources of SO2 emissions. In 2005, SO2 emissions in Shandong Province amounted to 2.03 million tons, of which 1.17 million tons, or 52.4 percent, were contributed by the power and heat industry.
13. The SPG has embraced the Central Government’s SO2 control policies and targets by developing i t s own SO2 emission control targets and compliance plan. The SPG’s plan calls for an overall 20 percent SO2 emission reduction by 2010 on the 2005 level. The emission reduction rate for the electric power industry i s set to be 27.9 percent on the 2005 level.
14. To achieve these targets, SPEPB has developed the “SO2 Control Implementation Plan for Thermal Power PlantsKogeneration Plants.” The focus of Shandong’s efforts i s on plants owned by provincial and municipal organizations. These plants are mostly cogeneration plants that cannot be moved to a new site because of the requirement to supply heat as well as power. Shandong’s strategy i s to ensure that any new plant i s designed to meet emission standards and to foster retrofitting of existing plants with FGD and other cleanup equipment. Where possible, the capacity of a larger plant i s to be expanded to allow smaller boilers, for which cleanup equipment installation i s uneconomic, to be closed down. These target plants find it difficult to raise financing for cleanup or do not have adequate self-generated finance. SPEPB also plans to upgrade environmental monitoring facilities and information systems, strengthen environmental governance and institutional capacity, as well as pilot emission certificate and emission rights trading schemes. However, the SO2 Control Implementation Plan requires approximately US$2 billion and lack of financing has delayed its implementation.
20
Annex 2: Major Related Projects Financed by the Bank and Other Agencies CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Implementation Progress
Sector Issue Bank-Financed
Development Objective
Coal dominance, environment Coal dominance, renewable energy Coal dominance, renewable energy Energy efficiency Energy efficiency Coal dominance, financing Supply efficiency,
Project
market reform Supply efficiency,
(IP) (DO)
market reform
Coal dominance, environment Energy efficiency Energy efficiency, access Other Development Ai Coal dominance, environment Coal dominance, environment Coal dominance, environment Coal dominance, renewable energy
Shanghai Waigaoqiao S
Coal dominance, renewable energy Coal dominance, energy efficiency
S
Renewable Energy Development China Renewable Energy Scale Up Program Energy Conservation Energy Conservation I1 Hubei Hydroelectric Power
Tongbai Pumped Storage
Yixing Pumped Storage
Development in Poor Areas
S S
S S
S S S S S S
S S
S S
Shanxi Coal Bed Methane
'ne Financed ADB: Coal Mine Methane I Development ADB: Liaoning Environment Improvement ADB: Inner Mongolia Environment Improvement 1 UNDP/GEF: Capacity Building for the Rapid Commercialization o f Renewable Energy UNDP/GEF: Solar and Wind Resource Assessment UNDP/GEF: End Use Energy Efficiency
IPDO Ratings: HS (Highly Satisfactory); S (Satisfactory); U (Unsatisfactory); HU (Highly Unsatisfactory)
21
Annex 3: Results Framework and Monitoring
CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Table 3.1: Results Framework
The project development objective i s to reduce SO2 emissions in the heat and power sector and enhance the capacity o f regulatory authorities to monitor and enforce compliance with their SO2 emissions reduction program
Intermediate Results One per Component
Component A: Technical Assistance (TA) to strengthen the technical and institutional capacity of SPEPB to implement SO2 emission reduction Strengthen SPEPB’s capacity in SO2 control
Improve emission monitoring to facilitate SO2 control
Strengthen enforcement of regulations to ensure compliance
Component B: Installation of FGD for four subproject companies
Total SO2 emissions in Shandong - reduced
Results Indicators for Each Corn ponen t
Policies, rules, procedures and standards on SO2 control and SO2 emissions monitoring issued and implemented
Installation and successful performance of CEMs including data transfer to the monitoring center from all sites which installed FGDs
Full collection o f SO2 emission fee according to requirements and noncompliance with emission standards penalized
Installation of FGDs which perform according to design specifications and are completed within the allocated budget and projected schedule; KPI: removal efficiency and SO2 rate (mg/Nm3) Timely disbursement of the Bank loan proceeds
Gauge the effectiveness of Shandong’s SO2 control program
Use of Results Monitoring
Progress on the issuing o f policies, rules, procedures and standards on SO2 control and SO2 emissions monitoring will indicate how well SPEPB i s institutionally positioned to implement i t s SO2 control program. The rate of installation and successful performance of CEMs in heat and power plants wil l indicate how well SO2 emissions in the heat and power sector can be monitored and thus controlled.
Percentage o f fee collection for SO2 emissions and noncompliance will indicate to what extent regulation enforceability needs hrther improvement.
Monitoring of implementation progress and action plan to address possible delay and performance deficiency
Implementation delays o f project
22
Table 3.2: Arrangements for Results Monitoring
Outcome Indicators
Total amount of SOz removed in the heat and power sector
Total amount of SOz emissions in Shandong Results Indicators for
Each Component Component A: - Rules and procedures issued on CEM installation, calibration, data collection and transmission - Number o f staff, managers and operators trained
- Percentage o f installation and proper operation of CEMs in heat and power plants - Online monitoring system
- SO:! control policy and regulation prepared Results Indicators for
Each Component Component B: - Installation of FGDs and CEMs at the four sites on schedule - Achievement o f the target SOz removal efficiency - Total tonnages o f SOz removed annually at the five sites - Achievement o f the target emission rate :400 mg/Nm3)
Baseline 2005
10,000 tons
2.03 million tons
0
10
0
0
Target Values Year 2010
900,000 tons
1.6 million tons
Operational
5 00
100
Operational
Operational
Operational
90-95%
58,645
All
Data C Frequency and
Reports
Annual implementation progress report
Annual implementation progress reports
Annual implementation progress reports
Annual implementation progress reports
Annual implementation progress reports Annual implementation progress reports
Annual implementation progress reports Annual implementation progress reports Annual implementation progress reports Annual implementation progress reports
llection and Rep Data Collection
Instruments
SPEPB annual environmental report
Report to World Bank
SPEPB Monitoring Center data
SPEPB records
SPEPB records
SPEPB records
SPEPB Monitoring Center data SPEPB Monitoring Center data SPEPB Monitoring Center data SPEPB Monitoring Center data
~~
ting Responsibility
for Data Collection
SPEPBPMO
SPEPB
SPEPB
SPEPB
SPEPB
SPEPB
3PEPB
3PEPB
3PEPB
SPEPB
23
Annex 4: Detailed Project Description CHINA: Shandong Power Plant Flue Gas Desulfurization Project
1. Investment Component.
The project consists of a Technical Assistance (TA) Component and an
(A) Technical Assistance Component (US$2.28 million)
2. The TA Component i s intended to strengthen the technical and institutional capacity related to SO2 emission control and reduction, particularly in the following areas: emission control planning, emission monitoring and regulation enforcement, technical and managerial training, installation of online monitoring equipment. The component would include both studies and capacity building activities.
3. Capacity Building for SO, Control: This subcomponent consists of the following two activities: (a) develop rules, procedures and standards on installation, operation and maintenance of, and data transmission from, continuous emission monitors (CEMs); (b) review the needs and make recommendations to upgrade the data information and transmission system, speed up and enforce the installation of CEMs and the associated facilities in each power plant (to link with and transfer data to SPEPB’s data system and information centers).
4. Policv and Regulation Development: Wh i le it i s recognized that SO2 emission control in the power sector by installing FGDs in each power plant would be effective, it i s equally important that the SPG take parallel actions to enhance and optimize its long- term policy effectiveness and sophistication in planning and implementing compliance programs, designing and implementing market-based policies and instruments, (such as emission trading) as well as enhancing environmental regulation compliance over power and non-power sectors. With regard to strategy and policy, SPEPB should optimize the design of SO2 control programs to reflect the cost-effectiveness (RMB per ton of pollutant removed) for each possible environmental control project. Such optimization would achieve the same environmental benefit at a reduced compliance cost or higher environmental benefit (lower pollution) at the same cost. Also, market-based instruments would be used to optimize the compliance costs.
5. Staff and Managerial Training: Extensive training programs will be implemented to enhance the knowledge and capacity o f government officials as well as key coal consumers on SO2 control policy and implementation. Areas of training would include: emission monitoring, data collection and analysis, CEM calibration and maintenance, and regulation enforcement, as well as operation and maintenance of SO2 emission equipment. Technical training activity will be targeted at SPEPB and local EPBs’ staff as well as power plant FGD operators.
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(B) Investment Component (USS74.955 million)
6. The investment component is to finance the installation o f FGD facilities in four coal-fired heat and power plants that are currently operating or are under (or planned for) construction. A description o f each heat and power plant i s given below.
Huangtai Heat and Power Plant (US$20.07 million)
General
7. The Huangtai Heat and Power Plant i s located in the northeast part o f Jinan, the capital o f Shandong Province, where it i s the heat load center o f the east and northeast areas o f the city. The power plant, belonging to the Shandong Luneng Power Group, plays an important role in meeting the power and heat demand o f Jinan.
8. The power plant was built in 1958 and currently owns seven boilers and eight turbines with a total installed capacity o f 1,005 MW. Units No. 1-4 were installed between the 1950s and 1960s and have been operating for more than 40 years. Units No. 5 and 6 are also very old and have been retrofitted a number o f times. A l l these six units operate at very low efficiency and produce severe air pollutant emissions.
9. To meet the continuous growing demand o f power and heat and to abate the environmental pollution, the power plant has decided to install 2 x 300 M W units to replace the old units (Nos. 1-6). The total capacity o f the replaced units i s 325 MW. The Bank loan would be used to finance the installation o f SO2 removal systems (FGD facility) to the two new 300 M W units.
The Proposed FGD Facility
10. The new 2 x 300 M W units are designed to operate based on coal with 0.51 percent o f sulfur content, 21.22 percent o f ash content, and 21,890 kJ per kg o f heat value. To meet the required emission standards, the SO2 removal efficiency o f the FGD facility should be 95 percent or higher.
11. reasons:
The Wet Limestone-Gypsum FGD process has been selected for the following
High availability 0
High SO2 removal and absorbent utilization rate Mature process for large capacity units
Suitable for a wide variety o f coal with different sulfur content Abundant limestone resources with high quality available in the vicinity o f the power plant Promising market in the area for the byproduct (Le., gypsum)
12. The FGD facility mainly consists o f the following systems: absorbent preparation and supply system, SO2 absorbing system, flue gas system, gypsum processing system,
25
water supply system, electrical system, and control system. I t will be located behind the boiler house. Each boiler will be equipped with a separate pressurizing fan, an absorber tower and a heat exchanger. The two boilers will share the lime making, gypsum dewatering and oxygen supply facilities.
Availabilitv o f Absorbent
13. In Jinan and nearby areas, many limestone quarries are available to supply very high quality limestone. The limestone block can be transported by trucks to the power plant. As the particle size of the absorbent for FGD system should be less than 20mm, a wet milling system will be installed to grind limestone to a fineness not larger than 250 mesh. The annual consumption of limestone i s about 25,800 tons. The purity of limestone should be more than 52 percent of CaO content.
Byproduct Utilization
14. The byproduct o f the FGD process i s gypsum. The annual output of gypsum i s expected to be 48,000 tons. The purity o f the gypsum will be higher than 90 percent. Gypsum i s mainly used in the construction industry (such as cement, construction materials).
15. There are no rich resources of gypsum in Jinan or nearby areas. The cement industry alone in the area (with an annual output o f 5 million tons) would need about 200,000-250,000 tons of gypsum. Moreover, gypsum wall-board industry would need around 100,000 tons or more. As such, the byproduct of gypsum should be readily marketable.
Laiwu Heat and Power Plant (US$20.075 million)
General
16. The Laiwu Power Plant, located 9 km away from Laiwu city, was built in 1975 with 3x125 M W units. To meet the growing demand of district heating for industrial and residential customers and to improve the heating network in the southern part of the city, two new 300MW coal-fired cogeneration units with FGD systems are under preparation for construction. The power plant i s owned by the Shandong Luneng Group.
17. According to the Feasibility Study Report, the new 2 x 300 M W cogeneration units will replace a total of 67 stacks and 107 small and medium-sized units in the area. Al l these existing units have low combustion efficiency, high pollutants emission with very short stacks. The reduction of SO2 and dust emission i s estimated at 2,203.6 tons and 847 tons per year respectively. Therefore, the completion of the proposed 2 x 300 MW new units will not only improve the structure of heat supply in Laiwu city and provide more power to the Shandong power grid, but also significantly alleviate the air pollution in the local area.
26
The FGD Facility
18. The new 2 x 300MW units will burn coal with 1.04-1.32 percent sulhr content and 24-27 percent ash content, and 19,700-2 1,190 kJkg heat value. To meet the required emission standards, the FGD’s SO;! removal efficiency should be 95 percent or higher.
19. the Wet Limestone-Gypsum process for the following reasons:
The feasibility study compared eight types of FGD processes and recommended
0
e
e 0
0
0
20.
High SO;! removal and absorbent utilization rate Mature process for large capacity units High availability Suitable for a wide variety of coal with different sulfur content Abundant limestone resources with high quality available in the vicinity of the power plant Promising market in the area for the byproduct (Le,, gypsum)
The FGD facility mainly consists of the following systems: absorbent preparation and supply system, SO2 absorb system, flue gas system, gypsum processing system, water supply system, electrical system, and control system. I t will be located behind the boiler house. Each boiler will be equipped with a separate pressurizing fan, an absorber tower and a heat exchanger. The two boilers will share the lime making, gypsum dewatering and oxygen supply facilities.
Availability o f Absorbent
2 1. Availability of limestone powder as the absorbent for the FGD system has been secured by the power plant from nearby suppliers. The calcium carbonate (CaC03) content o f limestone powder i s not lower than 90 percent and the fineness i s 250 mesh, which are acceptable by the process.
Byproduct Utilization
22. The area of Laiwu city lacks natural gypsum resources. As a result, the many cement factories in the local area import needed gypsum from other areas of the province. Therefore, the gypsum byproduct from the FGD process should not only find a promising local market, but can also expect to receive a good price (because the local supply will also save transportation costs).
Lubei Heat and Power Plant (USS20.67 million)
General
23. The power plant i s located at the Lubei High-Tech Development Zone in Wudi County of Binzhou Municipality. The power plant (2 x 300 MW) i s currently under construction. The first 300 M W unit i s scheduled to be commissioned in March 2008 and the second unit in May 2008. The proposed subproject will finance installation of wet
27
limestone-gypsum FGD facilities to the two 300 M W units. The project i s owned and operated by the Shandong Lubei Enterprises Group.
The FGD Facility
24. 11.02 percent of ash content and 22,760 kJkg of heat value.
The 2 x 300 MW units expect to burn coal with 0.6 percent o f sulhr content,
25. FGD.
The feasibility study report strongly recommends the wet limestone-gypsum
26. The power plant owner, the Shandong Lubei Enterprises Group, i s a large industrial complex. Besides power generation, it has subsidiaries with production capacity of 800,000 t/a of sulhric acid, and 600,000 of cement. I t i s the biggest producer of ammonium phosphate, sulfuric acid and cement in the world. I t i s also an exemplary enterprise in China for recycling. The byproduct of gypsum can be easily absorbed within the Group for the production of higher-value-added products of sulfuric acid and cement. As such, the sulfur contained in the coal i s not only fully utilized, but air pollution i s controlled at the same time.
Availability of Absorbent
27. The limestone block i s transported from Zibo City, about 200-250 km away. The quality of limestone i s good with CaC03 content greater than 92 percent. The total annual consumption i s about 27,390 tons. The power plant will install a wet milling system for preparation of limestone slurry.
28. the power plant’s seawater desalinization facility.
The FGD system will consume water at 100 t/h or 550,000 t/a, to be supplied by
Byproduct Utilization
29. The total output of gypsum for these two sets of FGD systems i s about 44,495 tla (with purity of 90 percent and less than 10 percent of moisture). As described above, a l l of the gypsum will be h l l y utilized within the industrial complex.
Yantai Bajiao Heat and Power Plant (US$I4.14 million)
Genera 1
30. The Yantai Bajiao Power Plant i s a new power plant with 2 x 300 MW units. I t will be located in the Bajiao District of Yantai Bajiao Development Zone, along the coast of the Bohai Sea. The power plant will be sponsored by the Shandong Luneng Group. A Bank loan has been requested to finance installation of the associated FGD facilities.
28
The FGD Facility
31. The 2 x 300 MW units expect to burn coal with 0.54 percent of sulfur content, 12.69 percent of ash content and heat value of 22,100 kJkg. To meet the required SO:, emission standard, the associated FGD system should reach an efficiency level of at least 90 percent.
FGD Processes Selection
32. The feasibility study report compared the available FGD technologies and concluded that both the Sea Water Wet FGD Process and the Wet Limestone-Gypsum FGD Process are suitable to meet the above-mentioned SO2 removal requirement. Considering the potential impact of the sea water wet FGD process on the marine ecosystem and the maturity and reliability o f the wet limestone FGD process, the latter process has been selected by the power plant.
Availability of Absorbent
33. The limestone block will come from Fushan District in the suburb of Yantai city. This area has rich resources of limestone of a high quality. The limestone contains 5 1.42 percent of CaO. Unfortunately, the SO2 content i s also very high (4.18 percent) which may cause erosion in the milling system and result in higher energy consumption.
34. The total limestone consumption would be 4.47 t/h or 24,600 t/a. The blocks will be transported by truck. A limestone supply agreement has been signed between the supplier and the power plant.
Bvproduct Utilization
35. The FGD process will produce gypsum as a byproduct with a purity not lower than 90 percent (plus 10 percent moisture). The total gypsum output would be 42,000 tons per year. The local cement and wall-board factories have committed to buy the full amount of gypsum from the power plant.
29
Attachment to Annex 4
Description o f Wet Limestone-Gypsum FGD Process
Wet Limestone FGD System
1. The wet limestone FGD system consists of mainly the absorbent fabrication and supply system, the SO2 absorb system, flue gas system, the gypsum processing system, the water supply system, electric system and control system. The FGD system will be located behind the boiler house of the power plant. Each boiler will be equipped with a separate pressurizing fan, an absorber tower and a heat exchanger. The two boilers will share the lime making, gypsum dewatering and oxygen supply facilities.
2. The SO2 absorb system i s the core of the FGD facility. I t consists o f an absorber, defog, circulating pump, oxidizing fan, among other elements. The SO2 in the flue gas reacts with CaCo3 in the lime and forms gypsum crystal after forced oxidization at the bottom of the absorber tower. The control system continuously monitors the gas flue, SO2 and C02 at the entrance and exit of the FGD.
Process Flow Sheet
Process Description
3. The wet limestone (lime)-gypsum FGD process adopts the inexpensive and easily obtainable limestone or lime as the FGD absorbent. The limestone will be mixed with water to prepare the absorbent slurry after being crushed and ground into powder with the required fineness. When the lime i s used as absorbent, the lime powder will be mixed with water to prepare the absorbent slurry after slaking treatment.
30
4. Inside the absorber, the absorbing slurry will be sprayed and fully contacted with the flue gas to remove the SO2 contained in the flue gas through a series of chemical reactions among S02, calcium carbonate in the slurry and the of oxidation air, producing gypsum as the final byproduct.
5 . The scrubbed flue gas will go through the mist eliminator where the small droplets of slurry will be captured to reduce the moisture in the cleaned flue gas. Then the cleaned flue gas goes into the stack after being reheated in the gas-gas heater (GGH) or emits from the stack into the ambient atmosphere without any reheating.
6. The FGD gypsum slurry will be recirculated to the spray nozzle levels by re- circulating pumps. Because of the recirculation of the absorbing slurry, the FGD absorbent holds a very high utilization rate.
7. The bleeding slurry from the sump of the absorber i s pumped into the gypsum dewatering system which consists of hydro-cyclones and vacuum belt filters. The gypsum dewatering system can reduce the water content of final FGD by-product to 10 percent. The collected water will be returned to the process to reduce water consumption of the FGD systems.
8. The final byproduct of this FGD process i s salable gypsum with high purity and can be widely used for building material. There are two ways to deal with the byproduct gypsum. I t can either be disposed of or reused. The selection i s mainly dependent upon the market demand for FGD gypsum, i ts quality and whether there i s a sufficient storage area.
9. The chloride in the slurry i s the main cause of corrosion in the materials o f the structure o f the absorber and al l ducts which come into contact with the slurry. Accordingly it can deteriorate the quality of the byproduct gypsum. Therefore, some wastewater should be discharged from the process system to decrease the concentration of chloride in the slurry. The amount of wastewater required i s relatively low, only several tons per hour, and will be treated by a specially designed wastewater treatment system.
10. The wet limestone-gypsum FGD process i s currently the most sophisticated desulfurization process and the most widely used. In the United States, Germany and Japan, the process accounts for approximately 90 percent of the total FGD systems installed. I t has been applied to a single unit with a capacity up to 1,000 MW. This process i s applicable for coal with any sulfur content and can achieve removal efficiency of more than 95 percent.
1 1. The wet limestone gypsum FGD systems are now widely used in China with more than 200 sets of wet FGD systems having been put into operation or under construction, accounting for 95 percent o f total FGD systems in China. Among them the largest capacity i s 1,000MW and the highest sulfur content i s 4.5 percent.
31
Process Features
12. The technical features of wet limestone gypsum FGD process are:
0
0
0
0
Most widely used and mature FGD technology in the world High SO;! removal, usually higher than 95 percent High availability: it i s possible to achieve 100 percent Flexible and suited to a variety o f coal with either low or high sulfur content Limestone as an absorbent i s both inexpensive and abundant in China Gypsum as a byproduct i s salable and has a promising market. Moreover, gypsum i s not a hazardous material and poses no harmful threat to the environment when it i s in storage
32
Annex 5: Project Costs
CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Main assumptions used in cost estimates:
0
0
0
0
0
0
0
Base costs derived from the feasibility study reports Exchange rate (December 30,2007): Y 7.30 = US$1 Physical contingency = 8 percent of base cost (investment only) Price contingency = 0 percent (FGD price in the domestic market has been coming down, which should more than offset inflation.) WB loan interest rate = 5.0 percent Front-end fee = 0.25 percent (after waiving by the Bank for FY08) Domestic bank loan interest rate = 7.84 percent
Table 5.1: Project Costs
Total Bank
US $million US $million US $million
Non-Ban k Project Cost By Component and/or Activity Financed Financed
I. Investment - Huangtai 5.07 15.00 20.07 - Laiwu 10.95 9.125 20.075 - Lubei 5.67 15.00 20.67 - Yantai Bajiao 4.14 10.00 14.14
11. Technical Assistance - Emission monitoring and enforcement 0.72 0.35 1.07
- Policv studies 0.16 0.10 0.26
Subtotal 25.83 49.125 74.955
- Training 0.65 0.30 0.95
Subtotal 1.53 0.75 2.28 Total Baseline Cost 27.36 49.875 77.235
Contingencies 4.36 0.00 4.36 Interest during construction 4.42 0.00 4.42 Front-end fee 0.00 0.125 0.125
Total Financing Required 36.14 50.00 86.14
33
Annex 6: Implementation Arrangements
CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Overview
1. Shandong Provincial Environmental Protection Bureau (SPEPB) i s the provincial government agency responsible for overall project coordination. A Project Management Office (PMO) under SPEPB has been formally set up through a decree jointly issued by Shandong Provincial Finance Bureau (SPFB), Shandong Provincial Development and Reform Commission (SPDRC) and SPEPB on March 20, 2006. The PMO i s hosted by SPEPB and headed by a Deputy Director General of SPEPB. Four deputy directors have also been appointed. The routine work of the PMO is to be performed by several staff of SPEPB. The PMO will be the focal point for the project and will provide the necessary coordination for project preparation and implementation. Each subproject has in place its own institutional arrangement for project preparation and implementation as described below.
2. A Project Leading Group (PLG) has also been established at the provincial level. The PLG i s headed by the Provincial Vice Governor in charge of environmental protection and consists of members from al l the related provincial departments (such as SPDRC, SPFB, SPEPB). The Leading Group will provide overall guidance and help resolve key preparation and implementation issues. The organization structure for implementation i s given at the end of the annex, and detailed institutional arrangements are described below.
Technical Assistance Component
3. The PMO will provide overall coordination in the preparation and implementation of the TA Component. The various subcomponents will be implemented by the various technical departments of SPEPB, but the beneficiaries of the capacity building and training will include both SPEPB staff and staff from the concerned municipal and county environmental protection bureaus as well as the related power plants. Special service contractors will be hired to assist in the implementation of the TA Component.
Investment Component
4. The sponsors of each individual power plant will be responsible for their own project implementation. A project office has been established by each subproject sponsor and will be responsible for technical design, procurement, construction supervision, and testing and commissioning. The subproject sponsor will own, operate and maintain the FGD facility.
5. process o f international competitive bidding.
Two national tendering companies have been engaged to provide assistance in the
34
6. Contractors will undertake civil works and the supply and installation of equipment. Depending on the technical and managerial capability of the individual project sponsors, the FGD facilities will be supplied either by a contractor with sole responsibility (including detailed design, supply and installation, commissioning) or by several suppliers with respective responsibilities for specific package(s). In the latter case, specialized design institutes and contractors will be hired to conduct detailed design and installation, while the subproject sponsor will take the overall responsibility for interfacing and commissioning. Under either case, specialized supervision engineering firms will be employed to assist in construction management. Training will be provided to plant operators for operation and maintenance of the FGD facilities and the continuous emission monitors (CEM) through the TA Component.
7. The resettlement implementation for Shandong FGD Project will be mainly carried out by subproject PMOs along with relevant city government agencies. The provincial PMO will be responsible for coordination and guidance. To ensure successful resettlement implementation, a Resettlement Leading Group (RLG) will be established in each project city. The RLG consists of officials from relevant city governments and project PMOs. Its main responsibility will be to strengthen the leadership of the project, formulate resettlement policies, smooth the resettlement implementation, and coordinate among different government departments. Under the RLG, a resettlement unit within each PMO will be set up, which will be responsible for planning and implementing the Resettlement Action Plan (RAP). Their main responsibilities include: assisting with site survey; keeping records; organizing consultation and community participation; developing and implementing the RAP; managing and allocating the resettlement funds; training resettlement staff at county and township levels; signing compensation agreements with affected families and villages; and receiving and responding to grievances from the resettlers. In each affected township, a resettlement working team will be established, which will work closely with the city resettlement offices for carrying out land acquisition and resettlement for these power plants.
Prqject Organizational Chart
35
Annex 7. Financial Management and Disbursement Arrangements CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Executive Summary
1. The Financial Management Specialist (FMS) has conducted an assessment of the adequacy of the project financial management system of the Shandong Power Plant Flue Gas Desulfurization (FGD) Project. The assessment, based on guidelines issued by the Financial Management Sector Board on November 3, 2005, has concluded that the project meets the minimum Bank financial management requirements, as stipulated in BP/OP 10.02. In the FMS’ opinion, the project will maintain financial management arrangements acceptable to the Bank and, as part of the overall arrangements the borrower has in place adequate mechanisms that can provide reasonable assurance that the proceeds o f the loan will be used for the purposes for which the loan was granted. Financial management risk i s the risk that World Bank loan proceeds will not be used for the purposes intended and i s a combination of country, sector and project specific risk factors. Taking into account the risk mitigation measures proposed under the project, the FM risk rating proposed for this project during the appraisal stage i s modest.
2. Funding sources for the project include Bank loan and counterpart funds. Bank loan proceeds will flow from the Bank into a designated account (DA) to be set up at and managed by Shandong Provincial Finance Bureau (SPFB), to various project implementing entities (PIEs) and finally to contractors or suppliers. The Bank loan agreement will be signed between the Bank and the People’s Republic of China through i ts Ministry of Finance (MOF), and onlending agreements for the Bank loan will be signed between MOF and the Government of Shandong Province through SPFB, then between SPFB and various PIEs. Counterpart funds will include equity contributions and local commercial bank loans.
3. No outstanding audits or audit issues exist with any of the implementing entities involved in the proposed project. However, the task team will continue to be attentive to financial management matters during project supervisions.
Audit Arrangement
4. The Bank requires that project financial statements be audited in accordance with standards acceptable to the Bank. In line with other Bank financed projects in China, the project will be audited in accordance with International Auditing Standards and the Government Auditing Standards o f the People’s Republic of China. The Shandong Provincial Audit Office has been identified as auditors for the project. Annual audit reports will be issued by the above audit office and subject to reviews by the China National Audit Office (CNAO). The Bank currently accepts audit reports issued by CNAO or provincial/regional audit bureaudoffices for which CNAO i s ultimately responsible.
36
Audit Report Project financial statements
Funds Flow and Disbursement Arrangements
Submitted by Due date Provincial PMO (hosted by SPEPB) year
June 30 of each calendar
6. Funds flow for the Bank loan will flow from a designated account (DA) to the PIEs and finally to contractors and suppliers. The DA will be established and managed by SPFB. The authorized allocation o f the DA will be discussed and determined between the Bank and borrowers during project negotiation. The fwnds flow i s as follows:
World Bank
Direct payment I Contractors/ - Suppliers PIES MFB, if
applicable - DAatSPFB -+
- PIES
7. SPFB will be directly responsible for the management, monitoring, maintenance and reconciliation of the DA activities of the project. Withdrawal applications required for Bank disbursements will be prepared and submitted by respective PIEs through MFB if applicable, then approved by SPEPB and finally to SPFB for final verification and consolidation before sending to the Bank for fwrther disbursement processing. The flow of the withdrawal application i s as follows:
World Bank Approved Approved Approved byMFB,if - bySPEPB - by SPFB .__*
applicable
8. domestic commercial banks.
Counterpart funds will include equity contributions from PIEs and loans from
9. The Bank loan would be disbursed against eligible expenditures as in Table 7.2.
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Table 7.2: Disbursement Percentage to Be Financed
Amount o f the Loan Allocated
(US$) 49,125,000
14,962,500 9,225,000
14,962,500 9,975,000
750,000
Category (1) Civil works, Goods
(a) Huangtai (b) Laiwu (c) Lubei (d) Yantai Bajiao
(2) Consulting services, training,
Percentage of Expenditures to be financed
100%
100% workshops, study tours
(3) Front end fee Total
Civil Works Goods Firm Consultant Individual Consultant Training
5,000,000 500,000 200,000 50,000
Al l
125,000 50,000,000
Expenditure Category Civil Works Goods Firm Consultant Individual Consultant
10. commitment are al l available for the project.
Four disbursement methods: reimbursement, advance, direct payment and special
Contracts M o r e than US$ Equivalent 5,000,000 500,000 200,000 50,000
1 1. For expenditures against contract amounts indicated in Table 7.3, Statements o f Expenditure (SOEs) will be furnished as supporting documentation to request reimbursement and reporting eligible expenditures paid from the DA
Table 7.3: Use o f Statements o f Expenditure
I Contracts Equivalent or Less than US$ Ea uivalen t I
12. For contract amounts subject to the Bank prior review as indicated in Table 7.4, the l ist of payments against the contracts, and records evidencing eligible expenditures, for example, copies of receipts, supplier invoices, will be furnished as supporting documentation to request reimbursement and reporting eligible expenditures paid from the DA.
Table 7.4: Disbursement against Contracts
38
Financial Management and Reporting Requirement
Risk Assessment and Mitigation
13. during the assessment:
The following risks with corresponding mitigating measures have been identified
Table 7.5: Summary Risk Assessment Risk
Inherent Risk Country level
Entity Level
Project Level
Control Risk Budgeting
Accounting
Risk Rating
Modest
Modest
Low
Modest
Modest
Incorporated Risk Mitigating Measures
See the following mitigating measures utilized in the project. Legal and institutional framework i s acceptable and current PFM systems are functioning reasonably well. Since this project will be implemented by several PIES, monitoring of compliance with PFM and Bank procedures will be important. Various level finance bureaus and PMO involvement will mitigate some of these risks. In addition, the Bank will work with PIES to strengthen their financial management knowledge and capacity. This project will be implemented by several PIES in various cities. Although all PIES are new to Bank financed projects, they are large and fully commercialized companies. They have strong financial management capacity and well-established financial management procedures and practice. To further mitigate risk at the project level, a well designed training session will be provided to SPEPB and PIES during the project launch workshop to understand Bank’s requirements.
The FMS will work with the SPEPB on project budgeting, execution and monitoring. Accounting policies and procedures are already in place. The Circular # I 3 has been issued by MOF and adopted for all World Bank financed projects. Necessary training will be provided to the accounting staff to improve their knowledge and qualifications.
Conditions of Negotiations, Board or
Effectiveness
39
Rating Incorporated Risk
Mitigating Measures
Although existing internal controls are in place at SPEPB and PIEs, they are not specifically focused towards the project activities. Therefore, disbursement documents will be reviewed by finance bureau at various levels to ensure compliance. The task team will ensure that mechanisms will be in place to ascertain Bank loan and counterpart funds released to the ultimate beneficiaries on a timely basis and avoid a bottleneck in disbursements. Additionally, SPFB i s very experienced with Bank-financed projects. The format and content o f financial statements have been stipulated by MOF. SPEPB will use them for project financial reporting. The external auditor, Shandong Provincial Audit Office, has extensive experience with previous Bank projects.
Control Risk
Control
Conditions of Negotiations, Board or
Effectiveness
FundsFlow
Financial Reporting
0 Auditing
LOW
Low
Low
14. modest. The FMS will monitor the project FM risk during project implementation.
Therefore, the overall FM risk rating of this project at the appraisal stage i s
Strengths and Weaknesses
15. Strengths. With significant experience in managing and implementing Bank financed projects, Shandong province, as a whole, has strong institutional capacity for preparation and implementation of Bank financed projects. SPFB has been managing several Bank-financed projects in urban environment and agriculture areas and has accumulated extensive experience in financial management and disbursement. All PIES are commercial entities with solid financial management experience. This will benefit the implementation of this project.
16. Weaknesses and Action Plan. SPEPB i s relatively new to Bank-financed projects and all PIEs do not have experience in Bank-financed projects. Training will be held during the project launch workshop on project disbursement and financial management.
Implementing Entities
17. A Project Leading Group (PLG) has been established at the provincial level to provide overall guidance and coordination. The PLG i s headed by the Provincial Vice Governor in charge of environmental protection and comprises members from all related provincial departments. SPEPB has been designated as the main project implementation
40
agency by the Provincial Government. A Project Management Office (PMO) has been established within SPEPB to coordinate the project preparation and implementation, including subproject selection. The SPEPB i s also the key counterpart for the implementation of the TA Component.
The project organization chart i s listed below:
PLG
PMOBPEPB
4 subproject entities
Budgeting
18. Although the cost table has been prepared for the project and the project will prepare its annual implementing plan, the budgeting system within the project will need to be well maintained or monitored. The FMS will work with the SPEPB and related entities to improve their budgeting system during project implemenation.
Accounting
19. The administration, accounting and reporting of the project will be set up in accordance with the Circular #13: “Accounting Regulations for World Bank Financed Projects” issued in January 2000 by MOF. The circular provides in-depth instructions of accounting treatment o f project activities and covers the following:
0 Charts of accounts 0
0
0
Detailed accounting instructions for each project account Standard set o f project financial statements Instructions on the preparation of project financial statements
20. The above standard set o f project financial statements has been agreed between the Bank and MOF and applies to all Bank projects appraised after July 1, 1998 and includes:
0 Balance sheet 0 Statement o f sources and uses o f fund by project components 0 Statement of implementation of loan agreement 0 Statement of designated account 0 Notes to the financial statements
41
21. SPEPB will be managing, monitoring and maintaining the project accounting records and will be responsible for preparing project financial statements and sending these to the Bank for review and comments on a regular basis. Original supporting documents for project activities will be retained by the PIES.
22. Adequate project accounting staff with educational background and work experience commensurate with the work they are expected to perform i s one of the factors critical to successhl implementation of project financial management. Based on discussions, observation and review of educational background and work experience of the staff identified for financial and accounting positions in the implementing entities, the task team note that the financial staff are qualified for the work they are expected to assume.
23. SPEPB will manually record and maintain the project accounting books. The task team will monitor the accounting process especially during the initial stage to ensure that complete and accurate financial information will be provided in a timely manner.
Internal Control and Internal Auditing
24. The project has established internal control procedures and policies, including approval and authorization controls, segregation of duties, clear staff functions, and safeguarding of assets. The hnds flow will be arranged and monitored through the finance bureau channels and will include their substantive review.
25. Each finance bureau has its own internal inspection division, which will function as the internal audit for this project, by conducting compliance and transaction oriented examinations on regular basis. During project implementation, the FMS will review their project examination reports and determine whether the Bank can rely on their work.
Financial Reporting
26. and the project will follow these documents.
The related accounting policy, procedures and regulations were issued by MOF
27. There i s no formal independent Internal Audit department for the project. However, this will not have an impact on the project’s financial management as SPFB and SPEPB’s management and monitoring and annual external audits will serve as the mechanism to ensure that financial management controls are fimctioning appropriately.
Conditionality
28. There are no additional financial covenants proposed by the FMS other than the standard financial covenants (for example, maintaining project accounts in accordance with sound accounting practices and audit requirement), as described in the legal document.
42
Supervision Plan
29. The supervision strategy for this project i s based on i ts FM risk rating, which wi l l be evaluated on a regular basis by the FMS and in consulation with the relevant task team leader.
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Annex 8: Procurement Arrangements
CHINA: Shandong Power Plant Flue Gas Desulfurization Project
General
1. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004 and the provisions stipulated in the Legal Agreements. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually, or as required, to reflect the actual project implementation needs and improvements in institutional capacity.
2. Procurement of Works: Works procured under this project would include: civil works and equipment installation of FGD facilities in Huangtai Power Plant, and civil works of FGD facilities in Yantai Bajiao Power Plant. Procurement will follow National Competitive Bidding (NCB) and post qualification procedures, using the Model Bidding Documents (MBD) issued by MOF in May 1997 (and agreed with the Bank).
3. Procurement of Goods: Goods procured under this project would include: (a) flue gas systems, SO2 systems, electrical systems, and utility systems of FGD in Huangtai Power Plant, Laiwu Power Plant, and Yantai Bajiao Power Plant (all the three plants are under the Luneng Group). Procurement will be conducted following the International Competitive Bidding (ICB) procedure using the Bank’s Standard Bidding Documents (SBD) for Supply and Installation of Plant and Equipment (June 2007), or SBD for Procurement of Goods (May 2007) or subsequent versions, or following NCB procedure, using the Model Bidding Documents (MBD) issued by MOF in May 1997 (and agreed with the Bank); (b) FGD systems in Lubei Power Plant. Procurement will follow ICB turnkey procedure using the Bank’s SBD for Supply and Installation of Plant and Equipment (June 2007) or subsequent version; and (c) air quality monitoring instruments will be procured through NCB or Shopping Procedures using Quotation Requesting Documents satisfactory to the Bank. In addition, the procedures to be followed for NCB shall be those set forth in the Law on Tendering and Bidding of the People’s Republic of China promulgated by Order No. 21 of the President of the People’s Republic o f China on August 30, 1999.
Procurement of Nonconsulting Services: N A
4. Selection of Consultants: Short l is ts of consultants for services estimated to cost less than US$300,000 equivalent per contract (if any) may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 o f the Consultant Guidelines. The TA component would include the following activities: capacity building
44
and enhancement in emission monitoring and regulation enforcement; technical and managerial training; and development of related regulations, procedures and policies. Each activity will include multiple contracts with either firms or individuals. No large contracts (US$200,000 or above) are expected. CQS procedures will be followed for consultant (firm) selection for contracts below US$200,000.
Operating Costs: NA
Others: NA
5. The procurement procedures and SBDs for ICB and MBD for NCB to be used for each procurement method, as well as model quotation requesting documents and contract documents for Shopping procedure are presented in the Project Procurement Manual.
Summary of Procurement Assessment
6. Procurement activities will be carried out by each power plant or entity and the procurement agents coordinated by the provincial PMO. The procurement staff has been assigned in each power plant or entity and Ms. Zhang Chen in the provincial PMO i s responsible for procurement coordination.
7. An assessment of the capacity of the Implementing Agencies to implement procurement actions for the project was carried out by Dawei Yang in June 2006 and completed in September 2006. The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement in the power plants or entities and the provincial PMO. The procurement agents have been selected after the assessment.
8. The key issues and risks concerning procurement for implementation of the project have been identified as less experience on the Bank procurement policy and procedures of the procurement staff; quality of bidding documents under turnkey approach may be low as both procurement agent and project entities have a lack of experience with turnkey approach. The corrective measures which have been agreed include: preparation and distribution o f procurement manual; training of procurement staff by attending workshops and seminars; and expert review of bidding documents, particularly the technical specifications. The Bank procurement specialist based in Beijing will provide guidance on a regular basis. Initial procurement training has been provided during the project preparation and more training will be provided as needed.
9. The overall project risk for procurement i s assessed as average.
45
Procurement Arrangements
General
10. The Borrower has developed a procurement plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team in November 2006 and i s available at provincial PMO office in Jinan, Shandong. I t will also be available in the project’s database and on the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually, or as required to reflect the actual project implementation needs and improvements in institutional capacity.
Goods, Works, and Nonconsulting Services
(a) List o f contract packages to be procured following ICB, NCB and Shopping: (No prequalification and domestic preference for works under the project)
Table 8.1: Procurement Arrangements-Goods and Civil Works I 2
Re$ no. Contract (description)
LB 1 Lubei FGD turnkey Lubei Power Co. Ltd
Yantai Bajiao Power Plant BJ1 Bajiao FGD
BJ2 Bajiao Electrical Supply
BJ3 Bajiao FGD civil works Bajiao Total
Huangtai Thermal Power Plant H T I Huangtai Flue Gas
system HT2 Huangtai SO2 System
HT3 Huangtai FGD utility 1
Equipment
HT4 Huangtai FGD Civil Works Huangtai Total
15 NCB equipment contracts
Laiwu Thermal Power Plant
3
Estimated cost (CNY million)
168
64.6
5
12
81.7
23.0
24.2
7.9
62.2
117.4
25
4
Procure- ment
method
ICB Goods
ICB Goods ICB
Goods NCB
Works
ICB Goods ICB
Goods ICB
Goods NCB
Works
NCB
5 Review by Bank (prior/ POSO
Prior
Prior
Prior
Post
Prior
Prior
Prior
Prior
2 Prior 13 Post
6 7 Estimated
Expected bid- cost opening date (US$ mill ion
(yeadquarter) equivalent)
200812 21
200814 8
200814 0.6
200814 1.5
10.1
200813 2.9
200813 3 .O
200813 1 .O
200813 7.8
14.7
200714 3.3
(b) ICB Goods contracts estimated to cost above US$0.5 million per contract and NCB Works contracts above US$5 million, the first NCB and Shopping contract
46
for each category (regardless o f value), and a l l direct contracting (if any) wi l l be subject to prior review by the Bank. A l l Goods contracts above US$0.5 million, Works contracts above US$15 million (not anticipated under the project) wi l l be procured through ICB procedures. All Goods contracts between US$O. 1 million and US$0.5 million, Works contracts between US$0.2 million and US$l5 million wi l l be procured through NCB procedure. All Goods contracts below US$O. 1 million, Works contracts below US$0.2 million (not anticipated under the project) wi l l be procured through Shopping procedure.
Consulting Services
Ref. No. T A l
TA2
(a) List o f consulting assignments and training:
Description o f Assignment
Capacity building and enhancement in emission monitoring and regulation enforcement Technical and managerial training
Table 8.2: Procurement Arrangements-Consultin
7
TA3 Development of related regulations, procedures and r olicies
Estimated
400,000 cost (US$)
300,000
300,000
- 4
Selection Method Multiple
contracts o f individuals & firms (CQS)
Multiple contracts of
individuals & firms (CQS)
Multiple contracts o f
individuals & firms (CQS)
5 Review by Bank (Prior I Post)
TOR for prior
review
TOR for prior
review
TOR for prior
review
Services 6
Expected Proposals
Su bmission Date To be
determined
To be determined
To be determined
7
Comment Multiple contracts
Multiple contracts
Multiple contracts
(b) Consultancy services estimated to cost above US$200,000 for a firm and US$50,000 for individual consultant per contract and single source selection o f consultants (firms) for assignments regardless o f cost wi l l be subject to prior review by the Bank. All contracts above US$200,000 for a firm shall follow QCBS/QBS procedures and wi l l be advertised on United Nations Development Business on-line and on dgMarket in addition to local newspaper(s).
(c) Short l ists o f consultants for services estimated to cost less than US$300,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
(d) The detailed design o f the TA component i s being finalized. The Procurement Plan wi l l be updated accordingly.
47
Bank Prior Review Thresholds
Expenditure Category
Table 8.3: Prior Review Thresholds
Contract Value Procurement Contracts Subject to Prior Threshold (US%’OOO) Method Review (US%’OOO)
Goods (including supply & installation contracts)
>500 ICB 500 (all ICB contracts)
NCB First NCB contract only 100-500
4 0 0
N A
Shopping First Shopping contract only
Direct Contracting A l l contracts ( i f any)
<200
Works (including equipment installation)
I Shopping Firs contract regardless o f value
~
215,000 ICB 5,000
4 5 , 0 0 0 NCB 5,000; first NCB contract I
regardless o f value
Consultant services
I N A I sss I A l l contracts I
N A Direct Contracting A l l contracts (if any)
2200 QCSS, QBS 2200 for f i rms
<200 CQS
I I N A I IC 250 ~~
ICB: International Competitive Bidding NCB: National Competitive Bidding QCBS: Quality and Cost Based Selection QBS: Quality Based Selection CQS: Selection Based on Consultant’s Qualifications IC: Individual Consultants SSS: Single Source Selection
48
Annex 9: Economic and Financial Analysis
CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Economic Analysis
1. Each subproject was subjected to an examination o f i t s economic and financial feasibility. To the extent possible, both direct and external economic benefits and costs were identified and quantified. Benefit proxies identified in the economic analysis are the avoided environmental damage costs o f reduced SO, emissions and the sales o f by- products. The avoided pollution levy on SO, emissions and the incremental electricity tariff revenues for power plants with operational FGD systems constitute the major financial benefits to the project companies. Both economic benefits and costs (including an allowance for physical contingencies) were valued at 2006 price levels.
Economic Costs
2. The main economic costs are the FGD installation and operation costs which include construction capital costs, operations and maintenance costs (O&M), as well as the external costs o f operating FGD systems. Capital cost covers the cost o f purchasing and installing FGD equipments, the cost o f land acquisition and any associated resettlement if required by a subproject. O&M costs have been calculated for the project period up to 20 years following commissioning. Both fixed capital cost and O&M cost have been adjusted to remove the effects o f inflation, duties, and taxes. The power used to operate FGD (1-2 percent o f gross output) represents a real economic cost and therefore i s taken into account in the analysis.
3. While the operation o f a FGD facility significantly reduces SO, emissions, for two reasons it marginally increases greenhouse gas (GHG) emissions. The first i s related to the stoichiometry o f the limestone process (which produces CO, as a byproduct), but which i s trivial in comparison to the overall carbon balance, and can therefore be ignored. The second, which reduces the ERR by about 1.1 percent when carbon i s valued at US$lO/ton CO;! (which corresponds to the current value o f typical carbon finance transactions), i s related to the additional power that i s required to operate FGD systems.
Economic Benefits
4. The principal benefit o f FGD i s the avoidance o f environmental damage costs from the reduction o f SO, emissions and other air pollutants. This includes the avoided damage to human health, species, buildings, farming and forestry. SO, i s a primary contributor to acid rain. I t has been well established that acid air pollution causes respiratory problems in humans, especially children, the elderly and people with asthma. I t has also been widely observed that acid rain causes damage to natural ecological systems (such as forestry and river system), agricultural production, and property.
5. Valuing external environmental damage costs i s a challenge, however. There are a number o f studies that quantify environmental costs o f SO, in monetary terms in
49
China, but none of them i s specific to Shandong. The valuation of environmental benefits follows closely the economic analysis o f the China Renewable Energy Scale-up Program (CRESP), which was supported by the World Bank. The unit costs of TSP, SO, and NOx used in CRESP are presented in Table 9.1. One may note that a significant portion of the environmental damage costs of power generation in Shandong occur in other (nearby) provinces, as a consequence of atmospheric transport.
Table 9.1: Damage costs, US$/ton emissions in Shandong (at 1999 price levels)
Total damage Y/ton Damage cost YO of damage cost( l), US$/ton in Shandong costs in
US$/ton Shandong TSP 1,332 10,656 270 20.3 so2 311 2,488 54 17.5 NOx 335 2,680 69 20.7 (I) Including damage costs in Shandong, Hebei, Henan, Beijing, Tianjin, and Jiangsu Source: World Bank, CRESP Economic Analysis, Vol 1,2002
6. Compared with the estimates of other studies (shown in Tables 9.2 and 9.3) on the environmental impacts o f SO, in China, the CRESP estimates are lower and more conservative. For example, Table 9.2 shows the damage cost estimates for SO2 derived by Zhou et. al. (1999).
Table 9.2: Damage estimates for SOz by region in China, in Y/ton
Low 2500 2800 1300 1500 3900 3300 1700 North Northeast West Southeast South East Middle
High 3000 3000 1500 6000 8000 8000 6000 Source: Zhou Fengqi and Zhou Dadi, and others, China Long- and Mid-Term Energy Strategy, China Planning Press, 1999.
7. A World Bank study on acid rain in Hunan Province3 derived the damage cost estimates shown in Table 9.3. These amounts are based on estimates of crop and forest damage because o f decreased yields, and human health effects based on both the human capital approach, and the willingness-to-pay approach. The damage cost i s about 20 percent greater than CRESP (for 1999/2000).
Table 9.3: SOz Damage cost estimates for Hunan Province 1995 2000 2005 2010 2015 2020
Ylion 2,384 3,022 3,912 4,884 5,736 6,595 Annual rate o f increase 4.9% 5.3% 4.5% 3.3% 2.8% CRESP (Table 1.3) 2,488 Source World Bank/ESMAP, 2003, Zhou Fengqi and Zhou Dadi, and others, China Long- and Mid-Term Energy Strategy, China Planning Press, 1999
World BanWSMAP, China: Air Pollution and Acid Rain Control: The case of Shijiazhuang City and the Changsha Triangle Area, October 2003.
50
8. These values increase over time because damage costs increase as per capita GDP increases. Shandong presently has one o f China’s highest annual GDP growth rates (15 percent in 2005), second only to Guangdong, so the increases in damage costs hypothesized in the Hunan study are quite conservative, even given that 15 percent GDP growth rates are very unlikely to be sustained over the entire project lifetime. In this study it i s assumed that the baseline damage cost estimates escalate by a constant 3.5 percent per year.
9. The CRESP damage cost estimates are at the low end of the range o f current damage cost estimates, and therefore provide a conservative estimate o f economic returns. They were adopted in the economic analysis of the FGD project.
10. The CRESP values have the advantage that they take into account the location o f the damage cost reductions, so the beneficiaries are identified more clearly in the analysis. This shows that a significant portion o f the damage costs of power generation in Shandong i s incurred in nearby provinces as a consequence of atmospheric transport (particularly in Hebei, Henan, Beijing, Tianjin, and Jiangsu). Only about 17 percent of the damage cost i s in Shandong itself. The damage cost from sulfur dioxide in Shandong i s US$54 per ton according to the result from CRESP study. Obviously, Shandong benefits from SO2 emission reductions in these other provinces.
1 1. In addition to the environmental benefits (which account for the bulk of the total present value of the typical benefit stream), a second economic benefit derives from the production o f gypsum. The economic value i s assessed at the current market price (which being in high demand in Shandong, i s unlikely to fall in price as a result of most of the subprojects offering gypsum for sale).
Evaluation
12. The economic values of the project i s the sum of the benefits of the avoided health damage cost and the sales of by-products, less fixed capital cost, O&M costs and the damage from GHG generated by the project. The aggregate economic costs and benefits over years were calculated and summarized by subcomponent, as shown in Table 9.4. The aggregate ERR of the entire project i s 24.5 percent.
Table 9.4: Aggregate economic returns
Huangtai 19.9% 159 -77 -46 -31 30 32 34 36 38 40 43 45 Lubei 23.5% 234 -80 -48 -32 42 44 46 48 50 53 55 58 Bajiao 20.1% 120 -54 -33 -22 21 22 24 25 27 29 31 33 Lai Wu 32.1% 423 -77 -46 -31 63 66 69 72 76 79 83 86 Total 24.5% 935 -289 -173 -116 156 164 173 182 191 201 211 221
13. These high economic returns reflect the high environmental cost of uncontrolled emissions. The ERR by component varies from 20 to 32 percent, and all subprojects
5 1
have their ERR above the hurdle level acceptable to the GOC (for example, the 10 percent discount rate for investment projects recommended by NDRC in 2002) and therefore they are economically justified for investment. Sensitivity analysis further shows that the favorable economic returns are robust given the range of uncertainty in key input assumptions.
Sensitivity Analysis
14. Given the uncertainty of some parameters used in the cost-benefit analysis, sensitivity analysis i s essential and, therefore, has been conducted for a few components to test the robustness of the results of the economic analysis. The analysis includes risk assessments on key variables such as construction cost, O&M cost, sulfur content in coal, sulfur reduction efficiency of FGD, and gypsum price. The sensitivity analysis shows that the switching values for sulfur content of the coal-the most important determinant of ERR-all l ie below the lowest sulfur coal available in the region. Therefore, the project i s sound even if there were major changes in the allocation of coals to the different subprojects. Similarly, the switching values for construction cost overruns show very high and unlikely values, and returns are also robust with respect to lower than expected SO, removal performance (with switching values typically less than 40 percent). The estimated returns are robust with respect to uncertainties in key input assumptions.
15. The ERR i s also robust with respect to the value assigned to C02 emissions. The baseline ERR falls from 24.5 percent to 23.3 percent when carbon i s valued at $lO/ton C02, and to 21.8 percent valued at $20/ton.
Impact on the Poor
16. Since the FGD project will cause a very small increase in the electricity tariff, the impacts of tariff increases on low income groups were reviewed. The project may potentially affect poor households in two ways. The first i s the large improvement in air quality, leading to significant benefits to health and longevity. The second i s the very small increase in the electricity tariff (consequent to the Y 0.015 per kWh increase that generating projects with FGD can levy).
17. Estimating the impact on the poor i s difficult because of the lack of billing frequency information, the uncertainty about the share of total residential electricity consumed by the poor, and the lack of detailed survey information that would reveal what proportion of the poor have access to grid electricity. In general, it would be true that the poor consume very l i t t le electricity, in part because many have no access, and those that do have access consume only small amounts.
18. According to the Shandong Poverty Alleviation Office, there are 2.4 million people living below the poverty threshold of Y 1,000 per capita income per year. Three percent of households are assumed to fall in this poverty category. I t i s assumed that a poor household consumes 15 kWh per month, while that of the non poor i s 80
52
kWh/month. The overall average tariff increase is Y 0.0016 per kWh (0.29 percent of the average residential tariff of Y 0.5469 per kWh). The calculation of the tariff impact on the poor i s shown in Table 9.5.
Table 9.5: Impact o f tariff increases on the poor
Consumption [KWh/HH/month] 15 80 [kWh/year] 180 960
Households [million HH] 0.65 21.75 22.4 total consumption [GWh] 117 20883 21000 tariff increase [YikWh] 0.0016 0.0016
Total [Ym] 0.3 32.8 33.0 [Y/year] 0.3 1.5
19. The impact of tariff increases on the poor i s shown in Table 9.5. Of the total Y33 million annual tariff impact on the residential sector, the poor account for only Y 0.3 million in aggregate, or an almost immeasurable Y 0.2 per household per year. It i s concluded that the tariff impact on the poor i s negligible. This project i s not a poverty alleviation project (that would direct benefits disproportionately to the poor). However, one should be confident that there i s no negative impact on the poor by the project.
Financial Analysis
20. Financial analysis was conducted for each project component to check the financial viability of the project. Different from economic analysis, the project financial analysis assesses the impacts of the project on the financial flows of project entities rather than economic returns to the entire society. This section summarizes the results of financial analysis done based on the feasibility studies of each component prepared by project entities; that is, power companies. Data used in this report were mainly provided in the feasibility study reports. Al l major assumptions are consistent with the current Chinese financial and taxation regulations as well as common practices in the project areas. The analysis uses constant 2006 prices and takes into account the changes in taxes, pollution fees, and electricity tariffs which affect the financial flows of project entities.
Financial Revenues
21. The revenue streams arise from project implementation: (a) the avoided pollution levy payments for SO, emissions, at a rate o f Y633/ton SO, in Shandong, (b) the sale of by-products produced in the desulfurization process (for example, gypsum in the case of limestone FGD at the selling price of Y 40 per ton), (c) the incremental power tariff revenue for electricity generated at plants with FGD which represents a price increment of Y 0.01 YkWh (about 5 percent of the typical generation price of Y 0.25-0.3 per kWh).
Financial Costs
22. Financial costs are those recorded in the books of project entities as expenses. They consist of (a) fixedkapital cost o f retrofit (construction) expense for an existing project including the tax to the government, and (b) variable operational and
53
maintenance (O&M) cost such as labor cost, water cost, limestone/magnesium cost, solid waste disposal cost, and the extra energy used to operate a FGD system (typically 1-2 percent, as forgone revenue loss, o f the amount of total power that i s generated and can be sold). Corporate tax rate i s assumed at 33 percent, without any tax concession. Local taxes such as education surcharge and urban maintenance tax are levied as a percentage of value added tax (VAT). VAT i s calculated on the recognized revenue to provide the basis for the local tax calculation. However, since the company itself can be considered to be VAT neutral, VAT itself does not appear in any of the other tables of the model. Depreciation i s taken as straight-line over 15 years with 5 percent residual value.
Financial Returns and Evaluation Results
23. The financial returns can be calculated in the following two ways. The first i s to measure the financial rate of return (FRR) to the investor’s equity. In the stream of cash flows for which FRR i s calculated, the negative flows during the construction years are limited to the contributions made by the developers; during the operating phase, the (negative) cash flows reflect debt service payments actually made (which are a function of the financial structure, loan terms, and interest rates). Al l other things being equal, the smaller the equity contribution, the higher the FRR. This i s the definition of FRR that i s used by the project developers.
24. The second i s the FRR independent of financial structure. This i s the way that the World Bank traditionally evaluates the financial returns for public sector projects. In this calculation, the entire investment appears as negative entries in the cash flows during the construction period (rather than as the costs of debt service during operation). The assumption i s that the financial cost of capital i s the same as the discount rate used in the economic analysis (and indeed differs from the economic analysis only to the extent of taxes, duties and transfer payments). In general, the FRR independent of capital structure will be lower than that of the FRR to the developer’s equity.
25. Both approaches were used in the financial analysis. But only the FRR calculated from the second approach are presented below. Table 9.6 shows that the FRR varies by subproject from 10 percent to 20 percent, and all are satisfactory. The FRR to the developers’ equity shows that the returns are above the average cost of capital.
Table 9.6: Estimated financial returns FRR (%)
Huangtai 10 Lubei 20 Bajiao 11 Lai Wu 12
26. The detailed results o f financial analysis by project component can be found in the full report of the project. As an illustration the results for Lubei are briefly summarized below
54
Lubei Subproject
Proposed Process Total Financial Flow [Y million]
Total NPV Revenue Total NPV Cost = Total NPV Financial Flows
FRR (to equity) Financial flows (independent o f financial structure,
27. The Lubei subproject proposed by the Shandong Lubei Power Generation Co. Ltd. has two FGD systems for the anticipated 2 X 300 MW coal-fired units. The wet limestone process has been proposed for FGD. Gypsum from the FGD i s intended to be used for production o f sulfuric acid, while fly ash will be sold for cement production.
Limestone FGD
245.6 214.4
31.2 19.9% 2.8
FRR (to financial structure) 12.3%
55
Table 9.8: Lubei Developer Cash Flows
N PV 1-21 1-11 PJ 111 121 131 141 151 f l 2005 2006 2007 2008 2009 2010 2011 2012 2013
Revenues tariff increment sales ofgypsum
avoided emissions tax total revenue perron SO2 removed tariff increment gypsum
[ I O ] emissions tax [Ill total [I21 [I31 Costs [14] l k e d O&M costs [ I S ] variable O&Mcosts [I61 major overhauls [I71 local taxes [I81 solid waste disposal cost [I91 water [20] limestone [21] elecricity [@foregone revenue] [22] total FGD operating cost [23] perron SO2 removed
(251 debt service principal [26] debt service interest [27] construction uses ofJunds [28] consauction disbursements [29] IDC (capitalised) [30] construction sources offunds [31] debt: local I: Yuan [32] debt: local2: Yuan [33] debt: FOREX I: P [34] deb/: FOREX 2: S [35] Cqitdsubsidy [36] total costs [371 [38] total financial flows, before tax [39] income tax [401 financial flows, a f t e r tax
~241
0.015 Wmllion] 40 IVitonl
100% IYmUionl 633 p’nillion]
p’nillion]
Iv/@nl WtonI luiW WbnI
4.8 VniUion] p’nillion]
0.0 nill lion] pinillion]
0 [Ymllion] 7 p’nillion]
80 NrnUionl
196.5 46.4 46.4 46.4 46.4 46.4 46.4
8.5 2.0 2.0 2.0 2.0 2.0 2.0 40.6 9.6 9.6 9.6 9.6 9.6 9.6
245.6 0.0 0.0 0.0 58.0 58.0 58.0 58.0 58.0 58.0
3064 3064 3064 3064 3064 3064 133 133 133 133 133 133 633 633 633 633 633 633
3830 3830 3830 3830 3830 3830
-20.2 0.0 0.0
-3.5 0.0
-16.3 -9.3 . .
0 25 p’mllion] -46.5 p’mllion] -95 8 ly ion1
-4.8 -4.8 -4.8 -4.8 -4.8 -4.8 0.0 0.0 0.0 0.0 0.0 0.0
0.0 0.0 -0.8 -0.8 -0.8 -0.8 -0.8 -0.8 0.0 0.0 0.0 0.0 0.0 0.0
-3.9 -3.9 -3.9 -3.85 -3.9 -3.9 -2.2 -2.2 -2.2 -2.19 -2.2 -2.2
-11.0 -11.0 -11.0 -11.0 -11.0 -11.0 -22.6 -22.6 -22.6 -22.6 -22.6 -22.6
-1493 -1493 -1493 -1493 -1493 -1493
p’mllion] -32.0 0.0 0.0 0.0 -8.8 -8.8 -8.8 -8.8 -8.8 -8.8 P(mLon1 -15.0 0.0 0.0 0.0 -6.3 -5.8 -5.3 -4.8 -4.3 -3.9
rYniUion1 -115.9 -87.8 -52.7 -35.1 p’mllion] 0.0 0.0 0.0 0.0
5.5% VniUionl 75.3 57.1 34.2 22.8 6.8% VniUionl 0.0 0.0 0.0 0.0 0.0% VniUionl 0.0 0.0 0.0 0.0 0.0% p’mllion] 0.0 0.0 0.0 0.0
p’mllionl 0.0 0.0 0.0 0.0 Vnillionl -183.4 -30.8 -18.5 -12.3 -37.6 -37.2 -36.7 -36.2 -35.7 -35.2
VniUionl 62.3 -30.8 -18.5 -12.3 20.3 20.8 21.3 21.8 22.2 22.7
pmllionl 31.1 -30.8 -18.5 -12.3 14.2 14.5 14.8 15.2 15.5 15.8 IYmllionl -31.1 -6.1 -6.3 -6.4 -6.6 -6.8 -6.9
[41] FIRRnominal [ I 19.9% [42] independenr of c@td structure [43] total financial costs [Ymillioi -242.8 -88 -53 -35 -29 -29 -29 -29 -29 -30 [44] levelised costltonS02 [Y/tonS( 3786 [451 [%US/toi 458 1461 total financial flows lymilliol 2.8 -88 -53 -35 29.2 29.1 28.9 28.8 28.6 28.5
56
Financial Indicators of Power Plants
Power plant Lubei Bajiao Laiwu Huangtai
29. To assess the financial soundness and debt servicing capacity o f each power plant after the installation o f FGDs, financial analysis was carried out for each power and heat plant based on the latest feasibility studies prepared by the project sponsors. The results o f the analysis are provided in Table 9.9.
FRR (%) Payback period (years) 12.3 10.5 8.9 10.6 7.9 11.6 8.7 10.7
30. Table 9.9 shows that the FRR (independent o f the financial structure) o f the power and heat plant varies from 7.9 percent to 12.3 percent, all higher than the investors’ hurdle rate o f 6.0 percent. The payback periods o f the individual and heat plants vary from 10.5 years to 11.6 years, indicating sound financial viability o f all the power plants.
57
Annex 10A: Safeguard Policy Issues (Resettlement Aspects) CHINA: Shandong Power Plant Flue Gas Desulfurization Project
1. This annex i s based on Resettlement Action Plans (RAPs) prepared by two power plants under the Shandong FGD Project. They are drafted in accordance with the related laws and regulations issued by the People’s Republic of China, the SPG, and the provisions from the World Bank Operation Guideline on Involuntary Resettlement (OP4.12). The purpose of compiling these documents i s to develop action plans for the project affected people to ensure that they will benefit fiom the project, and improve or at least reinstate their living standard after resettlement.
Resettlement Impacts
2. The proposed Shandong FGD Project will finance FGD facilities for four power plants in Shandong Province. Two will be newly constructed power plants (Yantai Bajiao and Laiwu), and two will be new units within existing power plants (Huangtai and Lubei). For the two existing ones, construction of FGD facilities will be located within the existing power plants with no new land acquisition and resettlement. For the two new power plants, the construction of power plants, including FGD facilities will involve a certain amount of land acquisition and resettlement.
3. The Yantai Bajiao Power Plant i s located in Yantai Economic Technical Development District of Yantai Municipality. The power plant, including ash yard and special railway line, will acquire a total of 80.1 ha of land, affecting 12 villages in 2 subdistricts. The Laiwu Power Plant i s located next to the existing Laiwu Thermal Power Plant. I t will acquire a total of 20.5 ha of land for both power plant site and ash site. Al l of the area to be acquired belongs to Duixianmen Village in Gaozhuang Subdistrict in Laiwu City. According to the RAPs prepared by the two project PMOs, a total of 100.6 ha of land will be acquired for these projects of which 67.5 ha or 67.1 percent are farmland. The land acquisition will affect 13 villages, 3 townships and two cities. During project construction, another 27 ha or 405 mu of land would be occupied temporarily.
Table 10 (A). 1: Land Acquisition for Three New Power Plants Under Shandong FGD Project (mu)
Projects Permanent Land Of Which: Of Which: Temporary Land Of Which: Acquisition Farmland Orchard Occupation Farmland
Yantai 1,201 850 26 1 405 172
Laiwu 308 163 0 0 0
Total 1,509 1,013 26 1 405 172 Source: Three Project PMOs. (1 ha = 15 mu)
4. In addition to land acquisition, a total of 274 households and 743 persons will be physically relocated (Table 10 (A) 2). Al l of them are located in Duixianmen Village fiom Gaozhuang Subdistrict in Laiwu City. A total of 46,120 square meters of structures will be demolished. Most of them are privately owned houses. In addition, a range of
58
personal assets and farming facilities will also be affected during the construction of these power plants. Al l affected people will be compensated with replacement value or have property restored by the project sponsors under the resettlement programs.
Table 10 (A).2: Scope of Resettlement Impacts for Shandong FGD Project Projects Acquired Affected People by Relocated Households Affected Floor
Farmland (mu) land loss * (Affected Individuals) Spaces (m’)
Yantai 850 315 0 (0) 0 Laiwu 163 543 274 (743) 46,120
Total 1,013 858 274 (743) 46,120 Note: Here, number of affected people is also called number of people requiring economic rehabilitation, which is obtained by dividing the amount of farmland loss per capita in each affected village. Source: Three Project PMOS.
Social Economic Condition of the Project Areas
5 . According to the social economic survey, because there are no ethnic minorities among the 13 affected villages, the Bank Indigenous People Policy will not apply to the project. The two power plants are located in three different cities in Shandong Province. All o f them are considered to be relatively developed regions in the province, particularly in Yantai where per capita annual income reached Y 5,144 in 2005, which i s 31 percent higher than provincial average (Y 3,930). For Laiwu, per capita income in rural areas i s around Y 4,300, which is higher than the provincial average. Well-developed industrial activities and nonfarm opportunities are the main reasons for the relatively high income in the project cities.
6. According to the survey of project areas, most of the affected villages no longer rely on agricultural planting as their main source of income. The majority o f their income comes from non-farming sectors, such as transport activities in Laiwu, and various industrial jobs in Yantai. Given the small amount of income derived from the agricultural sector and the limited amount o f land acquisition among most of the affected villages (3.4 percent in Yantai), the land acquisition will have limited impact on the livelihood of the affected people. In Laiwu, land acquisition will account for 58 percent of the total land holding in Duixianmen Village. The loss of land will have limited impact on the income and livelihood of the Duixianmen villagers, because most of their current income comes from non-farming activities, such as working in Laiwu Power Plant and providing coal transport.
Legal Framework
7. legal basis for land acquisition and resettlement for the Shandong FGD Project.
National laws and regulations and provincial implementation measures form the
8. The national laws or regulations include: “Land Administration Law” (1998), State Council No. 28 Decree on Strengthening Land Acquisition Management (2004); while the provincial implementation measures include: “Shandong Provincial
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Implementation Measure of Land Administration Law” (1 999) and Shandong Provincial No. 5 1 Decree on “Readjustment of Annual Crop Value and Compensation Rates for Farmland Acquisition” (2004).
9. Under the law, the land compensation will be 6-10 times the average annual output value (AAOV) per mu (15 mu = 1 Ha.) in the past three years before land acquisition. The job compensation will be 4-6 times the average annual output per mu for each of the “affected people.” This i s determined by dividing the amount of acquired cultivated land by the existing ratio of per capita cultivated land for each affected village. By reducing the per capita cultivated land ratio, the job compensation could increase up to 15 times the average annual output. If the land compensation and job compensation s t i l l cannot guarantee the restoration of the farmer’s previous income, the total land and job compensation could be increased up to 30 times the average annual output value per mu in the past three years before acquisition. (Article 47)
10. According to Shandong Provincial regulations, the land compensation will be 8- 10 times the AAOV for farmland within urban planned areas, 6-8 times the AAOV for farmland outside urban plan areas, and 5-7 times the AAOV for most other rural land areas. (Article 25) The job compensation will be 6 times the AAOV for farmland, and 4 times the AAOV for most other rural land areas. (Article 26) The compensation for standing crops i s based on the production value of one season’s crops. Trees that can be replanted are compensated as replanting fees and young tree loss fees. Trees that cannot be replanted are to be compensated according to the related regulations. (Article 27)
11. Since 2004, to improve rehabilitation outcome for land loss farmers, special decrees were adopted in both national and provincial levels to increase compensation rates for cultivated land acquisition to at least 16 times the AAOV. No. 5 1 decree issued by the SPG further specified the basic value of AAOV for farmland, which ranged from Y 1,200 to Y 1,800 per mu based on different geographical areas. The compensation policies for the proposed power plants will be based on these laws and regulations.
Compensation Standards
12. In accordance with the legal requirements o f the Chinese Government and the policy of the World Bank, the principles of compensation and entitlements for the project include: 1) compensation and entitlements provided to affected people are adequate to at least maintain their pre-project standard of living, with the prospect o f improvement; 2) land temporarily occupied and the period of disruption are kept to a minimum; 3) all affected people, legal and illegal, are taken into consideration and accounted for; 4) the per capita land holding after land acquisition i s sufficient to maintain the previous livelihood standards; 5) where land allocation per capita i s not sufficient to maintain previous livelihood standards, other income generating activities are provided; 6) al l affected people are adequately informed on eligibility, compensation standards, livelihood and income restoration plans, and project timing; and 7) no land acquisition will take place prior to satisfactory compensation of the affected people.
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13. Following the above-mentioned law and regulations, and based on the analysis of replacement value of lost assets, a set of compensation standards has been proposed by each PMO and summarized in the RAP. For cultivated land, the compensation consists of three parts: (1) land compensation; (2) job compensation; and (3) green crop compensation. In Yantai, because there will be limited loss of farmland among the affected villages, the combined land compensation and job compensation was set at 16 times the AAOV. In Laiwu, given the relatively significant land loss and reduced land holding after land acquisition, the total compensation i s set at 23 times the AAOV. Green crop compensation i s set at one-season crop value or 50 percent of the AAOV with Y800 per mu in Yantai, and Y650 per mu in Laiwu. Based on these multiples and average annual yields in the project areas, the resulted cultivated land compensation i s as follow:
Table 10 (A).3: Compensation Standards for Cultivated Land in Shandong FGD Project Project AAOV Number of Multiples Green Crop Total Land
(yuadmu) for Land and Job Compensation Compensation (Yuan) (Yuan)
Yantai 1,600 16 800 26,400
Laiwu 1,300 23 650 30,550
Note; For Laiwu, the AAOV for vegetable land is set at Y 2,400 and total compensation as Y 56,400.
14. The compensation for orchards, based on provincial regulations, includes land compensation, job compensation and standing trees. In Yantai, the land and job compensation i s the same as cultivated land, and compensation for standing fruit trees i s set at Y 32,000 based on Y 400 per tree and 80 trees per mu, which i s much higher than that of farmland. The combined compensation i s set at Y 57,600 per mu which i s more than double the amount for farmland. For other rural land areas, following the provincial regulation, the compensation will be set at 10 times the AAOV of nearby cultivated land or Y 16,000 per mu in Yantai, and Y 13,000 per mu in Laiwu.
15. The property compensation consists of compensation for lost buildings, attached facilities, and a moving allowance. These compensation standards are mainly used for the relocation program for Laiwu Power Plant site, and are based on the replacement value of lost assets. House compensation, after consultation with affected villagers, was set at Y 550 per square meter for a concrete frame structure, Y 3 5 0 4 5 0 per square meter for a bricklconcrete structure, and Y 300400 per square meter for a brick/wood structure. A moving and transfer allowance was set at Y 200 per square meter, plus Y 10,000 per family for an early moving bonus, significantly higher than in the local regulations.
Resettlement and Rehabilitation Plan
16. The main objective for resettlement i s to improve, or at least restore the livelihood of the project affected people to their former standards, including their living condition, earning capacity, and income levels. For land loss farmers, based on consultation among affected communities, different rehabilitation options will be adopted for different projects. In Yantai, following local policies of setting up pensions, medical insurance and
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livelihood subsidies for land loss farmers, the rehabilitation mainly aims to convert the land loss farmers into non-farm status and set up a retirement fund and medical insurance for each of the affected people, while providing job training for young people. In Laiwu, the rehabilitation approach includes (1) expanding non-farm employment opportunities during and after power plant construction; (2) investing land compensation into power plant construction and achieving a much higher and more stable return for dividend distribution; and (3) providing special assistance to vulnerable individuals so that their basic livelihood could be restored or improved.
17. The proposed rehabilitation measures will be financed by land Compensation and job compensation received by affected villages based on the amount of land loss. In addition, the construction of these power plants will also generate temporary and permanent employment opportunities for the affected villagers, which will further increase income and improve livelihood for the affected villagers.
18. For temporary land occupation, the affected households will be provided with compensation for the lost yield and green crop, which i s set at 1.5 times the AAOV for the period o f construction. Upon completion of the construction, the project owners will be responsible to restore these lands back to their original productive conditions, otherwise a land reclamation fee (Y 13,000 per mu in Laiwu and Y 16,000 per mu in Yantai) will be provided to the affected people.
19. For the relocated households in Laiwu Power Plant site, following extensive consultation, it was agreed that Laiwu Power Plant will provide their former living quarters to the village as a replacement housing site. The living quarters are located near the existing village and have a total of 119 mu of land area and 20 apartment buildings with 3 18 apartment units and 26,944 square meters of floor space. Each family could obtain a three bedroom apartment with 85 square meters, consisting of a modern bathroom, kitchen and other facilities. The cost of this replacement housing i s only Y 260 per square meter, which means that after purchasing these apartments, each family could still have a large amount of their housing compensation left, which could be used for other purposes. The living quarters also have various other services and facilities, such as a primary school, kindergarten, senior center, village office, and green parks. Most villagers have expressed a positive attitude toward the proposed rehabilitation.
Institutional Arrangements
20. The resettlement implementation for Shandong FGD Project will be mainly carried out by subproject PMOs along with relevant city government agencies. The provincial PMO will be responsible for coordination and guidance. To ensure successful resettlement implementation, a Resettlement Leading Group (RLG) will be established in each project city. The RLG includes officials from relevant city governments and project PMOs. Its main responsibility i s to strengthen the leadership of the project, formulate resettlement policies, smooth the resettlement implementation, and coordinate among different government departments. Under the RLG, a resettlement unit within each PMO will be set up, which will be responsible for planning and implementing the RAP. Their main responsibilities include (1) assisting site survey, (2) keeping records, (3) organizing
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consultation and community participation, (4) developing and implementing the resettlement action plan, (5) managing and allocating the resettlement funds, (6) training resettlement staff at county and township levels, (7) signing compensation agreements with affected families and villages, and (8) being a main channel for grievances of the resettlers. In each affected township, a resettlement working team will be established, which will work closely with city resettlement offices to carry out land acquisition and resettlement for these power plants.
Participation, Consultation and Disclosure
2 1. In the process of identifying resettlement impacts, formulating resettlement policies, and preparing the resettlement action plan, extensive consultation and community participation have been organized by local PMOs in the project affected areas. Through meaningful consultations so far, affected people have been able to identify the scope of the impacts and proposed compensation rates and rehabilitation measures. For example, in Laiwu where resettlement preparation has been most advanced, all relocated households were informed about compensation rates, replacement housing choices and rehabilitation package based on more than a dozen consultation efforts made between 2004 and 2005 (see the RAP of Laiwu for detail). In Yantai, where the project feasibility study has not yet been completed, some consultation meetings have already been carried out by the project PMO and local county land resources bureaus in the project areas regarding the compensation policies and rehabilitation options. Both local township or subdistrict officials and village representatives participated in these meetings. (More details of consultation are included in the RAP for Yantai).
22. More efforts will be made during the resettlement implementation to encourage further participation by the resettlers, such as increasing fairness in land readjustment, and increasing transparency in delivering and using compensation funds. To ensure that al l compensation will be used effectively, they will be delivered to affected villages and the use of such funds will be approved by all villagers and monitored by the township or district governments.
23. Following both Chinese law and the World Bank policy, the project resettlement office will make efforts to disclose the content of the RAP, and inform the affected people about resettlement impacts, compensation policies, and rehabilitation options. The disclosure will be implemented prior to resettlement implementation. This disclosure includes distributing resettlement information booklets to al l affected households, and making the RAP documents available in the affected township and villages for the public to review.
24. To effectively address any complaints by affected people, a grievance procedure will be set up by local PMOs. If a person i s not satisfied with the compensation amount or rehabilitation measure, they can first complain to the village, which should document such complaint and resolve the matter within two weeks. If the affected person i s not satisfied with the decision, they can bring their case to the relevant township or local resettlement office, which will provide a formal resolution within two weeks. If they do not agree with the resolution, they can then bring their case to the local land
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administration bureau, which will make a decision within 30 days. If they are still not satisfied with the resolution from the county, they can go to the city civil court to appeal. The affected people will be informed about these grievance procedures by meetings, information booklets and public notice.
Resettlement Cost and Implementation Schedule
25. The costs of land acquisition are included in the overall budget for these three subprojects. The total costs of land acquisition and resettlement are estimated to be Y 141.19 million, with Y82.21 million for Yantai and Y58.98 million for Laiwu. The cost estimate for land acquisition includes provision of physical contingency set at 10 percent of the total amount of resettlement cost.
26. Following the Compensation standards and policies set up in the RAPS, the project resettlement office of PMOs will sign land acquisition agreements with relevant city or district land resources bureaus, which will then sign compensation agreements with affected townships and villages for both the permanent land acquisition and temporary land occupation. The delivery of land compensation funds will go from the city or district resettlement office, through the concerned township to affected villages. The attachments of land will be delivered from villages to affected individuals. To ensure that resettlement funds will be used effectively and exclusively, the different levels of governments will carry out auditing on the use of resettlement funds each year.
27. The resettlement implementation schedule will be closely related to the construction progress. Land acquisition for both of the gas transmission and distribution components will be completed one month before the start of the civil work construction. The proposed schedule i s expected to ensure that all affected people prior to their actual relocation (a) will have been adequately consulted about the project, its impacts and compensation entitlements; (b) will have received compensations in a timely manner; and (c) have been provided with means of maintaining their livelihood.
Monitoring and Evaluation
28. To ensure that resettlement will be implemented smoothly and the livelihood of the resettlers will be restored, both internal monitoring and external M&E will be carried out during the resettlement implementation. For the project, the resettlement offices of three PMOs will be responsible for the internal monitoring. The relevant city land resources bureaus and township resettlement working teams will participate in the internal monitoring efforts. The main purpose of internal monitoring i s to monitor the implementation of the resettlement program to ensure that the agreed RAP will be fully implemented, and the interests of resettlers are protected. The monitoring will cover all aspects of resettlement operation, such as the delivery of the compensation fund, land readjustment among affected villages, and development of various income ,activities in accordance with the RAP. Once the resettlement implementation begins, a progress report will be submitted every three months from the village and township resettlement teams to the county land resources bureaus, and finally to the resettlement offices of three
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subproject PMOs. Such information will be incorporated into project progress reports to be submitted by the project owner to the World Bank.
29. A qualified independent agency will be hired by three subproject PMOs to regularly provide external M&E of the resettlement implementation and to evaluate whether the main objectives o f the resettlement program are being achieved. The process of independent M&E will provide assessment on whether the livelihood of resettlers has been restored. This will be an early warning system for the project management, and provide channels for voicing comments and opinions from affected people.
30. The method of M&E will combine sample surveys and rapid appraisal to monitor the implementation progress and evaluation of income changes among affected people. To achieve these purposes, the main indicators will include: (1) physical progress of resettlement program; (2) quality of resettlement implementation; (3) delivery of resettlement funds; (4) economic conditions of the resettlers before and after resettlement; (5) environmental conditions before and after resettlement; (6) employment conditions before and after resettlement; and (7) resettlers’ satisfaction.
3 1. The external resettlement M&E survey will be carried out at the end of every year once the resettlement implementation begins. An M&E resettlement report will be submitted to both subproject PMOs and provincial PMO as well as the World Bank by the end of February the following year. The resettlement and relocation work started in 2007 and the land acquisition will be completed in 2008. The resettlement M&E work will proceed at least 3 times between 2008 and 2009.
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Annex 10B: Safeguard Policy Issues (Environment) CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Part I: Overview:
Safemards policies trimered: OP 4.0 1 Environmental Assessment
Linked projects: Laiwu Two new boilers Huangtai Two new boilers Lubei Two new boilers Y antai-Baj iao Two new boilers
Part 11. Environmental Assessment:
1.
2.
3.
4.
Laiwu (two new boilers) 0 An EIA for the 300 MW boilers was approved in March 2005 by SEPA. The
EIA included the FGD (wet limestone-gypsum) component.
0 Public consultation for the EIA was conducted in November 2004 and the Chinese language document was disclosed locally in October 2006.
Huangtai (two new boilers) 0 An EIA for the 400 TPH/300 MW boilers was approved in July 2005 by
SEPA. The EIA included the FGD (wet limestone-gypsum) component.
0 Public consultation for the EIA was conducted in September 2004 and the Chinese language document was disclosed locally in October 2006.
Lubei (two new boilers) An EIA for the 300 MW boilers was approved in December 2004 by SEPA. The EIA included the FGD (wet limestone-gypsum) component.
0 Public consultation for the EIA was conducted in October 2004 and the Chinese language document was disclosed locally in October 2006.
Yantai-Bajiao (two new boilers) 0 An EIA for the 300 MW boilers was approved in April 2006 by SEPA. The
EIA included the FGD (wet limestone-gypsum) component.
0 Public consultation for the FGD EMP was conducted in January 2006 and the Chinese language document was disclosed locally in November 2006.
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Process: Laiwu Wet Limestone FGD Huangtai Wet Limestone FGD Lubei Wet Limestone FGD Yantai-Baj iao Wet Limestone FGD
Environment Impacts and Mitigation Measures
1. La: Phase
Construction
Operation
Operation
Issue The impact on air i s mainly from dust caused by excavating, storage and transporting o f excavated earth and delivery of construction materials (such as cement and sand) The amount o f dust will depend on wind speed. Domestic wastewater from construction workers
Noise from grab, bulldozer, road-roller, blender, and crane. The noise level i s
Disposal of waste construction material Dust from limestone storage and conveyor
1. Wastewater from gypsum dewatering process. The pollutant: pH (pH = 5-6), salt (fluoride, sulfite and sulfate).
75-93 dB (A).
2. Wastewater from washing FGD equipment when shut down. The SO2 and CaC03 in flue gas will combine to CaSO4.2H20 through chemical reaction. The purity o f the gypsum (CaS04.2H20) >go%, fineness: 30-6Oum; Water content 4 0 % . The amount i s 83000 T/a (based on design coal)
Mitigating measures Storing excavated earth in a designated pit and providing a fenced area for construction material. Other measures include spraying water on earth and establishing shields for cement. I t i s particularly important to take these measures during dry windy conditions.
Because the workers will live at the power plant dormitory, the domestic wastewater will be processed at the existing treatment plant. There i s no sensitive site or village within 500m. Therefore the noise would not disturb residents to any great extent. Also the construction work i s scheduled between 7:OO a.m. and 6:OO p.m.
This will be used to fill existing excavations on the power plant property Limestone will be received already ground and stored in sealed containers. Transport will be as a slurry
1. Construction o f new wastewater treatment system for the new boiler installation (pH adjustment, settling). The water will be reused for spraying landscaping and dust control.
2. The wastewater after washing will be collected in drainage and delivered to absorption tower b; pumps. The desulfurization gypsum will be sold by Shandong FANGXING
-
Industry Co., Ltd to produce construction material and cement. To avoid secondary pollution, close packaging i s necessary.
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Phase
Operation
Issue Noise from the operation o f blender, circulating pump and blower, etc. Level: 1 8 5 dB (A).
2. Huangt Phase
Construction
Construction
Operation
i Issue
The impact on air i s mainly from dust caused by excavating, storage and transporting of excavated earth.
Domestic waste-water i s expected to be minor as workers are all local and will commute to the construction site Construction waste from demolishing current building in project location (for heating project i s 96,250 m3, including 3,000 m3 for FGD project) The waste will be non-hazardous construction material (such as bricks and plaster). Noises from grab, bulldozer, road-roller, blender and crane. The noise level i s 75 dB (A). Limestone powders when crushing
1. Wastewater from gypsum dewatering process
2. Wastewater from washing FGD equipment when shut down.
Mitigating measures Equipment with low operating noise will be selected:
1. design the stacks straight and use sound absorbing supports for pipelines to reduce noise; 2. planting shrubbery and trees around the plant for sound absorption.
These measures could reduce the noise level by 15-20dB (A).
Mitigating measures
A suitable dedicated area on the plant site will be used to store materials and wastes. These will be sprayed with water, or shielded to minimize any adverse impact. Waste will ultimately be taken to an SPEPB approved dump site in Jinan.
Any domestic waste-water will be treated at the existing secondary treatment plant operating at the existing power station. The treated water will be used for spraying to reduce dust. Thus, the impact of wastewater will be minor.
The solid waste will be transported to Jijia solid waste use treatment yard in Jinan to be used for fill.
There i s no sensitive site or village within 500m, so the noise should not disturb residents. The construction work will only be performed in the day between the hours of 8:OO a.m. and 6:OO p.m.
Limestone powder will be limited to less than 50mg/Nm3 after bag dust filtering.
1. The wastewater will be treated in a new 10 TPH chemical treatment plant (pH adjust, limestone addition, and settling) and reused for spraying after treatment.
2. The wastewater after washing will be collected by drainage and delivered to absorption tower by pumps.
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Phase
Operation
3. Lubei Phase
Construction
Operation
Issue
The SO2 and CaC03 in flue gas will combines to CaS04.2H20 through chemical changes. The purity o f the gypsum (CaS04-2H20) >90%, fineness: 30-60um; Water content <lo%. Noise affecting workers from the operation of blender, circulating pump and blower. Level i s 585 dB (A) and from the ball mill i s 90 dB (A).
Issue
The impact on air i s from dust caused by excavating, storage and transporting o f excavated earth
Cement dust from storage area Construction and domestic wastewater
Construction solid waste material
The noise from grab, bulldozer, road-roller, blender and crane. The noise level i s 75-93 dB
Limestone powders during conveying and storage
Mitigating measures
Agreement has been reached with Shandong LUNENG Huangtai Industry Group to sell the gypsum to Shandong TAIHE Dongxin Co., Ltd and Tai’an XINHUA Gypsum Processing Co., Ltd to produce gypsum board o f 150 million square meters and 12 million square meters. To avoid secondary pollution, close packaging i s necessary.
Selecting equipment to meet the required standards and carrying out preventive measures: 1. using straight flow design of the flue pipe and providing sound insulated support structures; 2. Planting shrubbery and trees around the plant for sound absorption. The measures could reduce the noise level by 15-20dB (A).
Mitigating measures
Storing excavated earth in a designated place and taking additional preventive measures, such as spraying water and setting shields.
Cement storage area will be covered
The construction and domestic wastewater will be processed at the Wastewater Treatment Station of Lubei Corporation (Secondary treatment).The treated water can be used for spraying to reduce dust emission. Thus, the impact o f wastewater will be minor. The solid waste will be temporarily stored on-site to be used for fill and road construction.
There i s no sensitive site or village within 500m. Therefore, the noise should not disturb residents. Also, construction work i s scheduled to be performed between 6:OO a.m and 8:OO p.m.
Conveyor will be covered with a bag house at the discharge point
Limestone storage site will be covered.
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Phase
4. Yantai- Phase
Construction
Construction
Issue
1. Wastewater from gypsum dewatering process. The pollutant: pH (pH = 5-6) and salt (fluoride, sulfite, and sulfate).
2. Wastewater from washing FGD equipment when stopped. The SO2 and CaC03 in flue gas will combines to CaS04.2H20 through chemical changes. The purity of the gypsum (CaSO4<2H20) >90%, fineness: 30-60um; Surface water content: 10-12%. Noise from the operation o f blender, circulating pump and blower. Level and ball mill.
ajiao
The impact on air i s from dust caused by excavation, storage and transporting of earth Domestic wastewater i s a significant source o f pollution. The CODcr and BOD5 i s 200mgL and 100mg/L. Solid waste generated during the construction period may adversely affect the environment if not removed. The noise from grab, bulldozer, road-roller, blender, and crane. The noise level i s 75-94 dB (A).
Issue
Mitigating measures
1. Installing FGD waste water treatment system. After neutralization treatment (pH at 6-7) and sedimentation the water will be used to spray the coal storage site
2. The wastewater after washing will be collected in drainage and delivered to absorption tower by pumps.
Shandong Lubei Group Co., Ltd. will use all the desulhrization gypsum (73,975 t/a) to produce cement. At present, this company needs to buy.0.15 million tons of gypsum per year. To avoid secondary pollution, close packaging i s necessary.
Choosing the equipments with low noise (985 dB [A]) in general and 5105 dB (A) for the ball mill, and carrying out preventive measures: straight design of flue pipe with sound absorbing supports to reduce noise; keeping the temporary standby vibrating equipment in an isolated area and planting shrubbery and trees around the plant for sound absorption. The measures above could reduce the noise level by about 15-20dB (A) and comply with the National standard.
Mitigating measures
Storing excavated earth in a designated place and taking preventive measures, such as spraying water and setting shields.
The domestic wastewater will be processed at the treatment plant. The treated water can be used for spraying to reduce dust. Thus, the impact o f wastewater impact i s minor.
The solid waste can be stored on-site temporarily and then collected by the municipal solid waste authorities
The sites are approximately 190 m from the nearest village. Construction work will be limited from 7:OO a.m. to 9:OO p.m. If work must be done outside of these hours, local people will be given notice of at least one week in advance.
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Phase
Operation
Operation
Operation
Issue
Limestone dust at the storage silo
1. Wastewater from gypsum dewatering process. The pollutant: pH (pH = 5-6), salt (fluoride, sulfite and sulfate). 2. Wastewater o f washing FGD equipment when stopped. The SOz and CaC03 in flue gas will combined to CaS04.2Hz0 through chemical changes. The purity of the gypsum (CaS04-2H20) >go%, fineness: 30-60um; Water content <lo%. Noise from the operation of blender, circulating pump, and blower. Level: 485 dB (A). The noise level o f ball mill i s 90-105 dB (A)
Mitigating measures
Storage area will be sealed
1. The total wastewater from 7# & 8# units will be treated together and reused for spraying after treatment. 2. The wastewater after washing will be collected in drainage and delivered to FGD absorption tower by pumps.
The desulfurization gypsum will be sold to Shandong Yantai Dongyuan Cement Co., Ltd, Yufeng Lightweight Construction Material Co., Ltd in Fushan district of Yantai and Dehe Construction Material Co., Ltd in Muping district of Yantai.
Equipment with low operating noise will be selected (<85 dB[A]) and:
1. design flue pipe to be as straight as possible to reduce noise; 2. Planting shrubbery and trees around the plant for sound absorption. The measures above could reduce the noise level by 15-20dB (A).
Alternatives considered in uroiect design.
No project alternative
5. The “no project alternative” would maintain the high level of sulfur dioxide emissions and most likely the associated high ambient levels of sulfiu dioxide in one of the most heavily polluted provinces in China. This in turn would likely result in maintaining the high level of health risk to the general population of Shandong Province.
Technical design alternatives:
0 The design alternatives considered include: limestone (CaC03) scrubbing, lime scrubbing (CaO), circulating fluid bed (CFB: with hydrated lime- Ca(OH)Z), and magnesium oxide (MgO) scrubbing. These systems fal l into the class o f FGD types known as “non-regenerable.”
0 Alternative “regenerable” systems are considerably more expensive to build and are both expensive and complex to operate, and have a much more limited degree of commercial success. Their advantages are that they produce a commercial sulfur product (either elemental sulfur, or sulfuric acid) and the
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sorbent i s “regenerated,” so it can be used over and over again. However, these sulfur products tends to be either inferior in quality to other sources and/or at much higher cost. In short, they are neither suitable nor economical.
0 The lime and limestone systems are wet systems, so as the name implies, they utilize relatively greater amounts of water and produce a product that has the consistency of plaster. Additional drying/filtration i s needed to provide an easily handled commercially viable byproduct. The CFB system i s “semi-dry” and doesn’t require as much water. I t yields a product that i s more easily handled. CFB systems are slightly less efficient in removing sulfur dioxide than limekmestone systems. Furthermore, CFB systems produce a product that contains some fly ash, as well as unreacted calcium carbonate and oxide, in addition to calcium sulfate. As such, the by-product has more limited possibilities for utilization.
0 Magnesium oxide (MgO) scrubbing systems are quite similar in nature to lime or limestone scrubbing. Although MgO i s a very effective FGD sorbent, i t s use i s limited because of the higher cost relative to lime/limestone. I t has generally been utilized with the regenerable “MAGOX” system producing sulfuric acid. Under unique circumstances, where there i s a readily available supply of inexpensive magnesium carbonate and a strong market for magnesium sulfate, magnesium oxide scrubbing becomes a viable alternative.
0 Other alternatives include lower sulfur coal, fluid bed combustion, limestone injection modified burners (LIMB), or alternative fuels (gas, low sulfur oil). None of these alternatives are realistic because of the: (a) unavailability of fuel, (b) limited commercial experience, or (c) scale-up difficulties.
Key environmental risks
0 There are no substantial environmental risks. The by-products formed (either hydrated calcium sulfate or magnesium sulfate) are neither toxic or in anyway hazardous. In fact, if deposited on land, they are likely to leave the soil slightly alkaline, which in general tends to immobilize most trace metals, thereby preventing these pollutants from migrating to groundwater sources. In short, they would tend to improve ground water quality.
0 However, in al l cases the calcium based by-product materials will be used in the manufacture of construction materials, either as a supplement to cement or as the key ingredient in the manufacture of wallboard. The magnesium-based byproduct will be utilized as a fertilizer supplement.
0 Water use i s minimal even in the case of wet systems, and the water requirements will be met internally or from noncompetitive sources (treated municipal wastewater effluent, desalination plant effluent). There will be no abstraction o f water from external sources which have alternative use (such as
72
potable supply and agriculture) and thus no competition for high valued water resources with other local users.
0 Wastewater produced i s minimal and i s nontoxic. I t will be treated by adjusting pH and precipitating suspended solids. The treated effluent may contain traces of calcium or magnesium ions, sulfate, and chloride, none o f which are particularly toxic.
0 A summary of the environmental risks and their mitigation i s presented in the table below.
73
0 0
00 m
0 0
m m 8 z-
74
Imdementation arranpements.
Institutional resuonsibilities:
6. Laiwu Construction; Contractor i s responsible for implementing the mitigating measures
Operation; Laiwu Power Plant, Production Technology Department i s responsible for implementing the mitigating measures
7. Huangtai Construction: Contractor i s responsible for implementing the mitigating measures
Operation; HTTPP Production Department i s responsible for implementing the mitigating measures
8. Lubei Construction: Contractor i s responsible for implementing the mitigating measures
Operation; Lubei plant Power Generation Safety and Environmental Protection Department i s responsible for implementing the mitigating measures
9. Yantai-Bajiao Construction: Contractor i s responsible for implementing the mitigating measures
Operation: Yantai Bajiao Power Plant Operational Branch i s responsible for implementing the mitigating measures
Monitoring, auditing and reporting:
10. Laiwu Monitoring: Data collection will be performed by the Production Technology Department for both the construction and operation phases. Data Analysis: For both construction and operation the environmental staff member of the Production Technology Department will analyze the data Reporting and Recommendations: Environmental staff o f the Production Technology Department will prepare both monthly and quarterly reports to the Vice General Manager, Laiwu EPB, and Luneng Group
75
(parent company)
Action/Decisions: Most of the time the Vice General Manager will take the necessary action. However, depending on the situation either the Laiwu EPB or Luneng Group Co. will take the necessary actions.
1 1. Huangtai Monitoring: HTTPP Civil Works Department will be responsible for environmental monitoring during construction and the Operations Department during operations
Reporting and Recommendations: The specialized environmental staff in the HTTPP Production Department will prepare a monthly summary table of environmental results and any recommended actions
Decision Making: The HTTPP Vice General Manager receives these reports and has the authority to implement any recommendations
12. Lubei Monitoring: The Lubei Plant Power Generation Safety and Environmental Protection Department will be responsible for environmental monitoring during construction and operations
Reporting and Recommendations: The Vice General Manager and General Manager will receive a weekly summary table of any complaints or outstanding issues and recommended actions
Decision Making: The Vice General Manager i s the authority to implement any recommendations
13. Yantai-Bajiao Monitoring: Both construction and operation will be performed by Yantai Bajiao Power Plant
Reporting and Recommendations: Both construction and operation reports will be prepared by Yantai Bajiao Power Plant special staff assigned for environment
ActiodDecision Making: Both construction and operation will be performed by Yantai Bajiao Power Plant General Manager
Capacitv to implement safepuards:
14. For al l subprojects, implementation of EMPs i s an integral aspect of the facility construction and operation activities. All the subproject sponsors are large companies who have no outstanding environmental fines or penalties and never have had them in the past. In short, they are fully capable of implementing the modest safeguard requirements
76
specified in their respective EMPs, because these activities do not represent any significant departure from their current operations. The Task Team environmental specialist visited the facilities/project sites o f al l the proposed subprojects and has concluded that all the sponsors have appropriate technical staff and have or wil l have (new project) all necessary facilities to perform the modest mitigation and monitoring activities specified in their EMPs.
77
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e e
. . . e .
Y
78
E 0 c
3 4 P
x
0
.I
.I c v1 e
c,
E z Ccl 0 El 0
Q .I c
G?
-r
W 1
N
I
I
3 a
0 a
.- 5 3 W
79
Annex 11: Project Preparation and Supervision CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Prepared by: Shandong Provincial Environmental Protection Bureau
Preparation Assistance: N A Bank staff who worked on the project included:
80
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Annex 12: Documents in the Project File CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Project Documents a. Project Concept Documents b. Project Brief
Procurement Plans a. Huangtai Thermal Power Plant b. Lubei Thermal Power Co. Ltd. c. Yantai Bajiao Power Plant d. Laiwu Thermal Power Plant
Procurement Capacity Assessment Report
Financing Management Assessment
Economic and Financial Analysis
Shandong Power Plant Flue Gas Desulfurization (FGD) Project Economic and Financial Analysis
Environmental Management Plan a. Environmental Management Plan for Huangtai Thermal Power Plant b. Environmental Management Plan for Lubei Thermal Power Co. Ltd. c. Environmental Management Plan for Yantai Bajiao Power Plant d. Environmental Management Plan for Laiwu Thermal Power Plant
Resettlement Action Plan a. Resettlement Action Plan for Yantai Bajiao Power Plant b. Resettlement Action Plan for Laiwu Power Plant
Feasibility Studies a. Feasibility Study for Huangtai Thermal Power Plant b. Feasibility Study for Lubei Thermal Power Co. Ltd. c. Feasibility Study for Yantai Bajiao Power Plant d. Feasibility Study for Laiwu Thermal Power Plant
Letters, Decrees, Policy Papers
Various Reports and Studies
81
Annex 13: Statement of Loans and Credits
CHINA: Shandong Power Plant Flue Gas Desulfurization Project
Project ID FY Purpose
Difference between expected and actual
disbursements Original Amount in US$ Millions
IBRD IDA SF GEF Cancel. Undisb. Orig. Frm Rev’d
PO93963 2008 PO87318 2007
PO83322 2007 PO81776 2007 PO88964 2007 PO90377 2007 PO91020 2007 PO92618 2007 PO86035 2007 PO75613 2007 PO86515 2007 PO77752 2007 PO96285 2007 PO95315 2007 PO75732 2006 PO82992 2006 PO81348 2006 PO81255 2006
PO70519 2006 PO86629 2006 PO99992 2006
PO96158 2006 PO94388 2006 PO93906 2006 PO90649 2006 PO90336 2006 PO85333 2006 PO85124 2006 PO84742 2006 PO82993 2006 PO81346 2005 PO81161 2005 PO86505 2005 PO75730 2005 PO57933 2005 PO67625 2005
PO67828 2005 PO68752 2005
CN-Guiyang Transport CN--GEF-Guangxi Integrated Forestry Dev. CN-SICHUAN URBAN DEV CN-GUANGDONGPRD2 CN-Guangxi Integrated Forestry Dev CN-GEF-2nd Shandong Environment CN-Fujian Highway Sector Investment CN-LIAONING MED CITIES INFRAS 2 CN-CF-Tianjin Landfill Gas Recovery CN-Shaanxi Ankang Road Development CN-3rd National Railway CN-SHANDONG ENVMT 2 CN-MSE Finance CN-W. Region Rural Water & Sanitation CN-SHANGHAI URBAN APL2 CN-GEF-Termite Control Demonstration CN-HENAN TOWNS WATER CN-ChangjiangPearl River Watershed Reha CN-Fuzhou Nantai Island Peri-Urban Dev CN-Heilongjiang Dairy CN-Liaoning Medium Cities Infrastructure CN-Renewable Energy I1 (CRESP 11) CN-HFC-23 Emissions Reduction CN-3rd Jiangxi Hwy CN-CF-Facil itating Afforestation Program CN-GEF-NINGBO WATER & ENVMT CN-5th Inland Waterways CN-Ecnomic Reform Implementation
CN-GEF-PCB Mgnt & Disposal CN-IAIL 111
CN-LIUZHOU ENVIRONMENT MGMT CN-CHONGQING SMALL CITIES CN-NINGBO WATER & ENVMT CN-HUNAN URBAN DEV CN-TAI BASIN URBAN ENVMT CN-GEF-Renewable Energy Scale-up Program CN-Renewable Energy Scale-up Program CN-Inner Mongolia Highway & Trade Corrid
100.00 0.00
180.00 96.00
100.00 0.00
320.00 173.00
0.00
300.00 200.00 147.00 100.00 25.00
180.00 0.00
150.00 100.00
100.00 100.00 218.00
86.33 0.00
200.00 0.00
0.00 100.00 20.00
200.00 0.00
100.00 180.00
130.00 172.00 61.00 0.00
87.00 100.00
0.00 0.00
0.00
0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00
0.00 0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00 0.00 0.00 0.00
0.00
0 00 0.00 0.00 0.00 0.00 0.00 0.00
0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00 0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00 0.00 0.00
0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 5.25
0.00 0.00
0.00
5.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00
0.00
14.36 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00
5.00 0.00 0.00 0.00
18.34 0.00 0.00
0.00 0.00 0.00
40.22
0.00 0.00
0.00 0.00
0.00
0.00 0.00
0.00
0.00 0.00
0.00
0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00
0.00 0.00
10.00 0.00
100.00 4.65
170.70 96.00 76.1 1 4.50
320.00 173.00
8.44 290.00 200.00 131.16 100.00
25.00 144.90 14.36
139.63 95.61
98.25 91.76
175.65
71.95 1,045.51 151.92
2.01 4.39
65.42 18.44
106.86 17.57 55.04
144.82 85.89
155.62 29.77 37.67
2.40 28,66
0.00 0.00 0.18 0.00
28.54 0.00 5.67 0.00
-21.39 0.00 0.00 0.00
43.50 0.00 0.00 0.00
0.00 0.00 7.39 0.00
18.67 0.00 -10.01 0.00 l00.00 0.00
0.00 0.00
18.23 0.00
1.47 0.00 14.63 0.00
17.27 0.00
22.00 0.00
16.93 0.00 -17.77 0.00
30.50 0.00 0.00 0.00
-8.08 0.00 0.00 0.00
I .67 0.00 25.59 0.00 4.61 0.00 6.09 0.00
10.06 0.00
-5.41 0.00 40.16 0.00
-4.61 0.00 56.46 0.00 17.16 0.00 -0.35 0.00
8.90 0.00 -2 I .76 0.00
82
PO69862 2005 PO87291 2005
PO71094 2005
PO72721 2005 PO75728 2004 PO65035 2004
PO65463 2004 PO66955 2004 PO84003 2004
PO75035 2004
PO73002 2004 PO77137 2004 PO69852 2004 PO81749 2004 PO77615 2004
PO58847 2003 PO40599 2003 PO67337 2003 PO68058 2003 PO70191 2003 PO76714 2003 PO70459 2002 PO60029 2002 PO71 147 2002 PO64729 2002 PO68049 2002 PO47345 2001
PO51859 2001 PO56596 2001 PO64924 2000 PO49436 2000 PO64730 2000 PO45910 2000 PO42109 2000 PO38121 1999
PO51856 1999 PO42299 1999 PO36953 1999
CN - Agricultural Technology Transfer CN-CF-Jincheng Coal Bed Methane Project CN - Poor Rural Communities Development CN-GEF-Heat Reform & Bldg Egy Eff.
CN-Gansu & Xinjiang Pastoral Development CN-Jiangxi Integrated Agric. Modem.
CN-GUANGDONGPRD UR ENVMT
CN-ZHEJIANG URBAN ENVMT CN-GEF GUANGDONG PRD URB ENV CN - GEF-Hai Basin Integr. Wat. Env , Man. CN-Basic Education in Westem Areas CN-4th Inland Waterways CN-Wuhan Urban Transport CN-Hubei Shiman Highway CN-GEF-Gansu & Xinjiang Pastoral Develop CN-3rd Xinjiang Hwy Project CN-TIANJIN URB DEV II CN-2nd GEF Energy Conservation CN-Yixing Pumped Storage Project
CN-2nd Anhui Hwy CN-Inner Mongolia Hwy Project CN-GEF-Sustain. Foreshy Dev CN-Tuberculosis Control Project CN-Sustainable Forestry Development CN-Hubei Hydropower Dev in Poor Areas
CONTROL
CN-SHANGHAI URB ENVMT APLl
CN-HUAI RIVER POLLUTION
CN-LIAO RIVER BASIN CN-Shijiazhuang Urban Transport CN-GEF-BEIJING ENVMT I1 CN-CHONGQMG URBAN ENVMT CN-Yangtze Dike Strengthening CN-HEBEI URBAN ENVIRONMENT CN-BEIJING ENVIRONMENT I1 CN-GEF-Renewable Energy Development CN-Accounting Reform & Development CN-Tec Coop Credit IV
100.00 0.00
100.00
0.00
128.00 66.27
100.00
133.00 0.00
0.00
100.00 91.00
200.00 200.00
0.00
150.00 150.00
0.00
145.00 200.00 250.00 100.00
0.00
104.00 93.90
105.00 105.50
100.00 100.00
0.00 200.00 2 10.00
150.00 349.00
0.00
27.40 10.00
0.00 0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00
0.00
0.00
0.00 0.00
0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00 0.00
0.00
0.00 0.00
5.60 35.00
CN-Health I X 10.00 50.00
0.00 0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00
0.00
0.00
0.00 0.00
0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00
0.00
0.00 0.00
0.00
1 8.00 0.00 0.00
0.00
0.00 10.00
17.00
0.00
0.00 0.00
0.00 10.50
0.00 0.00
26.00 0.00 0.00 0.00
0.00 16.00 0.00 0.00
0.00 0.00
0.00 0.00
25.00 0.00 0.00
0.00 25.00 35.00
0.00
0.00 0.00
0.00 0.00
0.00
0.00
0.64 0.00
0.00
0.00 0.00
0.00
0.00
0.46 1 .oo 1 .oo 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
29.50 0.00
0.00 26.51 0.00
0.00
5.84 0.40
70.38 49.24
72.21
14.56 74.54 16.93
54.61 85.34 9.45
9.92
31.32 47.17 62.13 9.19 5.28
12.25 126.17
7.17 46.41 81.53 20.54 7.84 4.59
41.63 12.1 1 14.39 10.36
12.17 30.86 18.95 48.63 64.12 27.83
146.62 2.21
5.23 9.59 6.71
29.82 0.00
44.01
8.24 28.78 7.01
32.08 40.08 6.66
11.68
28.83 26.46 60.79 -8.14 8.66
12.25 83.35 25.86 35.85 50.85 -0.30 3.84
14.58 29.49 5.81 8.52
10.36
11.97 30.86 25.00 78.13 64.12 27.83
173.13 34.77
5.02 12.82 5.00
0.00 0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00
0.00
0.00 25.96 0.00 0.00 0.00
0.00 4.08 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00
-2.08
0.00
0.00
12.15 -0.68 47.78
7.87 10.02 28.90
4.74 0.00 5.00
Total 7,803 40 9060 000 27067 75 35 5,853 84 1,48037 143 74
83
CHINA STATEMENT OF IFCs
Held and Disbursed Portfolio (millions o f US. dollars)
Committed
IFC
FY Approval Company Loan Equity Quasi
2002 2006 2005 2003 2006 2005
1999 2000 2002 2005 2002 2005 2006 2005 2004 2006 2005 1998 2004 2004 1994 2006 2004 2004 2006 2006 2002 2006 1994 2007 2004 2006 2005 2006 2003 2006 2005 2006 2004
ASIMCO ASIMCO BCCB BCIB BUFH Babei Babei Necktie Bank o f Shanghai Bank o f Shanghai Bank o f Shanghai BioChina CDH China Fund CDH China I1 CDH Venture CT Holdings CUNA Mutual Capital Today Changyu Group Chengdu Huarong China Green Ener China Re Life China Walden Mgt Chinasoft Colony China Colony China GP Conch Dagang Newspring Darong Deqingyuan Dynamic Fund Epure Fenglin Fenglin HJ MDF Five Star GDIH Great Infotech Hangzhou RCB HiSoft Tech HiSoft Tech 1B
0.00 0.00 0.00
0.00 8.14 0.00 11.00
0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00
3.36 20.00 0.00 0.00
0.00 0.00 0.00
81.50 25.00 10.00 0.00 0.00
0.00 17.64 0.23 0.00 50.85 0.00 0.00 0.00 0.00 0.00
10.00 0.00
59.21 0.00 0.00 5.00 0.00
21.76 3.84
24.67 3.70 2.02
17.99 20.00 0.00
10.53 25.00 18.07 3.20 0.00
0.27 0.01 0.00
15.31 0.84
40.93 0.00
0.24 2.85 2.21
10.00 0.00 0.00
0.00 0.00 1.73
10.85 4.00 4.34
52.18
0.00
4.12 0.00
12.04 0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00
40.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 15.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 6.00 0.00 7.00 0.00 0.00 0.00 0.00
0.00
0.00
Partic.
0.00 0.00 0.00
0.00 0.00 0.00
6.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00
3.13 0.00
0.00 0.00
0.00 0.00 0.00 0.00 0.00 8.00 0.00 0.00 0.00
13.47 3.27 0.00 0.00 0.00 0.00 0.00 0.00 0.00
-
Disbursed
IFC
Loan Equity Quasi Partic.
0.00 0.00 0.00
0.00 8.14 0.00 8.94 0.00
0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
3.36 15.00 0.00 0.00
0.00 0.00 0.00
81.50 0.00 6.67 0.00 0.00
0.00 13.64 0.00
0.00 50.85 0.00 0.00 0.00 0.00 0.00
10.00 0.00
59.03 0.00
0.00 5.00 0.00
21.76 3.84
24.67 3.13 0.00
1 1.38 0.51 0.00 0.00 0.32
18.07 3.20 0.00
0.27 0.01 0.00
9.29 0.49 0.00 0.00
0.24 2.85 2.01 0.00 0.00 0.00
0.00 0.00 1.03 0.00 3.00 1.74
52.18
0.00
3.61 0.00 0.00 0.00 0.00 0.00
0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 10.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 6.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00 0.00 0.00 4.88 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00 3.13 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 5.33 0.00 0.00 0.00
12.53 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
2004 2006 2001 2005 2005 2006 2001 2005 200 1 1996 2004 2006 2001 2005 1995 2005 2003
2006 2006
2003 2006 2000
2004 2004 1998 2006 1999
2005 2006 2006 2006
2004 2003 2004 2006 2003 2002 2006
Jiangxi Chenming Launch Tech Maanshan Carbon Maanshan Carbon Minsheng Minsheng & IB Minsheng Bank Minsheng Bank NCCB Nanjing Kumho Nanjing Kumho Neophotonics New China Life New Hope Newbridge Inv. North Andre PSAM RAK China Renaissance Sec
Rongde SAC HK Holding SAIC SBCVC SEAF SSIF SH Keji IT SHCT SIBFI Shanghai Krupp Shanshui Group Shanxi SinoSpring Stora Enso Stora Enso Stora Enso TBK VeriSilicon Wanjie High-Tech Wumart XACB Xinao Gas Zhejiang Glass Zhengye-ADC Zhong Chen Zhongda-Yanjin
40.00 0.00
5.25 1 1 .oo 15.75 25.09 0.00
0.00 0.00 0.00 31.38 0.00 0.00
0.00
0.00 8.00 0.00
13.00 0.00 0.00 0.00
12.00 0.00
0.00 3.00 38.18 0.14 19.25 50.00 12.61 0.00
20.83 29.17 50.00 4.00 0.00 9.89 0.00 0.00 25.00 50.00 10.43 0.00
21.89
12.90 8.35 2.00 1 .oo 0.00
0.00 23.50
2.80 8.94 3.81 2.23 0.00
5.83 0.00
0.22 6.74 2.01 0.00 0.00
35.00 1.60 0.00
20.00 3.74 0.00 0.00
0.07 0.00 5.50 0.00 0.00
0.00 0.00 0.00 0.00 1 .oo 0.00 1.62
17.95 10.00 24.96 0.00 4.78 0.00
0.00 0.00
0.00 0.00 0.00
0.00 0.00
0.00 0.00 0.00 0.00
10.00
0.00
45.00 0.00 0.00 0.00
0.00 20.04 0.00 0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00
2.20 0.00
20.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00
18.76 0.00
0.00 0.00
0.00
0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00
28.64 0.00
36.75 0.00 0.00
0.00 4.17
20.83 175.00
0.00
0.00
0.00 0.00 0.00 0.00
18.00 4.87 0.00 0.00
40.00 0.00
5.25 5.00 7.00 0.00 0.00 0.00
0.00 0.00
31.38 0.00
0.00 0.00
0.00 0.00 0.00
13.00 0.00 0.00
0.00 12.00 0.00
0.00 0.00
29.04 0.00
19.25 50.00 12.61 0.00
11.00 0.00 0.00
2.00 0.00
9.89 0.00 0.00
25.00 0.00
10.43 0.00 0.00
12.90 8.33 2.00 1 .oo 0.00 0.00
23.50 2.79 8.82 3.81 2.23 0.00
5.83 0.00
0.22 4.25 0.00 0.00 0.00
3 I .38 1 .oo 0.00
2.00 3.37 0.00 0.00
0.07 0.00
5.50 0.00
0.00 0.00 0.00 0.00 0.00
I .oo 0.00 1.62 0.64
10.00 0.00 0.00
4.78 0.00
0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
IO.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00
0.00
0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00
18 76 0 00
0 00 0 00
0 00 0 00 0 00
0 00 0 00 0 00 0 00 0 00
0 00
0 00 0 00 0 00
0 00 0 00 0 00
0 00 0 00 0 00
0 00 0 00 0 00
21 78 0 00
36 75 0 00 0 00 0 00 0 00
0 00 0 00 0 00
0 00 0 00 0 00 0 00 0 00
0 00
4 87 0 00 0 00
Total portfolio: 733.58 577.30 181.40 340.89 470.95 371.06 29.61 108.03
85
Approvals Pending Commitment
FY Approval Company Loan
2002 SML 0.00 2004 NCFL 0.00
2007 Xinao CTC 2004 China Green
0.04 0.00
2006 Launch Tech 0.01 2005 MS Shipping 2003 Peak Pacific 2
0.00 0.00
Equity
0.00 0.00 0.01 0.00 0.00 0.01 0.01
Quasi Partic.
0.00 0.00 0.02 0.00 0.00 0.14 0.01 0.00
0.00 0.00 0.00 0.00 0.00 0.00
Total pending commitment: 0.05 0.03 0.03 0.14
86
Annex 14: Country at a Glance CHINA: Shandong Power Plant Flue Gas Desulfurization Project -
East Lower- POVERTY and SOCiAL Asia L middle-
China Paci f ic income 2006 Population, m id-year (millio ns) 13n8 GNIpercapita(Atlasmefhod, US%) 2,wo GNI(Aflasmethod, U S billions) 2,023.0
Average annual growth, 2000.06
Population (%, 0.0 Laborforce (%, 10
M o s t recent est imate ( Ia te r t year available, 2000-06) Po verty (%of populatio n below natio naipo veriyline) Urban woulation I%offofalw~ulat ionl 41 , . . . . Life expectancyal birth (pars) Infant mortality (per 1OOOlive birihsj Child malnutrition (%of childfenunderti) Access to an improvedwatersource (%ofpopulation) Literacy (%ofpopulation age 159 Gross primaryenrollment (%ofschool-agepopulation)
Male Female
72 23
8 77 91 m m m
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1986 1996
GDP (US billions) 2957 0581 Gross capital formation4GDP 366 404
Gross domestic savinps/GDP 358 425 Gross national savings/GDP 359 413
w r t s of goods and sewlces/GDP ne 201
Current accomt baiance/GDP Interest payments/GDP Total debVGDP Total debt seNice/eqorts Present vdueof debt/GDP Present vaiue of debt/emrts
- 2 8 0 8 0 2 0 5 8 0 8 0 8 2 8 7
1986-96 1996.06 2005 (average annualgrowth) GDP 0 . 1 9.0 0 . 4 GDP per capita 8.0 8.2 9.7 W r t S Of goods and SeNiCBS 0.0 218 24.3
le00 1883
3,539
0.9 13
42 71 20 5 79 91 In m m
2005
2,243.8 43.9 37.3 49.4 5 10
7 2 0.1
P .0 3.0 P.3 30.8
2270 2,037 4.035
0.9 14
47 71 31 a 81 89 m m In
2006
2,844.7 44.0 40.1 52.5 54.1
9.4
2006 2006.10
0 7 U6 0 1 9 9
23.3 I74
Development diamond'
Lifeexpectancy
capita enrollment
Access to improvedwatersource
-China ~ Lowr-middlsincomegroup
Economic
Domestic savings
indebtedness
-China L o w e r - m / M l w ~ o m e a m u ~
STRUCTURE o f the ECONOMY
(%of GDP) Agriculture Industry
Services M anufacluring
1986 1996
27.1 8 . 5 44.0 47.5 35.2 33.5 28.9 33.0
Household final consumption expenditure 493 43.5
Imports of goods and services w.7 e.0 General gov't final consumption ewnditure M.9 n.0
(average annualgrowth) Agriculture Industry
Services Manufacturing
1986-96 1996-06
4.3 3.5 a . 5 0 1 0 . 8 0 2 9.4 9.8
Household final consumption eqenditure 0 . 9 7.8 General gov't final Consumption expenditure u.4 9.5 Gross capital formation ns 0 2 imports of goods and services ns 13.5
2005
P.5 47.5 33.5 39.9
36.1
317 n.5
2005
5.2
P . l 0.5
5.8
n7
ne ne n 4
2006
n 7 48.4
39.9
33.2
322 n.3
2006
5.0 2.5
0.3
0.3 u , 9 '(3.2 n.3
IGrowth o f capital and GDP (YO)
01 02 03 M 05 OB
-GCF -GDP
Growth o f exports and impor ts (%)
4o T
01 02 03 04 05 OB -Exports -V-lrrpOrtS
Note: ZOOBdata are preiiminaryestimates. This table was produced from the Development Economics LDB database. 'Thediamonds showfourkeyindicators in thecountry(in bo1d)comparedvrithils incomegroupavarage.ifdalaaremissing,thediamondw4ii
be incomplete
87
China
PRICES and GOVERNMENT FINANCE
Domestic prices (% change) Consumer prices Implicit GDP deflator
Government finance (% of GDP, includes current grants) Current revenue Current budget balance Overall sumlus/defiut
TRADE
(US$ millions) Total exports (fob)
Food Mineral fuels, lubricants, and related material Manufactures
Total imports (cf) Food Fuel end energy Capital goods
Export price index (2000.100) Import price index (2000=100) Terms of trade (2000.100)
BALANCE of PAYMENTS
(US$ mMons) Exports of goods and services Imports of goods and services Resource balance
Net income Net current transfers
Current account balance
Financing items (net) Changes in net reserves
Memo: Reserves including gold (US$ millions) Conversion rate (DEC, locayUS$)
EXTERNAL DEBT and RESOURCE FLOWS
(US$ millions) Total debt outstanding and disbursed
IBRD IDA
Total debt service IBRD IDA
Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment (net inflows) Portfolio equity (net inflows)
Wodd Bank program Commitments Disbursements Prinupal repayments Net flows interest payments Net transfers
1985 1995 2004 2005
.. 16.9 4.0 1.6 10.1 13.7 6.9 3.6
26.0 10.6 16.6 17.5 7.3 0.6 1.7 2.0 0.0 -1.5 -1.5 -1.3
1985 1995 2004 2005
27,350 148,760 3.803 9,954 7,132 5,332
13,522 127,295 42,252 132,064
1,553 6,132 172 5,127
16,239 52,642
52 116 74 107 70 110
593,369 771.51 1 16,670 14,476
552,616 727,191 561,423 674,331
9,156 46,003
252,624 230,369
102 106 112 119 91 66
1985 1995 2004 2005
30,469 43,092
-12,602
641 243
-11,516
6,096 5,422
167,974 151,662 16,092
-11.774 1.434
5,752
16,711 -22,463
655,627 606,543 49,264
-3,523 22,696
66,659
137,705 -206.364
643,537 746,150
97,366
4,666 10,000
112,055
98,000 -210,055
.. 60,277 622,945 626,303 2.9 6.4 6.3 6.2
1985 1995 2004 2005
16,696 11 6,090 248,934 496 7,209 11,035 11,140 431 7,038 10,670 9,741
2,476 15.066 23,657 26 610 1,054 1,139 4 63 264 296
117 330 381 1,117 7,902 16 2,667 5,013 7,970 1,659 35,649 54,936
0 0 10.923
1,092 3,146 1,265 565 2,269 1,166 1,131
0 364 999 1,004 565 1,905 190 127 29 509 319 430
536 1,396 -130 -303
I -GDPdeflator +CPI I
Export and import ievels (US$ mill.) I I
800,wO
600,WO
400,WO
200.WO
0
O5 I 88 00 01 02 03 04
a &ports a Imports
Current account balance to GDP (K)
e T
1 88 00 01 02 03 W 05
I Composition of 2004 debt (US$ mill.)
A: 1 1.035 E: 10,670
D: 4,783
A - IBRD E - Bilateral B . IDA D - Other multilateral F . Private
G - Shon-term C. iMF
Note: This table was produced from the Development Economics LDB database. 6/12/06
88
Map section
