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Waste-to-Energy in

WANG Tianyi, PhD / Prof.

CEO, China Everbright International Limited (HKSE: 257) Chairman, China Everbright Water Limited (SGX: U9E) Chairman, China Everbright Greentech Limited (HKSE: 1257)

Member, UNECE PPP Business Advisory Board Member, China Council for International Cooperation on Environment and Development

MAY 2018 London TABLE OF CONTENT

1. China’s Environmental Protection Policies and Market

2. Development of Waste-to-Energy (“WTE”) in China

3. Technology and Business Model of WTE Projects in China

4. China Everbright International Limited’s WTE Business

2 “Ecological Civilization” is one of China’s national development strategies.  China made huge economic achievements since its “Reform and Opening-up”, recording a CAGR of 11.2% in GDP growth* from 1977 to 2017.  Despite the positive economic progress, the rapid growth also caused various pollution problems to China, such as desertification, choking haze and smog, garbage siege in cities, contaminated soil in farmland etc.  Since Mr. Xi Jinping took the office as China’s president, he emphasized the importance of environmental protection in many international arenas by explaining “clear waters and lush mountains are invaluable assets” to China’s sustainable development.  In line with the principle, China issues and revises a series of legislations and policies to implement its ecological preservation and environmental protection plans. Some of the key legislations and policies include:

• New Environmental Protection Law (2014) • Water Pollution Prevention and Control Action Plan (2014) • Environmental Protection Tax Law (2016) • Soil Pollution Prevention and Control Action Plan (2016) • Air Pollution Prevention and Control Action Plan (2013) * Source: World Bank Database and National Statistics Bureau of China. The environmental protection market in China

Development phase of different business sectors Overall market size* of environmental  Landfill as the final stage of solid waste treatment is phasing out. protection market in China**  Municipal WTE is growing with intense competition.  Government’s strong determination  Hazardous waste and water environmental management sectors are expecting  Strict regulations huge growth.  Increasing public awareness  Soil remediation and food waste sectors are at start-up phase.  Greater enforcement effort Start-up Growth Maturity Decline 17 The figures are expressed in Municipal WTE Waste Landfill trillion RMB. Hazardous Waste

Biomass Water Environment Soil Remediation Management 4.2 Food Waste 2.2 0.7

'01-'05 '06-'10 '11-'15 '16-'20 * The market size referred hereto is calculated by investment from both public sector and private sector. ** Source: https://www.thepaper.cn/newsDetail_forward_1877776, last retrieved on 2018-4-14. TABLE OF CONTENT

1. China’s Environmental Protection Policies and Market

2. Development of Waste-to-Energy (“WTE”) in China

3. Technology and Business Model of WTE Projects in China

4. China Everbright International Limited’s WTE Business

5 Municipal solid waste treatment in China by volume of treated waste and number of plants from 2006-2016

1,000tpd 69 66 74 93 104 109 138 166 186 220 257 700 97.0% 100% City level 600 80%  2007-2016 CAGR of 500 266 219 WTE volume: 9.0% 400 52.8% 158 185 60% 94 123  71 85 2011-2016 CAGR of 300 52 40% 45 WTE volume: 3.6% 200 40 335 344 356 273 290 300 311 323 20% 100 207 215 253  2016 waste treatment 0 0% ratio: 97.0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

1,000tpd 3 2 4 10 15 21 29 31 34 37 40 250 100% 88% County level 200 80% 19.2  2007-2016 CAGR of 16.1 150 14.6 60% WTE volume: 27.1%

100 40%  2011-2016 CAGR of 175.8 137.4 146.9 157.6 WTE volume: 4.9% 50 94.3 113.6 20% 6% 62.1  31.7 40.1 2016 waste treatment 0 13.6 17.9 0% ratio: 88% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Landfill WTE Others Sanitary treatment rate

Source: 2016 Yearbook of China City Statistic, E20 # No. of WTE plants in operation in respective year Municipal waste treatment: Waste-to-Energy is substituting Waste Landfill  In China, the responsibilities to implement the waste management work lie on the local government either at the city level (normally with higher population) or the county level.  At the city level, both WTE treatment volume and facility number have been growing rapidly since 2008, which demonstrates that WTE is more popular than landfill.  Such substitution is attributable to technology innovation, domestic capability of equipment manufacturing, land constraint in cities and favourable industrial policies*.  At the county level, landfill is still playing a major role in municipal solid waste sanitary treatment. Meanwhile, WTE is growing at the end of the review period, mainly due to higher collection rate, better logistics and strict regulatory rules. Treatment methods at the city level (waste volume) Treatment methods at the county level (waste volume) 100% 100% 80% 80% 86.0% 60% 56.0% 60% 40% 40% 41.8% 20% 20% 9.4% 0% 2.2% 0% 4.6% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Landfill WTE Others Landfill WTE Others

* WTE power can be 100% offtake by the power grid and the portion of tonnage waste to energy below 280 kwh can be purchased at a flat rate of 0.65RMB per kwh about 50% higher than coal-fired power. Development of WTE in different regions of China

Hebei (Central) 2% 2015 2006 (East) 36% Landfill 3,849 2,314 2015 2006 14% WTE 2,204 455 Landfill 3,258 4,683 Others 52 424 29% WTE 2,094 98 Total 6,105 3,193 2006 2015 Others 2,551 196 Total 7,903 4,977 2015 2006 Anhui (Central) 2015 2009 13% 41% Landfill 2,878 2,304 (East) WTE 2,019 332 2015 2007 9% Others 0 0 CEIL takes 25% of WTE market Landfill 7,498 6,629 41% Total 4,897 2,636 2009 2015 WTE 5,622 671 Others 655 327 Total 13,775 7,627

2015 2006

Sichuan (West) Jiangsu (East) 2015 2006 2015 2010 16% 40% CEIL takes 60% of WTE market 14% Landfill 4,073 6,104 Landfill 7,971 5,698 WTE 10,488 1,137 WTE 7,177 2,643 Others 0 0 Others 2,794 808 72% Total 14,561 7,241 Total 17,942 9,149 2010 2015 2015 2006

The figures are expressed in 1,000 tons in the respective year stated herein. Landfill WTE Others TABLE OF CONTENT

1. China’s Environmental Protection Policies and Market

2. Development of Waste-to-Energy (“WTE”) in China

3. Technology and Business Model of WTE Projects in China

4. China Everbright International Limited’s WTE Business

9 Grate Furnace and Circulating Fluidized Bed are two mainstream incineration technologies adopted in most WTE plants in China. Characterization of China’s MSW: Grate Furnace • High capex per unit  Low source sorting level without • High tonnage Waste-to- pretreatment Energy output  High moisture content (＞20%) • No mixer in combustion • Long availability of more  High non-combustibles (＞25%) than 8,000 hours/year Grate Furnace  Low calorific value (c.1,200kcal/kg) • No pretreatment needed • Low maintenance cost Combustion has gradually become Core WTE technical process: the most popular Circulating Fluidized Bed  and widely used Incineration system • Low capex per unit technology for  • Low tonnage Waste-to- Flue gas treatment system Energy output newly built WTE projects in China.  • Mixer is required in Fly ash handling system combustion  • Low availability of less than Leachate treatment system 7000 hours/year • Sorting and shredding pretreatment required • High maintenance cost

Comply with National MSW Pollutant Control Directive 2014 (GB 18485-2014).

Hazardous waste in China. Solidified with chelate before transferred for landfill.

On-site treatment of leachate required when the plant collects municipal solid waste with more than 10% moisture content. Thus, most WTE projects in China have on-site leachate treatment facilities. PPP (including BOT and BOO) is the prevailing business model for WTE projects in China. Normally, a qualified industrial investor is selected through an open tender process.

Municipal government (Owner)

Environmental Protection Bureau Regulation & Media and the Bureau of City Admin and • Waste Service Agreement Supervision Third party supervision public Law Enforcement btw owner and SPV

Tender& Selection Waste supply Loans Interest Commercial Banks

Commercial Banks Waste tipping fee Project Co. Electricity Supply Power Grid Industrial Investor Dividend Equity (SPV) Power sales revenue Operator

Investment Platform Co. • Power Purchase Agreement owned by local Gov. • Concession Agreement btw owner and SPV • EPC Contract btw SPV and EPC contractor • Joint Venture Agreement O&M EPC btw shareholders EPC contractor LEDGED PMT of EPC work Service fee Regulation Mass / service stream Financial stream Civil work Equipment Installation Other sub- contractor contractor suppliers contractor contractors Organizations bound by O&M Agreements • O&M contract btw SPV and O&M contractor TABLE OF CONTENT

1. China’s Environmental Protection Policies and Market

2. Development of Waste-to-Energy (“WTE”) in China

3. Technology and Business Model of WTE Projects in China

4. China Everbright International Limited’s WTE Business

12 China Everbright International Limited (“CEIL”) is the leading environmental protection company in China and the largest WTE investor and operator in Asia. Secured 94 Waste-to-Energy projects All projects are designed, built and operated in full  47 projects in operation with a capacity of 40,600tpd. compliance with Directive 2010/75/EU.   Contracted capacity is more than 80,000tpd. In 2017, 12 million tons of MSW was processed.   Commanded a total investment of c. USD6.4 billion*. In 2017, 4100 GWh green electricity was generated.  Received more than 1 million visitors on public open days.  Since 1st Jan 2017, real-time hourly emission data has been disclosed on line. Awards and Recognitions (HKSE: 257)  Dow Jones Sustainability World Index, 2016&2017;  Hang Seng Corporate Sustainability Index, since 2014;  MSCI China Index since 2013;  RobecoSam Silver distinction, 2017.

* 94 WTE projects commanded c. RMB40 billion. CEIL’s Equipment Manufacturing

Advantages  CEIL provides various products with customized designs ranging from 300tdp, 350tpd, 400tpd, 500tpd, 600tpd, 750tpd to 850tpd. Due to the economies of scale, a Grate Furnace with larger capacity usually delivers better financial performance to the project.  CEIL’s Grate Furnace obtained CE Mark of European Union and is eligible for export to overseas markets.  CEIL is the first company in China which owns both forward moving and reverse moving Grate Furnace technologies.  Gas flow in CEIL’s Grate Furnace is simulated by CFD Track records of CEIL’s Grate Furnace process in order to achieve the best combustion performance.  750t/d: 9 sets have been installed and in operation (eg,  , Wujiang, ), 36 sets are under manufacturing. The annual availability of CEIL’s Grate Furnace is longer than 8,300 hours per set (regardless its capacity).  850t/d: 2 sets have been installed and in operation in Yixing, 5  sets are under manufacturing. The unique tumbling grate design allows the excellent combustion effect and low ignition loss rate of slag  To date, 132 sets of different types have been either in quantity less than 3%. operation or purchased at manufacturing stage. Sichuang Province: Shangdong Province: Novago 2,700tpd MBT+RDF projects Suining, Mianzhu, Ya’an，Leshan Ji’nan, , ,, , , , Pingdu, , , , , Linshu, II

Henan Province: Xinzheng, Lankao,Xiayi,Sheqi

Jiangsu Province: I, Suzhou II, Suzhou III, Yixing I, Jiangyin I, Jiangyin II, Changzhou, Nanjing I, Zhengjiang I, Zhengjiang II, Suqian I, Pizhou, Xinbei, Guanyun, Yixing II, Nanjing II, Suqian II, Peixian , Wujiang, Gaochun, Liuhe, Huaiyin, I, Suzhou IV Can Tho 400tpd WtE Project

Anhui Province: Dangshan, Lingbi, Xiaoxian, Ma’, Fengyang

Zhejiang Province: I, Ningbo II, Ninghai, Hangzhou, Chun’an

Hunan Province: Yiyang, Yongzhou, Xiangxiang

Guangdong Province: Boluo, Huidong, Machong, Boluo II

Business Presence with WTE projects Hainan Province: I &II Business Presence without WTE project

Projects Projects in operation 金色品牌 绿色事业 Golden Brand Green Business

Thank you.

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