World Bank Document

Documentof The World Bank

FOR OFFICIAL USE ONLY Lodv3/ 7 -C9 Public Disclosure Authorized ReportNo. 8470-CHA

STAFF APPRAISAL REPORT Public Disclosure Authorized

CHINA

ERTAN HYDROELECTRIC PROJECT Public Disclosure Authorized June 11, 1991

Industry and Energy OperationsDivision

Public Disclosure Authorized Country Department Asia Regional Office

This doument ha a restlcted dsirbuton and may be used by redpint only in the perfonnance of their offic&adies. Its contt may no otherwise be dblosed whout World Bank atolzaton CURRENCY EQUIVALENTS (As of April 1991)

Currency Yuan (Y)

$1.00 Y 5.24 Y 1.00 $0.19 Y 1.00 100 fen

FISCAL YEAR

January 1 to December 31

WEIGHTS AND MEASURES

km - Kilometer (0.62 miles) kWh - kilowatt hour GWh - Gigawatt hour (1 million kWh) TWh - Terawatt hour (1 billion kWh) kW - Kilowatt (1,000 watts) MW - Megawatt (1,000 kW) GW - Gigawatt (1 million kW) kV - Kilovolt (1,000 volts) kVA - Kilovolt-ampere MVA - Megavolt-ampere(1,000 kilovolt-ampere) GVA - Gigavolt-ampere(1 million kVA) ton - 1,000 kg

GLOSSARY AND ABBREVIATIONS

CHIDI - Chengdu Hydro Investigationand Design Institute DRB - Disputes Review Board EEC - Ertan EngineeringCorporation EHDC - Ertan HydroelectricDevelopment Corporation EP - Environmental Panel ETIC - Energy and Transport InvestmentCorporation (SichuanProvince) GNP - Gross National Product GOC - Government of China HIPDC - Huaneng InternationalPower DevelopmentCorporation ICB - InternationalCompetitive Bidding LRMC - Long-Run Marginal Cost MOE - Ministry of Energy MWREP - Ministry of Water Resource..and Electric Power SAA - State Audit Administration SBC - Special Board of Consultants SEIC - State Energy InvestmentCorporation SPC - State Planning Commission SWCEPB - Sichuan Water Conservancyand Electric Power Bureau SCEPA - Sichuan Electric Power Administration TCC - Technical Cooperation Credit toe - tons of oil equivalent WREPERI - Water Resourcesand Electric Power Economic Research Institute FOROFFICLAL VWE ONILY

CHINA

ERTAN HYDROELECTRICPROJECT

STAFF APPRAISAL REPORT

Loan and Project Summary

Borro-wer: People's Republic of China

Beneficiaryt Ertan Hydroelectric Development Corporation (EHDC)

Amount: $380.0 million

Terms: 20 years, includinga nine-year grace period, at the Bank's standard variable interest rate. The proceeds of the loan would be onlent from the Government through Sichuan Province to EHDC under subsidiaryloan agreements with a 20-year term, includingnine years grace and the standard variable interest rate for Bank loans. The foreign exchange risk and commitmentcharges would be .,orne by EHDC.

Project Objectives: The main objectivesof the project are tot (i) provide additionalgeneration capacity to the power system in Sichuan Province (3,300 HW and 17 TWh a year) in order to alleviate an acute shortage of electricity; (ii) assist in the transfer of modern power technology and in the introductionof efficientdam construction methods to reduce the prevailinglong gestationperiods of hydropower projects; (iii) contribute to further improvementsin the analysis of environmentaland ecological impacts of hydroelectricresource development; (iv) enhance the institutionaldevelopment of EHDC by strengtheningits organizationthrough a modern management training program and introducingprinciples of economic efficiency and pricing; and (v) provide technical assistance in project design and implementation, and for the promotion of the optimal operation of the power system, prudent financialmanagement, and manpower development.

Project Description: The proposed project would include: (i) preparatory works; (ii) constructionof a parabolic,double-curvature arch dam (240 m high) across the Yalong River together with an undergroundpowerhouse complex, a log conveyance system, and appurtenantworks and structures; (iii) provision and installationof six 550-MW generatingunits and associatedequipment; (iv) resettlement of about 30,000 people; (v) an environmental management program and science station; (vi) consultant's services for engineering,procurement, manage-

ofthek offlWduties. tscontents may not otherwise be disclosedwithout World ank authotization. - ii .

ment of construction,and preparationof futurepower projects;(vii) studies of power pricingand power plant and reservoiroperation; and (viii)strengthening EIKDC'sorganization, technical assistance and staff training,together with relatedequipment and accessories. Benefits: This very largeproject, based on renewableand nonpol- lutingcost-effective hydropower, would greatly increasethe generatingcapability of the Sichuanpower system. Accordingto economicanalyses, the projectis 40 percentless expensivethan its best hydrolthermal alternativesin meetingfuture power demand. The developmentof :he projectalso would enhanceindus- trial and agriculturalproduction in nearbyundeveloped areas. The projectwould help to improvethe subsector's institutionaldevelopment, system operations, and managementand staffing. Purthermore,the projectwill avoidmining, transporting, and burningof some ten milliontons of raw coal a year in SichuanProvince vhich has the highestatmospheric pollution in China. The internaleconomic rate of returnbased on the cove- nantedtariff is about15 percent. However,if based on the willingnessto pay, this returnwould increase to 18 percent. Risks: Constructionrisks are withinreasonable limits and would be manageablewith the continuoussupervision arrangementsby foreignand Chineseconsultants who have been retainedfor the constructionphase. The consultantsare alreadyinvolved in reviewingpossible physicalrisks and proposingmeans and proceduresfor their avoidanceand mitigation.To minimizepotential risksassociated with the executionof the projectand its resettlementprogram, assurances were obtainedfrom the Governmentthat it would ensurean adequateand timelyflow of funds,and establishand maintaineffec- tive projectimplementation management. No major environmentalproblems are expectedunder this projectand the implementationof the proposedenvironmental man- agementprogram (including a monitotingprocess) would enhancethe environmentalquality in the projectarea. - iii.-

Estimated Costs Local Foreign Total -- $------million ------

Preparatoryworks 102.4 0.0 102.4 Resettlement 82.3 0.0 82.3 Land acquisition 7.1 0.0 7.1 Arch dam (lot no. 1) 217.8 284.3 502.2 Powerhouse (lot no. 2) 159.8 212.4 372.3 E&M equipment 54.6 139.9 194.5 Transformere 15.3 1.8 17.1 Gateslhoists,etc. 38.8 7.0 45.8 Contract administration 26.8 2.1 28.9 Engineeringand technicalassistance 25.5 17.3 42.8 Training 0.6 0.8 1.4 Environmentalprotection 1.6 0.3 1.9 Studies 0.6 1.1 1.6

Base Cost (early-1991prices) 733.1 667.0 1,400.1

Contingencies: Physical 80.8 83.2 164.0 Price 107.9 120.8 228.7

Taxes and duties 67.3 25.5 92.8

Total Project Cost 989.1 896.4 1,885.5

Interest during construction 342.9 258.7 601.6

Total Fin&ncing Required 1,332.0 1,155.1 2,487.1

Project FinancingPlan

IBRD loan - 380.0 380.0 IDA (TCC) La - 3.3 3.3 US Exim Bank Credit - 30.0 30.0 Norwegian Grant - 5.0 5.0 GOC (throughSEIC) 666.0 129.4 795.4 Sichuan Province (throughETIC) 666.0 129.4 795.4 Other Financing - 478.0 478.0

Total 1,332.0 1,155.1 2,487.1

Estimated Disbursements

IBRD FY 1992 1993 1994 1995 ------million ------

Annual 110.0 103.0 73.0 94.0 Cumulative 110.0 213.0 286.0 380.0

Economic Rate of Return: 15Z

la Credit 1664-CHA ($3.3 million used in 1989-91). . iv -

CHINA

ERTANHYDROELECTRIC PROJECT

STAFF APPRAISAL REPORT

Table of Contents Page No.

I. THE ENERGYSECTOR ...... 1

A. Overview ...... *. . . a1 Energy Resources ...... 1 Coal ...... I HydroelectricPotential ...... 2 Crude Oil ...... 2 Natural Gas ...... 2 Biomass ...... 2 Nuclear Energy ...... 2 Other Energy Resources ...... 2 Institutionsof the Energy Sector ...... 3 Energy Investments...... 3 B. Energy Sector Issues . . . . . , ...... 4 Intensityof Energy Use ...... 4 The Dominmace of Coal and Related Enviromental Problems ...... 4 Scale and Technology in Energy Industries ...... 5 Coal Subsector ...... 5 Electric Power Subsector ...... 5 Petroleun Subsector ...... 5 Energy Pricing ...... 5 Investment Funding System ...... 7 C. Energy Sector Strategy ...... 7

D. Bank Role in the Energy Sector ...... 7

II. THE POWER SUBSECTOR ...... 9

A. Background ...... 9 B. Institutions,Planning, and TechnologyTransfer . . . . 10 Institutions ...... 10 Power System Planning ...... 11 Modern Technology Transfer ...... 11 C. Power Pricing ...... 12 D. Subsector Issues and Strategy ...... 13 E. Role of the Bank in the Power Subsector ...... 13

This report was prepared based on the findings of an appraisalmission which visited China in December 1989, and an updatingmission in February 1991. The appraisalmission consisted of V. Mastilovic (Task Manager), Y. Albouy (Prin- cipal Economist), S. Shum (SeniorFinancial Analyst), W. Partridge (Anthropol- ogist), and D. Graybill and C. Killoran (Consultants). Peer reviewerswere A. Mejia (AS4TE),W. Cao (EM4EE), and K. Jechoutek (ASTEG). Division Chief is R. Stern and Department Director is S.J. Burki. PaLe No.

III. THE BENEFICIARY ...... 15

Introduction ...... 15 Organizationa M adanagement .1.5...... iS Staffingand Training...... 15 Planning,Budgeting and Control ...... 16 Accounting ...... 17 Audit ...... 17 Power Salesto SCEPA ...... 18 Billing and Collection ...... i 8. Insurance...... 19

IV. THE POWER MARKETAND THE PROGRAM ...... 20

Background ...... 20 The SichuanPower System ...... 20 DemandForecast ...... 21 DevelopmentProgram ...... 22

V. THE PROJECT ...... 24

ProjectObjectives and Rationale for Bank Involvement . . . . 24 Project Description ...... 24 Project Origin and Investigations...... 26 Project Cost Estimate . . . . 4 ...... 26 Financing Plan ...... 28 Procurement ...... 29 Disbursements ...... 30 Project Implementation ...... 31 Engineering,Technical Assistance and ConstructionSupervision 32 Studies ...... 3. ManagementDevelopment and Training . . * ...... 35 Resettlementand RehabilitationProgram ...... 35 EnvironmentalManagement Program ...... 36 Project Risks ...... 37 Monitoring and Reporting ...... 38

VI. FINANCIALASPECTS ...... 39

Background ...... 39 EHDC's Finances ...... 39 Financial Performance Targets ...... 39 Future Finances ...... 40 (a) Revenue Position ...... 40 (b) Funds Flow ...... 41 (c) Capital Structure ...... 41 SCEPA's Finances ...... 41 Past Financesand Current FinancialPosition ...... 41 FutureFinances ...... 42 - vI -

Page No.

VII. ECONOMICJUSTIFICATION ...... 43

Project as a Least-CostGenerating Alternative ...... 43 Project Size andTiming ...... 44 Project Benefits ...... 44 Sensitivity Analysis ...... 45

VIII. AGREEMENTSAND RECOMMENDATIONS ...... 46

ANNEXES

2.1 InstalledCapacity, Electricity Generation and Sales 2.2 Growth Index of ElectricityGeneration and Primary Energy Demand 2.3 ElectricityConsumption by Sectors 2.4 Ongoing Major Hydro and Thermal Power Projects by External Financing 2.5 ElectricityRates 3.1 Staffing of EHDC 3.2 Management Developmentand Staff Training Program 3.3 SCEPA's ElectricityTariffs 4.1 Energy Balance in Sichuan Province 4.2 SCEPA's Generation Capacity and TransmissionNetwork 4.3 ElectricityConsumption and Generation in Sichuan Province 4.4 Forecast Energy and Power Demand of the Sichuan Grid 4.5 Power GenerationExpansion Program 4.6 DevelopmentProgram of 500 kV TransmissionNetwork in Sichuan Province 5.1 Project Description 5.2 Project Cost Estimate 5.3 Local Cost Financing Plan (1991-95) 5.4 ProcurementSchedule - 5.5 Schedule of Disbursements 5.6 ConstructionManagement Services 5.7 Engineeringand ConstructionManagement Consultancy 5.8 Power Pricing Study 5.9 Study of Optimal Power Plant and Reservoir Operation 5.10 Resettlementand RehabilitationPlan 5.11 EnvironmentalManagement Plan 5.12 Guidelines for Project Monitoring 6.1 Financial System Followed by Chinese Power Bureaus 6.2 Assumptions to EHDC's FinancialProjections 6.3 EHDC's Income Statements (1998-2002) 6.4 EHDC's Balance Sheets (1991-2002) 6.5 EHDC's Funds Flow Statements (1991-2002) 6.6 SCEPA's Income Statements (1986-90) 6.7 SCEPA's Balance Sheets (1986-90) 6.8 Assumptions to SCEPA's Financial Projections 6.9 SCEPA's Income Statements t1991-200O) 6.10 SCEPA's Balance Sheets (1991-2000) 6.11 SCEPA's Funds Flow Statements (l991-2O00) 7.1 Economic Justificationof the Project 7.2 Economic Rate of Return 7.3 EnvironmentalImpact of Coal-FiredAlternative 8.1 Selected Documents and Data Available in the Project File - vii -

CHARTS

1. Organizationof the Electric Power Industrywithin MOE 2. Organizationof EHDC 3. Organizationof EEC 4. Project ImplementationSchedule

MAPS

General Layout of the Project (IBRD 21324) SCEPA's Power Network (IBRD 21308R) ResettlementPlan (IBRD 22093Rl) CHINA

ERTAN HYDROELECTRICPROJECT

I. THE ENERGY SECTOR

A. Overview

1.1 China has made remarkableprogress in developing its energy resourcesover the last four decades and became the third largest producer of commercial energy in the world. In that period, the output of coal has increasedat an average annual rate of 9.1 percent, crude oil productionat 19.3 percent, and electricitygeneration at 13.1 percent. In 1989, the country's primary commercialenergy supply amounted to 710 million tons of oil equivalent (toe). Coal is the most importantsource of commercialenergy, accounting for about 74 percent of the total. Oil accounts for 19 percent of the total and provides about 7 percent of the country's export earnings. Hydroelectricpower (4.3 percent), natural gas (2 percent), and small quantities of shale oil and geothermal power make up the balance. Noncommercial energy, equivalent to about one-thirdof commercial energy production,is very importantin rural China.

1.2 In 1989, China's final consumptionof com*ercialenergy was estimated to be about 680 million toe. The largest consumer of commercialenergy is the industrial sector (62 percent),followed by households (24 percent), services (9 percent), and agriculture (5 percent). About 20 percent of oil and 2 percent of coal productioncurrently are exported. Coal and its by- products meet 70 percent of the fuel requirementsfor industry and power generation, provide 60 percent of the raw materials for chemicals,and satisfy 80 percent of the commercialenergy needs of households. The country also is the third largest consumer of commercial energy =n the world. Still, energy consumptionper capita is low--about0.6 toe, or one-thirdof the world average.

Energy Resources

1.3 Coal. China has large coal deposits with recoverablereserves of about 900 billion tons, of which 30 percent are proven. There are now twelve provinces and autonomous regionswith more than 10 billion tons of coal reserves; Shanxi and Inner Mongolia each have reserves of over 200 billion tons. In 1990, the country produced 1.1 billion tons of raw coal, of which it exported only 16 million tons. By the year 2000, China aims to produce 1.4 billion tons of coal a year. While coal is produced in many provinces, the amount and quality vary; for example, in Sichuan--wherethe proposed project is located--muchof the local coal has a very high sulphur content (para. 4.2). The best quality coals are found in North China, which is also the region with the largest coal surplus. However, insufficienttransport capacity makes it extremely difficultto move coal from mines in North China to the large consuming centers in Southeast,Central, and East China. The safety and environmentalproblems associatedwith coal mining and utilizationalso are serious (paras.1.17 and 1.19). 1.4 HydzoelectricPotential. China is rich in water resourcesand has a long traditionof harnessing them for energy and other uses. The country's hydroelettricpotential is estimatedat 1,900 TWh a yeair,but only about 9 percent of it has been developed. Most of the potential is located in four major river basins in the Southwest (70 percent) and No-thwest (12 percent). about 1.500 km away from the main demand centers. The long gestationperlod for hydroelectricproiects also has inhibitedthe more rapid developmentand utilizationof hydroe!ectricresources.

1.5 Crude Oil. China's ultimately recoverablereserves of crude oil have been estimatedat some 80 billion tons, of which 16 percent are proven. The country produced 138 million tons of crude oil in 1990, and the target output for the year 2000 is 230 million tons. In view of the natural decline in productionfrom existing aging fields, it seems unlii.selythat this production target can be met. China's refining capacity is the sixth largest in the world and allows it to produce a relativelyhigh share of high and medium distillates.

1.6 Natural Gas. Chins's natural gas resourcesare estimated at 33 tri- llion Mi, of which 2.6 percent are proven. About 50 percent of the gas produced is nonassociatedgas. In 1990, China produced 15 billion cubic meters of natural gas. The target output for the year 2000 is 25 billion mi. Most of the gas is used as feedstockfor fertilizersand petrochemicals.

1.7 Biomass. Firewood and crop stalks account for 57 percent of the 224 million toe of rural energy supplies. About 70 percent of all fuelwood is used for cooking. Some areas of the country have been sufferingfrom serious deforestation,stemming primarily from fuelwood collection and land clearing for various purposes. The estimated offtake of fuelvood is 230 million tons (91 Mtoe), or 2.6 times the sustainableamount. The Government is taking various measures to address this problem, such as encouragingmore efficient use of wood, planting trees, improvingmanagement of natural forests and wood lands, making greater use of charcoal,and substitutingcoal for wood. China also produces many agriculturalresidues which are used as fuel.

1.8 Nuclear Rnergy. Known uranium reserves in China are sufficientto sustain 15,000 MS of nuclear power capacity for 30 years. In 1991, China plans to commissionQinshan nuclear power plant (300 MM), located near Shanghai. In 1992193,Daya Bay nuclear power plant (2x900MW) should be commissioned; 70 percent of its output is intended for nearby Hong Kong. The constructionof a few additional plants is planned before the year 2000, primarily in regionswhich lack coal and hydroelectricresources.

1.9 Other Energy Resources. Other energy resourcesplay a small role in energy supply and are used mostly in remote areas. Geothermalenergy has been found in more than 3,000 locationscovering nearly all provinces and autonomous regions. The Yangbajing geothermalpower plant, located in Tibet, supplies about 50 GWh a year, or about 20 percent of the electricityconsumption in Lhasa's power system. Although wind and solar energy have promising pros- pects (e.g.,wind in Inner Mongolia), they are not expected to affect the overall supply of energy significantlyduring the next two decades. Unoffi- cial estimatesof oil shale suggest that deposits are large, but little is exploitedbecause of lack of technology. - 3-

Institutionsof the Ener8g Sector

1.10 In 1988, the Ministry of Energy (MOE) was establishedto manage and develop the energy sector. Its formationwas intended to reduce the duplica- tion and overlappingresponsibilities of the former ministries in charge of coal, petroleum,and nuclear power. MOE also was given responsibilityfor electric power, formerly held by the Ministry of Water Resourcesand Electric Power (tMWREP).The new ministry has primary responsibilityfor planning and establishingpolicies and regulationsto promote the rational developmentand use of energy resources. Under MOE arc various companiesand administrations responsiblefor operationsin individualenergy industries. Chart 1 shows the organizationof MOE.

1.11 The State Energy InvestmentCorporation (SEIC) was establisheddur- ing the same peri&odto handle project financingin the coal and electricity industries. SEIC is responsiblefor onlending funds for projects of national importanceand representingthe Government in the joint finanacingof projects with other parties; it is expected to operate as a revenue earning entity. Petroleumand nuclear power investmentsare covered under separate corpora- tions. Both MOE and SEIC operate under the purview of the State Planning C-ommission(SPC), which has ultimate authority for project approval,budget allocations,and financingarrangements.

Energy Investments

1.12 Most investmentsin energy supply go to support projects with long gestationperiods. Energy investmentsfor the 1980s were planned based on an expected economic growth rate of 7.5 percent a year. Actual economic gzowth rates exceeded this target by an average of 2.5 percent a year, (4.5 percent in peak years). Also, indu-trialgrowth far exceeded what had been planned. The discrepancy between projected and actual growth rates has exacerbatedthe energy shortages that already existed at the start of the decade. China faces an additionaldifficulty in developingits relativelyabundant energy resources,as many of the resources are located far from consumptionareas and must be transportedover long distancesat high cost. In recent years, the Governmenthas thus given priority to shifting resourcesinto bottlenecksec- tors such as energ} and transport.

1.13 In 1989, China dedicated3.4 percent and 1.3 percent of its Gross National Product (GNP), respectively,to develop infrastructurefor energy productionand transportation. It invested a total of Y 44.6 billion ($12 billion) in energy supply, representing29 percent of state capital construction. In the early 1980s, energy supply investmentsaccounted for 21 percent of state capital construction. The shares of power and petroleum investmente' have increased since 1988 to 62 percent and 22 percent, respectively. State coal investmenthas declined (to 16 percent) but this decline has been offset by an increase in iivestment by coal collectives. About 20 percent of the investmentrequirements of the Chinese energy sector are met by foreign loans and direct investments. Direct foreign investmenthas financed most offshore petroleumexploration to date, although recent trends indicate a decline in direct investmentfor this purpose. On the other hand, there has been an increase in supplierscredit and bilateral lending for the petrochemicaland power industries. -4-

B. Energy Sector Issues

1.14 In addition to the already noted energy shortages,the main energy sector issues are: (i) the high energy intensityof the Chinese economy; (ii) the dominanceof coal use and associated environmentalproblemss (iii) the need to improve scale and technology in energy industries;(iv) the inadequacyof energy pricing policies; and (v) the weak investmentfunding system.

Intensityof Energy Use

1.15 In 1980, China's co.ssumptionof commercial energy was estimated at 1.5 toe per $1,000 of GNP. That high a level of energy intensitywas due to the emphasis placed on heavy industry,the small sca'e of industrialunits, and the raw materials and technologiesemployed. In the late 19709, the Gov- ernment began to address the inefficienciesin the economy by instituting regulationson energy use, establishingconservation centers to provide technical assistance,and allocating a larger share of investmentfunds for industrial modernization,particularly for projects which contributedto energy conservation. The elasticity of energy consumptionwith respect to GNP growth, which averaged 1.74 from 1952 to 1977, was reduced to 0.5 in the 1980s. In 1989, the country's energy intensitywas 1.1 toe, a 27 percent reduction from the 1980 level. It is estimated that technical and operational improvementsand the closure of some inefficientsmall-scale plants are responr M1e for about 70 percent of the energy savings, and the shift in the output mix of the economy for the other 30 percent. The efficiencygains have been evenly spread over heavy and light industry. Despite these improvements, China's energy intensity is still high. A target of the Eighth Five-Year Plan (1991-95)is to reduce it further by 10 percent. More energy could be saved by increasingthe scale of operations,employing P-ore efficient operating practices,and using more modern technologiesin energy intensiveindustries.

The Dominanceof Coal and Related EnvironmentalProblems

1.16 Unlike the situationin most countries, the electric power nubsector is not the largest consumer of coal in China. Industrialuse of coal is much greater. The growth of coal consumptionin the household sector also has been strong, due to urban population growth and the increasinguse of coal in rural areas. Moreover, there is considerablelatent energy demand in the residential sector, primarily for space 'leating,as present heating arrangementsmeet only miniasalneeds.

1.17 Many of the environmentalproblems in China are related to the country's heavy use of coal and the dispersed,small scale applicationof coal in industry and households. Environmentalproblems occur at every stage of the coal chains mining and disposal of mine waste, coal washing, transportand handling, processingand combustion,and ultiLatelyash disposal. Water pollution occurs both in mining regions and in dense urban areas, caused by problems in disposing of coal mining and processingwastes and the coal ash remainingafter combustion. In many large cities, ambient concentrationsof particulatesand sulfur dioxide are very high. The concentrationof particul- ates is the most serious proLlem; it is largely related to the extensive use of coals, their h.lghash content (20-30 percent), and the often incomplete combustion due to poor matching of coal qualities to boilers used. The aver- - 5 -

age sulfur content of the coal is relatively low (in the range of 1.2-1.7 percent), but because coal is used so extensivelysulfur emissions are increasing. Moreover, some provinces, such as Sichuan, use coal which has a very high sulfur content.

1.18 The environmentalimplications of continued increases in coal use are sobering. They highlight the need for stronger regulatoryenforcement and more resourcesdevoted to investmentsto conserve coal and mitigate its envi- ronmentaleffects. In addition,v.ore resources should go to the exploration and developmentof cleaner fuels. In many industrializedcountries, oil and natural gas have replaced coal in households. At the present time, however, China has limited scope for substitutingcleaner and often more cost effective fuels in industrial and residentialapplications. The country has insuffi- cient confirmednatural gas resources;its production of oil is increasingly absorbed by transportand petrochemicals;and its large hydropower resources are located far away from major consuming centers.

Scale and Technology in Energy Industries

1.19 Coal Subsector. Over half of the coal produced in China comes from small-scalemining operationswhich use traditionaltechnologies such as hand hewing or drilling and blasting. A major problem common to coal mines is worker safety. China has considerablepotential for developingmedium-size mines capable of supporting investmentsin semimechanizedor mechanized systems, safety equipment, storage and handling systems, and washery plants, reducing safety and environmentalproblems while improvingthe quantity and quality of output. In the larger centrally-controlledmines, productivityand safetycould be increasedby making greater use of mechanized long wall systems and employingmore economic designs for mines and washeries.

1.20 Electric Power Subsector. Large-scalepower developmentin China is beneficial from the standpointof both energy conservationand environmental protection. Modern power plants, with unit capacitiesof 300 KW and 600 MW, are about 10 percent more efficient than smaller plants and consume about 150 grams of coal less per kWh. This means that the faster the pace of electric power development in China, the sooner the countrywill be able to reduce its consumptionof coal to meet energy demand. The boilers of the modern utilities also support better pollutioncontrol equipment,raising the efficiency of particulate removal.

1.21 Petroleum Subsector. In the petroleum subsector,there is a need to employ more modern equipment and technologyat all stages of explorationand development;seismic survey and related data processing,exploratory drilling, and enhanced oil recovery in order to increase production from aging fields. Improvementsin operating and maintenancepractices also are needed to increase the efficiency of the subsector. Moreover, better management of the oil and gas reservoirswould help to maximize ultimate recovery rates.

Energy Pricing

1.22 Average energy prices have been rising in recent years because of the broadening of the free market. Coal prices have increased rapidly during the last five years, largely because the market has expanded to as much as 40- 50 percent of sales, depending on location. Indeed, free market prices for - 6 -

coal in East China are at or above the level of internationalprices. The administeredprice of coal, alth-.gh it has been raised in recent years, is still below domestic supply costs; just as importantly,the price structure does not fully reflect differencesin quality, such as calorificvalue ane ash content. The dual pricing system (para. 1.25) creates various distortions; some high calorificvalue coals are still underpricedand may not be directed to their most economic uses.

1.23 While the average price levels of some light petroleumproducts are close to internationalprices, average prices of crude oil and heavy fuel oil are substantiallylover. The pace of domestic oil price adjustmentshave remained slow, while extraction costs have risen sharply. Producer prices for natural gas are also distorted and should be adjusted to provide an incentive to find and develop more resources.

1.24 Electricityprices are largely based on tariffs set in 1976. Nei- ther the level nor the structureof tariffs reflects the differentialcost of service arising from consumptionduring peak load periods anidpower distribution at various voltage levels. In 1987/88, revenue enhancementswere introduced in order to improve funding of power development. In particular,a new plant, new price, policy guarantees that power prices will be sufficientto allow the power entities to fully service the debt on newly commissionedproj- ects. As a result of this policy, electricityprices are expected to rise subsfantially. Already a multitieredprice system is emerging in some provinces- while most consumers are charged just a fraction of the long-runmar- ginal cost (LRMC) of supply, some industrialusers are charged prices, at the margin, that are well above the LRMC (para. 2.13).

1.25 The recent increases in the price of coal and electricityand the initiationof energy rationingare helping to promote conservationand should positively influence investmentand operatingdecisions in the sector. How- ever, the full benefits of these actions will not be realizedas long as a dual pricing system for energy is not abandoned. Under this system, one set of prices applies to goods allocatedunder the plan and another set of prices applies to goods distributedby the market. Because allocatedprices tend to be significantlylower than free market prices, the system encourages consumers to use fuels covered by allocatedprices regardless of their suitability. Similarly,the system encouragesenergy suppliers to focus on markets offering free market prices and to neglect the economicallylegitimate requirements of other markets which offer allocatedprices. For example, the low prices for town gas inhibit investmentsfor supplying gas in forms suitable for household energy (natural gas, coal-basedgas, and process gas) in an environmentally sound manner. The existing price structurestill does not provide all necessary incentives for investment to improvecoal quality and for electricity consumers to shift their demand to off-peak hours or to be connected to higher voltage.

1.26 China needs strong price incentivesand rigorous enforcementstan- dards to encourage consumers to conserve energy. It must continue its program to raise energy prices, close the gap between administeredand free market prices for coal, and begin to correct the most serious distortionsin the pricing structures for coal, gas, and electricity. Energy price reform based on full recovery of supply costs also will help to remove anomalies in the funding of energy investments. The Government remains committedto its over- - 7 -

all price reform program. For example, in the last several months, the Gov- ernment hae implementedsignificant price increases and reduced the subsidies in a number of basic commodities,such as grains, cement, and steel. It also indicated its readinessto abandon dual pricing in coal and electricity.

InvestmentFundin& System

1.27 China has taken decisive steps recently in energy conservation, environmentalprotection, and fuel diversification. Improvementsin the scale and technologyof energy supply systems have multiplied in recent years, and the share of funds channeled into the energy sector is now approachingaccept- able levels. However, the funding of investmentshas suffered as a result of distorted pricing policies that led to a haphazard and compartmentalizedmobi- lization of resources,and an inefficientdevelopment of energy sources. To reduce financialpressures on the central government,responsibility for funding of energy investmentsgradually has been shifting to the provinces,with mixed results. In the coal subsector,local productionnow exceeds state productionbut is not operatingat the scale required to achieve higher efficiency or improve safety. Because of insufficientelectric power supplies, some local enterprisesare making their own investmentsin power plants. The investmentapproval system actually biases local investmentin favor of less efficient small-scaleplants, as these plants do not require clearance or any financialcontribution by the central government.

C. Energy Sector Strategy

1.28 The Governmentis working to eliminateenergy shortages in an environment of rapid economic growth. The Government'sprincipal objectives in the energy sector are to: (a) acceleratethe expansion of electric power and oil/gas production; (b) expand and improve the scale of coal production; (c) increase the efficiencyand change the forms of coal utilization; (d) minimize the environmentalimpact of energy use; (e) rationalizeenergy prices and investmentfunding; and (f) encourage the transfer of modern know- how and technologyin energy industries.

1.29 Allowing the power subsectora larger share in final energy consumption will help to modernize the Chinese economy, reduce overall energy inten- sities, and curtail pollution through the harnessingof hydropower,more efficient technologies,and larger-scaleplants. The same holds true for the oil and natural gas subsectors,both of which yield cleaner,more efficientfuels than coal. The continueddevelopment of coal mining is an inescapableneces- sity but it must occur under conditionsof higher efficiency,safety, and environmentalacceptability.

D. Bank Role in the Energy Sector

1.30 The Bank has supportedseven projects in electric power, five in petroleum (includingone gas project), and one in coal. In all three subsec- tore, the objectiveshave been to support technologytransfer, modern management practices,and the developmentof efficient,large-scale energy production. Through its sector work and project-relatedtechnical assistance, the Bank has assisted in studies to enhance improvementsin energy pricing and investmentpolicies. The power-specificaspects of the Government'sstrategy and the role of the Bank are covered in paras. 2.17-2.18. 1.31 With the Bank's assistance,the Chinese have done a good work in evaluating the economic costs of electric power and coal and in suggesting approaches for gradual price reform. With regard to electricity.LRMC and target tariffs were establishedfor East China in 1988. Since then, the Bank has sponsored the formulationof action plans and adapted them to the specific conditions of each regionalpower grid, with the objectiveof promoting their execution under repeater projects. An action plan for power pricing reform in Sichuan is included under the proposed project (para. 5.29). For coal, the Chinese have set pricing guidelines for various types of coal nationwide, but the recent surge in inflationhas prevented the Governmentfrom moving deci- sively along these lines. However, plans for a large increase in administered coal prices are still alive and the Bank will continue to promote the formulation and execution of a plan to rationalizethe level and structure of coal prices, with special attention to the most sensitivecoal users.

1.32 A Coal TransportStudy, being conductedjointly by the Bank and various Chinese institutes,will develop a model to identify optimal investments in infrastructureto move coal more efficiently,taking into consider- ation quality requirementsand the impact of more efficientutilization in major consumingareas. A Coal Utilization Study has evaluatedoptions to improve coal use and reduce its environmentalimpact both in industry and households. In regard to the petroleum subsector,two seminarshave been organized in China over the past five years--one on gas utilizationand another on petroleum subsectormanagement. Improving the planniig of investments and operations for the power subsectorhas been the focus of many Bank-sponsored activities (paras. 2.11 and 2.19).

1.33 Future Bank operations in the energy sector will continue to support rational energy developmentand technology transfer,energy efficiencyand conservation,and improved environmentalmanagement. Through both project and sector work, the Bank continuesto encouragepolicies which provide the proper incentives for sustainableenergy developmentand conservation. Finally, the Bank will cor.tinueto promote modern enterprisemanagement, greater autonomy and accountability,as well as improvementsin the regulatory frameworkof the sector. - 9 -

1I. THE POWER SUBSECTOR

A. Background

2.1 Since the 1950s, China has grown to become the fourth largest producer of electricityin the world. In 1990, the country had a total installed capacity of 135.0 GW, 74 percent based on thermal power and 26 percent based on hydropower. That same year it generated618 TWh of electricity,of which 126 TWh was from hydropower. Plant use and network losses accounted for 6.9 and 8.0 percent of generation,respectively. Fuel consumptionin thermal plants has been reduced to about 400 gram of standard coal per kWh. These levels of electricitygeneration, losses, and fuel corsumptionare close to those in industrializedcountries. Power is mostly distributedthrough 16 major grids, 13 of which exceed 1 GW in capacity and account for about 90 percent of total capacity. By the end of 1989, the total length of the extra high voltage transmissionlines reached 7,302 km and the capacity of substa tions amounted to 18.8 GVA.

2.2 The Government'srural electrificationpolicy emphasizes the development of local energy resources. Therefore,as much as possible,mini hydropower developmentis encouraged in isolated areas. In 1989, mini-hydro, small thermal, and diesel generating sets had a total installedcapacity of 19 GW. Mini-hydro plants alone had a capacity of 12.4 GW and an annual generationof 34.3 TWh. The networks in rural areas are made up of 1,990,000km of 110 kV lines, and 4,020,000km of low-voltagelines (35 kV and below). These networks have a transformercapacity of 85.9 GVA at high voltage and 142.5 GVA at low voltage. Approximately94 percent of townshipsand 85 percent of villages are electrified.

2.3 The growth of installed capacity,electricity generation, and sales since '949 is depicted in Annex 2.1. Annex 2.2 shows the historical trend of electricitygeneration, primary energy demand, and the GNP. The target of quadruplingthe GNP between 1980 and the year 2000 should result in average growth of 7.0 percent a year for power demand. On this basis, the Seventh Five-Year Plan (1986-90)called for an increase in generatingcapacity of about 35 GW (8 GW from hydropower)with an additional120 GW planned between 1990 and 2000. Power generation capacity expansionduring the period 1986-90 met the plan objectives for hydropower and surpassedthose for thermal power by 80 percent. Various steps are being taken to satisfypower demand. Large thermal power stations are being constructedmainly near ports and major coal mines in Shanxi, Heilongjiang,Henan, Shaanxi, and Shandong. Major hydroelectric stations are planned at the middle and upper reaches of the valleys of the Yellow River, Yangtze River, and Hongshui River. Two nuclear power plants are being constructed in Guangdong and Zhejiang Provinces (para 1.8). A 500 kV transmissionnetwork is being built to integrateregional grids. The first high-voltagedirect-current transmission link was commissionedin 1989 to transfer hydropower from Gezhouba in Hubei Province to Shanghai.

2.4 In 1990, China consumed 535 TWh of electricity;80 percent was consumed by industry, 7.8 percent by agriculture,6.2 percent by household, 2.0 percent by transportation/communications,and 4 percent by other services. Details of electricityconsumption by sectors are given in Annex 2.3. Average - 10 -

per capita consumptionin 1990 reached nearly 500 kWh; household use was about 85 kWh in cities and 20 kWh in rural areas.

2.5 Between 1986 and 1990, electricitydemand increasedfaster than generatingcapacity. As a result, power shortages reachedabout 20 percent of industrialelectricity requirements, which translatedinto the idling of indue'sial capacity for one or two days a week. Electricityis still allocated through quotas based on priorities set by local and central authorities and demands for new connectionsare closely screened; still, power cuts are frequent. The rapid growth of demand can be attributedboth to the very high economic growth and to the increasingshare of electricityin coimercial energy requirements: 13 percent in 1970, 18 percent in 1980, possibly 27 percent by the year 2000. Since 1986, residential,manufacturing, and transportation showed the highest growth rates: 20 percent for residentialuses due to income growth and 19 percent for transportationdue to railway electri- fication. The manufacturingsector is already a large electricityconsumer and is expected to maintain its share in the future. Notwithstandingcon- certed efforts at energy conservation,the growth of power supply should not be allowed to fall behind GNP growth. As economic growth is only targeted at 6 percent a year under the Eighth and Ninth Five-YearPlans, the power output is planned to grow at the commensuraterate of 5.8 percent a year to 1,100 TWh in the year 2000; however, such a figure may prove to be too conservative. Indeed, a faster pace of power system developmentwould be justified in order to accelerate the retirementof the less efficientand more polluting small coal-firedplants.

B. Institutions,Planning, and Technology Transfer

2.6 Institutions. HOE oversees all strategicaspects of power development (para. 1.10), includug six regionalpower administrationswhich coordinate the operationsof the power systems and prepare long-termdevelopment programs for the approval of MOE. There are 22 provincialand municipal power bureaus under the regional administrationsoperating as part of the regional power systems and eight other bureaus which operate in isolation. A number of investigationand design institutionsare affiliatedwith MOE, as are the 16 constructioncompanies involved primarily in building power projects. Several universities,colleges, and research and training centers also fall under the auspices of MOE.

2.7 The Huaneng InternationalPower DevelopmentCorporation (HIPDC)was created in 1985 as a financingarm of the former MWREP. It was designed to attract foreign capital and technology for power generatingplants located mainly in the open cities of the coast. Unlike the provincial power bureaus (the beneficiariesof multilateralfinancing), HIPDC has a mandate to raise funds directly from the internationalfinancial market. The HIPDC has been active in tapping bilateral and suppliers'credits, and a few commercialbank loans. As a result, the power subsectorin China has claimed a significant share of the country'sexternal financingin recent years (Annex 2.4).

2.8 Separate corporationsalso have been created for developingmajor hydroelectricschemes as is the case with the proposed project. These new institutionalarrangements are beneficialbecause such corporationsare allowed to maximize their efficiencythrough specializationand economiesof scale and to reinvest their earnings into future power development. However, - 11 -

in order to achieve maximum efficiency,this division of labor creates a need for coordinationof investmentsand operationsamong the various power entities in the eame region, includingtransfer pricing arrangements.

2.9 The power industry in China employs about 1.8 million people. Of these employees, fewer than 302 have received formal education beyond the junior secondary level. As a result, there is a shortage of trainedmanpower. particularlytrained technicaland administrativestaff. MOE has initiateda long-termprogram to upgrade the skills of the staff at all levels. The program is carried out primarilyby the provincialpower bureaus and regional power administrations. The training componentof the proposed project is designed to support the MOE program and assist in developingmanpower to meet the project'shuman resource needs (para. 3.5).

2.10 Power System Planning. Power system planning in China is the responsibilityof the Planning Departmentof MOE, which reviews the plans proposed by the regional power administrationsand bureaus. For the expansion of thermal power plants and transmissionnetworks, the research,planning and designs are carried out by the regional electric power design institutes. For major hydroelectricprojects, the research,planning, and design are carried out by the regional hydroelectricinvestigation an design institutesand the MOE's Water Resources and Hydropower Planning Institute.

2.11 As planning for China's power developmentbecomes increasinglycom- plex, there is a compellingneed for Chinese planners to adopt state-of-the- art system planning techniques. These techniquesare particularlyimportant for evaluating large-scaleprojects which have long lead times and for making decisions about generationmix, power plant locatiun,and grid configuration. Least-cost generation planning techniqueswere first introducedfor thermal generation in East China through technicalassistance from the International Atomic Energy Agency.l/ Under the Planning Support and Special Studies Proj- ect (Credit1835-CHA), least cost planning techniquesare being introducedfor hydroelectricgeneration and transm'-sionnetwork expansion plans for the Sichuan and East China power systems. Training in the use of these techniques is being provided to staff of the concernedpower bureaus and the Water Resources and Electric Power Economic Research Institute (WREPERI). These staff, in turn, will be able to assist other power bureaus and regionalpower administrations.

2.12 Modern Technology Transfer. For China to achieve its ambitious goals for increasingpower production,the developmentand transfer of appropriate modern technologieswill be crucial. Technology transfer is very importantfor thermal power plants, where increasesin the steam parameters and size of units can reduce net fuel consumption. Since thermal generation from coal-fired units is expected to provide about three quarters of total generationuntil the end of the century, reducing the amount of fuel consumed for power generationwould reduce pressures on both the supply and transport of coal, as well as on the environment. The Bank is helping to provide state- of-the-art t2chnology for the constructionand operation of large coal-fired units (300 MW and 600 MW), includingenvironmental assessments and impact mitigation. Technology transfer is also needed for large hydroelectricproj-

1/ Under the Bank's Second Power Project (Loan 2493-CHA). - 12 -

ects, particularlyin connectionwith thq interpretationof geologicaldata, the design of sophisticatedstructures and large undergroundworks, the selec- tion of equipment, efficientconstruction management, and envlronmental assessments. Assistance in technology transfer is being provided under ongoing projects and will be continuedunder the proposed project Qara. 5.23).

C. Power Pricing

2.13 The average official price of electricityhas remained constant since the 1960s at around 7 to 10 fen/kWh. The basic tariff structureadopted in 1976, which is still largely in use, includes five categoriesof tariffs; one each for small industry and commerce, large industry, agriculture,bulk sales, and lighting. Lighting is metered separatelyfor all consumers. Only the large industry category features a capacity charge (per kW) levied on the consumer's peak demand (or installedtransformer capacity). The tariff does not reflect the higher cost of service associatedwith lower voltage levels and consumptionduring peak hours. In fact, the 1988 study for East China (para. 1.31) found rates to be 20 to 50 percent below the LRKC of supply. In 1987/88, following rulings by the State Council, revenue enhancementswere superimposedon the basic tariff structure,as followst (a) across-the-board energy surcharges to industrialand commercialusers for plants financed by provincialgovernments; and (b) higher prices for power purchased from new plants. Customer levies also are being used to finance an increasing share oi the distributionnetwork. In several provinces,time-of-day tariffs have been recently introduced. Overall, the new pricing arrangementsreflect a wide spread commitment to conservingelectric power and to promotingthe financial viability of power entities.

2.14 The price of electricityfrom plants commissionedafter 1988 is 60 percent to 160 percent above the "old electricity'price. With the present growth rate of the subsector,this means that new plants will representmore than half of the total capacity by 1995, and at that time the average price may exceed the LRMC of power generation. Already some large industrieswith high growth rates end up paying, at the margin, prices higher than the LRMC of supply. However, the current pricing arrangementslack transparencyand often create additional distortionsin the price structurewhich encourage ineffi- ciencies and unfair treatmentof customers. They also are so complicatedas to slow down the introductionof effective structureimprovements, such as time-of-daytariffs. MOE recentlyhas begun to address these issues by introducing a standard formula for applying the 'new plant, new price' policy. This formula not only will guarantee the debt servicing of new plants but also will "dilute' the new price into the retail sales tariff in order to avoid the problems of multitier pricing for final consumers. The average national electricity rates in the period 1973-89 are shown in Annex 2.5.

2.15 The Bank is engaged in a very active dialogue with the Government on the topic of power pricing. The financialcovenants under Bank-financedprojects have long supported improvementsin power price levels, and collaborative work on tariffs is now reinforcingthe corrective actions already taken by MOE to adjust prices (para. 2.14). In a specific effort to support a systematic overhaul of power prices by the Government,the Bank financed a study covering East China under the Beilungang Thermal Power Project (Loan 2706-CHA). The primary recommendationsof this study--tobring tariffs more in line with the LIMC--are gaining broad acceptanceand will be used in formulatingspecific - 13 -

pricing reforms for power systems with predominantlycoal-fired generation. However, this prototype study cannot be applied to grids with a predominance of hydroelectricgeneration such as in Sichuan. This is because in systems dominatedby hydropower,the energy LRMC may vary according to the season and the fact that the peaking capacity cost is lower than in systems primarily fueled by coal. Therefore,a specific power pricing study is included in this project (para. 5.29). This study will be carried out within the next two years in two separate but related parts. Part A will serve to design a contract for the sale of the project output which the Governmenthas agreed to structureon the basis of the LRMC of generation (para. 3.12). Part B will serve to formulate a plan for the reform of bulk purchase tariffs from small producers and tariffs for retail sales to final users. The terms of reference for the study are presented in Annex 5.8.

D. SubsectorIssues and Strategy

2.16 China faces the followingmajor issues in the power subsector: (i) acute power shortages; (ii) inadequatepower pricing and investmentfunding; (iii) protracted implementationperiods for large projects; (iv) environmental impacts of power supply; (v) weak interconnectionwithin regional power systems; (vi) scarcity of skilledmanpower; and (vii) outdatedmethods for planning, operation,and financialmanagement.

2.17 The Government'sbasic policy for the power subsectoris to modernize it, expand it, and increase its efficiencyat a rate sufficientto meet the requirementsof industrialdevelopment and improve the living conditions of the population. This policy translates into the followingobjectives: (a) expand coal-fired thermal capacity at mine-mouths or near ports and load centers in order to reduce the rail transportationrequirements and use of lower grade coal in urban centers; (b) replace small- and medium-size thermal units with larger, less polluting,and more efficientunits; (c) accelerate the pace of hydroelectricdevelopment; (d) constructextra high-voltagetrans- mission lines; (e) introducea more rationalpricing system; and (f) adopt modern techniques in project design, environmentalimpact mitigation,and system planning.

E. Role of the Bank in the Power Subsector

2.18 The Bank's participationin the power subsector in China has particularly focused on institutionbuilding and the transfer of appropriatemodern technology. The Bank has supportedthe Government'ssectoral strategy through sector work, policy dialogue,and a series of lending operations in associa- tion with the regionalpower bureaus. The Bank has helped to introduce state- of-the-art system planningmethodologies which identify cost-effective,sus- tainable developmentpolicies for the power subsectorand, presently,it is participatingin the formulationof the Five-Year Plans in Sichuan and East China (para. 2.11). Repeater projects allow the Bank to assist the Government in applying power tariff reforms based on the findings of earlier pricing studies (para. 2.15). Through the Second BeilungangThermal Power Project (Loan 2955-CHA),the Bank is extending its policy dialogue to cover the reor- ganization,management, and regulationof power bureaus.

2.19 Since China has become a member of the World Bank Group, the Bank has helped to finance six large power generation projects (600 MW - - 14 -

1,400 MW)--three thermal and three hydro operations--andone high-voltage transmissionproject. Through these operations,the Bank has successfully(i) introduced internationalcompetitive bidding (ICB) for civil works and equipment; (ii) supported the transfer of modern technology in project construction and management; (iii) helped to improve the efficiency of pollution abatement equipment; (iv) promoted the integrationof a "egional power system in East China; (v) supportedthe developmentof master plans for modern distribution networks; and (vi) promoted operationalefficiency and prudent financialmanagement. Under the TechnicalCooperation Credit (TCC), the Bank assis,'edin supervisingand reviewinga feasibilitystudy for the Three Gorges Prolect.

2.20 Most of the ongoing power proj3cts financed by the Bank are being implementedin a satisfactorymanner, on schedule,and within budget. The first power-operation,Lubuge Hydroelectric(Loan 2382-CHA), is about to be completed. The second power operation,the? 500 kV Xuzhou-ShanghaiTransmis- sion Project (Loan 2493-CHA),was put into service, as scheduled. The Yantan HydroelectricProject (Loan 2737-CHA) is also progressingsatisfactorily. Several problems were encounteredearly in the implementationof the Shuikou HydroelectricProject (Loan 2775-CIA): project managementwas weak, and the original Government allocationwas too low to cover large cost increasesasso- ciated with the resettlementcomponent. Among measures to resolve these prob.. lems, the Bank agreed to revise the loan allocation and finance the importa- tion of materials needed for resettlement;project management is also being strengthened. The project is now back on schedule. Furthermore,the Bank is involved in financingthree thermal power projects--Beilungang(Loan 2706- C5A), Wujing (Loan 2852-CIA),and BeilungangExtension (Loan 2955-CHA). The Beilungangproject encountereddelays early on due to procurementproblems and poor coordinationamong the suppliersof various islands. These problems have now been resolved,and constructionis almost back on schedule. To minimize problems of coordinationamong suppliersfor the Wujing project, procurement was carried out using a single responsibilitycontract.

2.21 The lessons learned from the previous power projects in China have been taken into account in preparing the proposed project. These lessons include: (i) proper assessmentof resettlementcosts; (ii) tighteningtechni- cal and financialcriteria for the prequalificationof bidders; (iMi) improving procurementand contractualarrangements; and (iv) enhancing the role of project management and the use of engirieringconsultants. Particularatten- tion was given to the satisfactoryresults achieved and lessons learned in connectionwith the resettlementof the populationduring the implementation of the first two Bank-financedhydroelectric projects in China--Lubugeand Yantan. - 15 -

III. THE BENEFICIARY

Introduction

3.1 The beneficiaryof the proposed loan would be the Ertan Hydroelec- tric DevelopmentCorporation (EHDC), an enterprise created in 1988 with the aim to accelerate the constructionof large and economicalhydroelectric projects in SouthwestChina. EHDC is responsiblefor the developmentof hydroelectric resources of the Yalong, Jinsha, and Dadu rivers in Sichuan Province; the first of such schemes being the proposed project. EHDC is a separate legal and accountingentity under the jurisdictionof MOE with sole responsibility for procurement. A charter of EHDC acceptableto the Bank has been issued.

3.2 Prior to the creation of EHDC, project preparationactivities were handled by the Sichuan Electric Power Administration(SCEPA). SCEPA is a state-ownedenterprise which owns and operates a major portion of the generation and transmissionpower system in Sichuan (para. 4.5). SCEPA will continue to be responsiblefor the integratedoperatior.s of the system; it will assist EHDC in implementation,and later operation, of the Ertan project. All the power generatedby EHDC will be sold in bulk to SCEPA (para 3.12).

Organizationand Management

3.3 EHDC is governed by a Board of Directorswhose members are appointed by the SEIC (2 members), Sichuan provincial authorities(3 members),MOE (1 member), SCEPA (1 member), and EHDC (2 members). EHDC is headed by a General Manager appointedby MOE and assisted by three Deputy General Managers. The organizationalstructure of EHDC is shown in Chart 2. Satisfactoryresults have been achieved in establishingEHDC and recruitingits management and staff. The organizationof EHDC is suitable for managing major hydroelectric projects and appears to be appropriatefor the current institutionalsetup in China. EHDC has a capable and experiencedengineering staff. However, further enhancementsare needed in managing EHDC's affairs and developing staff skills. Therefore,EHDC managerial staff will need to broaden and acquire the modern management knowledgeand experiencenecessary for carrying out large and complex hydroelectricprojects in an effectiveand timely manner. To this end, systematicmanagement and staff trainingwill be provided, in addition to seminarswith foreign specialistsand study tours abroad (para. 5.31).

Staffing and Training

3.4 At present, EHDC has a total staff of about 200. For project site constructionmanagement, EHDC has created the Ertan EngineeringCorporation (EEC) headed by the EHDC's Deputy General Manager and Chief Engineer (para. 5.22). EEC will have a staff of about 300 people. Many of the parsonnelare experiencedstaff transferredfrom other power agencies,including (a) Lubuge Project ConstructionManagement Bureau; (b) Chengdu HydroelectricInvestiga- tion and Design Institute (CHIDI); (c) various hydroelectricconstruction bureaus in China; and (d) other electricitysupply bureaus. Some 56 percent of the total staff are engineersand technicians. Details of EHDC and EEC staffing are shown in Annex 3.1. - 16 -

3.5 EHDC does not yet have facilitiesto train its staff and until these facilitiesare available, it is dependent upon the training and education departmentof SCEPA. This departmentadministers five schools and ten training centers for techniciansand skilledwrrkers. Many of the staff needed for Ertan can be trained in these schools and centerswhich specialize in welding, hoisting,metal processing,machine tooling, and maintenance of hydropower plants. In addition, some employeeswould be tra'nedby other training institutions. The training component included in the proposed project is designed to meet EHDC staff developmentneeds (para. 5.31).

Planning, Budgeting,and Control

3.6 The power bureaus are responsiblefor developing annual and five- year production and investmentplans which are integrated into the national plans and are approved, through HOE's auspices,by SPC. These plans have emphasizedquantities of inputs and outputs. Financial planning was confined to attachingmonetary values, predeterminedby MOE, to the quantitiesbeing planned. A power bureau's plan might be revised to reflect changes in inputs or outputs arising from changed or unforesern circumstances;however, the plans would ordinarilynot be revised merely to reflect differencesbetween the prices assumed for planning purposes and those actually paid by a particular power bureau. Further, under the present finanrial system in China, heavy emphasis is placed on the annual budget as a contx.L.ling tool and financial planning beyord one year is generallynot undertaken.

3.7 The above planning system functionedsatisfactorily in a highly centralizedeconomy whereby controlled prices kept inflation rate negligible and investmentswere financed almost exclusivelyby grants. However, as part of the recently initiatedeconomic reform, prices have begun to escalate, and government grants have been largely replaced by loans. In addition, the institutionalframework is moving toward a reductionin centralizedcontrol with correspondingincrease in financialautonomy and responsibilityfor decision-makingat the power bureau level. In earlier Bank-financedpower projects, the Bank had initiatedsignificant steps toward strengtheningfinancial management at the various project entities. The measures adopted include the extension of the financislplanning horizon and training in modern financial management, focusing in particular on modern techniquesof cost and debt management. This training is cer.trallymanaged by MOEISEIC in order to promote coordinationand interactionamong the various bureaus. A number of training seminars in China and overseas trainingwere carried out and future training activitieswill build on these experiences. MOE/SEIC are in the process of designing a financialmanagement trainingprogram over the next three years in consultationwith the Bank. An oatline of this program is presented in Annex 3.2.

3.8 The proposed project will continue the process of strengthening financialmanagement at the power entities. During preparationof the project, the Bank method of long-termfinancial forecasting was introducedto EHDC. An assurancewas obtained from EHDC that it will furnish a rolling long-term financialplan to the Bank containingprojected income statements, sources and uses of funds, and balance bheets for the project implementation period plus no less than five years of project operationperiod. The first rolling long-termfinancial Plan will be furnishedto the Bank no later than April 30, 1992. Further, to help prepare EHDC for their increasing responsi- - 17 -

bility for the constructionand subsequentoperation of large and complex projects, includingErtan, a seminar focusing on project financialmanagement (financedunder TCC) was held in Chengdu. This was the first of a series of financial training activitiesmanaged by MOE/SEIC.

Accounting

3.9 As in the case of all state enterprisesin China, the power bureauq follow a unlfied Chinese accountingsystem in their financial reportingto the Government. The Chinese accounting system has largely been satisfactory in the context of a highly centralizedand closed economy. However, while the recent economic reforms in the country have resulted in changes in the financial system, correspondingchanges in accountingpractices are apparently lagging. For example, present Chinese practice uses historical rather than prevailing foreign exchange rates in reporting foreign loans. Hence, the impact of exchange rate fluctuationsis not reflectedin the enterprises' financial statements. With a view to promotingprudent financialmanagement, includingforeign debt management,a training seminar on selected aspects of internationalaccounting practices was held in China. The financialtraining program for Bank-financedpower bureaus is also attacted in Annex 3.2.

3.10 In accorcancewith Chinese accountingpractices, the power bureaus maintain two separate sets of accounts--oneset for capital constructionand the other for operation. Since these two sets of accounts are not being consolidated,the balance sheet for operationdoes not include constructionwork- in-progressand the related financing. As in the case of earlier Bank- financed projects,EHDC would consolidatethe capital cu.structionaccount with the operationaccounts (if any) for the audited financial statementsand rolling financialplans to be furnishedto the Bank.

Audit

3.11 As with other Bank-financedprojects in China, the Foreign Invest- ment Audit Bureau of the State Audit Administration(SAA) will have overall responsibilityfor auditing EHDC's accounts. Under SAA's supervision,the actual auditingwork will be conductedby the Audit Bureau of Sichuan Prov- ince. This arrangementis satisfactor;. However, mainly due to the special features of Chinese accounting,agreement was reachedwith SAA that for most Bank-financedprojects, includingpower operations,there would be improved disclosureof accounting policies and supplementaryfinancial information in order to provide an adequate illustrationof the financialperformance and status of projects/entities. Technical assistance for SAM and the provincial auditing bureaus will continue to be financed under IDA credits. An assurance was obtained from EHDC that it wouldmaintain separate accounts for the prolect and that the audited proiect accounts and financialstatements of EHDC would be furnished to the Bank within six months after the end of each fiscal ear.

Power Sales to SCEPA

3.12 As noted above (para. 3.2), the Ertan HydroelectricProject is being built by EHDC to exclusivelyserve the Sichuan power market through the network owned by SCEPA. The planned project output will provide 20-30 percent of SCEPA's sales to consumersover the years 2000-2010. A formal sales contract - 18 -

between EHDC and SCEPA will need to be entered into shortly before the Ertan plant begins operations in 1998. EHDC's future role and performancedepends heavily on its ability to recover the cost to build and operate the plant. SCEPA's investmentand operating policieswould also be significantlyaffected by this contract agreement. There are understandingsin this regard on the quantitiesand pricing principles that will govern the contract. Agreements have been reachedwith the Government regardingthe following four principles:

(a) the revenue generatedby EHDC's sales would ensure its financial viability,as measured by the agreed financialperformance indicators (para. 6.4);

(b) the project's output must be fully dispatchableunder the instruc- tions of SCEPA's control centers;

(d) the above cherges should not exceed SCEPA's avoided costs defined as the fuel and capacity costs that SCEPA would have to incur in the long run if the project output was not available.

3.13 An assurancewas obtained from the Governmentthat a contract satisfactoryto the Bank would be entered into between EHDC and SCEPA not later than June 30, 1996 and that the Governmentwould take the necessary steps to enable SCEPA to implementthe above agreement. Principlesof the said contract were discussedand agreed upon during negotiations.

Billing and Collection

3.14 All the power generatedby EHDC would be sold in bulk to SCEPA. The collectionprocedure would be simple and expeditious. Insofar as the grid is concet.ed,meter recording,billing, and collectionactivities are conducted by the t arteenpower supply bureaus of SCEPA. All the major industrialcon- sumers are charged in advance 2 to 5 times each month according to their planned consumption. At the end of the month, meters are read and adjustments to reflect actual usage are included in the first bill for the following month. Domestic consumers are charged once a month according to meter readings. SCEPA's electricitytariffs are given in Annex 3.3.

3.15 Consumers render payments to SCEPA's district offices usually within 3-5 days after the receiptof their bills. Fines are imposed on overdue payments, which rarely happen. These arrangementshave establisheda reliable cash flow from sales and maintainedSCEPA's accounts receivablefrom owner sales at unusually low levels. During the past five years, they averaged less than 1 percent of SCEPA's annual sales.

Insurance

3.16 EHDC will take necessarymeasures to insure all of its assets ade- quately against normal levels of risk. This would include both self-insurance and the purchase of commercialinsurance. Contractorsfor the main construction works will obtain insurancefrom insurancecompanies acceptable to EHDC. The related insurance arrangementsfor these works have been reviewed and - 19 - found satisfactory. Agreements have been reached with M=DCthat satisfactory insurance arrangements would be maintained. - 20 -

IV. THE POWERMARKET AND THE PROGRAM

Background

4.1 In 1990, the population of Sichuan approached 110 million for an area of about 600,000 km2. Services,agriculture, light and heavy industries each representabout 25 percent of the provincial economic output; from 1980 to 1990, economic growth has exceeded 10 percent a year on average. The Gov- ernment's target is to double the GNP between now and the year 2000, and to increase real income per capita by 4.5 percent to 6.4 percent a year.

4.2 The province is endowed with abundant hydroelectricpotential (para. 1.4) and natural gas (para. 1.6), both of which are underdeveloped. By con- trast, the recoverablecoal deposits amount to only 8 billion tons (1.1 percent of the country's total). By 1990, 45 percent of it was exploited;coal productionwas about 70 million tons in chat year, however, this coal has a high content of sulfur (5 percent) and ashes (30 percent). The reserves of crude oil (about 10 million tons) are too small to be developedeconomically.

4.3 Sichuan has more than 19 million hectares (ha) of forestableland accounting for about one-third of the whole area of the province. Forests cover about 7 million ha (about 13 percent of the province). Sichuan has an estimated 1.13 million cubic meters of woods and produces 18 million tons of wood fuel a year. In order to actively develop the province's fuel forests, effective measures and the proper balance of energy resourceshave been institutedto eliminate energy shortages,particularly in its rural areas. Sichuan is also rich in raw materials for making biomass fuels and can produce about 600 million cubic meters of biomass fuels a year, from its more than 1,500 large- and medium-size biomass plants and about 1.5 million small producing units. At present, biomass fuels are mainly used in households for lighting and cooking.

4.4 In Sichuan, the consumptionof commercialenergy in 1990 was about 40 million toe, of which coal products amounted to 60 percent, electric power 22 percent, natural gas 12 percent, and petroleum products 5 percent. The province imports coal, petroleumproducts and electric power. Details of the energy balance for Sichuan Province in 1990 are given in Annex 4.1.

The Sichuan Power System

4.5 By the end of 1990, the total installed capacity in Sichuan Province was 7,100 MW, of which hydro power amounted to 3,062 MW. The SCEPA power system representedabout 65 percent of the total capacity, consistingof 1,463 HW of hydro and 3,339 HW of thermal generatingplant; 28 percent of the installedcapacity belongs to the Sichuan Water ConservancyElectric Power Bureau (SWCEPB) and 7 percent to self-producers. Most of the hydroelectric power stations belonging to SWCEPB (about 1,250 MW) are small and of the run- of-river type with little firm output in the dry season. These stations are scattered throughout the province; some are connected to the SCEPA network and supply about 1 TWh a year. Tle self-producerthermal power plants are also small (less than 12 MW each), outdated and inefficient. - 21 -

4.6 SCEPA's electricitygeneration in 1990 amounted to about 21 TVh, or 73 percent of the total generation in the province. Further details on SCEPA's generating capacitiesare given in Annex 4.2. SCEPA's hydropower plants have small reservoir storages and their dry season firm output is 30 percent of the annual average. Most of the thermalpower plants use coal and a few use natural gas, but their fuel supply is very limited. Units of 50 MW or less representabout 50 percent of installedthermal power capacity. As a result, coal consumptionexceeds 550 g/kAh and plant use represents 10 percent of generation. The annual availabilityof thermal power plants is about 6,000 hours, which indicatesproper maintenanceand operatinspractices.

4.7 The SCEPA's transmissionnetwork services about half of the 210 counties of the province. As of end of 1990, the 220 kV grid extended over 4,044 km, with a transformercapacity of 8,570 MVA; and the 110 kV grid 5,908 km with 6,718 WVA. Details of the transmission facilities are shown in Annex 4.2 and on Hap 21308R IBRD. The Power DispatchingCenter of SCEPA is responsiblefor the unified operationof the system. Netvork losses are about 8 percent of generation.

4.8 Statistics on annual electricityconsumption in the province are given in Annex 4.3. In the 19809, electricityintensity has decreased at the annual rate of 4 percent. It is now about 0.14 kWh per yuan of output value. Installed capacity has risen by about 3.8 percent a year, while electricity consumption,through an increase in power plant capacity factors,has grown by about 5.5 percent a year. This rate is lower than that for China as a whole (para. 2.3). The compositionof power consumptionin 1990 vas as follows: industry--83percent, commercialand public services--7percent, agriculture-- 5 percent, transport--2percent, and others--3percent.

4.9 The value of the industrialoutput foregone because of planned power outages has been estimatedat Y 1 to Y 5lkVh. This value is 50 percent higher for unplanned blackoutsor brown-outi. Finally, it is worth noting that new industrial investmentsare not approved unless electricityrequirements can be met which is a serious impedimentto economic growth.

Demand Forecast

4.10 Demand forecastsfor the Sichuan Provincewere prepared by applying statisticaland analyticalmethods for each importantconsumer category. The demand forecastspresented in Annex 4.4 are based on the objective to quadru- ple industrialand agriculturalproduction between the years 1980 and 2000. After having eliminated the most critical power shortages,this target could be obtained with an annual growth rate of 5.2 percent for the traditional electricityintensive industries (chemicals,metallurgy, energy), 3 percent for agriculture,12.5 percent for the tertiary and residentialsectors, and 8.5 percent for less electricity-intensiveindustries. Electricityintensi- ties are expected to stabilizeor decrease. On this basis, industrialand agriculturaloutput would increase at a rate of 6.8 percent a year, and electricity demand at 6.6 percent a year between 1991 and 2000. System losses are planned to decrease with the introductionof larger, more efficient facilities. Residentialconsumption would reach 90 kWh per capita. The energy demand forecast is considered conservative,in view of the demographics,the relatively low level of residentialconsumption, and the potential for industrial sector development. For the same reasons, electric energy demand in the - 22 -

19909,and to a lesserextent the peak load forecasts,are consideredto be relativelyinsensitive to the increasesin power pricesthat would be required to fully reflectthe cost of supplyin the retailsales tariff. DevelopmentProgram 4.11 On the basis of the existingcommitments for power subsectordevel- opment,it would not be possibleto eliminateelectricity shortages before 1999. The capacityexpansion should be acceleratedin order to do this. Therefore,about 8,200MW of generatingcapacity must be commissionedby that date, and about 450 MW of outdatedthermal capacity should be retired. Table 4.1 shows the demandand supplyforecast for the SichuanProvince grid (detailsare presentedin Annex 4.4). The developmentprograms for generation capacityare presentedin Annex 4.5. The peakingcapacity and firm energy requirementsin a dry year will constitutethe most difficultbottlenecks to be met. All plannedhydro projectsare part of the core developmentprogram that is obtainedwhen overallexpansion costs are minimizedin a broad range of assumptionsabout load growthand coal prices. The amountof coal-fired capacityshould be the firstaffected if actualload growthdeviates from expectations.

Table 4.1: DEMANDAND SUPPLYFORECAST FOR THE SICHUANGRID (1991-2002)

Net Energy Power Demand Capacity Capa- Average Output Of which Peak Energy Margin /a bility Thermal Hydro EHDC Year (MW) (GWh) (MW) (GWh) (GWh) (Glh) (GWh)

1991 4,748 29,443 -2,776 26,667 19,597 7,070 1992 5,065 31,394 -1,145 30,249 23,179 7,070 1993 5,395 33,489 -1,180 32,309 24,039 8,270 1994 5,771 35,777 -1,927 33,850 23,700 10,150 1995 6,144 38,164 1,953 40,117 28,377 11,740 1996 6,622 40,646 4,252 44,898 32,138 12,760 1997 7,164 43,713 4,810 48,523 34,163 14,360 2,900 1998 7,683 46,460 3,199 49,659 35,299 14,360 10,600 1999 8,213 49,541 8,818 58,359 35,299 23,060 14,560 2000 8,791 52,748 10,398 63,146 34,446 28,700 15,340 2001 9,344 55,532 8,129 63,661 34,446 29,215 16,800 2002 9,858 58,586 7,787 66,373 36,148 30,225 16,800

/a Definedas the differencebetween peak demandand peakingcapability.

4.12 The role of coal-firedcapacity will be limitedby physicaland economicfactors: low availabilityand qualityof local coal,crippling transportcosts, and bottlenecksfor coal from the Shanxiprovince 1,400 km away. It is anticipatedthat, by the year 2000, provincialcoal requirements outsidethe power sectorwill reach the 80 milliontons of raw coal that can - 23 -

be locallymined. The remainderwill severely strain the railways capacity available for coal importswhich is planned to expand from 3 to 15 million tons/year. Transportcosts will raise the cost of Shanxi coal from about Y 100/ton of standard coal at minehead to just about the Lost of mining local coal (Y 210/ton). If fewer hydro projects were built, transportrequirements would exceed feasible targets in the medium term and would be uneconomicalin the longer run.

4.13 Hydropowerfor Sichuan Province,on the other hand, is inexpensive and has relativel7benign impacts on the environment when compared to its thermal alternativeor to hydropower in other parts of China. The least-cost expansionprogram under the base case calls for a sevenfold increase in hydroelectric capacity by the year 2005; at that date, hydroelectricgeneration would meet 75 percent of the provincial grid requirementsas against 35 percent in 1988. Fuel requirementswould peak at about 14 million tons of raw coal a year and thereafter fall below the 10 million tons as consumed by SCEPA in 1988.

4.14 The beneficiaryof the proposed project, RHDC, would play a key role in developinghydro resourcesunder the above plan. In addition to Ertan (3,300 KW), EHDC would also build Tongzilin (400 HW) and Pubugou (3,300 0W); constructionof both projects would start by the mid-1990s to be commissioned from the year 2001 to 2005. A fourth project, Jin Ping (6,000 4W),would be started before the year 2000 and its first phase (1,600MW) commissionedafter Pubugou.

4.15 The expansionof the transmissionnetwork will be marked by the introductionof 500 kV technology. Six 500 kV substationswill be built, with a total capacity of about 8.5 GVA. About 3,675 km of 500 kV transmission lines also will be constructed. Details on the constructionprogram for the transmissionnetwork are given in Annex 4.6. - 24 -

V. THE PROJECT

Prolect Objectivesand Rationale for Bank Involvement

5.1 The main objectives of the proposed project are tot

(a) provide additional generating capacity to the power system in Sichuan Province (3,300 KW and 17 TWh a year) in order to alleviate acute electricity shortages;

(b) assist in the transfer of modern technologyand in the introduction of efficient constructionmethods in order to reduce the cost and prevailing long gestationperiods of large hydroelectricprojects in China;

(c) contribute to further improvementsin the analysis of environmental and ecological impacts of hydroelectricresource developmentand in the design of relatedmitigation measures;

(d) enhance the institutionaldevelopment of EHDC by strengtheningits organizationthrough a modern management training program and introducing of economic efficiencyand pricing principles;and

(e) provide technical assistancein project design and implementation, and for the promotion of optimal operationof the power system, prudent financial management, and manpower development.

5.2 The project objectives comply with the country's regional and sectoral objectives and with the Bank's lending strategy. In particular, the proposed project is well-coordinated.withthe policy of the Governmentto accelerate the developmentof the large and economichydroelectric potential as well as to help achieve the Bank's specific goals regarding transfer of appropriatemodern technology,staff training,least-cost investmentplanning, and modern utility practices. Large hydroelectricprojects in China have had gestationperiods of up to 15 years. Originally the proposed project was expected to require 12 years to complete. With encouragementfrom the Bank, the Chinese are actively working to reduce its gestationperiod to nine years by applying modern constructionmeans and methods, critical path scheduling, involvementof competent engineeringconsultants, and acceleratingpreparatory activities. This project allows the Bank for the first time to assist in the start-up of one of the most importantpower developmentcorporations and to further its sectoral objectives, includingreduction in air pollution, the formulationof policies to improve electricitypricing, and training staff in modern utility management and financialplanning. The Government fully sup- ports the project objectives as they would have a major effect on future power developmentand economic growth in SouthwestChina.

Project Description

5.3 The proposed project consists of the followingcomponentst - 25 -

(a) preparatoryworks, includingaccess roads and bridges, water and electricitysupply, communicationlinks, and various construction plant and site facilitiest

(b) constructionof a parabolic,double-curvature arch dam (240 m high with a crest 775 m long) across the Yalong River togetherwith an undergroundpowerhouse complex, log conveyance system, and appurte- nant works and structures;

(c) provision and installationof six 550-MW generatingunits and associated electrical equipment, includinga 500 kV step-up substation;

(d) resettlementof about 30,000 people affected by the project;

(e) an environmentalmanagement program and creation of a science station for environmentalmonitoring and studies;

(f) consulting services for engineering,procurement, management of construction,ant preparationof future power projects;

(g) studies of (i) power pricing for Sichuan Province and optimal operation of the power plant and reservoir,and (ii) investigationsand tests related to safety of structures,monitoring of energy dissipation facilities,and powerhouseventilation; and

(h) management and staff training,computers and applicationsoftware, and accessories.

5.4 The Ertan hydroelectricproject would constitute the first step in the long-term developmentof the hydroelectricpotential of the Yalong River, one of the major tributariesof the Yangtze River in China. The Yalong River is 1,500 km long and has the potential to provide about 25,000 MW generating capacity. It representsone of the ten principalhydroelectric basins in China. A log-passingfacility would be built to allow the passage of logs from the reservoirto the downstream river with capacity of 1.1 million mi of logs a year. The developmentof the project also would enhance industrialand agriculturalproduction in the nearby underdevelopedDukou(Panzhihua)-Xichang area. With a normal pool level at the dam site of 1,200 m above sea level, the Ertan reservoirwill extend 145 km upstream. The active storage of the reservoirwill be 3.4 km8, or about 6.4 percent of the average annual runoff. The regulating effect of the reservoirwould be useful to downstream hydroelectric projects,particularly in increasingtheir firm output of electric energy. The upstream Jin Ping hydroelectricproject (6,000 MW, 39 TWh a year), when constructed,will significantlyincrease the output of the Ertan project (para. 7.4). A detailed descriptionof the project components is given in Annex 5.1.

5.5 The transmissionnetwork for connecting the Ertan hydroelectric station to the existing grid would require about 2,500 km of 500 kV transmission lines. This network would be constructedby SCEPA as a part of its 500 kV transmissionnetwork developmentprogram before the project is commissioned. The Bank is actively involved in the study work that would assist SCEPA in determiningthe optimal configurationof the 500 kV transmission network in Sichuan and its implementationschedule. An assurancewas obtained - 26 -

from the Government to (i) provide the Bank with an implementationschedule and a financing plan for the 500 kV transmissionnetwork connectingthe Ertan hydroelectricstation with the power system in Sichuan Province not later than June 30, 1993; and (ii) make or cause to be made arrangementssatisfactory to the Bank to secure completion by SCEPA of this network not later than June 30, 1998.

Project Origin and Investigations

5.6 The idea of developing the water resourcesof the Yalong River and constructingthe Ertan dam and power plant originated in the early 1950s. Since 1973, intensive site investigationsand geologicalexplorations have been carried out. These include more than 500 exploratorydrill holes (30,000m in total length) and 40 exploratoryadits (8,000m in length). Such level of explorationis considered to be satisfactoryin relation to the type and size of the project. The feasibilitystudy for the project was completed in 1984 by the CHIDI (para. 5.23). In January 1985, this study and the preliminary design report were reviewed and approved by MWREP. The documents also were reviewed in March 1986 by the Special Board of Consultants (SBC), consisting of eminent internationalexperts from Canada, France, Switzerland and the United States. SBC concluded that the design of the proposed project would adequatelymeet the conditions for developmentand was entirely satisfactory in its overall concept. Geologically,the Ertan site is consideredto be ideally suited for the constructionof the proposed parabolic,double- curvature arch dam and ancillaryunderground powerhouse complex. Neverthe- less, a number of recommendationsfor improvingthe project design, and for the acceleratingits constructionhave been made and agreed with CHIDI, EHDC and SCEPA. These recommendationsinclude, inter alia, the relocationof the axis of the dam, the decrease of the depth of excavation,a revised spillway concept, an increase in unit sizes from 500 MW to 550 MW, and an accelerated constructionschedule.

5.7 In December 1986, at the request of SPC, the China International EngineeringConsulting Corporationorganized an appraisal of the proposed project with the participationof engineeringspecialists and various authorities. Finally, in July 1987, the State Council approved the constructionof the project. Harza (USA) and Advisory Group of Norway (AGN) consultantshave been appointed to assist EHDC, SWEPA, and CHIDI with procurement,preparation of cost estimates, scheduling,construction, and specific engineeringaspects of the project. The services of these coniultantsare being partially funded by the TCC (Cr. 1664-CHA).

ProJect Cost Estimate

5.8 The total costs of the project are estimated to be $1,885.5 million equivalent,of which $896.4 million (48 percent) representsthe foreign exchange component. Annex 5.2 contains, in detail, the estimatedcosts of the project, which are summarized in Table 5.1.

5.9 The project base costs are in early-1991prices and are estimatedas follows. The costs of preparatoryworks are based on the actual construction costs for works completed to date, and on contract prices for the remaining works, which are expected to be completedbefore the end of 1991. Land acquisition costs are based on the actual cost of land purchased at the construc- - 27 -

Table5.1: SUMMARYOF PROJECTCOST

Foreign Local P@rQI_n Total Local Foreign Total as % of ------Y willon -- --- S millon---- Total

Preperatoryworks 489.1 0.0 489.1 102.4 0.0 102.4 0.0 Reoettlemont 429.4 0.0 429.4 62.8 0.0 62.8 0.0 Land acquieltion 26.9 0.0 26.9 7.1 0.0 7.1 0.0 Archdam (lotno.1) 1,140.8 1,460.8 2,029.0 217.8 264.8 502.2 68.6 Powarhouce(lot no.2) 886.7 1,112.0 1,640.7 159.3 212.4 872.8 67.6 E6M equipmont 285.7 782.6 1,018.2 64.6 189.9 194.6 71.9 Transformors 80.2 9.6 89.8 16.8 1.6 17.1 10.5 Oates/hoistsetc 208.0 88.8 289.8 88.0 7.0 45.8 15.8 ContractadminIstration 188.6 11.0 147.6 26.8 2.1 28.9 7.8 Enineorlnga toch.coot, 120.8 87.8 207.7 26.5 17.8 42.0 40.4 TrainIng 8.1 4.0 7.1 0.6 0.7 1.4 50.0 EnvironmentalprotcetIon 0.8 1.6 9.9 1.6 0.8 1.9 16.8 Studles 8.0 6.5 8.6 0.0 1.1 1.6 00.8 TotalBaso Cost S.712.0 8.450.9 7,201.4 7?8.1 607.0 1.400.1 47.0 Contingencies Physical 428.0 485.8 868.8 80.8 e8.2 164.0 60.7 Price 1,191.2 1,820.8 2,611.6 107.9 120.6 226.7 62.0 Toxesand duties 862.6 188.2 486.7 67.8 26.5 92.8 27.6 TotalProject Cost 5.6879.2 5.W77.7 11.0EB.9 8.1 _.4 1.886.6 47.6 Interestduring construction(IDC) 1,794.9 1,854.5 8,149.4 842.9 253.7 601.6 48.0 T*tWFlinancina 7.474.1 8.7?2.214.206.8 1.8B2. 1.166.1 2.487.1 48.4 RMauIred

Note:Flgures may not total exoctly due to rounding. tion site. The arch dam and powerhouse costs are based on the lowest evaluated responsivebids for each lot. The costs of electricaland mechanical equipment, transformersand gates are based on recent quotations from manufacturers and suppliers for similar equipment and materials involved. The costs of the remaining items are based on the consultingengineers' data for similar morks. Accordingly,the exchange rates that were applicable at respective points of transactionhave been used. Physical contingenciesare assumed as followss 20 percent for the undergroundpowerhouse, 15 percent for the resettlement program, 10 percent for the remainingpreparatory works, arch dam, engineering,contract administration,technical assistance, environmental management, studies and training, and 7 percent for the electromechanical equipment. These percentagesare considered to be reasonable in view of the site features,the stage of design, and the status of contractslet to date. The price escalation for costs expressed in foreign exchange (US dollars) has been calculated in accordancewith the anticipatedinternational price escalation of 3.4 percent a year in the period 1991-2000. The price escalation for costs expressed in local currency is calculated accordingto the projected local inflation rates, 10 percent in 1991, 8 percent in 1992, 5 percent a year thereafter. EHDC has requestedthe exemption from taxes and duties as has all previous Bank projects in China. The total project costs also include actual expendituresincurred before 1991 (about $95 million) which are related to the preparatoryworks, resettle.ent, land acquisition, and engineeringservices. - 28 .

5.10 The breakdownof the projectcosts into foreignand local components reflectsthe borrower'sdecision to hire foreignconstruction firms and to importappropriate modern construction equipment and technology,and to apply effectivemanagement methods so as to ensureefficiency in projectconstruction. Foreignexchange components would covers (a) the main civilworks; (b) electromechanicalequipment; and (c) the foreignexpenses associated with engineering,technical assistance, environmental management, training, and studies. FinancingPlan 5.11 Early on in the projectpreparation, the Governmentof China (GOC) indicatedits preferencefor seekingBank financingin two stagesas it was done for the ShuikouHydroelectric Project (Loan 2775-CHA). SinceErtan is a largeproject with a long gestationperiod (9-10 years), a phasedfinancing approachwould avoid tyingup financialresources that couldbe used for other projectswith more immediateneeds. No problemis envisagedfor the GOC in raisingforeign exchange financing for the secondphase of the projectat a laterdate. In view of the foregoing,it was agreedthat the proposedloan would be used to financethe firstphase of projectconstruction (1991 to mid- 1995). However,this would not preventthe GOC from seekingadditional assistance from the Bank for this project. The GOC requested,and it has been agreed,that the secondphase of the projectwould be includedin the Bank's proposedpipeline of futureprojects. In addition,the Bankwould assistEHDC to seek cofinancingfor electromechanic:alequipment. To enabletimely and effectiveimplementation of the project.it is necessaryto ensurean adequate flow of local funds,as shown in Annex 5.3. Duringnegotiations, GOC's obli- gationto providefunding for the entireproject, along with the yearlybudget and detailsof local financingfor the firstphase of projectimplementation, was reconfirmed. 5.12 The financingplan for the projectwould be as shownin Table 5.2. Table5.2: FINANCINGPLAN ($ millionequivalent)

Local Foreign Total

IBRD loan 380.0 380.0 IDA (TCC) 3.3 3.3 US Exim Bank Credit 30.0 30.0 Norwegian Grant _ 5.0 5.0 GOC (through SEIC) 666.0 129.4 795.4 Sichuan(through ETIC) 666.0 129.4 795.4 Other financing - 478.0 478.0 Total 1,332.0 1,155.1 2,487.1

5.13 Total financingrequirements, including interest during construction (IDC)of $601.6 million,amount to $2,487.1million. SEIC and Energyand - 29 -

Transport InvestmentCorporation of Sichuan Province (ETIC)would share the financing in equal amounts for the followings (a) 100 percent of local costs, includingtaxes ($1,014.6million equivalent);(b) IDC on their loans ($342.9 million equivalent);and (c) Bank loan interest and principal repaymentsdur- ing the project constructionperiod ($258.7million). Of the total local financing,40 percent will be in the form of equity. The balance (60 percent) will be in the form of loans, the terms of which are as follows: (a) 50 percent of the loans will have an interest rate of 3.6 percent a year, 15 years maturity; and (b) the balance (50 percent) of the loans will have an interest rate of 15.42 percent a year, 10 years maturity. The weighted average interest rate x suldamount to about 9.6 percent a year. This is in line with the prevailing interest rate for key national projects in China.

5.14 The US Exim Bank made a preliminarycommitment in the amount of $30 million to cofinance the project for servicesof Harza EngineeringCompany (USA), which was selected to assist EHDC in managing project construction. Furthermore,Norway offered a grant to help finance the project in the amount of Norwegian Krone 35 million ($5 million equivalent),of which a major portion would be used to cofinanceengineering services by AGN for the project.

5.15 The proposed Bank loan of $380 million would meet about 40 percent of the total financing requirementsduring the first phase period. Given the long implementationperiod noted above and the fact that EBDC would not be generating cash internallyuntil after project commissioning(para. 6.8), the project circumstancesjustify extending the grace period of the Bank loan from five years (which is the standard period for China) to nine years, and substi- tuting level repaymentsof principal for annuity payments. The loan would be made to the GOC at the Bank's standard variable interest rate for a 20-year term includingnine years of grace. The proceeds of the loan would be onlent from the GOC through Sichuan Province to EHDC with the same terms as the Bank loan. An assurancewas obtained from the GOC that it would onlend the proceeds of the Bank loan to EHDC, through Sichuan Province,under subsidiary lo-ansareements with a 20-yearterm, including nine lears graceand the standard variable interest rate for Bank loans. EHDC would bear the commitment charges and foreign exchange risk. The execution of subsidiaryloan agreements between the GOC, Sichuan Province,and EHDC, satisfactoreto the Bank, would be a conditionof effectivenessof the loan.

Procurement

5.16 The main items to be procured are: (a) preparatoryworks; (b) the main civil works; (c) electricaland mechanical equipment; and (d) engineering and consulting services. Contracts for preparatoryworks, totallingabout $100 million equivalent,have been awarded so far, following local competitive bidding procedures acceptableto the Bank. These contractswould be financed by local funds. The procurementof the main civil works, through ICB, has been divided into two lots, one for the dam and the other for the underground powerhouse and tunnels. These contractswould be partially financed by the proposed Bank loan. Bidding documents for the main civil works were reviewed and endorsed by the Bank, and prequalificationof bidders for these works also was carried out in consultationwith the Bank. Applicationsfor prequalification were received in 1988 from 14 contractors (mostlyjoint ventures of foreign and local firms), six of which were prequalified. Five out of six nrequ- alified joint ventures submittedtheir bids which were opened in public on - 30 -

October 25, 1989. Bid evaluationwas carried out by EHDC, MOE, and their consultants. The signing of the contractswith the lowest evaluated bidders for the main civil works is expected to take place in July 1991. Certain innovativecontracting procedures have been adopted for procurementof the main civil works, such as a Disputes Review Board (DRB) to be set up to help in prompt resolutionof disputes.

5.17 The proposed Bank loan also would partly finance advance payments for the supply of the 550-MW generatingunits and associatedequipment, including switchgear,cables, and instrumentationand control,which would be procured through ICB in accordancewith the Bank's procurementguidelines. Qualified domestic manufacturerswould be eligible for a 15 percent preference in bid evaluationsor import duties,whichever is lower. Items or groups of items estimated to cost less than the equivalent of $200,000 per contract,up to an aggregateamount of $2 million may be purchased on the basis of at least three quotationsfrom qualified supplierseligible under the Bank's procurement guidelines. All contract packages for works and goods financed by the Bank and estimated to cost $5 million equivalentor more would be subject to the Bank's prior review (about 98 percent of the loan). Consultantsfinanced under the loan would be selected in accordancewith principlesand procedures satisfactoryto the Bank on the basis of the "Guidelinesfor the Use of Con- sultants by World Bank Borrowers." The procurementarrangements for the proposed project are summarizedin Table 5.3.

Disbursements

5.18 The Bank loan would be disbursed against: (a) 100 percent of foreign expendituresfor the main civil works; (b) 100 percent of foreign expenditures or 100 percent of local expenditures(ex-factory cost) of goods procured through ICB; and (c) 100 percent for consulting services, studies and training. Furthermore,the proceeds.ofthe Bank loan will be used to finance 100 percent of foreign expendituresfor advanced payments for the purchase of electromechanicalequipment procured through ICB. For expendituresrelating to training,and contractsfor works, goods and services each costing less than $200,000 equivalent,reimbursements would be made on the basis of State- ments of Expenditure (SOEs). Documentationsupporting the SOEs would be retained by EHDC and made a&.ailablefor review by Bank supervisionmissions. To facilitatedisbursements for some categorlesunder the project, a Special Account in US dollars,with an authorizedallocation of $20 million, will be establishedin a bank on terms and conditionssatisfactory to the Bank. Applicationsfor replenishmentwould be submittedmonthly or when the amounts withdrawn are equal to 50 percent of the authorized allocation,whichever occurs sooner. Retroactivefinancing in an aggregateamount of $38 million would be provided under the loan to cover payments made for expendituresof urgently needed civil constructionworks, consultant services,and training incurred before the date of loan, but after September1, 1990.

5.19 The disbursementschedule for the proposed Bank loan is given in Annex 5.5. The disbursementperiod covers the first phase of the construction period. Because of the phased financingarrangements for this project (para. 5.11), it is not possible to compare its disbursementwith that of other projects, except to some extent for the Shuikou HydroelectricProject. The dis- bursement schedule is based on the detailed project implementationprogram and - 31 -

Table 5.3: PROCUREMENTARRANGEMENTS (In $ million)

Procurementmethod Project cost ICB LCB Other N/A Phase 1 Total

Preparatoryworks - 106.2 - - 106.2 106.2 Resettlement - - 104.1 - 94.8 104.1 Land acquisition - - 7.1 - 7.1 7.1 Arch dam (lot 1) 681.7 - - - 356.1 681.7 (15.0) (155.0) Powerhouse (lot 2) 530.6 - - - 393.7 530.4 (180.vl - - - (180.0) E&M equipment 275.5 - - - 53.0 275.5 (30.0) (30.0) Transformers - 23.4 - - 3.0 23.4 Gates/hoiste/cranes 8.0 52.6 1.0 - 10.8 61.5 (1.3) (0.7) (2.0) Contractadmin. - - - 37.4 16.8 37.4 (1.0) (1.0) Engineeringand - - 51.9 - 18.9 51.9 tech. assistance (11.0) (11.0) Training - - - 1.7 1.0 1.7 (0.5) (0.5) Environment - - - 2.4 1.5 2.4 (0.2) (0.2) Studies - - 2.2 0.6 2.2 (0.3) (0.3)

Total 1,495.6 182.2 164.1 43.6 1,063.5 1,885.5 (366.3) (11.7) (2.0) (380.0)

Notes: (1) Figures in parenthesesare the respectiveamounts financed by the proposed Bank Loan. (2) Possible Second Bank Loan could help finance foreign exchange cost for the main civil works, electromechanicalequipment, engineering, and training. expected procurementand contractingarrangements, taking into account specific Chinese practices and their pace of utilizing Bank loan funds.

Pro ect Implementation

5.20 The constructionof preparatoryworks for the project began in July 1987 and is progressingwell. These works include access roads, bridges over the Yalong River, power supply lines, water supply, communicationlinks, construction camps, and health service facilities. Land acquisitionfor con- structionpurposes (about 1,000 ha) has been completed and about 1,200 inhab- itants have been successfullyrelocated. - 32 -

5.21 Bids for the constructionof the arch dam and the powerhousehave been received and the evaluationof the bids was completed (para. 5.16) so as to enable the signing of the contr&.ctwith the surcessfulbidders immediately after the loan has been approved. The constructionof the main civil works is scheduledto begin in September 1991, the diversion of the river for dam constructionin December 1993, and the commercial operationof the first generating unit in 1998. The remaininggenerating units would be completed in sequence with the last sixth unit installedin March 2000, and all remaining work completedby September 2000. Thus, the project completion date would be September 30, 2000. The proposed schedule is consideredto be reasonableand attainable. Details on project implementationare shown in Annex 5.4 and Chart 4, and a more complete implementationschedule, including CPM networks, is available in the Project Files. With the two-phasedfinancing of the project (para. 5.11), the closing date of this loan would be December 31, 1996.

5.22 Particularattention was given to the establishmentand proper staffing of the project site unit and for this purpose EHDC has created EEC (para. 3.4), which will manage constructionof the project. EEC, with the support from EHDC and MOE and assistancefrom consultants(para. 5.26), will have the capabilityneeded to manage a large power project. The organization of EEC is shown in Chart 3. The project managementwould be encouragedto visit similarworks in other countriesand to exchange informationwith professional institutionsand power utilities building and operating similar projects. An assurancewas obtained from EHDC that, during the project implementation period, it would maintain the project managementunit with such responsibilities,resources and staff as shall be satisfactoryto the Bank, along with adequate authority for resolvingproject problems.

Engineering.Technical Assistance, and Supervisionof Construction

5.23 CHIDI has been retained by EHDC to assist in designing and imple- menting the project. It is one of the most experienceddesign institutes in China, and in recent years it has Completed the design of several large hydroelectric projects. CHIDI has over 2,000 professionalstaff and is equipped with modern facilitiesand laboratories. Nevertheless,EHDC recognizesthe very complex and delicate nature of the constructionactivities of this project, and thereforewill continue to use foreign consultantsduring the implementation of the project, as discussed in the succeedingparagraphs. Interna- tional engineeringconsultants have also been actively involved in reviewing project design and resolving specific technicalmatters related to the dam, powerhouse,electromechanical equipment, and log passing facilities. A number of technical delegationsand prominenthydropower experts visited the project site, offered valuable suggestions,and shared their experiencewith the Chinese in building large and complex projects.

5.24 EHDC has set up SBC (para. 5.6) to assist in resolvingparticular project problems and in advising on major design and constructionissues. SBC has been very active and effectivein supportingthe project preparationand procurementof the main civil works. The services of these consultantshave been partially funded by the TCC (para. 5.7). SBC meetings would be regular, averaging twice a year. An assurancewas obtained from EHDC that it would continue to employ SBC, independentof the designers of the project, for reviewingdesigns, technicalspecifications, and advising on unforeseenprob- lems that arise during project implementation. - 33 -

5.25 The TCC also was used to cover the cost of consultantsto assist EHDC with the preparationof cost estimates, scheduling,and the bid documents for the arch dam and the undergroundpowerhouse. It will continue to be used for two groups of consultantsto assist in the preparationof additionalbid documents; one for the main generatingunits, and the other for the remaining electricalequipment.

5.26 Due to the magnitude and complexityof the project and the use of foreign constructioncontractors and equipmentsuppliers, as well as foreign financingsources, EHDC will appoint experiencedand qualified international consultantswho would play a key role in assistingEHDC in managing project construction. The scope of work for the consultantswill include contract administration,cost control, scheduling,construction inspection and quality assurance, design engineeringservices, and constructionsite administration during the entire implementationperiod. A terms of referencefor these services and details of the expected collaborationwith EHDC/eEC and CHIDI are given in Annex 5.6. An assurancewas obtained from EHDC that it would employ, prior to the award of the contract for the main civil works, construction management consultantswhose qualifications,experience, and terms and conditions of employment shall be satisfactoryto the Bank. The total cost of engineeringservices and technicalassistance is estimated to be about $52 million, of which $21 million is in foreign exchange. These costs include about 1.000 staff-monthsof foreign consultants'services at the cost of about $20,000 per staff-month,which is considered reasonablefor this kind of highly specializedservices. A tabulation indicatingthe areas of expertise that will be covered, and the staff-monthsto be expended each year, are presented in Annex 5.7.

5.27 In addition to the foregoingconsulting services,there will be two othergroups of specialiststhat will assist EHDC for a successfulcompletion of the Ertan projectz (i) DRB (para. 5.16) and (ii) the EnvironmentalPanel (EP). DRB will be set up for the two civil works contractsto enable prompt resolutionof contract disputes and therebyenhance internationalcompetition, reduce bid prices, and expedite constructionof the works at lowest cost. One member uf !hZZ will be appointedby EHDC, one by a contractor,and a third member will be selectedby these two. The decision to create DRB alone is believed to have reduced bid prices for the main civil works possibly by as much as $100 million. EP will be made up of foreign and Chinese experts and is a response to the new Bank directive requiringestablishment of such a panel. Although the EP is not mandatory in this project, EHDC recognizesthe importanceof the environmentand will apply the Bank's new requirementto the Ertan project.

5.28 The procedures for inspecting,maintaining, and monitoring the safety of hydro works and high dams in China generally follow international practices and are considered to be appropriatefor the proposed project. Nevertheless,in order to ensure the safety of the dam and other hydraulic structures,an assurancewas obtained from EHDC that it would prepare, prior to completionof the dam, a satisfactoryprogram of maintenance for the project works, and that it would undertakeregular inspectionof the dam and associated works and structuresin accordancewith sound engineetringpractices. - 34 -

Studies

5.29 To complementefforts currentlybeing undertakenunder the Bank's Planning Support and Special Studies Project (para. 2.11), EHDC will carry out studies of power pricing, operation of the Ertan hydroelectricstation and its reservoir,and preparationof future power projects. The basic objectivesof these studies are as followss

(a) Power Pricing Study. The purpose of this study is tot (i) determine the cost of electricitygeneration in the Sichuan power system; (ii) design a contract for the sale of power and energy from EHDC to SCEPA; and (iii) formulatean action plan for the reform of tariffs to the ultimate consumer. The terms of reference for the study are given in Annex 5.8.

(b) Optimizationof ReservoirOperations. The object of this study is to determinehow Ertan, with its large reservoir and ability to operate as a peaking plant, can be best integratedinto the existing system containingmany thermal and run-of-riverhydro plants. The terms of referencefor the study are presented in Annex 5.9.

(c) Preparationof Future Power Projects. The aim of this project component is to help prepare EHDC's future power projects, including the resolutionof specific engineeringproblems in related feasibility studies. The scope of this work will be establishedin consul- tation with the Bank.

The above studies are expected to be completedprior to the start of the second-phase. An assu.ancewas obtained from EHDC that it would carry out the studies of power pricing and plant and reservoiroperation by not later than June 30, 1993, in accordancewith the terms of referenceacceptable to the Bank.

5.30 To assist in establishingrules and criteria for project structures and facilities,EHDC will also undertake the followingengineering investigations and testst

(a) Safety of Structures. This study work and related tests would establish rules and regulationsfor plant operationsin order to comply with the assumptionsused in the design of the structuresand works. Inter alia, it will include establishingof survey monuments and recording devices so that any movement in the structuresmay be detected.

(b) Monitoringof Energy DissipationFacilities. This investigation will help to establish criteria for observingof any deterioration in the spillwaysand plunge pool downstreamof the spillway,which may endanger the dam.

(c) Powerhouse Ventilation System. Electrical losses may cause the air temperatureto rise to w'acceptablelevels in the undergroundpowerhouse. Therefore,this Livestigationwill help to establishcrite- ria for designing suitable facilitieswhich would allow operating personnel to work in comfort. - 35 -

Most of the work in the foregoingengineering investigations and tests will.b'a carried out by CHIDI with help from other Chinese consultingexperts, together with specific and special advice from foreign experts, who may not only contribute to the studies, but also review the findings. Details of the scope and content of the above investigationsand tests have been agreed with EHDC.

Management Developmentand Ttaining

5.31 The newly formed EHDC does not have training facilitiesof its own, and to date has been dependanton the recruitmentof qualified staff from other organizations. With the expectationof the need of a great increase in technicalpersonnel, EHDC plans to establish its own training facilities,and a componentof the proposed project will assist it in this regard. Foreign funds have been included to cover the cost of the followings 80 staff-months of training abroad, includingvisits to similar projects; 20 staff-monthsof foreign lecturers to various classificationsof personnel; 120 staff-monthsof training in high schools and technical schools; and 106 staff-monthsof practical training in similar power plants in China. Details on the EHDC training program are presented in Annex 3.2. The program also will include training for financialmanagement and planning staff. To enhance its training capabil- ities, EHDC will purchase critical training equipment,including a hydropower station operation simulator,microcomputers, a closed-systemtelevision for student training, linguistic laboratories,and various essential equipmentfor high voltage and hydraulic laboratories. It should be noted that all the internationalcontractors and consultantswill have the obligationand duty to train EHDC engineers and administratorsas a part of their services. An assurance was obtained from EHDC that it would carry out the training program in accordancewith the timetable agreed with the Bank.

Resettlementand RehabilitationProgram

5.32 A comprehensiveresettlement plan and program have been prepared by EHDC and local governmentauthorities who will be responsiblefor its implementation. A complete descriptionof the contents and costs of the plan is presented in Annex 5.10. The objective of the resettlementplan is to rees- tablish affected people to a better standard of living than before the project.

5.33 Approximately30,000 people will be affected by inundationof the Ertan reservoir. Resettlementplanning has been carried out by EHDC, CHIDI, the Government of Sichuan ProvincialLand Bureau, and the County Land Bureaus, and City and County ConstructionBureaus. Officialsas well as private citizens from all affected areas have helped select the new sites and have inspected them, and developmentplans for the selected sites have been formu- lated in collaborationwith authoritiesand representativesof the affected population.

5.34 The resettlementareas are of three types (see IBRD Map 22093R1). First, agriculturalpeople in villageswhere all or most of the arable land will be inundated and who wish to continue in farmingwould be relocatedto reclaimedfarmlands at Hongge ReceivingArea or Pinshan ReceivingArea; other agriculturalpeople would become coal miners at the Hongni Coal Mine. Second, agriculturalpeople in villageswhere a few homes and small amounts of arable lands will be inundatedwould move to higher elevations away from the reser- - 36 -

voir in the same village, and arable lands would be reallocatedand small land reclamationworks would be undertaken to provide agriculturalplots to them. Third, residentsof Yanbian Town will move to the new townsite near Mishiqing where their places of employment (governmentoffices, factories,businesses, etc.) will be relocated. Detailed developmentplans and layouts have been formulatedfor Hongge and Pinshan areas and are in progress for the other receivingareas, and these are described in greater detail in Annex 5.10.

5.35 The resettlementoperation will begin with the reclamation,level- ing, and preparationof land in the new sites. The County Land Bureaus, local authoritiesand representatives,and the settlers themselveswill collaborate in this work. The constructionof houses and installationof public infrastructure, including irrigationworks, schools, clinics, factories,and no forth, will follow the land preparationactivities. During the construction of the new settlementsthe settler families will continue deriving their live- lihood from the old farms or jobs, and family members working on development of the new sites will receive a salary. It is expected that income during this transition period will be adequate. Regarding developmentopportunities over the long run, developmentplans were examined carefullyand reviewed thoroughlywith local officialsand representativesof the settlers. With timely implementation,the plans indicate that settlers' livelihoodswill be improved to above preproject levels within a period of two to five years following resettlement.

5.36 EHDChas developeda staff developmentprogram for officials responsible for resettlement. Senior officialswill participatein workshops and study tours of other resettlementoperations in China and abroad, and then prepare short courses and workshops for delivery to County and local government officialswho have responsibilitiesin the resettlementprocess. Imple- mentation of the resettlementprogram and the achievementof physical targets will be carefullymonitored by EHDC and the ProvincialLand Bureau, and the resultant reportswill be discussedwith the Bank supervisionmissions. In addition, EHDCwill subcontractwith an independentacademic research institution for monitoring and evaluation of the socioeconomicoutcomes of the resettlement operations in the receivingareas. The latter reportswill be reviewed with the Bank annually throughoutthe life of the project. An assurance was obtained from the Government that it would implementor cause to be implementedthe agreed resettlementprogram.

EnvironmentalManagement Program

5.37 Like all hydroelectricprojects planned for Sichuan, the Ertan project has relativelybenign environmentalimpacts when compared to thermal alternativesor to hydropower elsewhere in China; siltationproblems are highly manageable and resettlementrequirements are low. The project displaces about 2,000 people per 1 TWh of output as against 10,000 to 15,000 in Central and East China. Other comparativeadvantages relate to the avoidance of mining and use of some ten million tons a year of raw coal. First aspect of such 'avoidance"is the land use associatedwith coal mining (up to 1,000 ha/year) and second, the land use for thermal power plant estimatedat 600 to 2,700 ha excluding the sludge ponds for solid wastes. Lastly, the project will avoid annually at least 260,000 tons of gaseous and particle emissions, 1.9 million tons of solid waste and 0.5 million tons of water consumption. If lower quality local coal was used instead of Shanxi coal, sulfur - 37 -

emissionscould be three times as severe and would need to be cut through flue gas desulfurizationcosting an additional$500 million (Annex 7.3).

5.38 An EnvironmentalImpact Assessment has been completed for the project. Annex 5.11 contains greater detail on the work accomplishedto date and what which has been agreed for the future. The key issues investigatedby the environmentalimpact assessmbnt include environmentalhealth, catchment area land use trends and reservoir sedimentation,reservoir water quality and pollution, downstream effects, and impacts on fish and wildlife. Impacts identified in these areas will either be mitigated through the applicationof existing technologies(for example, pollutioncontrol measures at the Miyi Sugar Refinery which will affect water quality in the reservoir)or monitored closely during project implementation;chances of environmentalrisks are considered minimal. For example, schistosomiasishas been eradicated from the region, but will be systematicallymonitored by the environmentalmonitoring station to be financed under the project.

5.39 The key provisionof the environmentalmanagement program is the establishmentof the environmentalmonitoring station. This stationwill be charged with monitoring the reservoirand catchmentareas includingmeteoro- logical, hydrological,water quality, sedimentation,biotic, sanitary and human health conditions. The EP (para. 5.27) overseeing the program will annually review the results of the work of the environmentalmonitoring station. An assurancewas obtained from EHDC that it would carry out the environmentalmanagement program in a manner satisfactoryto the Bank.

Project Risks

5.40 Constructionof the proposed project will be a very complex job due to the geological,hydrological, and physical features of the project and its location. The project is sited in a narrow gorge with steep slopes, highly jointed and faulted rock, and occasional landslides. Nevertheless,project constructionrisks are within reasonablelimits and would be manageable given the continuous supervisionarrangements, involving foreign and Chinese consultants, that have been put in place for the constructionprocess. SBC (para. 5.24) is already involved in reviewingpossible physical risks, and it is proposingmeans and procedures to mitigate or avoid them. The economic riske, if any, would be minimal (para. 7.10). Other potential risks could include the continuity of goods supply, funding shortages,contract management diffi- culties, and effective implementationof the resettlementprogram. To minimize these risks and enable timely and effective implementationof the resettlement program, assuranceshave been received from the Government that it would ensure an adequate flows of funds, and establishand maintain effective management of project execution. No major environmentalproblems are expected under this project, and the implementationof the proposed environmentalmanagement program (includinga monitoring process)would enhance the quality of the environmentin the nearby areas.

Monitoring and ReportinR

5.41 Satisfactoryprocedures for monitoring,evaluating, and reportingon the project have been agreed by EHDC. The Bank would be furnishedwith quarterly project progress reports. A Project CompletionReport would be submit- ted to the Bank no later than six months after the completionof the project. - 38 -

The timelyimplementation of the projectis criticaland dependson adequate financialresources being made availablewhen needed. For this reason,the projectprogress reports would include,inter alia, EHDC's proposals regarding projectcosts and annualfinancing plan for the followingyear as well as the Government'sapproved budget allocation for the project. The scopeand content of the projectprogress reports have also been agreed. A frameworkfor projectmonitoring and reportingis presentedin Annex 5.12. - 39 -

VI. FINANCIALASPECTS

BackAround

6.1 EHDC is a newly created corporation. In the foreseeablefuture, its activitieswould be dominated by the constructionand subsequentoperation of the proposed project. EHDC's operationand finances are interrelatedwith those of SCEPA; all the power generatedby SHDC would be sold in bulk to SCEPA, accounting for about 30 percent of the grid's sales by the year 2000. As state-ownedenterprises, EHDC and SCEPA are bound by the financial regulations establishedby the Government. Within this framework,the future finances of EHDC and its sole customer, SCEPA, are forecast to be satisfactory.

6.2 SCEPA, as in the case of most power bureaus in China, follows a highly centralizedfinancial system (Annex 6.1). As part of the ongoing economic reforms, the Government is reassessingthe present fiscal system,with particular focus on tax reform issues and options. Since details of such reforms are still being formulate3d,there are considerableuncertainties relating to the specific parame ers affecting the bureaus' future finances. Nevertheless,in keeping with niespirit of the recently enacted Enterprise

Law, the integratedmeasures b the economic reform would be directed at enhancing rather than impeding the commercial orientationof the state enterprises. As a first step toward this direction,EHDC is allowed to retain its surplus funds to finance its future investmentsand build up the corporation's equity base.

6.3 One of the Government'ssectoral objectives is to strengthenthe enterprises'financial management so that the power bureaus could perform their increased fipancial role efficientlyand effectively. Toward this end, the proposed project would continue the process of institutionalbuilding already initiated under previous Bank-financedprojects, including (i) the extension of EHDC's financialplanning horizon (para. 3.8); (ii) training in financialmanagement for EHDC (para. 3.7); and (iii) agreementswith EHDC on financialperformance targets which would provide a frameworkfor financial discipline (para. 6.4).

EHDC's Finances

Financial PerformanceTargets

6.4 Traditionalindicators (such as rate of return on assets and self- financingratio) have thus far had limited significancein measuring the performance of power entities operating in a highly centralizedfinancial system. In particular, their surplus funds are largely remitted to the Government in the form of Adjustment Tax. Therefore, self-financingratios have been largely "notional,for most of the power bureaus in China. On the other hand, EHDC's surplus funds would not be subject to Adjustment Tax and self-financing ratio is thus a meaningful indicatorof its financial performance. With a view to promoting prudent financialmanagement, assurances have been obtained from EHDC regarding-thefollowing financialperformance tarietst - 40 -

(a) it would take all measures,including but not limitedto tariff adjustments,to ensure that its internal cash generation is sufficient to maintaina self-financingratio of no less than 20 percent in 1999, 25 percentin 2000,and 35 percentthereafter; (b) it would maintaina debt servicecoverage ratio of no less than 1.3 times in 1999, and no less than 1.5 times thereafter;and (c) it would maintaina debtlequityratio of no more than 82/18 in 1991-97,80/20 in 1998-99,and 70/30thereafter. FutureFinances 6.5 As noted above (para.3.12), agreements have been reachedwith the Governmentregarding the principlesof transferpricing and operatingarrange- ments for the salescontract between MMDC and SCEPA,including allowance for financialviability of EHDC. Based on the assumptionsdetailed in Annex 6.2, includingelectricity tariff setting which would allow MMDG to achievethe above financialperformance targets, projections of lHDC'sfinances for the period1991-2002 are presentedin Annexes6.3-6.5. Salientfeatures of EHDC's future finances are highlighted below.

Table6.1: EHDC'SPTUME FDK4CES (Ymil.)

Isp.a. Avera r rate Yoar Ended12/81 191 196 1996 1999 200 2002 1990-2002 (196-002)

Energyeelon (Gl) 0 0 2,900 10,600 14,660 16,600 12,040 66 Averagetariff/kh (too) 0 0 26 29 81 al 29 5 Wet salesrevenues 0 0 690 2,956 4,844 5,012 8,617 64 OperatingIncome 0 0 566 2,641 8,65 4,404 8,0o6 67 Net Income 0 0 105 1,271 1,954 2,065 1,462 111 Annual capitaloRpond. 77 1,916 1,978 1,745 1,681 2,242 1,958 Rate beo 0 0 4,686 9,267 11,466 14,268 10,00 82 Long-termdebt (scem.) 684 6,018 12,204 12,456 11,952 12,700 12,m 1 Debtsorvlce 0 0 706 1,961 2,165 1,686 1,656 28 Ro" of roturnon eea (oM) 0.0 0.0 12 28 24 19 20 Self-financlig ratio 0 0 0 20 50 76 40 Operatingratio (U) 0.0 0.0 22 14 14 16 16 Debt/0quity ratio 72/26 79/21 80/20 74/26 65/8S 60/40 67/48 Debt servicecoverage 0.0 0.0 0.9 1.8 1.5 2.0 1.5

(a) Revenue Position 6.6 The first two units of the project are scheduled to be commissioned in 1998, and the remaining four units would become fully operational by the year 2000. In order to ensurethe competitivenessof Ertan power,the financial forecasthas assumedthat EHDC'stariff would be about 25 fen/kWhin 1998 (16 fen in end-1990prices) which approximatesthe estimateof SCEPA'savoided cost of power generation;the consequentcash generationis projectedto cover some 90 percentof the debt servicerequirements. During the first five years of its operations,the averagetariff which would allow EHDC to achievethe - 41 -

agreed financialperformance targets are estimatedat 29 fen/kWh in current terms; this would allow Ertan power to remain competitive.

6.7 As is typical of hydro projects, Ertan hydropower plant is expected to have relativelylow operatingexpenses. Thus, EHDC is expected to have a robust revenue position,with a low operating ratio estimated to be no more than 22 percent during its first five years of operation (1998-2002). Its average rate of return on net fixed assets is projected to be 20 percent a year during the same period,which is satisfactory. However, debt service requirementswould be substantial. Specifically,debt service is forecast to account for an average of about 60 percent of EHDC's minimum revenue requirementsduring its first five years of operations.

(b) Funds Flow

6.8 During the project implementationperiod (1991-2000),EHDC's financing plan would be dominated by the proposed project. After commissioningof the project, EHDC is expected to generate substantialinternal cash. This is attributablenot only to its highly profitableposition, but also its cost structure which is dominated by depreciation, a noncash expense and a major source of Special Funds retention. As SCEPA would be the sole customer and is expected to maintain a sound liquidityposition (para. 6.11), no problem is envisaged rqgarding-,ollection of payments. However as noted above, the corporation would have a heavy debt service burden; debt service requirementsare forecast to account for some 45 percent of its total uses of funds during its first five years of operation. Indeed, the projectedminimum tariff requirements are determinedmore by the agreed debt service coverage ratios than the self-financingratios for future investments.

6.9 During project implementationperiod, compliancewith the agreed debt/equity ratio target would be achieved through Governmentequity contribu- tions. An assurancehas been obtained from the Government that it would provide. in a timely manner, the necessary equity to enable EHDC to achieve the agreed debt/equityratios during project implementation. Within the first five years of project operations,EHDC is expected to improve its capital structure considerablythrough retentionof after-tax profits, special funds and loan repayments. During the financial forecast period (1991-2002),its debt/equityratio is forecast to be reduced from a peak of 81/19 in 1997 to 57/43 in the year 2002.

SCEPA's Finances

Past Finances and Current Financial Position

6.10 SCEPA's income statementsand balance sheets for the five-year period 1986-90 are set out in Annexes 6.6-6.7. During this period, SCEPA's average sales growth and tariff adjustmentwere both 7 percent a year. The sales revenues,which increasedby an average of 15 percent a year, were out- paced by the increasesof operating costs of (20 percent a year). As a result, its rate of return on assets decreased from 10 percent in 1986 to 6.4 percent in 1990. During the same period, SCEPA's capital structure changed considerablyas a result of sharp increasesin debt-financedinvest- - 42 - ments. The company'sdebt/equity ratio increasedfrom 11189 in 1986 to 59/41 in 1990. Its liquidityposition 18 comfortable,as indicatedby a current ratioof about 4 times in end-1990.

FutureFinances 6.11 Based on the assumptionsdetailed in Annex6.0, includingelectricity tariff adjustmentswhich would allow SCEPA to achieve similar debt-service coverageratios (1.3-1.5 times) as EHDC, projectionsof SCEPA'sfinances for the period1991-2000 are presentedin Annexes6.9-0.11. During this period, SCEPA'soperating cost increases(averaging 7 percenta year)would continue to outpacethe growthof electricitysales (6 percent a year). This is mainly due to sharpincreases in both the quantityand costsof purchasedpowor from new and more costlythermal plants. Furthermore,its debt servicerequirements would increaserapidly as debt-financedprojects commence operations. In order to achievethe financialperformance targets noted above, SCEPA's averagetariff is projectedto increasefrom 10.6 fenlkiWhin 1990 to about 36 fen/kWh in the year 2000, representingan average increase of 12 percent a year (or 4 percent a year in real terms). With a view to rationalizingboth the levels and structures of electricitytariffs, the pricing study provided under this project would form the basis for electricityreform in Sichuan (para. 2.15). SCEPA's liquidityposition is expected to remain sound, as indicatedby its current ratio which is forecast to be no less than 4.4 times. - 43 -

VII. ECONOMIC JUSTIFICATION

7.1 The Ertan hydroelectricproject ia an importantelement of the core expansionprogram for the power generatingsystem of Sichuan (para. 4.11). Its size and timing are economicallyjustified. The capacity expansion is also justifiedon the basis of the economic benefits associatedwith the elim- ination of power shortagesand the increase in demand over the period 1998- 2000 when the project will be commissionedand its output used.

7.2 In this chapter, it will be first establishedthat the project is superior to alternatives,and that its size and timing reasonablymaximize economic benefits. Second, an estimate of the economic rate of return for the project will be provided. Benefits and costs are evaluatedusing constant end-1990 economic prices, net of taxes and subsidies. Tradable commodities are valued at border prices with a shadow exchange rate of Y 5.5 per US$.

Project as a Least-Cost GeneratingAlternative

7.3 Least-cost expansion sequenceshave been planned by SCEPA for the period 1990-2020with the help of CHIDI and WREPERI (Beijing). The Ertan project has been shown to be a part of these sequencesunder a broad range of adverse assumptions. increase of discount rate from 10 percent to 12 percent, 20 percent increase in project cost, and load growth reduced from 8.3 percent to 6.6 percent a year. A base case sequence is presented in Annex 4.5 and discussed in Chapter IV. In order to highlight and analyze the project's comparativeadvantages, an alternativeleast-cost expansion sequence has been optimizedwithout Ertan. This alternativeincludes both hydroelectricplants and thermal units using Shanxi coal to substitutefor Ertan but less transmission investmentsbecause more generation is located close to load centers than in the base case. Discounted at 10 percent as of 1998, the date of the project's first commercialoperation, the present value of costs for this alternative without the project exceeds that of the base case by about Y 5 billion. The project comparativeadvantage corresponds to a net return of 35 US cents per dollar investeds after inclusionof operatingcosts, the project unit cost is 11.6 fen/kWh as compared with about 16 fen/kWh for the alternative. Details about this avoided cost are given in Annex 7.1 and in the Project Files.

7.4 Ertan displacesmostly other hydropower projects and those projects displaced by Ertan in turn allow the postponementof thermal power. By the year 2000, the project average output of 14.6 TWh will avoid burning annually some e million tons of raw coal, and 10 million tons when the full project output of 17 TWh is obtained. The environmentalimpacts of this substitution are discussedunder para. 5.37. The contributionof Ertan to the firm power of the Sichuan system is 2,760 MW in the rainy season and 1,000 MW in the dry season (Novemberto May); the peaking capability is about 3,000 MW in the rainy season, and 2,400 KW in the dry season. The average annual energy and firm energy of the project will increase by 20-30 percent when other dams are built upstream to regulate the strong seasonal variations of the Yalong river. - 44 -

Prolect Size and Timing

7.5 The project size has been economicallyoptimized: the design head has been increased from 150 m in earlier designs to 165 m; as a result, the rated output has increasedfrom 3,000 MW to 3,300 MW and an additional840 GMh can be generated. This change,which costs about Y 50 million will bring about Y 500 million of fuel savings a year on the Sichuan power grid. Raising the water head further would not be economicallyattractive for two reasons: the reservoirbackwater level would rise too high for the next upstream dam to be built and the number of people to be resettledwould greatly increase.

7.6 The project schedule calls for the commissioningof all six units ovor the period 1998-2000. By themselves,units no. 1 to 3 will deliver all of the firm power and 10,000 GWh of average output. In present value, the correspondingsupply cost savings amount to about 80 percent of the total, the costs till this partial commissioningamount to 90 percent of the total; putt- ing these three units on stream at the earliest possible time entails a net savings of about 25 US cents per dollar invested.

7.7 Units no. 4 to 6 will generate an additional4,500 GWh and increase the peaking capabilityof the project by 1,200 MW. A postponementof these units would save lesiithan Y 300 million a year in turbogeneratorsand transmission facilities,but it would translateinto additionalfuel costs of the same magnitude elsewhere on the grid; thus even if load growth was to fall well below expectationsand additionalpeaking capacity was not immediately needed, the installationof the last three units would still be economically justifiedon the basis of fuel savings alone.

Project Benefits

7.8 In appraisingpower projects, it is customaryto value the project output on the basis vZ the consumer'sminimum willingnessto pay, as evidenced by existing or covenantedpower tariff levels. However, this approximation generallyunderestimates the value of electricitybecause, for many customers, power demand is rather inelasticto prices. This is particularlythe case in China; one manifestationof which is the economic cost of power rationing, which is imposed daily to industriesin Sichuan, at an average level of about 150 fenlkWh. There are otherwise few power tariffs at the generatingplant level to provide a benchmark of this willingness to pay. The tariff levels covenantedunder this project result in an internal economic rate of return (IERR) of 14.9 percent. 'Whenproject costs are not shadow pticed, the IERR is 15.4 percent.

7.9 A more representativemeasure of the project IERR can be obtained from the price level recently elicited by new thermal plants which were built as part of a special effort to alleviatepower shortages in Sichuan. Such prices are a better reflectionof the willingness to pay. This is the case of Jiangyou (660 MW) and Luohuang (720 MW) which in 1991 will start selling power in bulk at 21 fen/kWh (at early 1991 prices). On that basis, the project IERR is 17.5 percent. If the inputs are not shadow-priced,the IERR approaches 18 percent. Details of the calculationsare given in Annex 7.2. - 45 -

SensitivityAnalysis

7.10 The major economic risks associatedwith the project can be based on either one of the followingcausess (a) the project suffers serious cost overruns; (b) commissioningof the first units is delayed significantly;and (c) some of the expected growth in power demand fails to materialize. The possible change in power demand has been shown not to affect the timing of all 98.x units, let alone the viability of the project. A one-year delay would postpone the project benefits,but also, some project costs. Assuming that this delay is combined with cost overruns equal to the 12 percent physical contingenciesprovisioned for the project as a whole, the IERR is reduced by one percentage point. The likelihoodof further cost overruns is minimized by the advanced stage and selectedmethod of procurement,and by the low share of resettlementin the total cost. If a 20 percent cost increasewas to occur, the IERR would again be reduced by one percentagepoint. - 46 -

VIII. AGREEMENTSAND RECOMMENDATIONS

8.1 During negotiations,the followingassurances have been obtained:

(a) From the Government,that it woulds

(i) enable SCEPA to enter into the contract with EHDC by June 30, 1996 for the sale of the project output (para. 3.13);

(ii) (a) provide the Bank with an implementationschedule and a financingplan for the 500-kV transmissionnetwork connecting the Ertan HydroelectricStation with the power system in Sichuan Province not later than June 30, 1993; and (b) make or cause to be made arrangementssatisfactory to the Bank for securing the completionby SCEPA of this network not later than June 30, 1998; (para. 5.5);

Ciii) onlend the proceeds of the proposed Bank loan, through Sichuan Province,to EHDC on terms satisfactoryto the Bank (para. 5.15);

(iv) carry out or cause to be carried out the human resettlement program satisfactoryto the Bank (para. 5.36);

(v) provide the equity needed for EHDC to achieve the agreed debt/equityratio during project constructionperiod (para. 6.9);

(b) From EHDC, that it woulds

(i) furnish each year to the Bank a rolling long-term financial plan (para. 3.8); (ii) furnish to the Bank the audited project accounts and financial statementswithin six months after the end of each fiscal year (para. 3.11);

(iii) enter into the contractwith SCEPA prior to the commissioning of the project for the sale of project output in accordance with principles satisfactoryto the Bank (para. 3.13);

(iv) maintain during the project implementationperiod the project management unit with such responsibilities,resources, and staff as shall be satisfactoryto the Bank (para. 5.22);

(v) employ the Special Board of Consultantsto assist in resolving particular project problems and in verifying proposed solutions and specificdesigns (para. 5.24);

(vi) employ, prior to the contract award for the main civil works, constructionmanagement consultantswhose qualifications, experience,and terms and conditionsof employment shall be satisfactoryto the Bank (para. 5.26); 47 -

(vii) regularlyInspect project hydroworksand facilities,including the dam, in accordance with sound engineeringpractices (para. 5.28);

(viii) carry out studies of power pricing and power plant and reservoir operationin accordancewith the terms of reference and a schedule agreed with the Bank (para. 5.29);

(ix) implement management development and staff training programs in accordance with the timetable agreed with the Bank (para. 5.31);

(x) carry out the environmental management program agreed with the Bank (para. 5.39);

(xi) take all measures, includingbut not limited to tariff adjustment,to ensure that its internal cash generation would be sufficient to maintain a self-financing ratio of no less than 20 percent in 1999, 25 percent in 2000, and 35 percent thereafter [para. 6.4(a));

(xii) maintain a debt service coverage ratio of no less than 1.3 times in 1999, and no less than 1.5 times thereafter [para. 6.4(b)1; and

(ziii) maintain a debt/equity ratio of no more than 82/18 in 1991-97, 80/20 in 1998199, and 70/30 thereafter [para. 6.4(c)).

8.2 The executionof the subsidiary loan agreementsbetween the Govern- ment, Sichuan Province and EBDC would be a condition of loan effectiveness (para. 5.15).

Recommendation

8.3 Subject to the above assurances,the proposed project is suitable for a Bank loan of $380 million to the People's Republic of China for a term of 20 years, includinga nine-year grace period, at the Bank's standardvari- able interest rate. 8 2 _a

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2§|X3!|E2tbWII-!s d 3o8sff - 49 - A-.2

ERTANWDROEECTRXC PROJECT

rorwthIndeb of EglctrIcitim Geerotlon aedPrimery EnermyDeMnd

Inn% leod_$11MlA glarlel& as gUlSQ h In Totl Shereof i orlmory Electricit Year (MW) hydroS (Twh) hydrom) 04? Energy Geretton

1979 68,016.9 80.8 291.950 17.8 100 100 100 1080 66,809.1 80.6 800.600 19.4 106 108 107 l1l 69,182.6 81.7 809.800 21.2 118 102 110 1002 72,169.6 81.7 827.078 22.7 122 108 116 1908 70,444.9 81.0 861.489 24.6 1U5 112 125 1084 60,116.0 81.9 878.991 28.0 155 121 184 ls6 07,088.2 80.8 410.669 22.6 174 180 144 lo0 06,616.5 29.4 449.691 21.0 169 187 169 1907 102,697.0 29.8 497.818 20.2 210 144 176 106 116,497.1 28.8 645.065 20.0 288 157 196 1969 126,068.6 27.0 504.067 20.2 242 205

Soureo: NOE - 50 -

MTA NWIAATI >

Il.orIcav oncumotln by Seat.

Waooon'o oy transport- Shareof rural Shareof Year toteI Al re l WvyLAsh tion (Iutudin_ mun1tpel A (TO1h) a() household(I) retitlol (U)

1949 0.5 09.1 84.4 84.? 0.0 0.0 19.6 1012 6.2 60.0 48.0 87.0 0.9 0.7 16.4 19s? 16.4 62.9 59.6 24.8 0.4 0.? 16.0 1962 87.6 64.0 70.0 14.6 0.0 4.1 10.? 166 70.0 04.1 69.1 16.0 0.0 7.0 7.5 1972 128.0 62.8 69.7 12.8 0.0 10.5 6.0 1976 164.7 76.8 04.6 18.7 1.1 14.1 0.5 107? 166.8 76.5 65.0 18.5 1.2 18.7 0.0 1970 214.9 79.0 65.9 18.1 1.1 18.7 6.8 1979 288.6 79.0 06.9 18.1 0.0 18.9 6.5 1990 251.6 77.9 64.6 18.4 0.8 14.0 6.6 1981 259.0 70.2 62.6 18.6 0.6 10.0 7.0 1992 276.8 70.0 62.0 14.0 0.7 16.0 7.6 198 297.1 76.7 60.9 14.9 0.7 16.0 7.0 1984 819.6 76.2 60.6 14.7 0.6 15.9 6.1 1965 04.6 78.6 50.9 16.0 0.0 16.5 0.0 198S 879.7 72.9 67.7 15.2 1.2 10.4 9.5 1997 428.5 72.5 57.9 14.6 1.2 16.4 9.9 199 461.8 71.8 67.8 14.6 1.9 16.4 9.9 199 496.2 71.0 68.9 17.1 1.9 10.7 10.4

Source: MOE - 51 -

InSO%&led Yearof Low --TOOIt cemi.- a oun stoling Souroe of finane (1 win) onP S eql o hydro 8 x 7s IN840 Kuwalt Pnd for ArabE6.- 82. IWic Doelopment Mot" Shlas ii Tembepumped etor. 4 a 200 157-99 SECP loan 46.0 P8ikoPumped_ to. 38 110 iss-go overntof Italy 8s.?

- edwn hPro 4 a 800 19W-S# Coned.Supplier"' Credit 106.0 Wuqienqlhydro 5 a 240 1004 OECFloan 168.0

Ti lao (I) hydro 4 x 220 15042 OECFlooan 600.0 TI tonqiao(I) hydro 4 x 800 1059 OECFtoos 280.0 Subtotal bLl IJM.t

No-nR-A1 aPOtWER^E,8p1rt rd1 8. ,hedonge t..eisoI a 600o 1002 WA, France,Jopon, up- 1860.0 pler'. Cedt F.a:houthermal 2 a 860 1505 Japan,Suppi1er's Crect 100.0

th 2 a 8Iu20 195 Italyp uvrnt cnes- 200.0 atonalloon and Suppler' credit Shunanthermal 2 a 80 106 COnada,WA44, Supplier's 100.0 Creil wastSiJlng thermal 2 a 800 VO4-O5 OECFloan 160.0 Ino themal 2 a 80 1904-55 OSCP loon 160.0 -52 - -52-~~~t2- am 228

Znote"II d Year of LMon @ape.0ty comle- amout (onIti stoning Surc of (I mlw)

Daalen aCoo2x 0 ?9B9 Japan-Mitsublehl,Suppl- 190.0 e*re Credit rga-ol China Yucijae iWrmI 2 x 860 100 UK, 1/2 Govornm conceo- 190.0 slonel loon nd 1/2 S- Plioero Credit Ehou thenor1 2 x 800 194-05 OECFloan 10.0 Jiujion thural 2 x 800 104-U5 OECFloon 190.0

euensode shojtoo thrmoal 2 x 850 Is7 Japan-Miteubishi, Suppli- 280.0 *rl'e Credit Shantom ao turbines ax 10.6 167-S9 Froane, Supplier'. Credit 88.0 Southnet Chino Chonginol ng theral x 0 100 UK, Frenco/Japan, 1/2 Qow- 230.0 eminent ooneoionl lo and 1/2 Supplier's Credlt Chongqn ee t8urbtlwe 8 x 10.5 106768 EEC Crit ond UKGovern- 12.6 ment Loa Subtotal 14.99 0.4 Tote 1 20. m $1.f4.6

La World Bnkm-financed projects are not Included. - 53 - ANNEX2.S

BiTAN HYDROELECTRICPROJECT

Electricity Rates (Yuan IWh)

National Large Year average industry Agriculture Residential

1973 66.02 63.28 54.82 157.03

1975 66.09 63.42 58.16 156.95

1980 65.47 61.88 53.96 161.20

1985 70.85 66.59 55.93 162.17

1986 75.26 71.10 59.15 163.76

1987 78.66 74.51 60.38 165.21

1988 87.02 80.48 63.28 168.01

1989 102.48 96.47 73.40 171.40

Source: MOE. - 54 - ANNEXS3.1

CHINA

ERTANHYDROELECTRIC PROJECT

Staffing of ZHDC

Classification Number Percentage

EHDC Headquarters

Engineersand economists 110 66 Accountants 25 15 Administrators 33 19 Subtotal 168 100 Site Management(EEC)

Supervisingengineers 120 43 Contractengineers 50 18 Financialpersonnel 30 11 Administrativepersonnel 20 7 Servicepersonnel 60 21 Subtotal 280 100 Total 448

Notess (1) Excludesshort-term contract labor.

(2) Hydrological,meteorological and seismicobservation operations will be subcontractedto specializedinstitutions. (3) Excludesstaff for operationof the projectwhen completed. Source: EHDC. -55 - M= S.2 Page 1

CHINA

ERTANHYDROELECTRIC PROJECT

Management Development and Staff Training Program

A. Objectives

1. The management developmentand staff training program i. designed to enhance EHDC's managerial, technical,and financialcapabilities. EHDC is still in a formative stage, recruitingits staff from other entities, such as the Lubuge Project ConstructionKanagement, Yangtze Valley Planning Office (Three Gorges Project), CHIDI, construction companies experiencedin large high dams, and research institutions. Ertan is a very challenging and attrac- tive project and no problems have been experienced so far in employing high caliber managerial and technical staff. The main objectives of the program ares

(a) to enable EMDC to function as an autonomous specializedentity in the efficient and accelerateddevelopment of hydropower resources In Sichuan, able to manage large hydropower projects, and later on to operate them optimally;

(b) to staff EHDC with professionallyskilled personnel capable of handling developmentplanning, construction,management, and business operations.

B. Scope

2. High level staff will receive training in modern managementand decision-makingtechniques, particularly ins planning of investments,preparation of reconnaissanceand feasibilitystudies, advanced designing practices, constructionmanagement, hydrology forecastingand measurements,monitoring procedures,project economy and policy making, resolutionof claims and disputes, tariff and power pricing, financialmanagement, information management systems, environmentalprotection, humna resettlementmatters, safety and inspectionof hydroworks, log transportationfacilities, and personnelmanage- ment. Furthermore,the training programwill include operationalstaff for running the power stationwhen completed. The training program will be conducted both abroad and in China. Particular attentionwill be paid to the selectionof candidates to be trained and their adequate preparationbefore sending them abroad for training.

C. Organizationof Training

3. Experiencedmanagerial and technical staff will be sent abroad to be trained in the design and constructionof large hydropower projects, large span undergroundworks, high velocity structures,modern constructionmethods, project economy and management,application of computers, constructionequip- ment, large generating units, timber logging, design and operationof log conveyance systems, environmentalprotection, and human resettlement. Fur- thermore, foreign expertswill be invited to visit EHDC and give lectures on - 56 - AM= 32 Page 2

specifictopics and to conducttraining courses in China. Foreignengineering consultants,contractors, and equipmentsuppliers also would play an Important role In DC's staff training. MO0 Is expected to support EHDC la the Imple- mentationand fundingof localtraining activities. EHDC will be responsible for planningand organizingthe trainingprogram; the foreignaffairs department and the trainingdivision of the PlanningDepartment will carryout all relatedorganizational activities. D. Implementation 4. Trainingof EHDC staffabroad and visitsfrom foreignexperts visit will include about 230 staff-months. Details of timingand durationof the managementdevelopment and stafftraining program are presentedbelows a. Training Abroad Duration Specialty Timing (staff-months)

1. Arch dam foundation and temperature control, and engineering 1992-93 5

2. Design and installation of prestressed heavy load cables in piers of discharge outlets in arch dams 1992-93 2

3. High-velocity flow and high-discharge structures 1992-93 2 4. Excavationand supportof large-size underground works 1992-93 4

5. Monitoringtechnique for arch dams and underground works 1991-92 5 6. Hydrology forecasting and measuring systems 1992-94 4 7. Monitoringof earthquakeand slope stability 1994-96 2 8. Project economy and policy-making 1992-96 2

9. Management of claims and disputes 1992-94 4

10. Project Financial Management 1992-93 4

11. Operationalstaffs Mechanical/Electrical Engineers 1996-97 10 HydraulicStructure Engineers 1996-97 4 SCADA systems 1996-97 4 -57- ANNEX3.2 Page 3

12. Environmentalprotection and human resettlement 1992-94 18 13. Safetymonitoring and analyses 1994-96 6

14. Log passing systems and facilities 1992-94 4

Total 68 b. DomesticTraining 1. Lecturesby invitedforeign expertst a. Constructionscheduling and control 1992-93 4 b. Instrumentationand monitoring 1992-95 4 c. Cost estimatingand control 1992-95 7 d. Geologicalprediction and recording 1992-95 4 e. Hydrologyforecasting 1992-95 1 f. Environmentalmanagement 1992-95 2

Subtotal 20 2. Schooltrainings a. High schools 1993-97 50 b. Technicalschools 1993-97 70 3. PracticalTraining: Hydropowerplants 1994-97 106 Total 226

E. FinancialManagement Training

Background 5. As state-owned enterprises, the power entities are bound by the financialregulations established by GOC and the financialsystem has thus far been highlycentralized. Until the recenteconomic reform, these enterprises were essentiallyoperating arms of the government and financialresponsibili- ties/autonomywere very limited;investments were largelyfunded by government grantsand the entities'surplus funds were mostlyremitted to the government. Indeed,the functionof financeat theseenterprises essentially has been confinedto financialreporting; managerial orientation and moderntreasury tunctions(such as cash and debt management)are lacking. Further,under the presentChinese system, heavy emphasisls placedon the annualbudget as a controllingtool, but financialplanning generally is not undertakenbeyond one year. Withinthe presentinstitutional framework, the power bureaushave performedsatisfactorlly. -58 - ANNEX 3.2 Page 4

S. Under the ongoingeconomic and enterprisemanagement reforms in China,the institutionalframewore is becomingless centralizedwith corre- spondingIncreases In financialautonomy and responsibilityfor decision-making at the stateenterprise level. Reformsof the fundingarrangements betweenGOC and the state enterprisescontinue to evolve. As a firstmajor step, investmentsare being financedmore by debt (mainlydomestic loans) than by governmentgrants. For most of the Bank-financedpower entities,the Bank loan representstheir first foreign borrowings;it is also novel for ','atof theseentities to bear the relatedforeign exchange risks. Sepsratrly, initiativesare being taken to improvefinancial management and control. These initiativesinclude introducing computer applications and establishingan internalauditing function. However,these initiativesare at an initial stage o' implementationand are limitedin secope.In order to performtheir A'qcroasedrole efficientlyand effectively,power bureaus will need to strengthentheir financialmanagement, particularly with respectto planning, cost controland debt management.Under the variousBank-financed power operationsin China,provisions have been made for trainingin financialmanagement. These trainingactivities are centrallymanaged by M0E/SEIC. Recently a trainingseminar conducted by PriceWaterhouse (US and Hong gong) was held in Chengdu. In addition,overseas training was conductedby Electricitede France. Finally,the Bank recentlyorganized a seminarin Hangzhouto provide an overviewon corporateplanning and financialmanagement information systems. Objectives

7. The main participantsin the financialmanagement training would be officialsfrom the finance/accountingand planningdepartments of the various Bank-financedpower entities. The trainingactivities are designedto famil- iarizethese officialswith selectedtopics in the modernfinancial management of power utilities,covering both operationand projectconstruction. This objectivewould be achievedthrough a seriesof trainingseminars in China, overseastraining and study tours. Initialtraining activities would aim at providinga generaloverview of the selectedtopics. Subsequenttraining activitieswould build on the earlierexperiences and providein-depth discussions of the topicswhich are of particularimportance and interestto the participants. Scove 8. Two relatedand complexsubjects, tariff design and systemplanning, are being coveredseparately under Bank Group-financedstudies. The major topicsof financialmanagement training are outlinedbelow. I. FinancialControl, Monitoring, and Evaluation

9. For (i) operation;and (ii)project construction:

- budgetingunits and organizationof responsibilitycenters; - transferpricing, joint cost allocation;

- perrormance indicators for monitoring and control; -9 ANNEX3.2 Page 5

- methodologyand procedurefor cost management,including cost accountingtcost of serviceanalyses which could in turn providethe basis for tariffdesign; budget preparation and control;assessment of potentialcost savingsas well as stockmanagement; and

- organizationand proceduresfor internalcontrols, including internal auditingand operationallmanagementaudit. II. Long-TermFinancial Planning

- methodologyof long-termfinancial forecasting;

- project financialevaluation;

- coordinationwith investmentplanning and reiterationwith capital budgeting; - projectfinancing, including various instruments of financing,debt/ equity structuring, foreign debt management--including evaluation of different financing terms (covering different currencies, interest rates,maturities, grace periods, etc.), strategies and instruments to minimize foreign exchange risks. 1II. State-of-the-art in Financial Management Techni_qes

- includingcomputer applications for billingand stockmanagement, financialreporting, budgeting, long-term financial planning, control and managementinformation system. IV. InternationalAccouuting Standards

Selected topics which are of particular relevance and interest to the power bureaus, including for examplet (a) consolidated financial statements--Chinese accounting practice is not to consolidate capital construction accounts with production accounts. However,in order to providean overallview of the power bureau'sfinancial position, agreements have been reached with the various Bank-financed power bureaus that the financial statements furnished to the Bank would consolidate the capital construction accounts with production accounts; (b) cash flow statementsor statementof changesin financial position--theyare not requiredfor financialreporting in China. To facilitatefinancial analysis and managementby the power bureaus, agreementshave been reachedwith the Bank-financedpower bureaus that such statementswould be preparedand furnishedto the Bank. (c) accountingfor constructioncontracts; (d) informationreflecting the effectsof changingprices--this would becomeincreasingly significant as inflationrecently has esca- lated sharplyin China;and - 60 - ANNE$ 3.2 Page 6

(e) accounting for the effects of changes in foreign exchange rates-- current Chinese accountingpractice is an anomaly in this respect.

V. Contract Manapement

- commercial aspects of bidding documents, contract terms including financial claims. - - ANNEX 3.3

CHINA

ERTAN HYDROELECTRICPROJECT

SCEPA'sElectricity Tariffs

Customer Price Unit

For lighting (household,commerce, small industry) Below 1 kV 17.3-21.3 FenlkWh Above 1 kV 21.2-24.0 Fen/kWh Average 19.52 FenlkWh

Commerce and small industry Below 1 kY 10.868 FenlkWh 1-10 kV 10.758 Fen/kVh 35 kV and above 11.372 Fen/kWh Average 9.856 Fen/kWh

LarLe industrY Measured against kWh 1-10 kV 5.8, 3.8 La, 4.8 /b Fen/kWh Above 35 kV 5.5, 3.5 /a, 4.5 /b Measured against capacity (by month) Based on installedcapacity 4.0 Yuan/kVa Peak load 6.0 Yuan/kW Average 9.45 Yuan/kW

#Ariculture Below 1 kV 6.129 Fen/kWh 1-10 kV 7.111 Fen/kWh 35 kV and above 5.777 Fen/kWh Average 5.958 Fen/kWh Customer Wholesale 9.454 FenlkWh Buying and selling beyond Sichuan power grid 13.1 FenlkWh Average tariff for the year 1990 10.617 Fen/kWh

La For calcium-carbideproduction Lb For ferro-alloyproduction by electric smelting furnaces.

Source: SCEPA AN 4.1

ERttN I{IW tlmT

Hicb rek ;wu rsnl Crude Re.O coal ewlwd Fuel Cap- Kare- Natural Electric c e ol Cdc,. o il l ine 4m Coko Haut Diaeel ams po1r stve_e gs power Total I. Tol Ocilt I ailable ae,or 4,W47.02 7586 0.42 27.88 22.07 _. it: PiryP1) w 4,742. 9.s9 103.80 20.84 10.94 76.77 - - - 18.71 69.27 - 8 ,270.66 (2) laput from estaide 16.69 76.O - - - - 1.79 1.94 - 8.44 9.88 108.10 220.10 111.05 7. - - 6,. - S2.18 - - 869.50 1,480.88 15.27 Thorcl pe 38.87 467.78 21.61 2.s5 6.12 1.87 7S8.0 1.85 14.71 - 1.73 SO.66 812.94 36.24 28.98 "Mt 1swlT - 0.09 - - 2.20 85.98 1864.8 20.17 8.15 - - 612.94 4.80 - - leabcd coat 688.S2 - - - - - 0.67 Ceko 470.17 51.21 - - - - - 26.s 0.01 0.67 460.94 - - - - - 3.18 467.7 - - - - 142.14 Rised ei I - - - - - am. a~t- on - - - 21.61 S.44 6.12 1.67 - 40.54 - 86.42 8.98 - - - - 6.2s m. Low _wase 82.14 8.18 5.a7 0.97 - it: ieLoos traoeportwtion & - 0.0e 0.01 0.06 - diotributlo 124.65 - - 216.18 IV. Couampton 2,976.s88 4.77 tl) PdcCuon Qact 26.19 488.45 0.46 2.14 109.40 22.65 1,404.05 84.82 1.O06 486.61 0.46 112.64 700.12 1,S06.6S 86.24 26.98 S0.BE 1. Avicalture, fortrr, huw- 12.14 00.76 9.41 110.48 S47.19 1,185.20 bssdr. fishtery -eto 86.24 2.98 4,889.18 cemevmQ9.80 - 2.Zodsstr;o 0.08 0.66 - - 1,400.80 58.258 6.81 0.1S 40.86 - 4.08 P Rew -toiol. 210.0 480.96 0.46 12.14 41.67 1.°8 - - 101.80) 117.9S 10.60 - 17.79 41.78 1,0.60 86.24 26.98 a.Ar Iitocturo 18.88 808.98 8,709.73 7.08 0.18 - 2.48 - - - - - 488.2 s 6 . T i0 ;atien 46.72 0.69 3.6 0.04 12.21 0.6? 29.18 - S. Cem,ci-l. fd, Otearbil 5.71 0.7 - 42.4 7.85 - 87.29 8686 0-4.79 S 4.1 - - 8.51 amply.w stmew20.80 - Obc ;;J- er_, - 1.78 4.218 0.01 1.28 10.80 0.45 0.12 - 10.65 - - D0al s lifo 1.64 - - 6.64 0.1° 38.48 1,482.42 - 10:01 - 246.12.18 4.C2 17.S1 - - 18.09 48.01 118.0 - P"eD

- 63 - AM=£ 4.2 Page 1

CHINA

ERTANHYDROELECTRIC PROJECT

SCEPA's GenerationCa2acity and Transmission Network

A. InstalledGeneration Capacity

Installed Annual Capacity Output Number of Commission- Name of Power Plant (OW) (GMI) Units & Sizes ing Dates

Hydroelectric Changshou 140 620 17(15-0.3MW) 1941160 Gongzui 700 3,420 7x100 KW 1971178 Yinxiuwan 135 750 11(45-40 OW) 1971172 Longchi 10 50 4x2.51W 1957159 Mofanggou 38 18O 3x12.5MW 1971173 Nanyahe 120 650 3x40 KW 1983184 Yuzixi 320 1,850 8x40 MW 1972/87

Total 1,463 7,520

Thermal Chongqing 296 12(50-12 MW) 1954/69 fuayingshan 300 4(100-50 MV) 1978/82 Wanyuan 24 2x12 HW 1971/74 Daxigou 10 2x5 KW 1950/51 Chengdu 325 Sx25MW + 200 MN 1958/90 Jiangyou 554 6(12-50)MW + 330 KW 1960/90 Wutonqiao 108 4(2-50)MW 1942187 Juili 12 2x6 4W 1959166 Douba 300 4(50-100KW) 1970174 Baima 98 6(25-12)ffW 1961/70 Yibin 12 2x6 MW 1943/57 Neijiang 6 lx6 KW 1958 Dulkou 36 3x12 KW 1966 Hemenkou 200 6(50-25) KW 1968185 Xinzhuang 100 2x50 KW 1975/77 Chongqing Ext. 508 2x200 KW + 3x36 MW 1986/89 Baims Ext. 400 2x200 MW 1988/89 Fulin 50 2x25 MW 1990

Total 3,339

Total Installed 4.802

Sources SCEPA (1990). 64 AmxAM ..2 Page 2

S. Outout of Eaotina and Putre Htdro Plent.

InstaIled Dopendable Annual PulutFirm Outut CcIty Dry Sewson Averap Fire Dry Seon (g) ((()W (b) (Ge)

Exltlina HlXro Ch_ngehou 140.4 140 010 410 870 Oongzul f/ 700.0 000 8,420/4,#80 8,15/0085 905/1,405 Vinxtuan 185.0 ) 70 760 2165 Mtenauou 47.0 180 t8 210 70 Nanbe b 110.0 060/n0 010/00 0/0 Yuozix 820.0 240 1,560 1,60 570 subtotal 1.408L Lan !JQ LA Futre Hyro TJoiI ex /oZ 600.0 1og 8,210/8,710 8,060/8,80 780/1,0o0 aozbtwl 700.0 5t6 1,170 1,170 010 ZIlaebe 101.0 29 406 400 200 Taltniwi 160.0 125 1,574 1,510 ag0 1Y/bob 120.0 50/60 078/0 60/0 180/80 Eran 8,800.0 1,760 17,085 16,440 4,800 T oilin 400.0 800 1,140 2,410 760 =Xp asfDQ 1,100 10/76 806/870 815 10 Yale 110.0 110 01o 680 50 Pubu7 ou 8,800.0 1,760 12,680 11,180 8,7o0 Jinpingdl 1,600.0 780 11,400 10,000 ,600 a Second outputfligre atter ruQlatlonby Pubou. X Secon outputflgure afterreglatlon by Ylle. Source: SCEPA(1080). -65 - AMN 4.2 Page 3

C. Transmission Network

220-kV

e Transmission Lineet 4,044 km (total length)

Transformer Substationst

Number 35 Capacity 8,570 MVA No. of Units 62 Unit Sizes 90-180 MVA llO-kV

Transmission Lines: 5908 km

Transformer Substations3

Number IS0 Capacity 6,718 NVA No. of Units 210 Unit Sizes 10-63 JVA

35-kV

Transmission Liness 5,465 km

Transformer Substations:

Number 271 Capacity 2,498 MVA No. of Units 399 Unit Sizes n.a.

Sources SCEPA (1990). AM 4.8

CHINA ERTANHDREECTRIC PROJECT

ElectricityConaumotin and Geaorationin StchuanProvince

1960 1961 12 198 1984 1986 1986 1987 1986 1989 1990L

Agriculture 427 404 446 482 558 5 627 812 945 1,046 1,215 Lighttindstry 1,264 1,644 2,087 2,860 2,544 2,814 2,865 8,088 HWevy Industry 9,907 3,278 8,501 8,874 9,514 9,698 10,819 10,965 11,658 11,891 12,914 18,691 14,626 15,098 Subtotalindustry 11.171 11.068 11.980 12i!9 1L49 14.467 14.S6B 1L.002 16.897 18.028 19.887 Trasport 161 146 152 Services 105 249 8al 456 490 626 5s 007 671 756 768 90 1,042 1,188 Otbere 827 1,252 1,418 1,04 1,776 2,085 847 882 407 420 422 460 481 494 u22 541 Total Coasumatlon 12J.67 12.711 18.678 14._3 15.7S 196.98541 19.196 20.486 21.t0 24.2S6 TotalleIse 1,994 1,978 2,169 2,207 2,885 2,542 2,645 2,602 3,084 8,247 8,571 OcaorationReauireant 14.751 14J.!! 1L!f2 1J26. 16.158 19.477 19.968 22. 2S. 26.203 27.M PeakLoad (M- - 2,485 2,611 2,787 2,927 8,062 8,248 3,670 4,170 4,170 G0ns"tionJ 1) Kydro 2,482 5,888 5,893 5,767 6,146 6,716 ,5569 6,50 Thormal 8,100 7,965 7,00 7,854 0,150 8,296 8,997 9,887 10,280 11,244 12,000 14,691 16,980 18,900 TotalGomration 10.682 2l.2" ,88j 14.764 c8 18.846 17.808 18.760 21.761 2B.294 2#.0Z0 Purchases 4,219 1,891 2,174 2,156 2,620 2,582 2,168 8,260 1,749 1,919 2,628 /a ProlleanaryData Source: SCEPA(1990). Al 4.4

WAN Hea C PRECT

Poreast Enemy and Poe D_nMd for WhmSlchoan grid Mh)

1 192 198 1994 1995 16 1in 196 1999 2000 200C

Agriculture 1l,2 1,47 1,561 1,749 1,864 2,082 2,19S 2,86 2,58 2,755 4,094 Industry 20,858 22,140 28,515 4,992 29,5 26,156 80,282 81,96 88,976 35l,9l 424 Li ght Inadustry 4,082 4,297 4,565 4,694 5,179 5,529 6,012 6,879 6,65 7,85 11,018 HaVY industry 16,86 17,642 18,980 20,096 21,881 22,629 24,220 25,607 27,124 28,609 88,481 Transport 05S 706 762 622 967 o6 1,056 1,155 1,202 1,878 1,667 tarvices 2,259 2,472 2,706 2,960 8,240 8,582 8,51 4,1#9 4,576 4,969 7,905 0there 571 o6 a84 o 708 747 7 soo628 6a 1,167

Total conaeu.tioo s2e 70 f7J1 fl"! flAI3 fiJi! IL,417 IL.B.0 40,f1 43,192 45t96W 5IL!4! Total 1.. LZ! iI 4.M28 4.531 AM 5.200 .M0 L." IAU 8-2. !17 Eneg reawIred Za84 81,I4 U,489 85J7l7 1IIa!4 40."G 4,1711 4LI 49.S41 12! se, Peak Load (i 4,746 5,0 5,8 5,771 6 ,144 0,62 7,164 7,088 ,218 6,791 11,576 Utili_atioa aours of .siiin lood 6,201 6,196 6,206 6,109 6,212 6,186 6,102 0,047 6,082 0,000 5,948 A. t I Cdiic

Yew 1911 199 1998 1994 199 19o 1997 1996 199 2000 200 20e2 2t00 2004 2006 2006 200 7To01 adm Toinioui 0 I1S am0 1S0 ibai 0 175 880 175 Go Z; 184 00 700 Toipime 0 180 TaYole 110 vabaot 0 1 0 30 85 110 2 Liablo 18 Elta 40 so 1.100 1.80 1lo TE,ili, 860 8.800 10 800 -a Doisdi* O1.100 1,100 1.1o0 8,$OO Sill 1.067 1,600 SSbtoti 0 180 800 59 s8 425 0 .0 ofd idc: 8A 1SAW0 648 210D 8OD 0 m100,1 I'm 1.07 0 I8 S0 889 548 425 0 0 0 10.687 am0 0 95 It0 0 0 0 0 0 0 0 0 0 0 0 0 1.100 I1,60 80 2,067 Zeotol led 1,44 1.614 180 800 0 1s10o0 1.100 I,m 1.067 8.60 1.914 2,278 2,401 3.246 8,246 4*346 5,9s 6,641 69a1 7t,z2 7,281 6,881 9.481 1,0164 12.181 11.064

"imatuisodwas200 200 8a0 Oslpino 100 o0 800 a00 1.80 MOOLA _ Clo 80 00Soono800 200 lWa; extension ipigWD6 go001

Cihongng 10 1000 J;_m SWmO 20 Low-* t. .SW ago 39 i rmta -106 - 140 -16 .445 "uto") eddod m M22Z Di go0mER tai-gb: SCWPA 100 a 2 R l 0 800 17 296 04 800 0 200 0 2 2 LM -1 50 0 80 60 600 0 0 0 8.2. NM9 890 860 0 0 0 SW S6 0 0 LwtbIlod a,a89 0 0 0 0 0 0 0 8.W 4.20 4.501 5,00 5.665 6.06 6.220 6,22 0 1.7r0 6,075 6.075 6,8 6,975 7,675 7.87 7,=5 755 8,77 Tau added Z & lZ 31 IJ LEI 19B20 LM mii m341 .LQ L4 L 1LJS8 Total tstllad .= LJ LM - Z 4 L3 LO 10370 AL= L2 7 .5in S7Q L 12.2 20 3LSW UAW lo-FM Year t941 1992 1980 1994 1995 19 1997 199 19" 2O00 2001 2002 2008 2004 200 200 2007

Tcij.gzi 6S7 6§7 2.190 2.626 2.850 2. 8 ,00 8.12DS.0 268tO 8,718370 mmi 766 8.100 8.10 2,900 2.980 8 .220 3.80 1.769 2.360 2.860 2,18 2.80 2.180 2t4 2i IlW* i 2.180 2.18D 2.810 2.31 2 a0 2.810 is$ 326 360 a 60 360 SW taipinw 86 S6o 860 86 860 36D so S70 1.100 1.4S0 1,810 1.810 1,810 Vascbab 1.610 1.810 1.810 1.810 1.810 1t.6O 1,810 438 607 694 99 64 lot. s9 s6 69 S6 699 09a 6" LUa;ipS S00e 610 661 661 61 a6 661 140 Ertl 200 376 876 876 S76 s 8w6 2.900 10.6t e 14.w Tow; Ilia 14,16 14.1604 14.669 14.84 14,00 14.S0 14.5J0 0 Fabuom 780 2.240 2.$4A 2,240 2,240 2.20 2.110 Jurind; 4.400 18.75 14.600 15.20 2.840 30.,Eo subtotl la iE 2,L L M Ll Z4E z 1Ms 2L.4 2Z 24&4 2 go-aleW5 76a 49 5 lEiobla SCPA 6.7SO 6,950 .432 4.787 4,418 8.495 8.610 1,926 2.1117 S.200 8.48s OUAor 1.400 1,060 2.340 8.468 8,468 8.48B 8.468 .408 5.0S s.278 8.617 4,426 4.800 SIM6 5.178 S.00 8s.0012 a8s. 3.0s2 8,82 3,4186 38.68 YTofa SCEPA fZ Zi L21 L 9 .04Z ma2 A lM, ZlO0t 10. 11.787 l NLG=7 J.9674 L 60 J L.4 U.- ZJ.1E TotDl 880¢ 20 1SS 1S JLGOO JLO 291 Sml A 42,4=80

'Tota hydro S LEE 8 OMD iLI 10) XtSs 9 1 I1AR7 S 4 28 Sf SO Eon an,= 6.6S6al-a W i47LMh so3. 59.2 I t tbo"i 20.638 220.70 2S.269 24,216 24,60 29,.18 27.96 27.466 28S.82 28.60 28S.21 266,8t 2.802 27.72 2t.766 822.12 17,Z7S SA t31866 16,687 17.167 18.191 18,617 19.743 20,495 20.971 17.006 1481 CVK 4.600 6.10 6.2 Is.=65 17.8m S0494 19.664 18.16 14.174 902as 62.W7 e.96 I."$ 7.o00 e.51 G.87 B.00 .00 8.008 6.006 8,00 6.006 6.On 86.60 9ea, of torol C) 70 72 70 s6 6a aS 64 S9 4 4 42 48 46 42 82 S1 2S SStoo leod 29.448 81.394 33,489 35,77 8B.164 40,546 43.71 46.46o 49,SU 62.748 58.36 68.s 61.1108 Plant u.' 2.064 2.271 2,3Z7 2,42 2.460 6a..s 68.794 72.588 76.,0S 2.662 2.60 2l.4 2,286 2.146 2,210 2.406 ¢e cskmt 31.S07 63,668 85.8a6 2.766 2.619 2.064 2.107 1.641 66.199 40.624 48,206 46,878 49,071 1.7"7 64.694 87.742 60,992 64.516 67.867 70.666 74.665 76.220 Ccal cmau;etian u.721 2,018 18.217 18.758 1s.97o 14.8W1 15.902 15,612 1I,SS6 12.681 18.218 14,86 16.1a9 186.61 W2.832 12.899 9.flU C. Pe 4.fl4aand ,.mCaab;i,t..

Y.e 1S99 1992 1998 1M94 1995 199 1997 1996 1999 206 20 200 20 200. 20S 2006 200

Swat" PpAkinn Camaki t. i I, Ds. Sta,p 3n Tormi it;sa 7W90 60D 207 295 504 6oo 860 200 0 (180) 0 a30 G0 60D 0 0 loot l ld cacist. 0 3.88 ,X999 4.206 4.0t1 8,006 5.606 6,6 8.226 6.225 G.07 6.0?. 6878 6,C7S 7.75 7.SJS T76 7.575 torcd utosoo c7m 284 20 2C4 816 S50 897 422 486 486 426 425 446 468 N0 5Sa SW S0 $"t coati. li ty 2.793 3.347 3,6M 83,767 4.1, 4.7 .048 5,210 6,210 5.065 6.065 S.86 5,68 6.840 8.340 6.8 S,AM lVdvo udditiae 0 iSo SO 8S9 56s 426 0 1.100 1.6B0 64 290 MD 0 1.10 11m IlD 1.067 leotl ld capaci;t 1.464 1.814 1.914 2.27m 2.821 8.24 8.246 4.846 6.996 6.641 6.95 7. 7.231 8.831 9.431 112,04 11 orc cp"buiity 1.110 1.110 l.1Ut 1.260 1.460 1.770 1,860 1.6tl 2.600 4.180 4,768 4.966 5.256 5.26S 6.1Is 7?1516 806 Pll_e oaegoe (1) 167 167 174 189 218 am 2a22 420 '6 71 7456 790 790 we 1l.OR Dbt cm iMto 1.26 944 94. 9s 1.071 1,2=8 1.505 1.598 1.5g8 2.860 8.858 4,E60 4.288 4,476 4.476 5,256 6.04D 7.0es taul C;. I;ely 3.788 4.2tl 4,606 4.MS6 6,422 6.246 6.641 6,600 7?.tW t.m 9.1SB 9.574 10.314 10.816 11.5955 MM Peek detd 13.1 4.740 S.068 5,89 8.771 61,44 .e20 7.164 7.6'0 8.218 S671 9.344 9,tas 10.40O 10.978 11.57B 12.8 12.*m hrvia (U) -21.8 -18.8 -18.5 -18.2 u1.s -. 7 -7.3 -11.4 -7.6 -1.7 -2.2 -2.9 -0.8 -1.4 0.2 1.4 3.9 (1.01O) (774) (9) (9m) (m (a87 MM C3) (2) (8) 09) ( () (16) 322 A 49 Ammial lete- e..CmhiIi..(-

Tbh l wdit. T790 660 207 29 804 6w no0 200 0 (18R 0 SO0 600 600 0 0 tal led cae9c; 0 8.889 8,999 4.206 4,01 S,0056 86,6 b.lw 6.25 SAM 6.078 6.075 6s.75 6.978 7.578 7.575 7.175 1t45 Mlij 19.97 7.75 30.179 24.089 2.,700 23.877 32.1S 84.165 85.299 a5.299 84.446 4.446 8Ulm a8s. 42948 42.9a4 42.94 M42. I tVdm fi., ori, 1.200 1.680O 1.S 1.00 1.60o 0 4.700 5.60 as8 1.010 .6,10 80 8.10 4., 4.40 Acaictod 7.070 7.070 8.270 10.150 tl.740 12.760 14.8 14.60 28.060 28.700 29.2t5 O Toti

9 _JW?Wdomad 29,443 81.894 18.489 35.777 3,164 40,46 48.723 46,460 49.841 62,748 6SS.= 565.6 618.06 85.28 65.794 72.578 76.569 br2 (3) -9.4 -8.6 -8.8 -5.4 8.1 10.8 11.0 6.9 17.8 19.7 14.6 15.5 t8.814.8 20.6 20.0 19.8 5-eetlo 0 Caillt, in am S.... fa1

tbercl edits"ou, 790 66O 207 296 o 660 360 200 0 (230) 0 MO 6m 60oo 0 0 0 IeAlflt,d aaolty .3a89 8,.99 4.206 4,101 S.005 8.688 6.020 6,226 S.=2 6.07 6.075 6.s75 6.975 7.575 7,575 7.675 ?.5W5 94.10 abiIty 11,199 18.472 18.757 1 .5-216 28.54 19AM 20.170 20.798 2D.88 21.404 20.656 22.597 24,541 24.541 24.841 24,84 tvdro firm eory 10 no80 750 460 0 410 0 700 730 a10 60 38.700 0 2l Accsmi.ted 2.410 2,410 3.010 3.190 .940 4.250 4.720 4.720 9.eo0 9.600 9,720 10,600 10.8s 11.860 1S.a0 18.166 17.866 Total itlit 8,s609 8,2 16.747 17.774 20.156 22,614 24.242 24.890 29.t1 2.W7 8,1V24 81.156 38.44"7 8,191 B.0e1 36.61 42.0n Smer dad 38.779 14.692 18.672 16,748 17.660 S,9022 20.457 21,742 28,S14 24,6S5 25.988 27.417 2d.s S0.16 a2.194 1sa, Obra; (3) 8.4686 -1.2 -28.8 6.9 6.2 12.9 18.9 18.5 14.5 28.6 19.8 19.8 13.6 18.6 le.6 20.9 17.4 17. Rovisad leod 04.) 8.788 4.291 4.506 4,t08 6.422 6.246 6.641 6.eos 7,5 8.63 9.1u 9.7W4 1o.314 10.616 11,80 32.= 1U.= twalsad tled (*) 26.687 30.249 82.809 38.850 40,117 44.89 4a.6 49.6s9 8s.,89 68,146 63.661 66.878 71.81 74.W68 82.968 S.098 91.40 wz sr uffusu ysr WI am"i a a1s uw Mw wiu w ri uuwy anTiw W an WI a 'T WT am! 40Y ani M WYT 1 0WI 1WIp anu , 0?0t Clt1 li¢t 013 009 01#I 03?1 ~~~~~~~~~~~~~~~~~~~~~~~~~009 009 '$t g* 6U6't' 0' ' ti' 0363? 0t3S't 00?' 'lt '0 'O t 1 O9'?t 0M 01 OMI1t !Uo034J o#g'g oos 014't1 009 0 5 S orez 8 0 OctW on On ow i3 On S 0 .P~~~E.9 F 00909 01'?[ 009' 006';056 " M01 .jau. 0t 059 (M.,aeo/Ot two !Iu

o0 02Um usuUGeJ 0o£n 0 Oait - oo*Lt0 ;33 0on on amqut~

t 0ie10wt oet OZ S C 03£ 006S 015' S 916 *9? 6£?ON £91 £61 91£ 90 OM On 613 eos oe6 90(tS 90 Glt COt Ont I*A.1 twt o 1" O336ITAIO 011 99li M' 0 W1. M'ss3 99ttvs m 'Y s Si D * sw urzX wsurr a m n a f m a ? am asl 09?~~~~~~~~~~~~anl 093'? 031 00L6 99w O 09l on M 6m033~~~~~~~~~a"M.W 036 On - a *ea?d"e£03?q 093 091~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Ci 00? 09~~~~~~~~~~~~~~~~~~~~~~0 4=1 006 ~ ~ ~ Go. ftm;q.9u~ SupguOdw OM"6 &Jo a! "ZODO-~100 oft~ ~ fwF gm WIF WI WY iT T! ~~!1U~~~ 1W!! IWV IWZ 1W? WY WY~~u an1

at3' 001'? 0?'?d0?'? 003 00? 00? 05?~~~~~~~~~~~~~~~~~~~~~~~~~~a0 13? OCT 91 Oc a Om M3 IL? 0 IL? 0on a0- 00£ on 00n 0am maj"A uo!wm13x3 Joa@JP044 6? tot? 061 mot? Tot06?i T0M 000 006? 0061 £0? 06 9661 IMi.L £0M Om0 s00t $00 g0m am0 qMMa - 72 -

ANNEX4.6

CHINA

ERTANHYDROELECTRIC PROJECT

Development Program of 500 kV Network in Sichuan Province (1987-2000)

Length Transmission Lines (km) CommissioningDate

Zigong-Chengjiaqiao 2 x 180 1992 (180), 1997 (180) Ertan-Zigong 2 x 470 1996 (470), 1997 (470) Ertan-Luohuang 2 x 660 1997 (660), 1998 (660) Zigong-Longwang 2 x 190 1997 (190), 2000 (190) Baozhusi-Longwang 270 1993 Luohuang-Changshou 95 1997 Luohuang-Chengjiaqiao 50 1997 Chengiiaqiao-Changshou 90 1997 Longwang-South Chengdu 60 1996 Huangjuezhuang-Zigong 90 2000 Ertan-Dukou 20 1997

Total 3,675

Capacity Substations (MVA) CommissioningDate

Zigong 2 s 500 193 (500 MVA), 1999 (500 MVA), 2000 (500 MVA) Chengjiaqiao 2 x 750 1998 (750 HVA), 1999 (750 MVA) Longwang 2 x 750 1999 (750 MVA), 2000 (750 MVA) Changshou 2 x 750 1999 (750 MVA), 2000 (750 MVA) South Chengdu 2 s 750 1999 (750 MVA), 2000 (750 MVA) Dukou 2 x 500 1997 (500 MVA), 2000 (500 MVA)

Total 8,500

Source: SCEPA (1990). -73 - AMNX 5.1 Page .

CHINA

ERTANHYDROELECTRIC PMOJECT

Project Description

1. The proposed project consists of the Ertan HydroelectricStation, resettlementof about 30,000 people, an environmentalmanagement program and a science station, technical assistanceand consulting services,studies and staff training,with an objective to provide a reliable supply of electric power to consumers in SouthwestChina.

Ertan HydroelectricStation

2. The Ertan hydroelectricpower stationwill be a major project in a series of power stations to be built on the Yalong river. With an installed capacity of 3,300 MW and an annual production of 17 TVh, the main purpose of the project is power generation. The power stationwill include a 240 m high concrete arch dam, two tunnel spillways,an overflow spillway,mid- and low- level outlet works, a plunge pool and a tunnel for conveying logs around the dam. The undergroundpower complex consists of an intake structure,water conductors,a power chamber, a transformerchamber, a tailrace surge chamber, and two tail race tunnels. Power will be transmittedthrough four 500 kV transmissionlines to the Sichuan provincial grid.

3. Project Location and Geology. The project is located in the south west of Sichuan Province, 33 km upstream from the river mouth near Panzhlhua City, an important iron and steel industrialbase. The damsite is 730 km by railroad south of Chengdu, the capital of Sichuan. The Tonguilin railroad station on the Chengdu-Kunming railway is 28 km downstream from the damaite. In an area of high mountains and deep canyons,the Ertan gorge is composed of Permian basalt with large intrusionsof syenite, a granite-likerock. The dameite is formed by a deep, narrow gorge with the mountains on both sides rising to heights of 300 to 400 meters. The Yalong River has a width of 80 to 100 meters during the dry season. Overburden in the river bed at the dameite is generally 20 to 30 m thick. Local geologic mapping started in 1972. A large amount of geologic explorationand investigationwas accomplishedwith 571 boreholes totaling 30,450 m, and 8,130 X of adits with four shafts adding another 200 meters. Numerous tests have been conducted to determine rock mechanics parameters for design and stabilityanalyses. The site is in an area with an earthquake potential of 7 MM.

4. Climate and Hydrology. The climate of the river basin shows distinct dry and wet seasons. It is dry from November to April. From May to October, the southwestmonsoon prevails and the weather is warm and humid. Temperaturesrange from OOC to 40.8°C,with an average of 19.70C. River water temperaturesvary from 6.0 to 22.50C with a mean of 14.60C. The Yalong River has a length of 1,500 km with a drainage area of 130,000 kmt. Over its down stream length of 350 km, the river has a hydraulic head of 990 m and an estimated exploitablepotential of 11,000 HW, making it one of China's ten principal hydro power bases. Ettan will be the firet project for the initial stage - 74 - ANNEX5.1 Page 2 of developmenton this stretch of the river. A gaging network was established in 1953. The closest station near Ertan at Xiaodeshi, 12 km downstream from the dameite, has collected streamflowdata continuouslysince 1953. The long- term average streamflow at the damaite is 1,570 in/s and the mean annual runoff there amounts to 52.7 billion ms. The reservoirhas a total capacity of 5.8 billion ma and an effective capacity of 3.37 billion mi. With a normal pool level at the dam at El. 1,200 the reservoirwill extend 145 km upstream. Based on the availabledata it is consideredthat the reservoir will be secure and safe from leakages and disruptive land slides. The maximum flood recorded at the damsite was 11,100 m9/s on August 1, 1965. The minimum flow of 353 m8/s occurred on March 15, 1984. The design flood (1,000 year) has been establishedat 20,500 m5 /I, check flood (5,000 year) at 23,850 m Is. Since the 1970s, the sediment load in the river has 'ncreaseddue to deforestation for land reclamationand road construction. Mean annual suspendedload at Xiaodeshi is 28.4 million tons.

5. Arch Dem. The double-curvaturearch dam will have a maximum height of 240 m, a crest length of 775 m, and a concrete volume of 4.20 million ma. Maximum thicknessat the base of the crown is 55.7 m, base thickness to height ratio is 0.23, and the span to height ratio is 2.82. The static analysis of the arch dam was carried out with a trial-load type program and its results were verified by finite element analysis and structuralmodel tests. Dynamic analyseswere also carried out by the trial-loadmethod. Stresses were computed for normal, unusual, and extreme loading conditions. Normal Loading (N.L.) is normal reservoirelevation plus dead load, design temperaturedrop, and silt loading. Unusual Loading (U.L.) is normal load with maximum reservoir level due to flood p;ssing. Extreme Loading (E.L.) is normal loading plus seismic loading. The maximum stresses are shown below:

Maximum Stresses in kg/cm2

Allowable Computed Normal Extreme Normal Extreme

Compressivet Downstream face 80 105 86 99

Tensile: Upst.eum face 10 15 11 17 Downstream face 15 20 3 4

These streoses were obtained using the trial load method. The results of the finite element analysis show a similar stress distributionfor both static and dynamic loading conditions. Local stress concentrationsoccur in the vicinity of the openings, but the overall stress distributionand the structuralbehav- lor of the dam are not affected. The dead weight stresses during construction are vithin the allowable stresses. 75 - ANNEX 5.1 Page 3

6. Concrete Placement. In view of the locationof the dam in a narrow valley, concrete placementwill be achieved by means of two sets of high-speed cableways located at different levels. These cablewayswill also handle the heavy parts of the metal structuresfor gates and outlet works. Concrete in the dam will be placed in 1.5 and 3 m lifts in 39 blocks separatedby contrac- tion joints spaced at about 30 m. There is no longitudinaljoint. Extensive tests have been performed to determine concrete properties. Three zones of concrete strength will be used. A large number of instrumentswill be embed- ded in the concrete of the dam, includingdirect and Inverted plumb lines. A network of observationposts and targets for geodetic measurementssurround the damsite. Instrumentswill mcnitor temperaturesduriaig construction and check the structuralbehavior oi Coe arch dam during and after construction.

7. Dam Foundation. Parametric analyses were performed to evaluate the stability of the abutments of the dam against sliding failures of rock wedges. Detailed investigationswere carried out for the two most critical wedges on both abutments. The results of the analyses indicate that joint sets with low dips downstreamand towards the river are the critical planes for stability. The semi-radialfoundation of the arch dam will be excavated generally to slightlyweathered rock. Lightly to moderatelyweathered rock will be adequate after consolidationgrouting. A grout curtain and a drainage curtain are provided to minimize and control seepage flow around and underneaththe dam. On the left abutment, this curtain is continuous with a similar curtain upstream of the powerhouse chamber. Drainage adits and drainage curtains are arranged downstream of the main curtain at a distance of about 10 meters. Foundation galleries in the dam, and grouting and drainage adits in the abutments are provided to facilitate drilling and grouting operations. These will serve also if remedial work in the future is necessary.

8. Energy Dissipation. Because of the relativelysmall size of the reservoir,limited flood storage capacity, and a narrow gorge downstream, floods have to be released frequentlyand energy dissipationproblems are potentially serious. In order to provide a safe spillway operation,an arrangementwith three spillwayswas adopted. This will enable discharge of floods up to about 13,000 ma/s (30-yearflood) over two spillwaysin the event the third is not available. The three impact zones are senarate,and each spillway can operate independentlyof the other two. The overflow spillway on the dam coneists of seven 11 m-wide openings controlledby radial gates (11 x 11.5 m). The openings are provided with differentialflip buckets and dental sills to spread the impact pattern and reduce impact pressureson the base slab of the 300 m-long plunge pool. The thickness of the slab varies from five meters at the upstream end to three meters over most of its length to the downstream auxiliary dam.

9. The tunnel spillway in the right abutment consists of an intake structureand two concrete lined tunnels 887.0, and 1,150.8m-long with a modified horseshoe section. The intake structurecontains two operating radial gates (13 x 15 m) and two emergency closure gates (13 x 17 m). The flow velocities reach a maximum value of about 45 mWs at the exit. Aeration grooves are provided to mitigate against cavitationdamage. The flip buckets are designed to spread the Impact zone in the river. The mid-level outlets consist of six steel-linedopenings through the dam, controlledby 6 x 5 m radial gates at the downstream face. Different exit angles spread the area of - 76 - ANNEX 5.1 Page 4

impact in the plunge pool. The emergency gates at the upstream face are normally closed and will be opened only during the flood releasingperiods. Four low-leveloutlet works with inverts at El. 1,080 are provided for lowering the reservoir. The steel-linedopenings are controlled by 3.0 x 5.0 m slide gates and hydraulichoists at the downstreamend. The gates are designed for operation with a head of 80 m. Each opening also has a 3.0 x 8.5 m emergencywheel gate at the upstream end, which is normally closed.

10. UndergtroundPowerhouse. The power complex, located some 200 to 350 m underground,in the left abutment,consists of three large chambers for power generation,transformers and tailrace surge action. The six 550 MW turbine generators are each fed by separate 9.00 m internal diameter concrete lined water conduits. The 85 m-high intake structurewill be provided with a set of trashracks,7 x 9 m slide gates with hydraulic cylinder hoists, and 7.32 x 9.30 m bulkhead gates operated by a gantry crane. The water conduits are steel lined along the lower elbows and the lower horizontal section immediately upstream of the power chamber. The excavateddimensions of the power chamber are 191.9 m-long, 25.5 m-wide and 65.0 m-high. The total length of power chamber plus erection and service bays will be 280.29 m. The axis of the power chamber is oriented to bisect the angle with the two predominant sets of joints, which facilitates efficient layout of all hydraulic features of the power generation system. The rock in the area of the three underground chambers is mainly syenite with some altered basalt. The compressive strength ranges from 1,500-2,600kg/cm 2. A maximum insitu stress of 200-300 kg/cm2 has been measured. Two- and three-dimensionalfinite element analyses have been performed to study stresses due to construction. These demonstratedthat the rock is stable with appropriatemeasures of rock bolting and shotcretingdur- ing construction. Prestressedrock anchorswill be provided for permanent stabilityof the high walls in the power chamber.

11. TransformerChamber. The six main transformersand the SF6 equipment are located in the transformerchamber, which is 214.9 m-long, 18.3 m- wide and 19.5 m-high. The power chamber and transformerchamber are connected by six bushbar galleries and both are connected to the access road on the left abutment by a 1,340 m-long access tunnel, 10 m-wide and 8 m-high. Service and emergency access to the power chamber are also provided by means of an eleva- tor in the service bay which connects with the access road to the crest of the dam. A bus tunnel leads from the transformerchamber to the outgoing trans mission line yard near the top of the left abutment of the arch dam.

12. Surge Chamber. The tailrace surge chamber is downstreamof the transformerchamber at a distance of 30 meters. This chamber has a length of 203.0 m, a vidth of 19.8 m, and varies in height from 71.3 m to 66.0 m. Below El. 1,027, the surge chamber is divided into two parts by means of a concrete wall. Draft tube gates are provided for each unit and are operated from a mevable hoist in the surge chamber.

13. Log-Passing Facilities. The Yalong River Basin is rich in forest reserves which are economicallyimportant to Sichuan Province. Every year from June to September a large number of logs drift down the river from the felling area to Panzhihua and downstream cities on the Yangtze. The log-passing facilitywill have a design capacity of 1.1 million cubic meters of timber during a three-monthperiod. The overall length of the system will be 2,394 m -77- ANNEXS.1 Page 5

and will include a tunnel section 819 m-long, with a height of 7.0 and a width of 15.0 m.

14. River Diversion. The diversion scheme consists of one concrete- lined tunnel on each abutment 17 m-wide and 23 m-high. Intake and outlet structuresare provided for each, with closure gates at each intake. The downstream portion of the left bank tunnel will be utilized as the downstream part of tailrace tunnel No. 2. Non-overflow,fill-type cofferdams complete the diversion scheme. The design capacity of the scheme is 13,500 m'Is for a 30-year flood. A risk-basedoptimization study was carried out to determine the height of the upstream cofferdam. This included identificationof events that led to overtoppingand an evaluation of their likelihoodof occurrence, followed by a determinatiotof the consequencesof overtopping,calculation of risk costs and, finally a comparison of these costs with the cost of construction to determine the least overall project cost. Four 4 x 8 m temporary sluice ways, equippedwith closure gates and hoists, will be provided In the lower central portion of the arch dam to be used after closure of the diversion tunnel. The openings will be sized for a waximum dry season discharge of 1,500 m8as during the period from mid-Novemberto the end of May.

15. Main Data. The main particularsof the Ertan HydroelectricStation are given belows

Hydrology

Catchment area above damsite 116,400 sq km Flow records used in design 1953-82 Maximum recorded flow 11,100 ma/s Average annual discharge 1,670 a Maximum flood expected (10,000years) 25,200 a Designed flood discharge (p - 0.12) 20,600 n Check flood discharge (5000 year flood) 23,600 2 Mean annual silt discharge 27.2 million t

Reservoir

Normal pool level 1,200 masl Dead water level' 1,155 ' Reservoir area (at normal pool level) 101 sq km Total reservoirvolume 5.8 cu km Effective reservoir capacity 3.4 n

Diversion Works Upstream cofferdams Maximum height 56 m Crest elevation 1,062 masl Length of crest 260 m Width of crest 15 m

Downstream cofferdams Maximum height l30 Crest elevation 1,030 masl -78 - ANNEX 5.1 Page 6

Widthof crest 10 m Dimensionsof diversiontunnels (width x height) 17.5 x 23.0 m Designflood 13,S5090mals Left diversiontunnel length 1,090m Right diversiontunnel length 1,189m

Arch Dam

Crest elevation 1,205 ma8l Maximumheight 240 m Crest length 775 m Maximumthickness of arch end 58.5m Base thicknessof the crown cantilever 55.7 m Thicknessof the top arch 11.0 m Concrete volume of the dam 3.9 million cu m Spillways

Overflow spillway, number and size 7 - 11 x 11.5 m Overflow spillway discharge 6,659 me/s Middlelevel spillway,number and size 6 - 6 x 5.0 m Middlelevel spillwaydischarge 6,293m&/s Spillway tunwils, number and size 2 - 13 x 13 m Spillwaytunnels discharge 7,400mls/ Length of tunnel No. 1 941 m Length of tunnel No. 2 1,281 m Emptying Outlet

Number and size 4 - 3 x 5 m Designflow discharge 2,000cu m/s

Penstocks Number 6 Length 300 m of which steel liner length 101 m Inside diameter 9 m Thickness of steel 30 mm

Underground Powerhouse

Underground rock excavation 1.5 million cu m Dimensions (Length x Width x Height) 280 x 26.5 x 65.3 m Number of generating units 6 Unit capacity 550 Mw

Turbines Type Francis Maximumhead 189.2 m KMlnui head 135.0 m 79 ANNEX5.1 Page 7

Rated head 165.0 m Rated output 560.0 MW Specific speed 1S8.0 M-kW Rated specific speed 125 rpm

Generators

Rated output 550 Kw Rated voltage 18 kV Power factor 0.9

Main Transfonmers

Type single phase Rated capacity 3 x 204 1VA Rated voltage range 550118 kVIkV

Station Supply Transformers

Type single phase Number 18 Rated capacity 1,050 kVA Rated voltage range 1816 kVjkV

Switchesar

Type of circuit breakers GIS Number of 500-kV circuit breakers 17 Rated current 3,230 A Rated breaking current 40 kA

Annual Output

Total energy output 17,035 TWh Firm energy 8,760 TWh Firm power 1,000 Kw

Quantities of Works

Open cut earth and rock excavation 6.2 million ma Underground excavation 3.1 Earth and rock fill 1.2 n Total volume of concrete 5.3 a Reinforcementbar 33,938 tons Steel 7,502 tons Metal structures 13,766 tons Peak labor force 6,000

LoA Transport

Annual amount of logo 1.1 million me - 80 - ANNEX 5.1 Page 8

TransmissionLines

16. The 500 kV transmissionlines to carry power from the generating station to the Sichuan system are not part of the project, and will be constructed by SCEPA. China has over ten years of experienceusing this voltage and its introductionhere is needed not only for Ertan but has been dictated by system requirements. As a result, the 500 kV line from Zigong to Chengjiaqiaois scheduledfor completion in 1992, and the Baozhusi-Longwang line in 1993. Power from the generating stationwill be transportedfrom the undergroundgas insulatedswitchgear (CIS) station via 500 kV dry type cable to a small switchyard on the surface, and thence to the first transmission line tower. The first 2,000 KW is destined for Chongging and two routes are being considered (see map). In the first stage, two circuits on the northern route are confirmed. One assumption is to use four circuits on this route, and the other is to use the southern route for the two additionalcircuits. This southern route does not rise to the high altitudes of the northern route where the line would be subject to severe icing conditions. However, the southern route is about 100 km longer. SCEPA will finalize its studies by June 1991, and expects to receive approval by December 1991. The cross-sec- tions of the transmissionconductors will be 4 x 240 mm2/phase,and each circuit will be mounted on separate towers. The developmentprogram for the 500 kV network is presented in Annex 4.6.

EnvironmentalImpact and Human Resettlement

17. The Report on the EnvironmentalImpact of the Ertan Hydroelectric Station has been prepared and approved by the relevant Chinese authorities. Necessarymeasures will be taken to protect the environment,prevent excessive felling of forest trees, soil erosion and pollution during the construction and resettlementof the populationand existing factoriesand mines. It is estimated that about 30,000 people will be affected by the power station constructionand its reservoircreation. The aim of fair indemnificationis to provide a former owner with the same or a better economic situation than he or she had prior to flooding or influencinghis or her property. EHDC with the assistance of provincialauthorities has started solving resettlementmatters. Details of the environmentalimpact and human resettlementare given in Annexes 5.10 and 5.11. An EnvironmentalScience Stationwill be created to conduct environmentalmonitoring studiesthroughout the life of the project.

EngineeringServices

18. A new company, the Ertan EngineeringCorporation (EEC) has been formed under the overall directionof EHDC has been formed to be the Engineer on the project. EEC's responsibilityis the overall management of the project with the objective to construct a quality project at a reasonableprice, and to complete the project on or ahead of schedule. The Manager and Chief Engi- neer of the Corporationwill also be the Deputy General Manager of EHDC. He will be assisted by project managers responsiblefor the following: dam and surface works, undergroundworks, mechanical and electricalequipment, technical administration,purchasing, and administration. The basic engineering services are being provided by the CHIDI which is well organized and competent in the design of hydroelectricpower projects. CHIDI is also assisted by other Chinese institutionsassociated with MOE. In the initial stages, for- -81- AMNNEXS.1. Page 9

eipn consultantsprovided assistanceas well as a Special Board of Consultants (SBC)l they will continue to do so during the project. EHDC also retained the services of consultantsto assist in the preparationof the civil bid documents, and the project cost estimate. These consultantsalso will assist in the analysis and evaluationof the bids. Also, consultantswill be hired to assist in preparingbid documents for the generating equipment and the special electrical equipment. EHDC and its Engineer (EEC) lack experience in international contract management,and will engage foreign consultantsto assist them in the constructionmanagement of the project. The activitiesand scope of the constructionmanagement activities are presented in Arnex 5.6. In addition two more groups of consultantswill be retained. One, the Disputes Review Board, has the potential to promptly resolve disputes and claims, and the other, an EnvironmentalPanel, will ensure that the agreements reached on environmentalmatters will be properly carried out during the project.

Management Developmentand Training

19. Although the training of staff will concentrateon the technical subjects,personnel in all departmentsincluding finance and personnelwill also receive appropriatetraining, so as to prepare EHDC for the efficient operation of its facilities. SCEPA staff also would be includedwhere appropriate. The program would include overseas training, lectures by foreign experts, local high and technical school courses, and a supply of training aids. These would involve about 200 people trained locally and abroad and 50 expatriate instructors. Funds earmarked for training could be used for supporting attendanceat various internationalprofessional conferences and promoting local research and developmentactivities related to improvementsin the power system.

Studies

20. Power Pricing Study. This study would be carried out in two parts: (a) to determine the cost of generation in the Sichuan System in order to design a contract between EHPC and SCEPA, and (b) to analyze trans mission and distributioncosts in order to calculatenew tariff rates to the ultimate consumer. It has been agreed between GOC and the two parties that the following principleswould applys

(a) the price level would ensure financial success of EHDC;

(b) all Ertan energy would be fully dispatchableby SCEPA;

(d) the pricing will reflect Ertan's ability to provide peaking capacity as well as secondaryenergy.

21. The Terms of Reference (TOR) for this study are presented in Annex 5.8. The study will be carried out by Chinese experts and will take about two years to complete. Therefore,a start should be made immediatelyso that the results are availablebefore the appraisalof the possible second Ertan loan and the transmissionnetwork. - 82 - ANNEX 5.1 Page 10

22. Optimal Power Plant and ReservoirOperation. When Ertan begins operation, the Sichuan system will increase from about 15,000 KW to 18,000 MV in generation capability--ajump of about 22?. Therefore,it is importantto study the effect of Ertan's peaking capability and large reservoir,on the existing system made up of many thermal and run-of-riverhydro plants. Opera- tional rules and utilizationpolicies of the storage reservoirneed to be establishedin order to take full advantage of the facility and to operate it at the highest efficiency level. The TOR for the study are given in Annex 5.9.

23. Preparationof Future Power Projects. Studies and investigations related to the preparationof the future EHOC's power project would be carried out as requestedby the Chinese authorities. These would be done mostly by the Chinese institutionssupported, where necessary, by the qualified professional foreign consultants.

24. Safety of Structures. EHDC intends to set up a Hydraulic Structures Branch to record all constructiondetails, including the effect on each 1e- ment of the facility during the filling of the reservoir. This study will form tl'ebasis for all records and recordingstaken during the life of the power complex. Rules and regulationsfor plant operationwill be established on the basis of observed readings,and will be adjusted whenever circumstances require. In this regard, the Bank has been given China's criteria for the monitoring of dame, which have been based on the recommendationsof the Inter- national Congress on Large Dams. The SBC will be asked for its opinion on China's criteria for dam safety inspection.

25. Monitoring of Energy DissipationFacilities. This study work is intended to form the basis for monitoring the energy dissipationfacilities downstream of the spillways so that any deteriorationmay be immediately noticed and appropriateaction taken.

26. Optimizationof UndergroundPowerhouse Ventilation. China has limited experience in designing of ventilating systems for undergroundpower- houses. This specific investigationtherefore is designed to ensure the comfort and safety of personnel operatingthe undergroundpowerhouse. -83- AM 5.2 1'age 1

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s:LP 4.13 0.29 4.2? 0.M 3.49 0.31 3.14 0.32 34.61 2.74 37.

10.bunasr1 brola GM cmt 1.s5 0.m I.S 0.01 1.S7 o.m 1.35 0.0 53- 1.41 4.8 fsl'smt cmt. 0.16 O.tl3 0.16 0.01 0.16 0.01 0.14 0A.0 1.55 0.14 1.69 pric . 0.42 o.W 0.49 o.01 0.57 Q0. 0.56 0. 3.18 0.11 3.2 Tom ad Wts 0.01 0.01 O.1 0.01 .0m .0M 0.0 .0M o.m o.0 O.C0

W x 2.15 MM1 2. 0.0 2. 0M 2.04 O.C0 L12 1.5 297

11.Tewc. AL as am cmt 0.09 1.36 C.0 1.6 0.09Q 1. 0.09 1.36 0.10 12.9 13.48 "W1et Cm. .01 Q1 001 0.1m 3e 0.0 m1 .1 03 0.09 1. 1i PMis Ct. MM0 0.34 o.m 0.39 0.S 0.46 M0. 052 O.8 2.40 2.78 1ad bAles 0.01 0.0 0.0 o.01 o.m 0MO o.m 0O. 0.0 0.01 0.D

SWUISL 0.12 1.72 0.13 1.78 0.13 1.8K 0.14 1.90 1.17 1644 117.61

am t 0.06 0.19 O.OS 0M 0.06 0.0 0.06 O.1 040 0.16 1. FtcL cm. 0.01 0.0 0.01 .0M 0.01 O.01 0.01 o.01 0.06 0A 0.14 M. Cat. 0.08 O.ll 08 0.0QCD 0 0.01 0.01 0.12 0.10 0OA Tam wad cs 0.01 0.m o.01a .o O.0 0.0 0.1D 0.0 01O 01 0.

flUOTL 0.0S 026 0.8 0.0 0.09. O1O MM09 01 0.05 1.?1 - 87 - AIiM 5.2 Page 5

am EWM BEIU1CRT P0JC aTr EsnTDW ( W tLa nittWe )

Ulf 1#2 1901B 1991 118 99 Projt ammt: LOrL we* lma FA?ig Loal fceg LaL Fi IDeaLLhimm LML Frigtn eal Fr ebig

u,SAM L . a pro. OIm tt 0.00 0.00 0m 0.0o 0.3 0.I? 0.13 0.0 0.1 0. 0 0.2D 0. 0.18 0. NlaL at. 0om 0m. 0. 0.C 0.0M 0.01 0.01 0. 0.01 0m 0.e 0.01 OR 0.1 prie ca.- 0.m0 0.0 00 0. o.Ce 0.m 0.01 0.01 O.1 0.01 0.0o 0.OI QO0 0.01 Taus aSRies&rd 0CD 0O. 0Q0 0O. 0.D 0.00D 0.00 0.m0 0.0 .0O o0.D 0.M

SUwrD 0.ao 0.00 0o20. 0.43 0.C8 0.15 (O.B 0.14 0.04 25 0.7 OA2 0AF

14. 8ttfes B m t 0.0G 0.00 0.00 0.03 0.06 0.M 0.0 0Qt0 0Q! 0.0? 0.0S M0M0 0.11 0.10 i%vsleaL tt. 0.m 0.00 0m.I 0. 0.01 0.01 01 0.01 00 0.01 0m 0.01 0.01 0.01 Prim ca*. 0.00 0.00 0.0 0 0.OD 0.0 0.01 0.01 o.0 0.01 0.01 0.0 0.0 0.2 Tims erduties 0m 0.m 0. 0m 0. 0.m 0M. 0o. o.m 0OD 0M 0M. 0M. o0.D

LT C.0 M.m 0.m 0.00 0.07 010 Q0 0.1 0mu 0.09M M0M 1 Q1 0.1

aim tost 91.10 .00 63.61 43.2) ¶1.45 1;D.81 73.49 e2A 6.49 6136 67.74 73.15 8.99 106.51 WieA cat. om 0m 8.14 5.82 14.86 17.92 1045 a6s 9.57 9.72 a 9.0 10.13 11.S1 Prim. cat. 0.0 0.00 1.t2 0.8 6.SS 7.16 73 6.18 9.Z 6 .1 2.45 13.59 1933 2.44 Tams ad uties 0.00 0.00 4.39 2.33 1a5 6.59 7.3 2.84 4.45 3.16 6.59 2.98 11.41 3.09

F_,,~*== .. M= ,. Z=. _== _m= === ma== .... = .....== -- 1Wm 91.70 0.m 7736 52.19 152.51 12.48 55 79.WAS 87.72 5.03 95.67 0mM021.36 1W8.56

OUl/WZMXTCC) Oms tcst 0.2 2.00 0. 1.26 0.00 0.0 .0m 0.m 0.0 0m 0.m 0.00 0m 0M riml aft. 0.0 0.M 0m. 0.m 0.m 0.0 0OD 0.D 0.D 0.m .0 0mD 0m Q0

Tam amd oAts0.0 0.00 0 000 QC0 0.0 0.00 0M 0. 0M 0M. .m o.m 0M

iuP 0.92 2.mD MU2 1.26 0mD 0m. 0.0D 0.00 0M 0.0 00 0.00 o.m 00

ba cn 92.62 2.M 63.10 44.45 845 1W.81 73.49 6.24 64.49 6136 67.74 73.Si V.99 101.S1 Ryat, cat. 0.00 0.D 814 S.e2 16.86 17.9e 10.45 656 9.57 9.72 a8e 9M.0 10.3 11.51 Prim GM. 0O. 0O. 1.Z 0.3 698 7.16 7.3 6.18 9.21 a84 12.45 U.59 193 ZL4 Tees ad Duties 0.00 0.D 4.39 2.33 10. 6.59 7.2X 2.81 4.45 3.16 6.59 2.56 11.41 3.00

~ATjOns tA.OD 77.48 53.45 152.51 12.48 8.55 79.5 V.12 5.S8 952 IWO 19.36 14.56 - 88 - 5.2 Page 6 oa a t.w gnElRI PrIK (u oawr -"iE

1§9 aX~~~~~~~D b ot PftJjt Oiut: h f Wet fre1P Lot ftb Let h et e iU_t

13.Uwlr.tat. 8 Puqe. as out 0.3 0.0 0.10 0.W 0.00 0M 0OD 0O. 1.59 0.29 1* pwcttOM. OM MO 0O.1 00 0.00 MOD MOD 0O. 0.16 0.S 0.19 prie We. 0.0 0W OM 0.0 0M O OM 0M 0M 0.% 0.3 Toam lWths QCD 0. 0.CD 0.M0 0.QD 0m. Qm 0. CLOD 0OD MO

SBW5 0.45 0.00 0.14 0.m 0om 0M. 00 0o. 2.00 0.36 236

1 t 0.11 0.10 0.12 0.10 0.06 QD OAS 0.19, 0S. 1.0 1.65 Nwlct Cat. 001 0.01 0.01 0.01 0.0 0Q2 0W 0.2 0.05 0.10 0.16 - e a". 0.0S Q. QO0 00 0.01 0t 0.0Q 0.0. 0.13 .2 0.41 - adlutis 0. 0.00DM 0M. QC0 0.0M 0M M.O MOD 0mO MOD 0mD

iiiiXi 015 0.14 0.17 0.15 0.06 029 0.5 0.29 0.77 1.43 2.2D

am out 79.4 M5.4S 41W 39.15 27.10 3328 1636 19.8 731 4C63.741.61 "vdow cm. 838 1QS6 3.71 3.53 2.75 3.41 1.3 2.41 MM0 5.1 1L65 rime t. 21.3 aL. 12.05 V11 9.e 12.0 6.84 8.3 W.M 137r? 2 ues ad s 12.38 2.45 S.1 0.46 3.73 0. 1.76 0.6 67.34 25.44 3.78 mmmm in mmC iWML 1.79 16.44 .95 S5.51 46.41 49-3 28 31.21 W3.90 8S.1 11.01

001 waIACC MWt 00 0.00 00 00 00 00 0.00D 0mO 1. 3.a6 4.5D siet we. 0.00 0.0 00 0mO 0O. 0O. mO 0m 0.OD 0m 0 Me Omi. 0.m 0.0D 0.m 00 0D 0m 0.D 0.m 0.0 0M 0.00 To ad Ms 0o0 0.00 0.00 0.D 00D 0mO 0m. O. 0.0 00 0.m

SIM 0.00 0.00 00 0.m0 0 0.00 0.o0 0.00 13a 3.26 4.50

am Got 79.6 1M.4S 413M 39.15 27.10 333 166 192. 73.1 6.00 ia.n1 Nft let GMt. 8.3 10.56 3.71 3.53 2.?5 3.41 1.95 2.41 &IOD 15.15 16.95 Me Cat. 21.3 3.18 12.5 12.1? 9.f2 12.0S 6.8 L.B IVP 1M.77 2iB. 1_damb*is 12.3 2.45 5.11 0.66 3.73 0.71 1.76 0.6 67.34 5.44 W.78

510. 12.79 146.4 62.9 55.51 48.41 49.37 26.0 313A W.14 J 185.51 5.2 Page 7

1-es 8-rdI-ed 4-tb 5-tb 4-b 7-tb 0-tb 9-tb 10-tb Yea. 11191 1999 1§90 1994 199 1991 9W 190 1nd son Ieter"Wteaal .nttio. 8.40 8.A0 8.40 8.A0 8.40 8.40 8.40 8.40 8.40 8.40 Osmtic iflotion (in Ws tow_) 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 8.40 E2cha. RX. ( wce I USe )s efeo 19*0 3.73 OutIng 190 4.74 I. Aftr 1990 8."4

*.ca t Factor.:b. F|

1-o Jroo: 0.e2 I.£ 21- per: 0.99 0.09 - peer: 0.06 0.00 4-tb year:- 0422 0.1* -t per: 0.1$ 0.18 I-tb per: 0.99 0.90 7-tb per: 0.24 0.24 OD -0t per: 0.90 0.29 9-tb oe?: 0.88 0.88 10-tb per: 0.37 0.87

8. Cms cat.. toWod an favoabliWi eatdioa, bid price. Anddota roaead during Proj;e pr*paration ad pre/oppr i,Ial riolieo to Chine. The beaa cot eatlato. or* emprocd In early-9l9 priceD. - 90- £415.2 Page 8

Om HVIRAM POWe w w u'um

w~~~laet -t 419H193 199 195 ftoJu Ogpu1 : WLt Faralp Loot frenp tamL vt Loo al LadL Feelop ~iLoo l La 199tFervor mIROm OaNo. 1) 00: Pseig Gt far La1, u MIm aaws fa G^ PPis a bid Itely Lire is M

gma (UtsDO bLLO NIWttu lhd i 1dor Pri*e 0.WD MOD 21.23 "I.B 44.70 562 15.19 9.17 1.3 3.3S aiT 34.24 36.3 47.7? of t:1 U.8 Iatw 0.m 10.70 3.94 LIS 1.2 34 2 fmsd Pew 0.1m 4645 lSA 17.12 3m 0.Q OR.19 3 ZmIyLi.ft CM5 91DS 2M159. 3819. 7M41 A21310 In6Ia

Att In atat0 IS D O.m 0.5 21.311 3S 44.70 59.3 1S."9 9.71 16.3 &3S 36S. 3.25 36.5 ls. of tAld US. IUi O.CO 107 24.3 3.94 6ss 1.2 3.54 2 FIridAhan 0M) Loa 182 2. 6.16 1.12 15.51 3 iteLy Llru OA) 7.57 17.11 2.79 6. * 10.41 1U4.

am us daLtw to

a"n of bimis: F. Fruws Ito. Lime Gu. Hak

(tuamin 0M WILYan Dpet 1, 1991)

IAM (Lot .L 1) Ote: hr lot 11, Forhip Cst is cnty G6' MM O CintOA tAtw NILtin) _so Tu Mfriar 0.)W 0M 13.71 13.43 43.32 3.29 Z.50 as.50 2.12 5. 17.06 8.31 16.95 1W In IaIwta 6. lIC 0M 25.51 995 mm5 61.46 44? 34.33 am Gm an MAlw Niuttlsn muno m O.M 0. 13.71 IS. 3.12 3.53 MM 29.4 ?3.12 321 17.06 .0 1695 ; - 91 - Ala= 5.2 Page 9

Fmnopymwts. Loct Fos twt FawupLooW reg m faipi LocL Folp TUtd G N"^~~~IW1)8

*a Tear fi. 3.7? 45.56 10.9 13.6 6.86 &94 5.Q 7. 27.80 MLBS 40.3 of W*d1 U.S.Lo1w 19.59 5O 3.84 3.13 115. 115.0 2 fr FeB I54 .48 1.* 1.9 501.44 314 3 IMty Lm 1 54 S Z 3 31.32 7 295 10

a 0out omaW "M AU in BjlvmW USto 5.77 482 19 14.45 6.86 9.46 5.42 7.71 217.0 MAJ XL18 of ltdl1 U.S. tL 19.9 5.J 3.84 3.13 115.4 11.4s 2 Frach Fms 1479 4.43 2.90 236 a.m V.3 3 Itay LimB 13 4.15 2.72 221 81.0 81.0

0*1MW.LoM U) amB PlS RnUw Ft1U1 _ 0DTpdr Pric 12.3 11.52 245 2.14 4.S 5.13 3.96 5. 1f9.22 W1.9 39.6 in kutwti 6. IWl 21A. 4.06 9.74 9.58 34046 340.46

mWa0*t (us RnU #I" a nw adus) 123 12.89 2.06 2.39 4.M 5.74 3.96 5.45 159. 212.41 3V2 - 92 - ANNM=5.2 Page 10

OMAlWVIDELEC PRJECT P0JERCwST £rJE ( FM yun itti )

8e 199l W 199 94 995 199 PI'ect Coqxnfls: Locak foreig cal. Fheg Locat Fhrigi loL Fwe* Locel Fcraig Loot Fai Loa Vce.l

l.PVVeG" vbr am Cst 2M.36 0.m 95.90 o.m3 S. 0.03 0o. 0.0m 0.0) 0.D 0.CD 0.03 0M. o.m lysimal, G. 0.0Q o.03 9.59 0.0m 5.48 0.0Q o.m3 0.03 o.m3 0.Qm 0M o.m 0M 0. Prize cat. 0.3 0.3 5.27 0.CS 0..a 0.03 0.03 0.m o.03 o.m3 o.m 0.m O.tD Tom ad Dities O0 0.03 o.03 o.03 0.M 0.0 0.3 o.m 0. o.m O. 0.0 0.0a 0.D

SItoTML M.3M 0.o 110.77 0.03 48.96 0.Am 0.03 o.m3 (0LD o.03 o.03 0.0D 0.D 0.03

2.Rosoitttmt ae cost 4.04 0M. 42.0C o.m3 76.81 0.03 113.68 O.A 93.58 .0M 64.10 o.ao 33.59 0.Qm P%ysiolCont. 0.03 0.03 6.31 0.03 11.52 0.m 17.05 0.03 14.04 0.m 9.62 0.0 5.06 0.03 PricaCot. 0.03 0M. 2.42 0.m 12.72 Q00 28.46 Q0.03 299 0.03 25Z 0.03 1S*R 0.0 Tam ail Duties o.m3 0.03 0m o.03 0.0D o.m 0.03 o.03 o.03 o.m 0.03 0. 0.03 O.0D

SUToTJ 4.04 o.0o 50.76 o.03 101.0S o.0 19.19 0.m 137.59 o.0 9S.97 0m 54.45 Q.m3

3.mrd axpisitian one cost 25.58 0.0m 1.30 0M 0m 0.03 0.03 0.03 0.03 OM 0.3 0.03 0.03 0.03 HtsiceL Cast. 0.0m o.m3 0.13 0M. 0.03 0.03 o.03 o.03 o.m3 0MO 0.0 o.03 0.03 fom Prim Cast. 0.03 o.03 0.07 0.03 0.03 Q0.0 o.Cm 0MO o.03 0.03 o.m3 .0M 0.03 O.D

::OIN 25.58 o.03 1.50 0.03 0.03 o.m3 o.m3 0mO OM 03 0.03 o.03 0MO o.03

4.ArbhDa (tot Ib. 1) meCost o.0 0.03 111.40 U7.93 234.04 311.90 79.54 508 a5.24 115.42 1.30 18.79 193.35 MAo ftsict Cont. 0.03 0ED 11.14 13.79 23.40 31.19 7.95 S.C8 8.52 11.54 13.91 18.9 19.33 26.48 Price Cnt. 0.0D M0. 6.13 7.59 37.07 49.41 19.C3 12.17 24.12 3C.37 52.40 71.51 87.12 119.32 Taxesand Dties o.0o 0.03 16.99 5.50 35.22 11.36 12.u 3.87 12.69 3.98 2a.69 6.54 28.73 9.16

SEBW. o.m3 Q0.0 145.67 164.0 329.73 4M.6 11MD 71.95 32.58 166.31 22.09 286.82 3as4 419.77

5.WtauMe (tOt RD.2) ame Cost 0.03 0.03 72.04 78.68 M5.24 306.40 119.89 155. 1.0 189.55 89.31 16.57 8.73 109.9D flsiad COt. 0.03 0.03 14.41 15.74 45.05 61.28 23.98 31.M5 24M 37.91 17.86 27.31 17.75 21.18 Price Cant. 0.03 0.03 4.32 4.72 38.92 52.95 31.32 40.56 40.46 63.37 3671 56.13 4362 52.06 Tam ad Dies o.03 o.03 6.01 6.70 18.23 23.14 9.75 10.99 9.56 12.56 7.0a 9.06 6.96 7.09

SAIrAL Q0.0 0.03 96.78 105.84 3Z7.43 443.76 184.94 237.87 195.24 3as.39 150.9i 229.07 157.06 1S6.1S

6.EA. BMi. G*1uait aem Cst 0.0D 0.03 M03 o.m3 0.03 0.03 42o.6 14.5 1.72 4.28 16.56 41.35 59.99 153.49 Pi)ical Caot. o.co 0.03 0.03 0mO o.03 0mO 3.0 7.49 0.12 0.30 1.16 2.89 4.2D 10.74 Price CaT. o.m 0.Q0 o.m o.m o.m 0.03 9.98 24.92 0.51 1.28 6.0? 15.16 2a.s 67.23 Toms ad aitles 0.03 Q0.0 0.03 0.03 0.03 0.0m 15.95 O.D 0.62 0.03 6.15 Q0.0 .4 0.03

UBIW3L 0.03 O.D 0.03 o.03 M.0 0.03 71.79 19.39 2.97 5.86 29.94 59.40 112 21.92 - 93 -

o09 EmnK NdIEC PFJC

(te86yumittwn)

1997 W19 zm Too" Piojet cxpurnt umL kvasg tm famr,g Loca iorotg LocL Poreig LcAL PotviO Tofto

Iba cost o.ai 0.0 0.no 0.C0 0.OJ 0.00 0.m 0.00 43i9.0? 0.m 43.a* ftpal COt. 0.0 0.00 0.0 o.a3 0.m o.00 0.D 0.M 15.0? 0.m 15.07 Prue oft. 0.m 0o. m0 0M. 0m 0m 0.80 0.m0 1.6 13.56 ad Sutlom.s 0 om00 0D 0.m 0.00 0.O 0.00 0.00 M. 0M 0.m

SEM 0.M .m 0m 0.mM 0.0m 0.00 0.l: 4809 0.M 46.09

Losttiu onst 1.S6 0.D 0M 0.m 0.0 0.m 0.m 0o.0 4.3M 0.o 4.S iuw t. 0.23 0.00 0.00 00 0.00 0. 0.00 0.0 MAD 0.mD 6S.ma Pr-oecant. 0.86 0.m 0.00 0.M0 M 0.00 .m .m 115.51 O.C 115.51 Tansad Sutis 0.0D 0.m 0m0 0.m o.0 0.0 0.00 MO. 0.C O.0D 0o.

SaI.o 2.66 0.m 0m M.m 0.00 0.0M m0 0m GM.6& 0.m .69

3.LAAAo*dsitios as cmt 0.OD Q00 0.ao 0M Q0 0.00 0.m 0.00 26.88 0.m 26.83 NTeiOcatl*t. 0.00 0m. 0.m 0M. Q9 0.m0 0 0.00 0.13 0.00 0.13 P,ce Cat. 0.m M. 0.m 0.m 0.oo 0.m 000 0.m 0.0 0.m O, Tam ai ties 0.m 0.t D 0.0o 0.0 0.m 0M 0.0 0.D 0.00 0.0 0.

WWA o.0o 0.0o 0.00 0M. 0.00 M. 0.M 0.m 27.5 0.0 2.5

4.Arh Dim(Lot ttb. 1) 1a cost 176.79 252.56 56.50 75.65 35.93 49.54 28.3B 40.35 1W4.2514W.77 MA P9s1ctccat. 17.68 2526 56 ?.56 3.59 4.95 2.84 4.04 114.0 18.3 2.90 PriceCatt. 93.37 133.39 34.44 46.11 24.97 34.43 22.2 31.67 AM.94 540.56 9f3.90 Tass adiPuties 26.2? 8.3B 8.38 2.62 5.35 1.?3 4.21 1.36 110.4 54.504 .3D

SAIUT 314.11 419.58 1t4.97 131.94 69.4 90.66 57.1 77.42 M.01 2M.11 41.12

5.1owtme (Lot lb. 2) bamcost 64.78 67.48 13.85 12.54 21.09 3I.05 20.73 29.56 836.661112.r *8.66 Psicat cat. 12.f6 13.50 2.?7 2.51 4.22 6.01 4.15 5.91 16.3 22.40 38.73 price Cat. 37.32 3.38 9.21 8.34 15.99 22.79 17.74 25.31 275.61 365.10 640.71 Tan eM autlos 5.11 4.45 1.09 0.84 1.66 1.99 1.66 1.94 6.08 78.69 145.?6

83a. 120.17 12A.31 36.72 24.22 42.95 60.8 44.27 62.72 1346.69m78. 3124.86

6A.. Khdc.k#1mvt sa cost 84.57 215.39 39.99 104.23 31.40 p.32 89 24.44 5.67 732.491018.16 NSc oant. 5.92 15.08 2.00 7.3 2.40 5.76 0.0 1.71 20.0 51.27 71.2? PriceCan. 43.44 110.65 25.71 61.8D 21.23 55.65 6.56 18.66 137.40 355.39 469.19 Tan d Duces 31.48 0.00 14.91 0.0 11.74 0.m 3.Z 0.m 1M.42 0.tO 16.42

SU8WAL 165.41 361.11 81.42 173.35 66.57 14U.74 18.9? 44.0 549.891139.15 189,04 - 94 - ANI5.2 Page 12

Omg miiw.EcluI ~ECT-

efore 19"p 1991 193 195 194 1K 1 Pesiet Comimet: LOBL Vore1 Lae Perelim LomA Fawd1g LLt frelip InmL Pore1g Imau Fsvig Loot Fasi

7.Trssfmuros Om am 0.m 0.m 0.m 0.0 0.m mm0 0.m 0.00 5.62 066 5.62 0.46 7?2 0.62 fositi Omt. 0m 0.tO 0m 0.mm 0.mm 0.m 0.m o,m 0.0 a 39 .as 0.51 0 Price . 0.m 0.m 0.m M. 0.m 0.m 0.m m 1.A O8 2.06 0. 3.17 036 Tamnad Dies 0.00 0.00 0.00 0.m 0.00 0.m 0.00 0.0m W 0.0m 0.0 Q 0O.OD m

SIJIW. Q.O 0M 0m 0.m 0.m 0.co 0m M.m 7.69 09 0 Mg0a 1 1.A

Usta_ro", etC. 0.0m 0.m 0.m 0.m 4.11 t.8 5.47 2.2D 7.45 0.71 13.43 10.16 51.34 13.40 Niwee8tcet. 0m 0.0 0m 0.CO 0.29 0.13 0.3 0.15 0Q2 0.S 0.96 0.71 3.59 0.% frice oft. 0.0o 0.00 o.m 0.0 0.63 0.3a 127 0.51 2.Z 0 4.Q 1.72 250 SW Tm a4dOIutis 0.00 am 0M O.Cb QOP o0.a 0.14 0.m 0.43 Qm 0.42 MM 1.70 o.m

OBNL o.0 0.m . 0.00 5.13 2.Z 7.27 2.1S 10.61 0.8 1.91 1459 79.15 221

9AWOutt AhlnkiWt. am cst 8.a 0.tD 2.13 1.10 13.4 1.10 12.91 1t10 12.91 1.10 15.8 1.10 15*Y 1.10 $sicatCntg. 0.00 0.8W 021 0.1t 1.34 0.11 1.29 O.1M 1.9 0.11 1.9 0.11 1.59 O.11 R400COM. 0.m 0CO 0.12 0.06 2.13 0.17 3.09 0a. 3.95 0.3 5.98 0.41 7.15 0.49 Tam ad Dies 0.m 0.0 0o.m 0.m .0D o.m 0.m 0.m 0.W 0M. 0.m 0m O. 0.D

SWOWL 8.50 Q0 2.46 1.27 16.5 138 17.29 1.47 18.15 1.54 23.44 1.42 31.61 1.70

'l.lU*irs SuvAm bce cGst 29.52 o.m 6.46 1.87 8.64 1.87 8.64 1.81 8.64 1.81 8.64 o.m 8.am 0.0 isct cult. 0m .m .65 0.19 0.6 0t9 05 0.18 0.85 018 0S. 0M. o.e o.0 Pricecet. 0.m 0m. 0.36 0.10 1.37 0.1 2.07 0.43 2.5 0.56 3.a5 0M 3.71 O.0 Tarn d Duies 0.00 0.00 0.00 0.00 0.00 00 0.00 0.00 0.0 0.00 0.0 0.00 0.0 0.00

85071 29.52 O.0D 7.47 2.16 1.88 23 11.58 2.43 12.16 2.55 12.77 00 12.76 0.0

11.Tedlmet AssitsSuia am Comt 00 0.0 0.47 6.59 0.47 6.59 0.47 6.59 0Q 659 0.47 6.59 .47 6.59 Ifs1s Ce. 00D 0.00 0.05 0.66 Q0. 0.46 0Q 0.66 0.05 0.66 Q 0.6 0.Q 0.46 Pice cam. 0.m 0.00 0.03 0.36 0.07 1.04 0.11 1.58 0.4 2.0 0.18 2.48 .21 2.9 Tar ad anits 0.00 o.00 0.m 0.m 0M. 0M. 0.00 M0 0.m 0.m 0.0 0.m 0.0 0M

Sli. M0 0m 0.54 7.61 0.59 829 0.63 83 0.46 9.? 069 9.73 Q73 10.22

b Cnt 0mO Q0. 0.31 0.m 0.31 5.8 0.3 0.22 0.31 0.64 0.31 0.11 .31 0.2 ,es1 on. D0 Q00 Q0.3 .0M O.D u.o 0.0 0.3 0.a 0O. 0.0 0.I 0.0 o.a2 Priooft. 0.00 0.00 0.2 0.00 0.00 0.31 0.07 0.00 0.10 0.13 0.12 0.04 0.14 0.10 Tar ard uties 0.00 0 .0 0m. 0.m0 0M. 0.0 0.m 00 00 0.m 0.m0 00 0.m

Q N 0.0 0.0 036 0.0 0.39 2.0 04 029 0.4 029 0.46 .62 0.48 0.3a 95 - AMUN5.2 Page 13

aw6 OMR fEUCC PASCT

iw~ ~~~in pin )ot 2llX 197 189 1999 Teal.s Ppr$ct ewwnts: WmL ftfti91 too todot w tol formip tat hvei Toto

?.Ttenforor 8am Cot 72. 0Q* 2.00 236 2.40 3.24 8? 0.99 1.19 9.56 8.75 Andc, on. 0.51 0.06 1.4 0.17 1.5 0.3 0.56 0.07 5.61 o0a 6.8 Price Cot. 3.72 0.42 116 1.40 17.5 2.19 6.16 0.75 4649 5.57 S. TamSad Mies 0.m 0.00 0.00 0.00 0Q.0 0o. 0.00 00 M.OD 000 0.00

S911 11.46 1.0 33.;5 3.95 46.10 5.66 14.80 1.81 12.30 15.?9 U189

Ua_tes/oes, etc. cost 54.9 6.59 59.8 1.92 5.36 O.0 0.99 0.00 !.98 36.79 39.77 Nysicat Oft. 3. 0.46 4.19 0.13 0.38 0.C0 0.7 0.00 14Q21 2.5 168 Pries Cm*. 5.5 3.3 35.S1 1.14 3.63 0.00 0.78 0.00 99.67 15.13 114.79 Tu ud Duties 14 0.m 2.37 00 0.80 0.00 0.14 O.J 8A 0.C0 8A

S3TO1N 5.93 1044 101.95 3.; 10.17 0.D 1.S 0.D 35.09 54.50 379.59

9.CfiltroctDtlNist. Sao cast 15.8 1.10 15.* 1.10 12.49 1.10 10.87 1.10 136.62 10.% 1AO NsloLt Cm. 1.58 011 1.58 0.11 125 0.1 1.09 0.11 12.81 1.10 13.91 pr*e COt. 836 0.58 9.64 0.4e 8.S 0.76 8.53 0.85 57.66 4.Q2 2.25 Tornm Ud*Dies 0.A 0.00 0.00 0.0) 0.00 0.0) 0.OD 0.M 0.00 0.0 0.0)

-3W 95.76 1.79 27.06 1.8 2242 1.97 D.50 2.07 v.07 16.70 B.7?

10.9|1w* Ssrvlces a C*t 8a. 0.00 8.3 0.CO a?3 O.m 7.05 0.Q) 110.55 7.36 1.91 NyslSBt Cat. 0A M.CO 0.a2 0.0 0.ez 0.CO 0.71 0.0 8O 0.74 a . Pries Co. 4.35 M.0 S.O? 0m 5.72 0.M 5.56 0.00 34.04 1.39 35.43 TOr d klm"s 0.00 0.00 0.00 O.0 0.0 0.00 0.00 0.00 0.0 0.00 0.0o

55 3 5.40 OAD 14.07 MOD 14.7? 0.00 13 0 152.70 9.48 14.18

11.TetlydaslAists Dwe C4st 0.47 6.59 0.47 6.59 0.47 6.59 0.47 6.59 4.69 6.10 70.59 dnt Cot. 0.0 0.66 0.C5 0.66 0..6 0.46 0.06 0.66 0.47 6.59 7.06 Price Ct. 05 3.48 0.29 4.tC 0.33 4.58 0.37 5.17 1.9? 2V.71 29.68 TOMnd Dutie 0mO 0.00 0.00 0.0 0.0) 0M 00 0.0m 0.00 0.00 O.m

.t6 07 10.75 0.8 1.2 0. 11.8 0 .5 12.42 7.13 10D2 W.32

12.t1n09if 1 otm 031 0.99 0.31 o.-O 0.31 0. 031 O.t 3.12 3.93 7.I "ysCat own. O.CB 0.10 Om o.m O.06 o.Cm 0.05 0C.0 0.31 0.40 . 71. Pfre Cmt. 0.17 0.52 0,19 0.00 0.22 0.00 03 0.00 1.31 1.16 2.48 T_SQM m o.Q.C 0.00 O.00 O.O 0.0 0.0 0.00 0.00 00 0.00 0.00 0

9iUTL 0.51 1.61 0.53 O.00 0.56 0.00 0.S9 0.00 4.5 5.S1 1O.a - 96 - ANNEX5.2 Page 14

oun iNW4 HWU C Ucr UJCT 01STSTIMi ( ISB ym rdtion

kdw 1 1991 19! 195 194 195S 199S "MOO omw"t. Loot tweicL f* WL mLoot Fmeig ft.010 WcaL _ _uL _ wl__

13.e-DwsM. a Pina. am am 0. 0M 0. 0.3O04Z 1. 03 m8 0m 05 02 1 0.94 %fmimt mt. 0.0m 0m mm.0 0.m 0.19 0.04 0. 0.0 0.06 0.03 0.10 0.IB 0.059 OA Prm at. 0.m 0.m 0o. 0.m 0.t . 0.16 0.3 0.18 0.0l 0.39 0.10 4 0.12 Toms ard DAies 0.CD 0O.O 0.03D 0.0D 0.D 0.OD 0OD 0.D .MD 0O. .O 0.CO Q0 O.D

UTUN 0.ID 0.D 1.A 0.03 2.4 0.48 0.91 0.44 0.81 0.39 1.54 0.41 1.45 0.43

14. SmAils sne cost MM .0 O.0O 0O. 0.31 0.44 03 0.55 01 03M 016 0.44 0.57 0.56 Rhicst eat. 0W 0m 0a. 0.03 00 0.0 o.B 0 0.0 0.04 0.S 0.01 0.06 0.GS Prim oft. O.3 0.0 0.03 0.03 0.03 0CS M.O 0.13 0.03 0.12 0.0 (.17 03a O. Tom ad Wes 0.0 0.03 MD MO.3.0 D 0.D 0a) 0.0 0.IQ0 .03 03 0.0 0OC.0 MO

sGmL0.3 0m.03 O.D 0.0M Q39 0.55 042 0.74 0.15 0.54 0.3 Q65 0.89 0.5

UTatals d:

Oms as 366.0D .0D 3 2.99 2W.16 48.0 6S.A 384.75 WAS W7.63 W .2 54.61 3Y.0 40.63 547.1S Rysint Cu. o.03 o.03 42.40 3.48A 25 55.83 54.70 44.84 50.10 50.91 46.53 50.DD 5.065 2 PIi- wat. 0.03 0.03D 188 12.8 1t.03 101.59 55.67 M1.1 11B.Q2 105.67 137.39 149.9 210.43 M8 Tm ad kIes 00D 0M. 23.01 122D 53.54 34.50 38.11 14.8W 23.2 16.54 34.51 1S.40 59.74 16.1

TOIM. 356.W0 0m 417.3 m1.6 a.87 a5.39 57.22 46Z 519.0 452.35 5n.04 64.41 M7.5 2.42

am cut 3.43 7.46 1.67 6.59 0.03 0.0 O.0O OA.0 0.m0 0 0.03 MO 0.3 0.03 lswit Corl. 0.0 O.D 0.0 0O. 0.03 0.0 0.0D Q0. 0.0 03D 0O. 0.O 0.03 0. fle, Cu. O.0O 0.03 o.0o M0. 0mO 00 00 0.D M0. 0.03 0.3 mO 0.OD 0.0 Tam ad DomI 03D 0.m 0o. 0M. 0M. 0MO 0.m 0ma 0.03 0mO 0.0 0.O3 0.O 0.

S81013. 3.43 7.46 1.a 6.59 0M. 0.m 0o. 0m 0mO 0m. 0mO 0.0 0. 0O.0

Om Cast 359.43 7.46 334646 22.75 da(B 62.4? 314.75 355 33.63 51.3 354.61 w.4 460.63 5s7.15 cslt ewe. O.0O O0. 42.60 3.48 88.25 SO 54.70 44.81 50.10 50.91 46.53 5o O 53.06 OX.7 fRi cm. om.0 O. 18.78 12.8 1Q2.0a 16.59 95.67 8D.70 10. 10.67 W.39 149.97 210.43 18. T_ ad Uies 0.0 0M 23.01 12.2 53.54 34.50 38.11 14. 23.29 16.54 34.51 15.40 59.74 16.18

lmm 359.43 7.46 419.G5 m.z2 8* 8SS.39 57a.2S 4d6Z6 519.01 4M.3 573.01 6m.41 73.15 W2.42 - 9 7 5.2 Page 15

00S amKARM FM mwarw uaw ( Rmp) NiLti )

"9 "98 "g99 mm Tws Projut ~uw~: _ cut Uot.tgi W~ Fo~.i01 LAmE icre* LaNA f_e* _L Ftp T____

5.mw1r.Slmt. 8 Prq am- Mt 1.72 0.0 0.52 0M 0.10 MM O. 0. 8SM 1.54 93 "Wedm a". 0.1? 0.0C O01 D.0m 0.0 0.0. 0 0.0Q 0.o 0.15 0.9Q Prmmot. 0.91 MD 0M 0.0 0D 0. 0.0 0.M .73 0.4 3.19 TM1 ad Dtes O0 0. 0.0D 0. OD. OD.0 0.0 0 0.0 0.0 o0.m

STO. 240 om 0.8 0.0 0.M MM CoD 0m 11.9 2.U14

14. 5xtai OMa 0.57 0.55 0.62 0.55 02 1.04 0.16 0.W. 3*2 S.49 LS1 dNysa ot. 0.06 0.1C 0.06 0.6 0.2 0.10 0., 0.10 0.30 0.55 OA. frt am. 0.3D 0.29 0 0.33 0.14 0.73 0.12 0.78 1.4 2.86 4. TAMad owu5b1om 0m 0o. Om 0. 0.0 0. 0.0 .OD0 m0 0.0 0.0

aSIP. 0.55 089 1.W 0.94 03? 1t 0.29 1.86 4.7S 6 .o

am ca 416.99 920.0 21 W.94 1413 1.8 O5A 1. S.42 Sq.e rueZ .wfeGM*. 45.e6 56.2 19.41 18.49 UA.0 17M 10.11 UA0 42.01 45.32 M mrk Cmt. WA.3 2940 13D.56 15.81 L.7$ 12.13 4845 O.A 119.17 1I45 2sn.49 TOeMad Dwi 644.81 12.B 36.73 3.46 19.55 3.72 9.23 3.5 32.53 1.18 46572 =!~~~~~~~~~MEO-_ _ _ __- _ Tm 746.91 911.77 36e.91 36070 274.40316.57 13.1 m.1 34.14u 90.46 W.79

am cost Mo0 Qm o0m om O. o.m 0.0 0m. S.10 144 19.15 Aslat cat. 0.M M.0 00 0M Q00 0.0 0.0D .O o.0 0.m 0.0 Pris cate. OD O.OD 0m. o.W om 0.0m QCD 0m o.m O 0. Tom Wm om 0.00.0 0.W 0.0 o.0m 0.0om0 0.0 0.0 00 mo.

SLop 0O.0 . 0.000 0. 0O. 0.0 Q0.0 0 5.10 14.0 19.15

a osat 416.99 552.07 2164 251.94 141.89 173.89 5.45 10.0 3712.523418.89 7M.41 Ny8iat aoit. 43.85 S5.27 19.41 18.49 1440 t7.81 10.1 12.60 45.01 0.5 5 FIMOam. 8916 2n1.d0 1w.56 18.81 98.7. 121.13 46.32 5.5 191.17ItR 31.49 Tomsew Mi. 66.81 12J. 675 3.46 19.5 3.72 9.2 3.0 3325.3 1W.18 45.72

WImL 716.91 911.7? W.91 L.70 24.40 316.57 173.31 1.11 56194 W.711 9 ANE 5.2 Page 16

Hmg - winamc ~r aisr mlms.r

ASSU M

l-ob 2-rd 8-rd 4-t &-t 6-tb 7-tb 8-t1 9-tb 10-t 1. ear 191 1999 19 1994 19o5 19908 197 1wr 1999 NW00 Iatornat.on.I 1sfliat.o 10.00 0.00 8.00 Dasotic flotioan 8.00 8.00 8.00 8.00 8.00 8.00 8.00 10.00 0.00 8.00 8.00 8.00 8.00 8.00 Ezdago Re t. ( FM YJ USe): Soore 190 8.78 8.00 8.00 8.00 During 199W 4.74 After 1990 5.24 2. Ec,lation Factor.:

a. Loca b. Frign

1-ot Yoer: 0.05 0.05 ? 2-nd your; 0.14 0.14 8-rd year: 0.22 0.25 4-tb year: 0.28 0.26 ot,er: 0.84 0.84 6-tb jer: 0.41 0.41 7-t yoer: 0.46 0.46 0-th jer: 0.85 0. 9-th year: 0.68 0.0 10-t yeur: 0.71 0.71

S. Co"skimae. booed an fmibilty tud"., bid prices for spin civil conotrutle, work, sod date riv durin Project preparation and pro/lmpprestl leelene to ahi,na. lb. baca cot eatit.o *are exprsoed In early 19"1 prieeo. - 99- AMNAX S.3

CHINA

ERTAN HYDROELECTRICPROJECT

Local Cost PinancijlpPlan (1991-95) (Y million)

1991 1992 1993 1994 1995

Capital Expenditures

SEIC 210 457 303 274 3o3

STIC 210 407 270 245 270

Subtotal 419 864 573 519 S73

IDC on Local Loans

SIC 6 28 56 84 117

ETIC 30 52 81 110 145

Subtotal 36 8s 137 194 262

Debt Service on IBRD Loan

SEIC 13 35 60 91 111

ETIC 13 31 53 81 99

Subtotal 25 66 113 171 210

Total Local Financing 480 1.010 823 884 1,045

Notess (1) Local financingwith 60 percent loans, 40 percent equity.

(2) SEIC and ETIC will share equally total local costs. 100 ANNE 5.4 Page 1

CHINA

ERTANHYDROELECTRIC PROJECT

Procurement Schedule

Main Civil ConstructionWorks Beginpreparation of bid documents June 1987 Invitationfor Contractors'Prequalifications January31, 1988 Receiptof Prequalifications May 14, 1988 Approvalof bid documentsby GOC July 1988 Noticeto PrequalifiedContractors December25, 1988 Approvalof bid documentsby Bank April 17? 1989 Bid documentsavailable to Contractors May 22, 1989 Pre-bidmeeting and site visit May 23-30,1989 Bid opening October25, 1989 Evaluationby EHDC-FinalReport Harch 15, 1989 GOC approvalof contractaward April 10, 1990 Bank approvalof contractaward April 25, 1990 Pre-contractClarifications and conditional AcceptanceLetter of Intent November25-December 12, 1990 ContractSigning July 1991 Instructionto CommenceWork July 1991 Contractormoves to site September1991 Poueet cmf i~

7 a6 S6riamo 1 2 8 4 a1m F inC, wto. he28.. wor cantAob Tgrbiuw au4 oneoratoo od Caauter/60DA l0i kV dp cabl Gsmotmw

02/1910/93 12/f0l/9 Gagin Drc.tian of tador do=tOJO 101J90 lOJOlJli 10/01/90 O//98 avloM02/10/ Apo,eu by Chi" gh ,t 0/01-04/i/2 0801/92-04/15/92 oW/0/2404/25/92 10/04/9.641/0/ 1/04/90-11JW/049 lO//9s1/04/93 Rovico of tbo World ik 03/03j92-06/01/02 05/01/92-04/01/8.2 0S/01/92-6/0/O 12I /-12,/ 1U/5/9S-M// 1/1/W12/0/93 04/15/94 09/01/92 l=, l lander dOni 07/05/92 07/05/W2 07/05/92 01A/s/94 01/15/94 01/15/94 rddaesd en clarificbticn 07/0/92-1020/92 0/20/-10/20/92 07/W/92-10/0/92 82/9 l 82/O4-04-S/01/ 2/01/94-06/0I/94 10/04/94 08/01/99 aide rain 12101/92 12/01/2 101/92 W7/01/94 07/094 07/01/94 Bid* ewl;

CHINA

uRTAN HYDROELECTRICPROJECT

Schedule of Disbursements ( million)

Bank FY and semester Semester Cumulative Project Bank profileLa (X) (2)

1992

December 31, 1991 45 4 12 3 June 30, 1992 65 110 29 10

1993

December 31, 1992 67 177 47 18 June 30, 1993 36 213 56 30

1994

December 31, 1993 37 250 66 46 June 30, 1994 36 286 75 58

1995

December 31, 1994 37 323 85 70 June 30, 1995 57 380 100 78

La Bankwide standard disbursementprofile for all sectors in China (April 25, 1990). -103 - ANNEX 5.6 Page 1

CHINA

URTANHYDROELECTRIC PROJECT

CONSTRUCTIONMANAGEHENT SnRVICES

Draft Terms cf Reference

A. Descriptionof Project

1. The multipurposeErtan HydroelectricProject is one of a series of power stations on the Yalong River and it will be developedmainly for power generationwith a total installedcapacity of 3,300 MM. The dam site is located on the lower reaches of the Yalong River at a distance approximately 46 km from Panzhihua City. The dam site is accessible by highway from Panthihua via Tong:ilin which is 17 km downstream from the da site. Tongsilin is a railway s'stion on the Chengdu-KunaingRailway 727 km from Chengdu and 373 km from Kunming. The closer airports to the project site are Chengdu airport and Kunming airport. Regular direct flights to and from Beijing, Shanghai,Guangzhou and Hong Kong are available at both the aforesaid airports. The detailed descriptionof the project will be made available to the selected consultant.

B. General

2. The overall responsibilityfor the developmentand constructionof the Ertan HydroelectricProject has been assigned to the Ertan Hydroelectric DevelopmentCorporation (EHDC) and its engineering branch the Ertan Engineer- ing Corporation (EEC),who is the designated project engineer.

3. Due to the magnitude and complexity of the project and because of the intended use of foreign constructioncontractors and foreign equipment suppliers,international type contractualarrangements, and foreign financing sources, EHDC would appoint an internationalconsultant to assist in construction management and work closely with EEC and Chengdu HydroelectricInvestiga- tion and Design Institute (CHIDI).

4. These draft terms of referencehave been prepared as an outline of the scope of work required. The consultant should elaborateon his proposed scope of work and may modify the required activitiesbased on his own findings, specifying any reasons for the modifications. The TORe should be amended before sending them to the consultantsto specify clearly responsibilities and roles of foreign and local consultants,as well as consultantswho will be selected to assist in the finalizationof bidding documents for electromechanicalequipment. The scope of work will include the followingbasic tasks:

(a) Management RequirementsDuring Construction;

(b) Contract Administration; - 104 - AUNN 5.6 Page 2

(d) Design EngineeringServices; and

(e) ConstructionSite Administration.

These above tasks are described in more detail in the ensuing paragraphs.

C. Management RequirementsDuring Construction

S. The consultant and EEC will form an organizationfor managing and coordinatingall aspects of the design and constructionof the works. This organizationwill be designated as the ConstructionManager (CM) which will report to EHDC. However, the CM should be independentin its professional activities. The foreign consultantwill be the lead firm and as such will be responsiblefor carrying out the policies establishedby EEDC, and for the *day to day* running of the project. The goal of the CM will .e to build a safe, reliable project on schedule and within the planned budget.

6. The principalmanagement responsibilitiesof the CM organization are:

Contract administration,including control of costs, schedule monitoring and coordination,change control, communicationand document control, and the establishmentof correspondingproce- dures.

* Constructioninspection and quality assurance, including site survey, constructioninspection, and inspectionin manufacturers' facilities to confirm the compliancewith the drawings and specifications.

v Design engineeringservices, includingpreparation of material and equipment specifications,construction drawings, incorporationof design changes, review of contractor and manufacturersubmittals, record drawings and review board support.

e Site administrationservices, including safety, camp management, inventory control, office services,project services,etc.

ESDC will arrange for land acquisition,reservoir clearance, relocationsand resettlementand power transmission.

D. Contract Administration

7. Timely completion of constructionof the Ertan HydroelectricProject will require the satisfactoryperformance and completion of each part of the works by a number of contractorsand suppliers. It will be the responsibility of the CM to coordinate and administer the work of each of these parties to bring about successfulcompletion of the works. The CM organizationwill therefore be structured to enable a safe and reliable project to be constructed within budget and on schedule. This is the primary aim of the organization for project construction. Checke and safeguardswill be set up to -105 - ANNE 5.6 Page 9 monitor the technicaladequacy, quality, costs and progress of each contractor, and te provide management with informationfor early correctiveaction if required.

8. The main responsibilitiesof CM in the area of Contract Administra- tion include the followtitg

(a) Control of Costs. Under the various contracts, the CM is responsible for measuring and certifyiug the works for the purpose of making interim and final payments to the contractorsand suppliers. Inspection,testing, and approval of the contractor'smate- rials and workmanshipwill be required prior to certification.

At the constructionsite, the physical dimensions of the various parts of the structureswill be measured or verified by the CM inspection staff as part of their routine checks for compliance with the designs and specifications. Reports of concrete placement, reinforcementsteel and form= rk check-outs for each placement, and other constructionitems must be compiled daily by the inspectors in the field. This daily informationmust be made accessible to the con tract administratorsin order for them to check the interim accounts submittedby the constructioncontractors, to agree with contractorson interimmeasurements, and to issue interim payment certificates.

Computationfor the final measurementof excavation,structure or section will be undertakenby staff on site as soon as all the necessary informationis available. Each contractorwill almost certainly undertakehis own independentmeasurements, and the CM contract administratorsmust investigateand reconcileany dis- crepancies and arrive at an agreed final measurement. Progress payments for the various supply contractswill be certifiedafter the CM confirms the percentage of each unit completed by the manu- facturer,or on the basis of defined milestones in the manufacturing or testing program.

Completion,maintenance and final payment certificateswill be required for the various contracts. Rigorous tests will be under taken before final acceptancecertificates are issued for mechanical and electricalplants, and each final payment will not be certified until the CM is satisfied that the contractorhas met his obligations. These obligationsinclude completion of all tasks such as cercification,record drawings, reports and data submittals.

(b) Schedule Monitoring and Coordination. Once a contract has been awarded for any of the constructionor supply contracts, the contractor will prepare a detailed constructionschedule. Each contract will have defined dates by which the various critical stages of the project must be completed, and each contractorwill have the freedom to prepare his own schedule for approval within these defined dates. This schedule may or may not be the construction schedule that has been used for pre-tender planning purposes, or -106 - ANNEX 5.6 Page 4

the constructionschedule submittedwith the contractor'stender. However, once this schedule is reviewed and approved by the CM, it will form the basis on which the contractor'sperformance will be monitored.

The CM also will be responsiblefor ensuring that the schedule for each part of the work performedby each contractormeshes with the schedule for other parts of the work performed by other contractors. Each contractor'sincentive to keep on schedule may be affected by interferenceand delays which the contractormay consider attributableto others. The management role of the CM thereforewill include checking of all interfacesbetween the various contractorsand monitoring the progress of each of the contractsvery closely.

The key to managing the schedule of a fast moving construction project is to have accurate and up-to-date informationin a form that will enable any factors that could delay progress to be identified early, so that measures can be taken to avoid or overcome the delays.

(c) Change Control. The organizationmust be equipped to facilitate settlementof disputes and claims within the terms of the contract, since the contractorswill inevitablyargue that in a number of instancesextra payment or an extension of time for completion is justified. A detailed analysis must be made for every such claim that is formally submittedwhich evaluates its merits in accordancewith the Contract; this analysis must be made available to the Disputes Review Board.

(d) Communicationano Document Control. Crucial to effective contract administrationwill be the flow and control of correspondenceto and from the contractors. This correspondencewill include certifications,schedules, material deliveribs, submittalsand contractual correspondence. Computerswill be used to record and process all the data rapidly so that it can be used for daily planning and for rapid evaluationof disputes with the contractors.

(e) CorrespondingEstablishment of Procedures. The performanceof these duties will require a set of procedures to be establishedto effectivelyexercise control of the project without introducing avoidable costs or delays. These procedureswill encompassall aspects of contract administrationincluding measurement and payment, schedule control, cost control, certifications,management of correspondence,preparation and issuance of change orders, inspection,testing, informationfor decision making, site administration services,compliance with drawings and specifications, and handling of claims formally submittedby the contractors. -107 - AM= 5.6 Page 5

E. ConstructionInspection and Quality Assurance

9. The CM organizationwill be responsiblefor developing and executing the inspectionand testing program to ensure that each item which forms a part of the permanentworks has been constructedin accordancewith the design and constructionspecifications. This program should include inspectionof mate rials and equipmentproduced off-site in various suppliers'shops as well as inspectionof on-sitework.

(a) Site Surveys. The CM will provide survey teams to check the contractors'basic layouts and to establish and maintain a permanent network of monuments and markers for precisemeasirement of defor- mations. The survey teams will also spot check local survey con- trols establishedby the contractorsfor setting formwork, etc.

(b) ConstructionInspection. At the constructionsite, inspection servicesmust be maintained whenever work is in progress. For much of the constru'tionperiod, full coverage will be required for 24 hours per day and six days per week.

Backfillswill be controlledby moisture content and density tests, and concrete by aggregategradation, slump, air content, temperatureand compressiontests. These laboratoryprocedures will be supplementedby field procedures such as nuclear density gauges and Swi8s Hlamer tests as well as inspectionsof the placement of reinforcingsteel, embedments,and form location and accu- racy. In addition,welds will be inspectedand tested with the latest radiographicequipment and techniques. This program should be based upon routine quality control measurementswhich, after processing,will provide a record of trends and enable early adjustmentsand correctionsto be made if necessary. The program wistmeasure and record what is done and process this data so that the design parameters can be checked and usable records developed for future safety appraisals.

(c) Inspectionin Manufacturers'Facilities. The quality assurance pro gram will also incorporateaudits of manufacturers'facilities to confirm compliancewith national and internationalstandards with respect to design, manufactureand testing. The inspection engineerswill visit manufacturers'facilities not only to audit the facilitiesbut also to check the various stages of the manu- facturingprogress, to examine materials and test certificates,to witness tests and, if appropriate,to arrange for independent tests. Manufacturingmay be undertaken in a number of widely separated locationswithin and out side China and the CM will arrange for routine inspectionvisits to be made by a local resi- dent staff of an approved inspectionagency. In other cases, the CM will arrange for inspectingengineers to temporarilyreside at the manufacturers'shops when this is justified by the inspection work load.

An additional important function of inspectionvisits to the various manufacturers'facilities will be to check on progress in -108 - ANNEX 5.6 Page 6

manufacture,testing and preparationfor shipment. With the tight constructionschedule planned for this project and its remote location,it is imperativethat all the employer-furnishedplant and equipment is delivered on time and in good condition. Thus, the inspectionstaff must monitor all stages of the manufactureof the equipment from award of contract to delivery, and recommend to managementany measures needed to expedite matters.

(d) Start-up and Commissioningof the Works. The start-up and testing of large hydroelectricunits requires a team approach. This team will be composed of personnel from the CM, the constructionand installationcontractors, and the equipmentmanufacturers, each entity being responsiblefor fulfillingits contractual obligations during the equipmentcheck-outs, start-ups and testing. A team leader, experiencedin start-upprocedures, will be assigned by the CM to direct the day-to-dayactivities of the start-up team.

Start-up and test proceduresare complex and exacting,and inevi- tably, the results of the tests form the basis for recommendations which may modify the future operating procedures and which the CM must incorporatein the project operation and maintenance procedures manual.

The objectivesof the CM in the area of start-up and commissioning are as follows:

e To coordinatethe performanceof tests with the various mAnufacturers'engineers and other entities involved in the commissioningand start-up.

* To assist with the developmentof accurate ard safe start-up and test procedures.

* To assist In performingtests and evaluatingtest results.

e To coordinatethe preparationof final start-up and test reports and formulate recommendations for future operating procedures and manuals.

F. DesiLn Engineering Services

10. The CM will utilize the services of the CHIDI as the nominated project designer for the preparationof specifications,final designs and constructiondrawings. During the constructionperiod the CM will be responsible for the following activities:

e Preparing specificationsand control documents for Employer-supplied permanentmaterials and equipment.

* Preparing detailed constructiondrawings which incorporatefinal design computations,results of tests and studieswhich continue -109 - AM S.6 Page 7

into the constructionperiod, and details of mechanical and electrical equipment.

* Incorporatingdesign changes to meet unanticipatedconditions encounteredduring constructSon.

* Ensuring the designs and drawings prepared by the constructioncon tractors are completed in accordancewith the requirementsof the contract documents.

e Ensuring that the design and drawings prepared by the equipment sup pliers are completedin accordancewith the requirementsof the con tract documwnts and are compatiblewith the other designs.

o Producing permanent record drawings showing actual dimensions and details of the finishedwork.

9 Providing support for meetings with review boards.

These duties are explainedmore fully in the follorAingsections:

(a) PermanentMaterial/Equipment Specifications. It will be the responsibilityof the CM (utilizingCHIDI) to produce technical specificationsand related special contract conditions (testing and warranty clauses, etc.) for all permanent equipment and materials. For equipmentand materials purchased from international sources, this work will include a technicalanalysis of bids received.

(b) ConstructionDrawies. During the constructionprocess, the CM (utilizingCHIDI) will continue to amplify the details of the tender drawings, to provide fV al verificationof design computations, to make revisions to final design taking into account the results of the tests and studies that will continue into the constructionperiod, and to prepare details when the manufacturers' designs for mechanical av.delectrical equipment are available.

The CM, with assistance from CHIDI, will supply the following informationto the contractoron supplementarydrawings approved for constructions

The exact locationsfor major structures such as the powerhouse, intake structure,spillways and log-passingtunnel.

Detailed dimensions of all member outlines, openings,projections, pads and locationsof embedments (such as anchor bolts and welding pads), waterstops, constructionjoints and control joints.

Reinforcementshowing location,size, and spacing of all rein forcing bars.

Details of miscellaneousmetalwork. - 1X0 - ANNEX S.6 Page a

* Mechanical constructiondetails showing the general equipment layout as well as the size and approximatephysical location of pipes, ducts, valves and other piping components. The drawings should include generic componeut desig- nations which will be used to identify additional requirements contained in the specificationssuch as material type, rating, etc. Detailed informationon Employer furnished equipmentwill need to be provided to the contractor in order for it to be incorporatedas necessary on the contractors' drawings.

e Schematicand interconnectiondiagrams for electric power and control cables.

e Layouts of power and control cable routes, conduits,and trays and location of grounding cables and grounding inserts.

0 Lighting fixture layouts and circuiting information.

o Schedules for conduits and cables required.

This informationmust be provided to the contractor in a timely manner as required by the constructionplan and schedule.

(c) Desi8n Changes. Although thorough investigationshave been under taken at the site over a number of years, and the subsurfacecon- ditions can be predictedwith a fair degree of confidence,it is inevitable that the major excavationswill reveal foundation conditions in some locationsthat are not the same as those pre- viously inferred. The differencesmay not be significant,but it is possible that in some areas it will be necessary to modify the designs. In this regard, the flow of informationand data from the site should enable timely design modificationsto meet unan- ticipated conditionswith the minimum delay and cost.

The CM must, however, take care to avoid introductingof design modificationsto effect marginal changes if there is any risk that such changes could disrupt the contractor'sconstruction plan and schedule. However, modificationsshould be made when necessary for project safety, and when it is judged that substantial improvementsor savingswill result for the project as a whole.

(d) Design Checks (ConstructionContractor Drawings). The construction contractorswill have their own design offices on site to design temporaryworks, formwork and reinforcingdetails, and to prepare concrete lift or other placement drawings. These designs and drawings must be checked by the CM to ensure that they are in accordancewith the requirementsof the contract documents.

(e) Design Checks (Manufacturers'Drawings). The manufrcturersof mechanical and electricalequipment will prepare and submit designs and drawings to the CM for review and approval. All such 111- - ANNEX 5.6 Page 9

designsand drawingsmust be checkedto ensurethat theymeet the contractrequirements and are compatiblewith the other designs. This may necessitateseveral revisions of the drawings,but it is an importantpart of coordinatingthe designand must be carried out expeditiouslyif manufacturingdelays are to be avoided. Such delaysmight affectthe overallproject schedule. (f) PermanentRecords. Many of the permanentrecords of the project will be in the form of drawingsincluding construction drawings, the con tractors'lift and reinforcementdrawings, manufacturers' shop drawings,geological maps of foundationsand surveyplots. It is the respousibilityof the CM to compilea completeset of thesepermanent records. A finaldesign report will be prepared by the CM whichwill documentthe finaldesign as modifiedduring construction.

The CM will also compilea set of "Record"drawings which record actualmeasurements of all featuresof the project. The data on which these drawingsare developedwill be compiledby the inspection staff,and once a stucture is completed,the CM will incor- poratethis data in the constructiondrawings to providea permanent recordof actualconstruction of each projectfeature. (g) ReviewBoard Support. EHDC will continueto employthe Special Board of Consultants(comprising both nationaland international experts)to reviewall maj3r questionsregarding design and the Impactof constructionmethods and fieldconditions on the design shown on the drawings. This Boardwill meet at periodicint^rvals throughoutthe constructionperiod. Therefore,the CM will have the responsibilityfor preparingmaterials for thesemeetings and implementingthe decisionsmade duringthese meetings which will be a continuingprocess throughout the constructionperiod and the first filling of the reservoir.

G. Site Administration 11. The CM organizationwill be responsiblefor all matterspertaining to administrationof site servicesand projectlands, as followst

e Safety,including monitoring of the contractors'safety programs.

o Inventorycontrol including purchasing and warehousemanagement.

* Project services includingaccounting and auditing. H. ConstructionManaaer Organization

12. The following are guidelines to be used in preparing the proposedCM organizations (a) The internationalcon6ultant will be requiredto enter into an agreementwith EEC for performing the constructionmanagement 112 - ANN 5.6 Page 10

services. The CM will be responsiblefor the ^day-to-day'management and administrationof the project.

(b) The internationalconsultant will be designatedas thielead firm of the CM organization.

(c) The constructioncontractors and equipment sapply contractorswill be officially advised by BUDC of the role of the GM.

(d) The CM will be a fully Integratedteam of personnel from both TIC and the consultant.

(e) The consultantwill develop a functicnal organizationchart clearly indicatinghis proposed concepts for managing the project. The consultant will also present his proposed staffing requirements for the duration of the proj tct togetherwith an organization chart.

(f) All positionsassigned to the consultant staff will have an SEC counterpartwho will be trained to assume that position at the earliest practical opportunity.

(g) CHIDI, who prepared the basic project tender documents and drawings, will be retained by the CM as the nominated project designer for services related to the final detailed design and construction drawings. CHIDI will be fully responsiblefor this work. How- ever, it is intended that CM will appoint several design engineers to CUIDI to coordinate and monitor design activities. - 113 - ANNEX5.7

CHINA

gRTANHYDROELECTRIC PROJECT

The Engineering and Construction Management Consultancv

Followingis the tabulation of the engineering activities related to the Project,the time requiredin each phase of construction,and the areas of expertiseneeded, on an annualbasis.

Steff-eati it1m 1991 1592 1098 1094 1996 1906 1997 199 1999 Totol

EArchd itR"acture i- 1 1 a 5 6 - - - 1S Undergroundwork 1 2 8 8 8 - - ie- llecanical equlpmnt - - 1 1 2 a 8 - - 10 Electrical equip6nt - - 1 - - - S 8 - 7 H"Ig-pressure gate structures - 1 1 2 2 2 2 2 - 12 Lcg-pasingfecil ltie - 1 1 1 1 1 1 1 - 7 Subtotal 6

Leadconsultant 4 12 12 12 12 12 12 12 12 100 Consultant for LotI 4 12 12 12 12 12 12 12 12 100 Consultant for Lot IX 4 12 12 12 12 12 12 12 12 100 Contractenlnoer 4 12 12 12 12 0 O 0 a 70 Coordinatingngineor 1 0 6 a 8 8 10 10 - 42 Clelai nm oor - 0 0 0 0 12 12 12 12 72 Cost estimator 2 2 1 1 1 1 1 1 - 10 Reportenginer 1 2 2 2 2 1 1 1 - 12 Schoiulingand plenaing 2 2 1 1 1 i 2 1 1 12 Financeand economics 1 2 2 1 1 1 1 1 - 10 Subtotal flM Qbt_Ov surnmx god ogndtruetlon wiItJiTiupervllon eftloor - 2 8 a 0 9 9 2 2 44 Laboratoryengineer - 2 4 4 4 2 4 4 - 24 In.trucntotlonelnginer - - - 0 0 0 0 0 - 80 Foundotlonondga3logy 1 8 8 4 4 4 _- - 17 molo struour.englneor - - 2 - 0 0 4 - - is Electrical eIner - - - - - 8 6 0 0 21 Undergroundworks engineer - 0 0 0 0 0 - - - so Subtotal 184 Eroctlon and ) no of E/M equimaimnt T-P ne engineer - - - - - 6 12 12 12 42 Generator engineer - - - - - a 12 12 12 42 Computer monitoring engineer ------12 12 24 S60 kV 01S olect'leol enginer ------12 12 24 600 kV eable electrical onginoer ------12 12 24 Tranoformer, breokr electriecal engineer ------0 12 18 Controland protectlon engineor - - e 12 18 Test and toet operatlon onginer ------12 18 Engineor.for inspectionot Hydro plont - - - 2 2 2 2 2 - 10 Subtotal 282 Mleollaneou naineoarInagontinsonci

v*ron1Mntalmonitorlng and protection epocililste - - - - 2 65 6 a 20 SpseialBoead of Consultonto (consleto of 6 esmbr) 6 6 6 56 sC 5 5 45 DisptueReVIew Board (consist. d am ube3aro - a a a 8 8 8 a a 24 T0X811 X.1 - 114 - AMNEX5.8 Page 1

CHINA

ERTAN HYDROELECTRICPROJECT

Power Pricing Study Terms of Reference

A. Background

1. As of December 1990, the capacity of the Sichuan interconnedpower grid was about 4,800 MW, of which 1,460 HW was seasonalhydropower and most of the rest small and medium size coal-firedunits; the transmissionnetwork voltages werc 220 kV and 110 kV.

2. By the year 2000, installedcapacity is expected to approach 13,000 MW with the project and other hydroelectricplants totalling6,000 MS. A 500 kV network will be developed. With the exception of the project owned by the Ertan HydroelectricDevelopment Corporatiok. ;EHDC), the major power facilitieswill be controlledby the Sichuan Electric Power Administration (SCEPA)which is the entity responsiblefor the dispatch and sales of energy to the consumers.

3. It is plausible that, with the completionof the already committed expansion investments,power shortagescould be eliminatedwith the commissioning of the project in 1998-2000. The growth in daytime load and in seasonal uses of electricitycould then be ve-y rapid; the provision of adequate price signals to consumers and producers is an important policy instrument to rationalize demand patterns and the utilization of power supply facilities.

4. The pricing of the electricity generated by EHDCand sold to SCEPA must ensure not only the financialviability of the parties but also that the project is optimally inserted into the operationof the grid and the economic value of its output to that system is maximized. The principles of this pricing were agreed and their applicationto the design of a contract between EHDC and SCEPA must be coordinatedwith the setting of provincial electricity prices.

B. Objectivesof the Study

5. A power pricing study will be carried out with the followingobjectives:

(a) to transfer to SCEPA and EHDC modern methods of power tariff design based on criteria of economic efficiency,financial ade- quacy and fairness;

(b) to look into the problems raised by the transition from the existing pricing arrangementsto more desirableones and to propose a medium team action plan; - 115 - 11ANNS.8 Page 2

tc) to provideguidelines for the designof the long tern salescontract for the outputof the Ertan project.

C. Scopeof Works 6. The lricingstudy will considerthe desipnof power tariffand structure;it will cover sales at hiah, mediumand low voltageas well as purchasecontracts with bulk energysuppliers. The study shouldevaluate and highlightthe relativemeritsldemerits of the proposedapproach in comparison to the ones adoptedin China so far and to purelyfinancial approaches. 7. Part As ProiectOutput Pricing (a) Analyzingfinancial and marginaleconomic costs of generationfor SCEPAand EHDC by functionalcategories (peak power, firm and secondaryenergy); (b) Designingcandidate tariff structures for the sale of the project outputtaking into accountthe value of this outputto SCEPA; Xc) Analysingthe financialsoundness of the proposedrates from EHDC'sand SCEPA'sviewpoints; (d) Recoumendinga tariffstructure and levelfor thls sale;

4e) Reviewing internationalpractice and advising on the design of key technicaland legalclauses of the contract. 8. Part B: Gtid Power Pricing (a) Analyzingsystem load and individualdemand patterns by voltage level;

(b) Analyzing financial and marginal economic costs of power transmission and distribution;

(c) Calculating marginal costs of service and comparing them with current revenuelevels for typicalconsumers; (d) Designingcandidate rate structuresfor smallbulk purchasesand salesto consumers; (e) Analyzingthe financialsoundness of the proposedrates;

(f) Selectinga targettariff structure and level; (g) Designingan implementationstrategy for the targettariff, including improvementsin meteringand billingsystems;

(h) Recomendinga mediumterm actionplan. - 116 - ANNEX 5.8 Page 3

D. Method and Organization

9. The study will draw on the method, materials and experience gathered from the East China Power Pricing Study which was completedunder the BeLlungangThermal Power Project. It will make ample use of the expertise available from the Water Resources and Electric Power Economic Research Insti- tute in Beijing. However, the large share of hydropowerand the important EHDC power sales contract are very novel and specific features of the study; foreign consultancyservices and a mid-course overseas study trip are needed to assist on these aspects and review the practical steps recommendedfor tariff improvements.

10. The transfer of know-how will also take place through on-the-job training and three workshops organized at tl"einception stage and to review the interim and final study reports.

11. The study will be carried out jointly by EHDC and SCEPA for Part A and SCEPA for Part B under the auspices of the Ministry of Energy. It will be managed by u Steering Committee representingthe parties and coordinatedby a Principal Investigator. The Committeewill exchange views with the Bank on the progress and findings of the study.

12. The pricing study will make use of the output from the systems planning studies being carried out under the Special Studies and Planning Support Project financed by the Bank. Sample load measurementsand analyses should be started as soon as possible. Key dates in the timetable for the study are planned as follows:

Startup March 1992 Interim report December 1992 Final Report June 1993

E. Cost Estimate

Foreign Experts:. 5 staff-months $100,000 .Overseasstudy trip: 6 Chinese experts $50,000 Local costs for data collection and processing, (60 manmonths)workshops organization and contingencies Y 200,000 -117- ANNEX5.9 Page 1

CHINA

ERTAN HYDROELECTRICPROJECT

Study of Optimal Power Plant and ReservoirOperation

Terms of Reference

Objectives

1. The objectives of the study are to examine the technicaland economic aspects of operating the Ertan HydroelectricStation and its storage reservoirand to establish rules and procedures for their optimum exploita- tion. The study will also develop the attendantcomputer software packages and specify facilities for their execution.

Scope of the Study

2. The study should cover, inter alia, the following steps:

(a) Review present methods and procedures for gatheringand interpret- ing hydrologicaldata and for determiningthe base and variable power and energy output of the station;

(b) Establish a methodology fcr preparing forecastsof expected long- term water inflows in the reservoir;

(d) Investigaterelevant facts and featuresneeded to achieve optimal operation of the Ertan power plant and reservoir in the integrated power supply system taking into account the changes in the system configurationover the period 1998-2010;

(e) Determine rules and procedures for the optimal utilizationof the power plant, and the schedulingof generatingunits taking into account the constraintsand factors influencingplant maintenance;

(f) Develop basic principles and methods for practical and efficient calculationof weekly economic decision rules for reservoirman- agement based on actual reservoir level, projectedenergy requirements and system capabilityover the followingweeks;

(g) Develop routines and programs for daily, weekly, and seasonal water releases taking into account power system requirementsand physical constraints;and

(h) Specify computationalfacilities and applicationsoftware required to apply routinely the procedures identifiedand developedunder (e), (f) and (g) above. - 118 - AMNE 59 Page 2

Method and Program of Study Work

3. SCEPA will appoint its own specialistsand hire local expertswho will participate in the executionof the study. Foreign consultantswith the relevant operationalexperience will be employed to assist in the executionof the study. EHDC and SCEPA will organize visits for their operationalstaff and management to similar large hydroelectricpower plants with storage reser- voirs. If required, applicationsoftware packages would be purchased or obtained in connectionwith the executionof this study.

4. EHDC will prepare a detailed program of the study and visits not later than June 1992. The study is expected to take one year to complete.

Cost Estimate

5. The cost estimate for the study and related visits is as follows:

- Foreign experts, 18 staff-monthsat US$20,000 $360,000 per man-month, includingall costs

- Overseas study visits for EHDC and SCEPA opera- $90,000 tional staff and management,15 man-months at $6,000 per man-month, includingall costs

- Local costs related to the preparationof the Y 200,000 study, collectionand processingof data

Totals Foreign $450,000 Local Y 2C0,000 -3119 - ANNEX 5.10 Page 1

CHINA

ERTAN HYDROELECTRICPROJECT

Resettlementand RehabilitationPlan

Project Area

1. The inundationof the Ertan Reservoir on the Yalong River will entail the resettlementof approximately30,000 people living in 31 villages and one town in five counties in Sichuan Province. The affected area is in Miyi and Yanbian Counties of PanzhihuaMunicipality, and Yanyuan, Dechang, and Xichang Counties of LiangshanAutonomous Prefecture of the Yi National Minor- ity. No Yi national ethnic minority people will be displacedby the project. The banks of the Yalong River, as well as tributariesAkeni, Tengqiao, Shuwa and Pingchuan Rivers, are steep slopeswith sparse vegetation, scatteredcul- tivated plots, and widely dispersedpopulations. The banks of the tributary GaniyuRiver are relativelygentl qlo'es with a more concentratedpopulation, includingYanbian town and cult. lands. The physical assets to be sub- merged by the Ertan Reservoir a Aated in Table 1.

2. The surface area of tk. An Reservoirwill be 101 km2 , or about five times the area of the existin, river bed. The reservoirwill inundate 1,656 ha of cultivated land, 2,440 ha of grass hillside, 1,978 ha of fuelvood forest, 1,042 ha of timber forest, 838 ha of paddy field, 818 ha of dry land and 692,000 economic trees and other land and assets that in comprehensive 1983 surveys included 961,000 m2 of houses, 146,000m2 of other buildings,16 small hydropower stations (2.3 MW), 358 km of highways, 397 km of communica- tion lines, 648 km of transmission and distributionlines, 819 km of broadcast lines and 12 factories. Samples of large livestocksuggest reservoir-area cattle and pig populationsof about 7,000 and 30,000 head respectively. Proj- ect constructionsites will requirean additional 14 km2 of land that has mined ownership and uses. The three major resettlementsites at Hongge, Pinshan and Moshiqingwill require 29.4 km2 of land that consists entirely of abandoned plantationsand wasteland. The property affected by the project is identified in Table 1.

Affected Population

3. At the time of project appraisal the estimated number of persons that would be directly affected by the project was about 30,000. This total includes 1,200 persons to be displaced from the 14 km2 constructionsites; 13,900 persons of farm families living within the 101 km2 reservoirarea; 2,950 persons of farm families living above the reservoir areas but having land in the reservoir area; 5,015 urban dwellers living in Yanbian Town; and 1,645 urban dwellers living in other parts of the reservoirarea. The base- line total (24,710)has been adjusted by an increase in population (2,197 persons) due to urban migrationbetween the end of the survey year, 1983, and 1995 (3 percent of the 1983 populationcompounded annually for 11 years) and natural population growth (3,050 persons) in the reservoirarea (I percent of the 1983 population compounded annually for 11 years), plus rounding of num- - 120 - ANNEX S.10 Page ,!

Table 1s PROPERTIESAFFECTED BY COUNTY

Yanbian Miyi Dechang Yanyuan Xichang Totals

Farmland (ha) Paddy 589.3 124.5 31.5 92.7 0.5 838.5 Dry 263.2 115.6 34.4 77.7 5.2 496.1

Reclaimedwasteland for forage (ha) 183.5 58.7 18.7 60.6 0 321.4

Other land (ha) Fish =xtd 0.6 0 0 0 0 0.6 Orchard 1.6 0.1 0 0 0 1.7 Timber 766.1 181.1 44.4 48.5 2.3 1,042.5 Fuelwood 1,086.7 314.6 97.4 408.4 71.8 1,978.9 Grass 801.0 799.4 23.3 787.9 47.9 2,440.3 Economictrees La 464,874 66,574 16,573 11,406 0 692,083 Dwellings(m 2) 771,222 118,488 15,181 31,059 0 961,499 Other buildings(m) 105,306 30,258 2,252 8,494 0 146,320 Factories(no.) 12 Mines (no.) 1 Hydropowerstations (kw/site) 1,187/3 336/3 55/1 516/8 0 2,344116

La Includestree crops such as tung oil, fruittrees, tea, bamboo,etc. bers in the planningprocess. Populationgrowth in the reservoirarea will be monitoredannually until resettlementis completed. ResettlementPlanning and Organization 4. Planningof resettlementand rehabilitationof the populationto be displacedby the Ertan Leservoirbegan in 1984. At that time a preliminary surveyof the assetsaffected was carriedout by the Bureauof City and County Construction,Land Bureauand EnvironmentProtection Bureau of the Government of SichuanProvince (GSP), with the help of ChengduHydroelectric Investiga- tion and DesignInstitute (CHIDI) of MWREP. The CountyLand Bureausand City and CountryConstruction Bureaus, which will be key implementingorganizations at the Countylevel, have cooperatedin detailed,site-specific development planning, also assistedby CHIDI. The GSP will be responsiblefor implement- ing of the Resettlementand RehabilitationPlan throughthe line agenciesof the countygovernments, as indicatedin Figure1. The governmentsat all levelsare responsiblefor land acquisitionand overallresettlement and reha- bilitationpolicies. The migrationoffices at each levelare responsiblefor resettlementplanning and implementationwork, includingconstruction, trans- -121- ANNEX 5.10 Page 3

port and establishmentof production infrastructureand facilities in receiving areas.

Pizure 1: RESETTLEMENTAND R}EABILITATION

Government of Sichuan Province

Migration Office of Land Bureau of GSP

Governmentsof Panzhihus (Dukou)Municipality and Liangshan AutonomousPrefecture

PanzhihuaMigration Off ce of Land Bureau

PanzhihuaOffice for Construction ISupport of Ertan Project

Liangshan Autonomous Prefecture Migration Office of Land Bureau

Governments of Yanbian, Miyi, Dechang, Yanyuan, Xichang Counties

Migration Coammittee of Yanbian County Migration Office of Land Bureau of Miyi County Migration Office of Land Bureau of Dechang County Migration Office of Land Bureau of Yanyuan County Land Bureau of Xichang County

S. A resettlement plan itemizes the location,schedule, and quantities of work of the respective schemes. Reservoir area resettlers have been aware of the project and the need to move since 1983. Construction site resettlers have been informed around 1987. Government representativesand at least several dozen private citizens of villages that will move to the fongge, Moshiqing or Pinshan receivingareas have visited these areas and participated actively in the reeettlementplanning process. In accordancewith the plat, 204 families have already been moved from constructionsites to nearby areas and the remaining1,000 inhabitantsof the sites and base camps will be moved before June 1991 to Pinehan. In Yanbian County, farmerswill be resettledby - 122 - ANNEX 5.10 Page 4

moving to higher elevations in their present village at the reservoirmargin (2,000 persons),by moving to the Hongge ReceivingArea (7,600 persons), and by becoming miners (4,600 persons) at the Hongni Coal Mine. Nonfanmers (7,800)will move to Moshiqing, includinggovernment offices and small industries. Residentsof the Yumen and Ganyu rural area towns (210 persons) will move to higher elevations in their present villages. In Miyi County, 3,100 farmerswill be resettledat the Pinshan ReceivingArea, 180 others will be resettledby moving to higher elevations in their present village. Approxi- mately 900 persons associatedwith the Ertan Clay Mine will be moved to higher ele-rationswith the mine. Farmers in Liangshan Prefecture (1,500 persons) will be resettledby moving to higher elevations in their present village.

6. Annual requirementsand plans for agriculturaldevelopment, trans- portationof portable assets, and acquisitionof steel, cemezitand wood for constructionhave been itemized and presented in a series of tabular supple- ments to the September 1989 documentsprepared for project appraisal.l/ The provincial office that is responsiblefor implementingthis plan has assigned five of its 22 existing staff members to the Ertan Project. City, prefecture and county resettlementinstitutions that are responsiblefor implementingthe plan currentlyemploy 54 persons and plan to add 11 more by 1992 for handling the Ertan Project resettlement. PanzhihuaCity has created an "Office of SupportingErtan Power Station Construction'and has assigned the Vice-Mayor of Panzhihua City to supervise its progress. EHDC will establish a resettlement office that will regularly inspect and report on physical progress and subcontractindependent studies on the socioeconomicconditions of resettlers and hosts. The monitoring of physical progress and socioeconomicconditions will regularlyaddress the physical progress of the resettlementoperation.

ResettlementPrinciples and Guidelines

7. Compensationand resettlementof the affected populationwill be based on the "Land AdministrationRegulations" and "Statutefor Land Requisi- tion for ConstructionUse by the State" issued by the PRC State Council, the 'DesignNorms of Reservoir Submersion for Water ResourcesProjects' issued by MWREP, and the 'ProvisionalRegulations for Land Management of Sichuan Prov- ince" promulgatedby GSP. These documents and the present administrative practice of GSP provide the followingbasic principles for resettlementand rehabilitation:

(a) Compensationfor dwelling is based on a 1-in-20-yearflood level;

(b) Compensationfor agriculturalland is based on a 1-in-5-yearflood level;

(c) Displaced persons and facilitieswill be reestablishedin the near- est availablesites within their respectivecounties and, if possible, within their original townships;

(d) To the extent possible,displaced people should be enabled to continue in their prior occupations;

11 In Project File. -123 - ANN= S.10 Page 5

(e) Resettlementshould be arranged so that physical and human resources can continue to be at least as productiveand living conditionsat least as convenientas they were before the move;

(f) Plot sizes for resettledfarmers should meet minim=m standardsso as to allow the farmers to continue making a living on the land;

(g) Durtng the transitionperiod, the provincial governmentwill supple- ment the agriculturalproduction of farmers with grain, fuel, and fodder as required;

(h) Public facilitieswill be reconstructedto at least preexisting standards;

(i) Supply of constructionmaterials (steel, lumber and cement) for the reconstructionof dwellings,buildings, and other facilitieswill be given priority;

(j) Compensationfor dwellings,houseplots, lost wages and moving expenses will be paid to heads of householdsshortly before the move. Compensationfor productiveassets and infrastructurewill be paid to the local (village)government having jurisdiction;

(k) While local governmentshave assisted in planning resettlementand rehabilitationfrom the beginning, the affected populationwill be informed and involved as participantsin finalizingthe project formulation;

(1) To the extent possible, the integrityof neighborhoodsand hamlets will be maintained in the resettlementprocess;

(m) Resettledpersons will be allowed to return to the reservoirarea to plant and harvest crops and salvagematerials until their lands are flooded; and

(n) To the extent possible, individualhouseholds will be given a range of choice in regard to:

(i) the design of their dwellings;

(ii) the availabilityof constructionmaterials at official prices;

(iii) opportunityfor buying additional constructionmaterials at market prices;

(iv) the quality of their dwellings;

(v) the building contractorsused; and

(vi) the disposal of materials from their old homes. - 124 - ANNEX 5.10 Page 6

Hongge and Pinshan ReceivingAreas and Optimizationof AgriculturalProductiv- ity

8. Together these two sites are designed to accommodate11,000 rural resettlers. Their productivebases will be developed by reclaimingwasteland and abandonedplantation land to produce food and cash crops. This will be achieved through the uoe of gravity irrigationsystems supplied by river water that is pumped to ponds created at higher elevations. The Hongge Receiving Area has a land area of 1,862 ha and is owned by the State, which has the right to use the land accordingto relevant regulations. Approximately408 ha of this area currently is used without contract by nearby farmers on a rota- tion and single-crop-per-yeaibasis. T1"'t'ffsetthe lss of this use, the project will allocate 78 ha of irrigated land to nearby farmers (hosts)and include this land and the costs of preparationand irrigationin the overall Hongge resettlementprogram. A similar arrangementwill be made at the Pinshan ReceivingArea. Detailed cropping patterns and schedules for its development (includingpumping and irrigationrequirements and systems) have been prepared and evaluated to the feasibilitylevel of detail,with the involvementof local authoritieswho will construct the systems. Arrangements for the distributionof water and the control of quotas, inputs, cropping patterns,marketing, and operationand maintenancewill be handled by existing institutionsin each area. Fuel and fodder requirementshave been considered but may need further attention since they will be met in part by controlled lopping of branches from trees in off-site areas. Electricityto provide irrigationbefore Ertan begins to generate revenue will be paid for by the Sichuan Province ResettlementOffice, with resettlementfund revenues from other hydro projects which are already in operation. In calculatingthe net benefits of resettlement,an allocation of 1.5 mu (15 mu - 1 ha) of irrigated land per capita, an electricityprice of Y 0.04/kWh,a gravity irrigation system, and a dry year with a 1 in 5 year return period were assumed. The net benefit from resettlementis Y 939/personlyearas compared to a present income of about Y 450/person/year. Research to support optimal cropping patterns and to reduce water requirementsthrough shifts to more efficienttypes of irrigation will begin during the constructionstage.

Drawdown Agriculture

9. Shoreline landslidesand unstable areas have been identifiedand mapped by geologistswho traversedthe entire reservoirmargin on foot. The populationaffected in such areas will move houses to higher elevations in the same village. They will either continue to plant lands which are unaffected or will be allocatednew agriculturallands in the same village if their farm- lands are also affected. In addition,much land will be exposed annually during the dry season when the reservoiris drawn down for power generation, and some of this with very slight slope will be suitable for one crop each year. But the timing, duration and extent of this drawdown zone in any one year is difficult to predict or rely upon without the benefit of actual experience with the reservoir operationover time. For this reason, no families will be made dependentupon drawdown agriculture;instead, drawdown lands are considered a bonus on top of replacementland allocationsto be allocated by local government. - 125 - ANNEX 5.10 Page 7

10. Coal Mining. Displacedpeople changing occupationsto coal mining at the expanded Hongi Coal Mine (expansionfrom 0.45 million tons to 1.05 million tons 1991-96) are expected to earn a minimum Y 2,000/personlyear. This is considerably better than families continuing in agriculture. Many families actively seek to place one of their members in coal mining employment, so difficultiesin recruitingdisplaced people to this work are not anticipated.

11. Yanbian Town. Small industriesand governmentoffices in Yanbian Town presently will be relocatedto the new site and most townspeoplewill continue employment in their present occupations. Due to transportand commu- nication rdvantagesof the new site, the existing small industriesand many new ones a..eexpected to do well, in comparisonwith limited opportunitiesfor growth in the former more remote location.

SubsistenceAllowance During the TransitionPeriod

12. The income of resettlerswill be sustainedduring the transition period by an arrangement that will allow some family members to be hired by the project to develop the receivingareas, and others to remain behind to cultivate land in the villages to be inundated. Incomeswill be regularly evaluated by the socioeconomicmonitoring program.

13. ResettlementMonitoring. The monitoring of progress in the resettlement and rehabilitationprogram will be subcontractedby EHDC to an independent socioeconomicresearch institution. The Terms of Reference for this work require, inter alia, that: (i) the monitoring be conductedannually beginning in 1991 through such time as program objectivesare achieved; (ii) monitoringwill cover samplez drawn from all major sites and will utilize standard survey, participant-observationand case study methods; and (iii) in addition to indicatorsof progress in physical works (e.g., land, housing, infrastructure,fuel, etc.), indicatorsselected for monitorivg shall include standard demographic,socioeconomic and health variables designed to measure the well-being of the resettledpopulation.

Training and Staff Development

14. EHDC has designed a staff developmentprogram includingdomestic and overseas seminars,workshops, short courses, study tours and literaturefor strengtheningthe capabilityof resettlementstaff at all levels of government.

Cost Estimate

15. The cost estimate is based on the resettlementplan and is detailed and comprehensive. It incorporateslessons learned from other projects and takes into account feasibility-leveldesigns for the major receivingareas (see Table 3). Members of the resettlementplanning team have visited the Shuikou HydroelectricProject to obtain first-hand informationon the problems that were encounteredthere and have integratedthis informationwith the cost estimation and materials planning for the Ert&a HydroelectricProject. The cost estimate has been updated to early 1991 unit costs. Annual quantitiesof work and materials have been identified (Table 2). A 15 percent physical 126 - ANNEX 5.10 Page 8

contingencyhas been included in the estimate. Price contingencieshave been included that are based on the same assumptionsthat were used for the con- structioncost estimate. The base cost of Y 429.38 million and the total cost of Y 608.69 million have been included in the overall project cost estimate (Table 3).

FinancingPlan

16. Annual budget requestswill be initiated in August of each year by each county resettlementoffice. These requests will be passed upward through the city or prefecture resettlementoffices to the Sichuan Province Resettle- ment Office and finally to ENDO. EHDCwill incorporatethese requests into its overall budget request for the followingyear and then submit 50 percent of this request to the State Energy InvestmentCorporation and 50 percent to the Sichuan Energy and CommunicationsInvestment Corporation. Each of these investmentcorporations will release funds to EHDC, 40 percent of which will be issued as grants that EHDC is not required to pay back, and 60 percent of which will be issued as loans that EHDC must pay back with interest. The total cost estimate is considered adequate to resettle all affected persons so that they are at least as well off after resettlementas they were before resettlement.

Reportingand Supervision

17. EHDC has agreed that its resettlementmonitoring cell will report physical progress on resettlementto the Bank on a quarterlybasis, in the same manner as EHDC reports progress on the main works. Also, EHDC has agreed to include resettlementin the terms of reference for the internationalEnvi- ronmentalPanel (EP). This arrangementwill be adequate to insure that resettlement is implementedas planned. The members of the EP will receive all the quarterly reports of the EHDC monitoring team and of their subcontractor,who will conduct socioeconomicevaluations on the same schedule as the quarterly reports on the mAin works are submittedto the Bank. The EP will be required to give a formal reaction to each report for the first two years after the start of construction. Members of the Panel will visit the project once every six months for the first two years and more often if problems occur. ANN S105. Page 9

labI: CST eSrLDAM FOR EWAN fRD.W inErTLBT (in 1991 prices)

(Ai6 Ulit Coot CY) Uuentity Ce (10 Y) M g "o Ohv TC. t-.t M t

Land8enaptiz So6978.5 36 045.0 Cul.v,watod lend hae 38,00o 1,81.6 10,81.5 2,824.6 7,735.2 17.0 Conttin 48,249. 8.47 27839.4 240.18 7'924.4 8.98 2,175.8 cout ha 9,00 12.47 1,24.5 12.47 1,284.5 170.40 5'82.2 8.67 167.0 Fish pod, hea 88,000 0.6 19.6 ttneeplot4 ha 0.6 19.8 388000 56.47 ,868.2 42.88 1,896.9 9.78 821.1 R.clasud/fobs tend ha 88,000 2a1.4 10,60S.2 1.0 38.0 3.40 112.2 188.47 6,054.4 58.67 1S6.0 18.67 616.0 60.60 1, 999.8 Roett" sobaidissWon nt 48,269.6 w.1 27,889.Z Cult-vted l1nd be 7,924.4 2,175.8 5,62.2 5.67 a3,000 1.810.6 48,249.0 828.47 27,s89.4 240.18 7,924.4 1V FPtu PeM he 83,000 0.8 19.S 65.s9 2.175.8 170.4 5,623.2 8.67 187 Copona,stion for ocon_eic trea no 16.5 60,992.0 11,071.4 448,563.0 7.819.1 s6,774.0 1,102.8 16,s73.0 278.5s 4.4062.0 2,877.0 "ammo recotnptct.on toot 2 27,187.8 20,8am.6 4,698.8 )lnoAeo 534.821.0 374.5 1 075.4 srick-coeant 21,845.9 16,5s9.4 a,425.4 860.2 12.0 141.0 18.6 143.0 18.6 1 027.9 Brick-woo 98. 1,436.0 Earth-wood 18.2 1,456.0 186.2 4 44.0o S9'8.0 17,406 &,814.08 13,697.9 59,8w4.0 Thaadhod ctteot r 27.5 28'866.0 2,612.1 8,860.0 301.8 18,052.0 794.8 Animl 642.37 1,120.0 632.5 9.626.0 264.8 241.0 rd e 87.5 11,t96.0 8,07.9 82,406.0 6.6 819.0 8.6 Lautinof 2,26.1 19 001.0 822.5 1,620.0 44.6 8,170,0 224.7 27.8 3,072.0 84.4 1,748.0 48.1 1057.0 Apprteaapt .tructure 1,04.1 29.0 262.0 7.2 5.0 0.1 C4 nCr,ndrrina *rea. 8.0 119.8 14.8 5.5 104,130.0 572.6 37,02.0 473.8 47.5 '4 l0uo pits 5.S 1,SB69.0 11,16.0 61.5 1,200.0 6.6 4,672.0 28.7 Netjune-eaetiat 91.1 a69.08 18.5 6,847.0 48.6 1,996.0 7.7 pVito 22.0 8,828.0 187.6 8,495.0 186.9 2,957.0 16.8 A niaawetor P.to 11.0 718.0 '2.0 0.7 Sparo;.edina 7.9 704.0 7.8 14.0 0.1 m-as .5 7,244.0 204.9 84,711.0 &xned poulaticn poran 191.0 1,668.0 9 1 870.0 4.8 1,610.4 2,948.0 4,747.5 2,109.0 8,896.4 ss9.0 1,851.1 bt.rsal r,moemet coot 18,619.0 1,974.7 14,1t6.0 L ;D,otaKc roloeption peroo 1,459.6 a,238.0 418.3 a28.0 21.8 1,148.0 75.5 12.0 1100.0 1,465.2 6,000.0 10566.0 8100.0 409.2 lbw. e beclwrd por7e1 669.0 509.8 6p115.0 403.6 188.0 9.1 8.0 21.3 1,143.0 75.5 Otber aubaidioa 1,24.2 981.6 Work toot per 2Z.0 16,819.0 21.9 21.3 75.5 Othor 414.2 14.1185 910. ,36.0 71.38 52.0 pOreen 44.0 18,819.0 829.1 14.118 7 2 1 143.0 25.2 621.1 8,2SB.0 142.5 828.0 14.2 1,148.0 so.8 Adminisatmtion 856 141 6on.9 1n;r,c, te 4,250.7 93,928.9 2,817.7 24,7S8.6 742.2 s869.2 170.7 55 141,06.e9 7,064.5 98,928.8 4,696.2 16W1.8 86.9 W4.0 11.2 24,786.6 1,231.9 5,691.2 264.6 16,961.8 646.1 874.0 1s.7 Subta 1 1 1014 2S77 6146.5 ZlULU 40 mrinl itnWriAe nd SerViceA LOn cepontie- ut;fated land 1,163.9 1,067.2 70.S 26.4 ha as 000 24.07 794.6 24.07 T4.8 Houaeplote ha 893000 11.20 406.6 6.27 272.9 2.18 70.8 0.60 26.4 Resettle.it aebe diizvt;om 1,163.9 Cultivateod lend 1,067.2 70.8 26.4 ha 83,00 24.07 794.3 24.07 794.s #bI*eple hbe 38,000 11.20 406.6 8.27 272. 2.13 70.3 0.6 26.4 Hoao rocnetruction cost , 370.1 41S6.7 lbgae. 8~~~~~~~ f87.6 825.9 ick-cont ~ ~~~~~1.449.05,251.6 4,109.6 686.8 81.8 165.0 8,131.0 516.7 3,1S1.0 516.7 Bric-odi 110.0 2,047.0 Earth-wood 2,295.2 1i,6 5.0 1,71.9 8,86.0 872.1 1,2.O0 2D1.2 <44.0 54,021.0 2,877.0 40,684.0 1,797.6 10,64q.0 otdKd a>ttw c0 27.8 1,82.0 486.8 2,11t.0 111.1 Aica olde 86.S 1,.0 86.S 02 27.6 1S1.0 4.2 80.0 2.2 71.0 Laroas_ 0 27.5 1.971.0 2.0 54.2 1,889.0 86.9 e08.0 18.9 1. .5. ANNEX5.10 Page 10

.~ ~_ ~ ~. i ... _.!It Xnio.m. .

Un;t Coot (Y) 4.nti t' Ceot (103 Y) bUait-Cost

R,ral Itergria and Servicon (cOnt'd)

4getont*_ rCtien ast ds 88.3 46 9 Grain dr7inlo arose 81.8 10.1 8.5 13,847.0 7.4 7.7C0.0 42.8 4,186.0 22.8 1,421.0 7.8 Ibosro pit. 3.5 887.0 2.1 NChaoe-geOorating 197.0 1.10 190.0 1.0 Vito 22.0 80.0 1.8 80.0 0.7 850.0 1.10 Surradino wgelo 56.6 2,000.0 11.0 616.0 8.4 1,187.0 6.3 247.0 1.3 Ibtorial reom cvsenStct 275.0 110.0 110.0 S 5.0 Subaidization for spin pr4- ductien to_m.. 84.2 928.P 114.4 Seleriee allomence 18.2 Tax/inuoteet al 8.8 4.4 3omea8.0 20.0 110.0 Othor peronr 44.0 660.0 29.0 S31.0 2S.8 97.0 4.8 82.0 1.4 Adm;nistrmo* as 8 84S.1 240.4 6424.4 ZLwi.;blo cost 192.7 1371.3 41.1 540.S 16.5 aS 8J848.1 417.8 6424.4 821.2 1871.8 68.6 54.5 27.5 Subtetal 90S22 "311,1 .0 64. Per opita 19,686.0 11,878.0 18,678.0 16,662.0 Yrndk;tnCmmt. Tam Rohebi Uittitn 8",449.6 88,449.6 8 Snemcint Fociltion 171,757.3 6,678.2 3,61.4 488.6 2,848.9 9.2 Taffic foci;ity rec. 187,017.1 1,16.0 281.5 8.6 H,*gvyQ kc 440.0 080.10 15,5s4.0 TrIctor rod km 11.0 67.0 787.0 87.0 607.0 10.0 110.0 Pet road, kI 3.3 217.0 T16.1 18O.0 828.0 8.0 1.$ 2.0 6.8 Comnicgtion line roc. polo kg 11.0 880.6 8,686.6 Broadcast lino rnc. Polo he 2.64 684.0 1,678.8 15.0 Wic,. byd. apeoIF ototion 409.2 479.0 1,284.6 cc bmtrion kW 2.2 2,094.6 4,606.1 1,187.0 2,611.4 a88.6 740.5 55.0 121.0 516.0 1,185.2 Rural t_rami.ioen liro rec. 3.615.7 912.9 8,018.7 in uhich: High voltwo 224.4 1,459.7 km _6.S 182.0 2.178.0 64.0 1,056.0 6.0 182.0 Low voltage km 7.7 60.0 990.0 446.45 3,437.7 118.55 912.9 284.9 1,9b2.7 12.0 92.4 61.0 469.7 Forootry fmci I ts can. 1.760.0 Ertmn clay mine *eloc. 16,096.3 Ardamological eotcaration coat 220. Seal dino/factory coapaestion s88.8 211.2 2.9 47.3 Water-peo-red rollers nwo 4.4 18.0 147.4 79.2 2.0 8.6 4.0 17.6 7.0 80.8 5.0 22.0 Wetor m;l ".no 8.3 15.0 49.5 8.0 9.9 oil Dille S.0 9.9 5.0 16.5 4.0 13.2 noo 4.4 8.0 19.2 2.0 8.8 1.0 4.4 Licaki ln no. 4.4 14.0 61.6 4.0 17.6 7.0 80.8 3.0 18.2 Brickki I n/ti Ii Ino fre 8.5 40.0 220.0 21.0 11.5 Scall coal mine0 rw 18.0 71.5 6.0 83.0 18.2 8.0 66.0 5.0 66.0 Smtl iron ominu nVo 13.2 8.0 89.6 2.0 26.4 1.0 18.2 Saill copeor aino* rwo 13.2 1.0 13.2 1.0 13.2 S&WiIga r rofinery noo 5.5 8.0 16.S 2.0 11.0 1.0 6.5 Remersoir clearing kD2 6.6 86.5 570.9 42.2 278.5 21.7 148.2 8.5 36.3 15.7 108.6 1.4 9.2 Rrho rand Doni n Cost 2.196.2 1,037.0 169.0 35.9 105.8 2.0 IZnetiption and deign 0.88 427,248.8 1,281.7 207 40.3 692.2 38,810.1 101.4 7.17S.6 RoGeO-ch 0.28 427,248.0 21.5 21,164.7 63.3 418.1 1.2 654.5 207,403.8 414.8 33,810.1 67.6 7.175.6 14.4 21,164.7 42.8 413.1 0.8 T1I 429 S380. 0 2.440.3 3-ZS1 3 J £1S1

source: sc. ANNEX 5.10 Page 11

Table 8: SUOMMR OF COSTETI MATE (103 Y)

I= Btere 1991 1to1 1992 1998 1994 1991 199B 1997 Total Ruralmigrant resettl;6oat 16,041 2*,482 89,622 47,687 28,206 16,184 1,812 178,484 Yenbian County 7,811 17,811 27,181 MiJyiCounty 30,296 18,90 10,898 186 107,461 2,841 4,804 5,482 8,261 6,850 1,118 2B,341 Llansabn Prefocbure 1,461 2,861 8,841 5,922 Ploaninga dsign 8,173 2,770 22,68 1,988 990 990 191 4,164 Administration 9n0 825 Other co8st 880 B80 440 27S 91 4,881 185 1,651 1,648 2,098 1,518 1,633 8W6 9,459 Rural onterprises and servicos rolocatlon 94 559 952 1,876 t Ynumarural area (R.A.) 47 8,529 88 188 22B 456 0 862 Ganyu R.A. as 270 eV # SWIngi R.A. 880 744 15 1,442 14 66 170 846 16 an Re R.A. 14 S6 177 881 I Yabian Couty Town Robabi B 5OO atton 11,000 22,000 88,00O 22,000 5,450 98,450 Traffic Facility Roconstruction 7,424 16,729 81,900 17,600 28,600 Coauication Lins Rlocation 17,275 121,52 650 550 W88 8o0 "a 8,66 Broadcast Linas Rolocation 650 5tO 574 Micro Hydropower Stations 1,674 Csponssation 1,100 1,100 1,100 1,308 4,608 Transmission Limn Relocation 550 .,1 0 0 2,200 Forestry Facilities Rconstruct)ion 1,100 6S6 5,616 880 880 660 440 110 1,780 Erten Clay ine Reconstruction 4,040 5,898 8,800 2,860 Arcboeolegical o2cvavons 16,096 55 5 S6 65 220 Rasero)e clearing 66 55 otbora 110 110 110 18t 571 2 228 sae cost 4.040 42.040 76.810 113.680 93.580 64.100 88.590 1.S0 429j8,0 Physical contingoacy (1S5) 6,310 11,520 17,050 14,040 9,620 5,040 20 68,800 Pricecontingency 2,420 12,720 28,460 29,060 26,250 15,820 86O 115,510 TOl 4.040 50.770 101.060 1596190 187.590 98.970 §A.460 LQ 608.690

Source: EIHC. -130 - Page 1

CHINA

ERTANHYDROELECTRIC PROJECT

EnvironmentalManagement Plan

IMact Assessment 1. Environmentalimpact assessment studies of the Ertan Projecthave been carriedout since 1980 by CHIDI,which has invested3,510 staff-daysby 29 specialistsin EnvironmentalAssessment (EA). Environmentalstudies to date have coveredmeteorology and hydrology,sedimentation, water tempera- turelquality,geology, soils, terrestrialecology, aquatic ecology, human health,tourist resources, and timberfloating. In addition,3,241 staff-days have been spent by 48 outside specialistssubcontracted by EHDC and CuIDI for studies of human health and water quality, radioactivity,terrestrial ecology, aquatic ecclogy, environmentalgeology, soils, archeology,and timber float- ing. The completedEA also contains a classificationof impacts accordingto the matrix method recommendedby the InternationalCommission on Large Dams (ICOLD). These researchworks have been examined and approved,along with other project investigations,by 19 experts from the Chinese Academy of Sci- ences, headed by the Vice Presidentof Qinghua University and Deputy Director of the Technical Services Department of the Chinese Academy of Sciences.

EnvironmentalHealth

2. Risks of schistosomiasis,malaria, and other diseases that could be affected by project constructionand operationare recognizedby project and local health authorities. Disease vectors are routinelymonitored by public health authorities. Health authoritiesdo not believe that construction activitieswill threaten the health of Yi people who inhabitmountains around the project area, because these peoplt have interactedwith the Han majority in lowland towns and markets for many decades. Public health screeningof incoming workers and monitoring and treatmentmeasures have been planned and will be carried out by health authorities,augmented by financial support from EHDC. By the time of appraisal,4,000 workers were already on site for preparatory works, and health measures were in operation.

CatchmentArea Land Use Trends and ReservoirSedimentation

3. Informationon current land use and on trends in forest cover over the last three decades in the Ertan catchment area has been estimatedfrom Sichuan Land Department and Sichuan Forestry Departmentdata which cover 95.6 percent of the catchment area. At present 52 percent of the area is classifiedas grazing land, 34 percent as forestry land, and 2 percent as cultivated land. Actual forest cover (canopyclosure, excluding shrubs, as a percentage of total land area in the catchment)was estimated to be 12.3 percent in the 1980s, 13.0 percent in the 1970s, and 12.3 percent in the 19609. The period of record for sedimentationmeasurements near the dam site extends over 30 years and provides a good basis for computingthe sediment deposition in the reservoir. At present there are seven gauging stations operating -131- ANNEX 5.11 Page 2 within the Ertan catcbment area that make regular sedimentationmeasurements. The policy on forest cutting and water conservationin the catchnentarea is based on the objective of sustainableyields. Conditions in the catchment area will be monitored by the environmentalmonitoring station described below (para. 8).

Downstream Effects

4. Because of the relativelysmall size of the live storage (3.37 billion mi) in relation to the annual discharge of the river at the dam site (52.6 billion m8) and in downstreamareas (1 trillionma at the estuary), downstream effects--exceptin areas iumediatelydownstream of the dam--are considered to be insignificant. Effects in the areas immediatelydownstream of the dam have been studied in detail and includes (a) daily fluctuationsin water levels that range from about 8 m near the powerhouse tailrace and 4.5 m 12 km downstream; (b) minor changes in water temperatureand water quality, includingoccasional nitrogen supersaturation;and (c) minor channel erosion. Channel erosion is not expected to adverselyaffect any existing structuresor activities. Because the population is sparse and river use--exceptfor log transport--is uncommon in areas immediately downstream of the dam, and, because a regulatingdam is planned for sometime in the future, the project does not include an electronicwarning system for these areas. Downstream effects will be monitored regularlyby the environmentalmonitoring station described below.

Impacts on Fish and Wildlife

5. The project will convert 20 km2 of river into 101 km2 of reservoir, and alter the topographyand biota of 14 kim of constructionsites. In so doing, it will displace terrestrialplants and animals and will cause changes in the species compositionof aquatic life in the stretchesof the reservoir that will :e inundatedand that will be immediatelydownstream of the dam. The aforementionedstudies have identifiedsome rare plants and animals in the project area, but concluded that impacts on these specieswill not be significant because the project area is only a small part of the large ranges of these species. Also, the studieshave concludedthat there are no speciesof fish that have major migrations in the vicinity of the dam or reservoir. Aquatic weeds are not expected to be a serious problem. Environmentalmoni- toring will address changes in the species compositionand population size of fish in the reservoir and of wildlife such as waterfowl that may use the reservoir.

Water Pollution

6. Concerns that existing industrialpollution or discharges from the proposed expansion of the coal mine near Hongni could interactwith the project to cause or worsen adverse impactshave been addressed. The Light Indus- trial Department of Sichuan Province issued Document SLP (1989) No. 044 on April 12, 1989 which specifieda schedule for pollution control at a number of existing industrialfacilities, beginning in 1989. The Miyi Sugar Refinery on the Anning River, upstream of its confluencewith the Yalong River was among these facilities and is scheduledto be cleaned up by end-1991. During appraisal discussions,evidence was presented that another sugar refinery had 132 - ANNEX 5.11 Page 3

already installed pollutionequipment as scheduledin 1989. At the Hongni coal mine, it was revealed that most of the coal reserves are above or remote from the reservoir. Results of laboratoryanalyses of coal, coal mine drainage, and river water were presentedwhich indicate that the coal has a low sulfur content (0.5 percent), the mine drainage is not acidic, and the concen- trations of other substancesare not notable. At a paper mill in Yanbian County work is underway to installpollution equipment in 1991/92, even though the mill will not be relocateduntil 1994. Water quality of the reservoirand of areas immediatelydownstream of the dam will be monitored as planned.

EnvironmentalMonitoring Station

7. Establishmentof a permanent 75-man environmentalmonitoring station will be financed by the project. It is expected that 38 of the staff will be recruitedand trained by 1992 and that the remainderwill be added between 1992 and 1997. This station will monitor meteorological,hydrological, water quality, sedimentation,sanitary and biotic aspects of the project on the environment. The plans include an organizationstructure, a preliminary schedule,a list of required instrumentsand equipment, task descriptions,a staff training schedule and a cost estimate. The status of this monitoring station will be reviewed and reported on regularly.

Training and Staff Development

8. EHDC has submitteda program to be financed under the project for domestic and overseas seminars,workshops, short courses and degree programs to strengthen the capability of the staff of the environmentalmonitoring station and others involved in environmentalmanagement for the Ertan project.

Cost Estimate

9. An environmentalcost estimate and disbursementschedule has been prepared (Table 1). This estimate yields a 1991 local currency base cost of Y 14.04 million for staff training and equipment,including a 10 percent physical contingencyand price contingenciesbased on the same assumptionsthat were used for the project cost estimate. This estimate covers all environmental work and environmentalprotection associated with transmissionlines and project construction (waste disposal, site reclamation,etc.).

FinancingPlan

10. EHDC has assured the mission that the budgeting and financingof environmentalwork will be treated in the same manner as the budgeting and financing of the constructionof the main works of the project.

Reporting and Supervision

11. The EnvironmentalMonitoring Station as describedabove (para. 7), togetherwith the review and reportinr functionsof the EP (para. 5.27) provide an arrangement that will be adequ;:'teto ensure that environmentalmanagement is implementedas planned. The followingagreements were reached regarding environmentalmanagement operationsunder the project. First, at least four environmentalsubjects will be addressed in each quarterly report of EHDC - 133 - ANNEX 5.11 Page 4 to the Banks (i) progressin establishingthe aforementionedstation; (ii) environmentalhealth of the labor force;(iii) progress in controlling pollutiondischarges at existingindustrial facilities in the projectregion; and (iv)progress in environmentaltraining. Second,when the stationbegins monitoring,it will issuereports on at leastan annualbasis and more fre- quentlyif deviationsor unexpectedimpacts emerge. Third,members of the SP will receiveall reportsof the station,all environmentalsections of the quarterlyreports noted above,and all reportson resettlement.The SP will be requiredto give a formalreaction to the BlDC sectionson environmentand to each reportof the stationfor at least the firstthree yearsafter the start of construction.Fourth, the firstvisit of the EP to the projectarea shouldinclude a trip to loggedand reforestedparts of the catchmentarea of the projectduring the firstyear of construction.Subsequent visits to the projectshould occur at leastat one-yearintervals. Fifth, the adequacyof the environmentalcost estimateshould be criticallyreviewed at leastannu- ally throughoutthe constructionstage in responseto findingsof the environmentalmonitoring station. Detailsof costs for environmentalprotection at the Ertan HydroelectricProject are shown in Table 1. Page 5

T^blo ls fWAG fflCTIN COS!S (lop Ii ita aft 199 29 1994 1995 199 1097 18 Total

-a"capareoveo-yq fr environment works' coaeption 18.0 No" boealthof reservoir 88.0 7n.0 124.0 Loring construcion noise 48.0 84.0 for residentlal aonsa 86.0 31.0 12.0 47.0 159.0 78.0 SubIdization for envirommat oroeoction %mrsnine and qaratlne archivos 81.0 18.0 lmmn ealth prevention 0.0 81.0 82.0 1.0 16.0 0.0 159.0 Afforcstoteon for water conservation 180.0 90 M7.0 17.0 165.0 81.0 24.0 166.0 251.0 1,091.0 24.0 127.0 188.o 24.0 28.0 M8.0 Via m ,,Itrunism for works' anml.ntation an eni ront maltorrina 101.0 99.0 20.0 Env Irvot a&orima cost Tralning of obearvrs an urvoyora * Civil work end 166.0 .quapipment 742.0 1,410.0 116.0 21.0 Research, conultatlon, an desi B88.0 825.0 579.0 420.0 1,456.0 - A^Ainetrailon 106.0 65.0 62.0 117.0 5,417.0 24.0 25.0 26E.0 24.0 24.0 25.0 24.0 24.0 28.0 Subtall 19.0 paQ 1.90.0 600.0 670.0 1.040. 940.0 1.720.0 520.0 8-4.0 n,trnal finacina in considration of contineasv sril Cost beso In 1090pricos 940.0 1,960.0 Physical contingency 690.0 570.0 1,040.0 940.0 1,720.0 520.0 Price 90.0 190.0 70.0 00.0 100.0 8,840.0 contingency 60.0 90.0 170.0 60.0 80D.0 310.0 160.0 180.0 860.0 420.0 910.0 Subtotal 820.0 2,740.0 .0600 2.4ao.0 910.0 0 1.$$O, 1.450.0 2,000.0 690.0 External fenc? 11.8 Staff taining a80.0 S88.0 Equip;ps 270.0 980.0 Pbhylc.l contlngncy 270.0 270.0 40.0 80.0 640.0 Prico contingency 80.0 80.0 80.0 16.0 60.0 80.0 60.0 120.0 120.0 Subtotal 460.0 480.0 440.0 A.0 420.0 420.0 Total a2..40.0 12080. S.91.0.0 &.85, 1.i9o. 0 1.070l. 2L .0 0. 14.040.0 - 135 - AMNEX 5.12

CHINA

ERTAN HYDROELECTRICPROJECT

Guidelinesfor ProjectMonitoring 1. Guidelinesfor projectmonitoring have beendiscussed and agreed with EHDC. Monitoringwill take a seriesof targetdates for major events in the projectimplementation program (Annex 5.4). 2. Recordsof selectedperformance indicators would be maintainedby comparingthe forecastagainst actual results for: (a) activitiesof engineeringconsultants; (b) procurement,i.e., prequalification, preparation of bid documents, bid opening,contract awards; Cc) resettlementand environmentalplan implementation; (d) constructionprogress; (e) progressin stafftraining; (f) progressof studies; (S) energyproduction and purchases; (h) maximumdemand; Xi) electricityconsumption; (j) powerlosses; (k) qualityof powersupply; (1) numberof outagesand theirduration; (m) numberof customersby category; (n) staffstatistics; (o) tarifflevels and movements; (p) ratesof returnon revaluednet fixedassets; (q) self-financingratio; (r) operatingratios; (s) changesin projectcost estimatesand relatedfinancing; (t) debtlequityratios; (u) debt servicecoverage; and (v) currentratio. - 136 - ANNEX 6.I Page 1

CHINA

ERTAN HYDROELECTRICPROJECT

Financial System Followed by Chinese Power Bureaus

1. Power companiesmay accumulate capital from three separate and distinct sources. These include funds for fixed assets, funds for working capital, and a number of special funds.

(a) Funds for Fixed Assets. These funds are obtained from the State in large enough amounts to permit implementationof approved projects according to agreed schedules. Until 1980, these funds were provided almost entirely as grants; since then, the Governmenthas decided to make these funds available as loans obtained from the banking system or from official sources. The funds under this category are used exclusivelyto finance works classified as capital expenditures. The funds are released monthly, in accordancewith plan provisions,in amounts needed to cover actually incurred expenditures. The power bureaus are not expected to finance significant portions of capital expenditurefrom operations;rather, they are expected to remit most of their surplus income to the government through payment of taxes;

(b) Funds for Working Capital. These funds are also received from the State. They are based on a fixed amount establishedby regulation and are subject to review at intervalsof about ten years. These funds make up only a minor part of the power bureaus' capital and, because most of the bureaus have drawn their entire allocations since the last review, these funds have been used only as a minor source of capital in recent power projects proposed for Bank financing. Because current obligationsboth to and from the power bureaus are settled almost as accrued, the working capital funds have been used primarily to finance operating inventory;and

(c) Special Funds. These funds are earmarked for distinct purposes and are funded from net operating revenues or cash receipts in amounts establishedaccording to regulations. The power bureaus' accounts contain four separate categoriesof special funds, includingthose for: (i) maintenance; (ii) renovations;(iii) employee benefits; and (iv) distributionimprovements. The special funds for maintenance are financed by allocationscharged as operating expenses in determiningnet operating income before Income Tax. The special funds for renovationsare financedby charges against Government Funds (the balance sheet account showing the Government'sequity investment in a power bureau) equal to the portion of depreciation provisionsnot used for debt repayment. The special funds for employee benefits are financedusing distributionsfrom Net Income after Income Tax but prior to the Adjustment Tax. Receipts and withdrawals from the special funds associatedwith distribution improvementsare passed through the Flow of Funds statementand are -137 -- ANX 6.1 Page 2

specifically excluded from the Income Statement. All other allocations to the special funds appear or are reflectedon the Income Statement as though they are operating costs or distributionsfrom earnings,regardless of whether correspondingcash expenditureshave been incurred. Under more traditionalaccounting systems, expenditures under the special funds would largely be classifiedas operating costs or working capital. However, items charged to the Spe- cial Funds for both renovations and distributionimprovements would be capitalizedas fixed assets once the underlyingwork were completed. Thus, when the renovationsor distributionimprovements are completed,their value is deducted from the special funds balance and added to the GovernmentFunds account. The power bureaus have only one way to channel tariff revenues into cash since all operating revenuesmust either be expensed; distributedto cover cash out- flows, debt service or taxes; invested in renovationsor distribution improvements;or retained for future expenditurechargeable to the special funds. The bureaus channel revenues into cash by using the excess of special fund allocationsover the sum of (a) Special Fund Expenditures;(b) cor)leted renovationsand distribution improvements;and (c) inc eases in Special Fund Assets. In turn, cash generated through t' Special Funds may be interchangedwith other operatingcash; huaever, allocationsto particular special funds create an ultimate obligation for a power bureau to use the accumulatedcash only for certain categoriesof expenditures.

2. Until 1983, the power bureaus paid remittancesto MOE equal to operating revenues less the sum of cash expenditurescharged directly to operations, all allocationsto special funds, and debt service. Since 1983, the power bureaus pay HOP an Income Tax, assessed at 55 percent of operatingreve- nues less the sum of costs (includingdepreciation) charged directly to operations, all allocationsto special funds that are treated as expenses, and debt service in excess of the portion of depreciationprovisions specificallyallo- cated for debt repayment. From the residual after Income Tax, the power bureaus must cover the special fund allocationsthat are treated as distribu- tions from earnings and the amount of debt repaymentand capitalizedinterest during constructionto be met from net income, and remit the remainderto MOE as an Adjustment Tax.l/ MOE has some flexibilityin controllingthe power bureaus' liquidity. It can do this either by changing their allocationsto the special funds, making grants for allocation to the special funds, or relievingthe power bureaus of a portion of the AdjustmentTax. The power bureaus appear to have adequate liquidityand MOE has not shown any inclina- tion to adjust the procedures that affect their liquidity.

3. Under the existing financialsystem, the Governmentdoes not intend for the power bureaus to retain a surplus. However, tariff revenuesmust meet debt service requirementsand repaymentper se does not representa charge against earnings. Regulationsprovide that certain stipulatedamounts of repayment shall be met from cash that has been generatedby depreciation; however, the remainderof the cash Senerated by depreciationmust be added to

FProm an accountingpoint of view, the AdjustmentTax is treated in a manner similar to a dividend. - 138 - ANNEX 6.1 Page 3 a bureau's operating cash and a correspondingallocation must be made to the Special Funds for renovations. As a result, the remainderof repaymenit,which must be met from an earmarked incrementof tariff revenues,creates an accumu- lation of equity in the form of a correspondingundistributed earnings.

4. Most power bureaus have units which engage in constructionmanagement and subsidiarieswhich function as contractors. As a rtule,the accounts of the constructionmanagement units are consolidatedwith those of the power bureau's operatingunits; however, the accounts of subsidiariesacting as constructioncontractors are, as a rule, not consolidatedwith those of the operating units. As a result,when investmentshave been financed through grants, the power bureau's consolidatedaccounts may have routinelyunder- stated gross fixed assets and certainlydid not reflect adequatelyconstruc- tion in progress. Also, in the past, only about 85 percent of the value of government grants used to finance new fixed assets was transferredfrom the books of the constructionsubsidiaries functioning as contractorsto the power bureau's consolidatedaccounts. The residualwas considered to have been expended in purchasingmoving assets,which remained with those construction subsidiariesupon the completionof construction. The change to using loans rather than grants to financepower sector investmentshas caused investment funds to be channeled from the Government through the power bureaus for payment to constructionunits acting as contractors. Thus, in the future, the consolidatedaccounts of the power bureaus should more accurately reflect the value of gross fixed assets and constructionin progress.

5. Given the existing financial system, the power bureaus have little financialincentive to increase tariffs at the present time. Once a power bureau has sufficient revenues to meet the costs charged directly to operations and all special fund allocationsand debt service, any additional revenues are remitted to the State through income or adjustment taxes. Thus, once expenses and required distributionshave been met, ever.a large tariff increase would not increase a power bureau's financialviability, except to improve debt service coverage. Therefore, the familiar indicatorsof financial performancesuch as rate of return and self-financingratio have very limited applicationto a financialanalysis of the Chinese power bureaus.

6. Nevertheless,the relationshipsbetween pricing, operatingcosts, and size of the investmentprogram are becoming increasinglyimportant to MOE/SEIC. In their role as nationwidemanagers of the sector,MOE/SEIC have to arrange financing for the large and rapidly expanding investmentprogram of the regional power bureaus. As a result, they have become acutely conscious of the need to mobilize appropriateresources from the consumers. To further their efforts at resourcemobilization, recent Bank-financedpower projects in mainland China have provided for financialcovenants with specific targets for a "notionalself-financing ratio." For purposes of these agreements,the Adjustment Tax would not be considereda reduction in earned cash because it is a remittanceof a residual and not a tax built into the cost structureand the proceeds are generally recycled into investmentsin the power subsector. - 39 - ANNEX 6.2 Page 1

CHINA

ERTAN HYDROELECTRICPROJECT

Assumptionsto EHDC's Financial Projections

Income Statement

1. Tariffs are assumed to be adjusted so that the average revenues would be adequate for achieving the financialperformance targets (para. 6.4). After the year 2000, the average tarift is assumed to remain constant in current terms even though the minimum average tariff requirementsare projectedto decrease from the year 2000 onwards.

(a) Under the self-financingratio covenant (1999 and thereafter), earned surplus cash available for financing future investmentshas been defined as total cash (includingincome from the sale of electricity and other receipts,if any) less the aggregate of (i) cash operatingexpenses; (ii) operationalinterest; (iii) income taxes; (iv) required increasesin working capital; (v) net increasesin Special Fund assets; (vi) loan repayments;and (vii) Special Fund expendituresfor maintenanceand employee benefits. Separately,the average annual investmentprogram has been defined as the average of the previous year's actual capital expenditures,the current year's planned capital expenditures,and the next year's projectedcapital expenditures.

(b) For pur,oses of calculatingthe debt service coverage covenant, internal cash generationhas been defined as net income (after income taxes) plus operationalinterest and loan repaymentfrom depreciation.

2. Material costs are assumed to escalate with local inflation rates.

3. WFaes are assumed to escalate with local inflationrates.

4. Depreciationis assumed to remain constant at an average composite rate of 2.4 percent of gross fixed assets in operation.

5. Allocation to the MaintenanceSpecial Fund is calculatedat 1 percent of gross fixed assets in operation.

6. Other operating costs are assumed to escalatewith local inflation rates.

7. Income tax is assumed to be 55 percent of net operating income less interest expense and loan repayments.

Balance Sheet

8. Capital constructionaccounts are consolidatedwith operation accounts. -140- ANNEX 6.2 Page 2

9. The averagecollection period of accountsreceivable is assumedto be five days (whichis the same as that of SCEPA). 10. Accountspayable is assumedto increasewith energysales. 11. Due to governmentis assumedto increasewith incometaxes. FundsFlow Statement

12. Futureinvestments -- In additionto the proposedErtan Project, it has been assumedthat EHDC wouldbe responsiblefor the followingfuturet projects:

Projects Totalproject costs Implementationperiod (in-current Y million)

(a) Tongzilin 1.579 1995-2002;first unit to be commnissionedin 2001, the rest (3 unit) in 2002. (b) Pubugou 8,589 1994-2005;first unit to be commissionedin 2004. (c) Jingping 4,864 1999-2008;first unit to be commissionedin 2006. 13. Assumptionsof projectfinancing--Tongzilin has been assumedto be 100 percentfinanced by centraland localgovernments; the above localfinanc- ing has been assumedto be the same as that for Ertanviz SEIC and ETIC would contributeequal sharesof financing,of which 60 percentin the form of loans and 40 percentin the form of equity. As to Pubugouand Jingping,it has been assumedto be 100 percentlocal debt financing,with interestrates at 9.36 percentper annum,15 yearsmaturity, including grace period during project constructionperiod.

14. Energyand transportfund would be remittedto the Government,it would be derivedfrom 15 percentof depreciationand 15 percentof enterprise retainedprofits for employeebenefits.

15. Loan repaymentwould be coveredby the followingsources of funds: (i) depreciationfund--90 percent of depreciationless energyand transport fund duringthe first3 yearsof operation,and 50 percentthereafter; and (ii)net income.

16. RenovationSpecial Fund allocationis derivedfrom depreciationless energyand transportfund and loan repaymentfrom depreciation. 141 -

ANMEX 6.3

CHINA

ERTAN HYDROELECTRICPROJECT

Ertan HydroelectricDevelopmet Corporation

Projected Income Statements (1998-2002) (Y million)

Year ended December 31 1998 1999 2000 2001 2002

Operating Revenues Sales increase (Z) 266 37 5 10 Energy sales (t¢h) 2,900 10,600 14,560 15,340 16,800 Average revenue/klWh(fen) 25.06 28.89 30.84 30.84 30.84

Total Operating Revenues 727 34062 4,490 4,730 5,180

Operating Costs

operation & maintenancecosts 62 126 185 194 214 Administration 11 12 12 16 17 Sales tax 31 112 155 163 178 Depreciation 57 171 284 347 367

Total Operating Costs 161 421 636 720 776

Operating Income 566 2,641 3,853 4,01C 4,404

Interest 461 887 797 738 634

Net income before income tax 105 1,754 3,056 3,272 3,770

Income tax 0 483 1,102 1,357 1,706

Net income 105 1,271 1,954 1,915 2,065 MEX 6.4 CHIM Et4N IHYDROELECTRICPROJECT

Ertan Hydrloctrc Derolst Co@raotion Prolected salano Shoots (M91-2002 (V elliion)

Yeur ene Doeber 81 1M 1992 1908 1994 16 16 107 10t 190 20 200 2002

Cr"t Asuoto Cash 6S 166 107 115 160 227 260 174 146 Inventories 0 176 601 1,527 0 0 0 00 0 10 11 11 12 Acoouan lRooivebl, 0 0 12 0 0 0 0 0 10 42 62 6s 71 Total currat asssS i 66 166 107 116 60 227 250 198 190 249 677 1.610 Fixed as"s Plant In service 0 0 0 0 0 0 0 4,742 0,464 14,227 (low.) Accum. dpreciation 0 14,659 16,962 0 0 0 0 0 0 S7 228 612 859 Oa Nt plont in servico 0 0 1,228 0 0 0 0 0 4,686 9,267 13,715 18,800 14,728 - Constratlba UP 1,156 8,081 4,819 65,96 7,612 10,38 18,884 10,64 7,565 4,651 8,216 7,169 * Total fixed assets 1.156 B.081 4.819 5.6 7.612 10.885 18.-84 16.249 1.2 1jj S 20.016 21.8S Spocial fnd asseWt 0 0 0 0 0 0 0 0 2 4 7 18 Total assts 1.220 8.187 4.427 5.811 7.772 10.612 L84 15."l 17.022 18.318 20.701 2!.60 L;;bI ltie3s Currabt libilitts Account_ payable es 15s 107 115 160 227 250 171 167 170 Due to Goarnment 0 0 16 207 0 0 0 0 0 0 0 0 0 0 Sbort-trm debt 0 0 0 ) 0 0 0 8s 0 0 0 0 Total current liabilities 65 156 107 115 10 227 250 265 167 170 l85 207 working capital funds 0 0 0 0 0 0 0 0 Long-trm debt 84 0 0 0 0 2,887 8,852 4,452 8,018 8,252 10,766 12,204 12,466 11,0o2 12,045 12,700 Goveorn funds 822 689 968 1,244 1,600 Spoclal 2,088 2,66 2,941 8,802 4,857 65,2 6,087 fudA 0 0 0 0 0 0 0 48 Hydropoer devlo entfunds 0 i18 270 485 652 0 0 0 0 0 0 0 74 1,86 2,478 8,86 Totalliabilitios oequity 1.220 8.167 4.427 5.811 7.772 10.562 18.664 IS.448 17.022 1.618 20J7M 2.6 0/bt/uty rtio 72/28 77/28 70/22 79/22 19/21 00/20 81/19 80/20 74/26 05/85 60/40 57/48 Ertan l4vro.lctrlc DovelopmentCornotio. Projected Funs Fiew tatsM,_ (A1=- (V ellI Ion)

1 199 0 2001 2002 Y.cr endd DbcAor 81 1991 1992 1998 1994 19 199 199?

Soure o fund 2,899 0 0 0 0 0 0 68 2,169 2,751 2,858 Not Inco before lntoreat 0 347 887 0 0 0 0 0 0 0 67 171 265 Doeprecitlon 0 0 0 33 76 114 117 128 Maintonance (rat of oxpenditure) 0 0 0 0 0 _ 2.40S .160 8,1L17 8154 Internal casb soersotion 0 2 2 OIL2 2 48 488 299 110 89 0 0 GornO nt equity 17 872 274 278 868 £ orroe,fl 0 86 468 492 080 872 912 861 817 208 0 Propose 1 loon 2986 624 18 104 0 0 loans 802 68 648 68 732 977 1,101 Othor Erton project 225 SW 508 709 78a S88 1,248 1,667 Otbhr loanu 0 0 0 0 2S 1I" 1.24 888 1.248 IW! Total borrowing 698 l.W8 1.0 1.100 1il2W Llt 2.028 9 2.O88 8.7J80 4.09 4U Total sources of funds 776 1.875 I.299 1._77 L 2. s Ucation of F J 1,011 1,118 1,6 1,619 744 S91 878 0 0 Proposed Ertan Project 715 1,7 1,089 I,306 0 0 0 0 267 417 460 88 965 1,196 1,701 Other construction 0 0 0 0 1 2 S 9 Renotono anci minor .p.nsion 0 0 0 0 0 0 0 0 0 0 0 0 Distrlbution ension 0 0 0 0 868 462 649 980 S98 19? 266 296 426 JT.rstin during construction 61 146 249 1.91.8 2.723 CM IJ_3 1.746 1.881 L2 242 Total capital exp ituros 7n7 1.75 .1.29 1.??

-87 -28 1i 180 8 -11 -16 Inc/doc n workisg capital -47 -12 49 -7 -4 0 0 0 0 0 0 708 1,881 2,185 1,11% 1,63 Debt s"tesvic0 0 9 25 48 52 66 tromsport fund 0 0 0 0 0 0 Ensrb 0 0 o 8 6 7 T Eepioy. benefits 0 0 0 0 0 _-7 f2 7I 2.042 2J I" LE Totel oportlonel srquiprants -4 49 -7 -4 2.976 L2n LI8 4.01S2 LI9! Ia Total applicatlonsoftunds ?. iL. IAL 1.870 1.071 2. 45 67 23 -76 -23 so 426 US Iocr.a./decr.eo in cash 47 92 -49 7 0.9 1.8 1.5 1.7 2.0 Annal debt service covers" (tim.) - 144 -

WAN KYDRI. IC POJCT

Slhugn £locrle Power Admnialla&Ion Itnos SVte.eobet1080 (TV IIion)

Year endedD.cemer 81 1900 160 166 1009 1lo0

Sal. bnres. ) 8.6 4.7 6.6 2.60 12.70 Energ seele (Wh) 17,010.0 160486.1 20,029.0 20,685.8 2,162.0 Averageprice/klh (fen) 0.1 8.8 0.6 10.16 10.0 SelzM revenuzt 1,426.4 1,680.1 1,702.5 2,084.8 2,464.1 (1046) Sales tax (86.0) (8".5) (80-0) (440.1) (627.0) *ole Rovonu08 I.028.4 l.lfS. 1I.E 1.M.2 I.2.

Fuel 26.7 881.2 808.6 87.6 780.6 Purchaed power 126.1 60.0 161.0 180.0 107.8 Operation & maintenence 109.8 174.6 268.7 264.2 847.0 Administration 08.0 94.8 100.0 108.0 182.0 epreciatbon 126.1 147.8 100.9 204.4 210.0 TotalOperatlng CosOt 607.1 IB7.81,0l4.6 1.4.8 La .6 Operting IncoI 211.B 880.$802.0 207.0 208.9 Interest 44.5 17.1 40.6 101.0 Not incom before incometx MJ.8 21.6 294.9 160.8 192.9 Incometeox 147.0 180.6 141.0 71.7 04.4 Net Incowm 148.7 158.8 148.0 06.0 108.5 - 145 - AH i.Z

ERTAN HYRWRCTRIC PROXCT

SiehuanEle1tric PowerAd, nIatrston

Yearended December 81 1330 106 1001 to6 190

Cu,hn208.0 487.6 405.1 545.6 590.8 Inventorles 140.5 148.2 168.4 107.8 179.1 Accounts Rowivoblo 15.4 11.0 21.0 ".2 84.5 Totalcurrent ast gm J Aim f.LZ

Plant In servieo 4,804.0 4,So1.1 508?.? 6,134.4 6,06.4 tlsow)t Accum.deproetllon (1,891.0) t |(1,10.)(1,660.1) (168,68) (2,110.6) Wbt plantln service Lf.0l 48jUu 1JA.4 $."C. P.L2. ConstructlonIn Pro 567.0 1,828.5 2,649.? 4,219.2! ,107.2 Totalfixed assoe A.M. A..2I1 MIA ZAIfi L.712.1 Specialfund assoet 11.0 8.6 401.6 449.2 46.8

Totalassso 4.212.L SJ L10ZL1 8,772. 10.970.1 *Li0blIltlies A gali Account.payable 12.6 146.1 166.5 167.2 179.0 Due to Governmnt 18.2 20.7 22.0 28.8 24.7 Totalcurrent lIabilities 1.81 . 8 1934 Long-termIabilItles 487.0 1,098.8 2,45.8 4,1.0 6,888.?

Workhg capitalfund 69.2 91.6 102.0 109.0 114.0 Governmnt fund 2,898.5 2,077.8 2,n7.4 2,512.0 2,84.? Spocialfund/enterpelrs fund 1,140.? 1,870.8 1,508.1 1,04.1 1,604.0 TotaI equities B.6.a 4,847. 4.411.6 I4 1. 4.482.? Totalliabliltles A equities 4.9b2 L..8 ?L0.& L.L?2.l la9alLL Current ratio 8.0 8.0 8.6 8.9 8.0 Debt/equlty ratio 11/60 20/60 86/64 46/62 59/41 - 146 - ANNEX 6.0 Page 1

CHINA ERTAN HYDROELECTRICPROJECT

Assumptionsto SCEPA'sFinancial Projections

IncomeStatement 1. Energysales reflect Sichuan's projected expansion program as detailedin Annex 4.4. 2. Tariffsare assumedto be adjustedso that the averagerevenues would be adequatefor achievingthe minimumfinancial performance targets similarto those of EHDC viz. debt servicecoverage ratio of no less than 1.3- 1.5 times. 3. Fuel. The price of standardcoal is assumedto be increasedwith projectedlocal inflationrates. 4. PurchasedPower. Price Quantity Year of Sources (currentfen/kWh) _(GW) purchase A. New Power (at New Price) (a) Jiangyouthermal 20-34 1,800 1991-2000 (b) Lohuangthermal 21-35 3,000-6,2081991-2000 5C) Ertan hydro 25-31 2,900-14,5601998-2000

B. Old Power (at Old Price) other purchasedpower 5.4-9.1 1,081-5,9851991-2000 5. Materialcosts are assumedto increasewith local inflationrates.

6. Wages are assumedto escalateat the same rate as fuel costsnoted above. 7. Depreciationis assumedto remainconstant at an averagecomposite rate of 4 percentof gross fixed assetsin operation. 8. Allocationto the MaintenanceSpecial Fund is calculatedat 1.4 percent of gross fixedassets in operation. 9. Other operatingcosts are assumedto escalatewith local inflation rates. 10. Incometax is assumedto be 55 percentof net operatingiz&;me less interestexpense and loan repayments. - 147- ANNEX6.8 Page 2

BalanceSheet 1. Capitalconstruction accounts are consolidatedwith operation accounts. 2. The averagecollection period of accountsreceivable is assumedto be 5 days. 3. Accountspayable is assumedto increasewith cash operating expenses. 4. Due to governmentis asaumedto changewith incometax and adjustment tax. Funds Flow Statement 1. CapitalExpenditures. SCEPA Is assumedto be responsiblefor most of the future power generation development projects in Sichuam Province (Annex 4.5), while EHDC is assumed to be responsible for the balance of the projects (Annex6.2). In addition,SCEPA is assumedto be responsiblefor the entire transmissionnetwork development program (Annexes 4.6).

2. Borrowings.All of SCEPA'sfuture generation and transmissionproj- ects are assumedto be lOO percentdebt-financed locally, with 10 years repayment period after grace period during the construction period, and an interest rate at 9.54 percent per annum (the prevailing long-term interest rates from localcommercial banks). 3. DistributionExpansion Special Fund representsthe receiptsof consumer connections. The fund is assumed to increase at 10 percentper annum. 4. EmployeeBenefit Special Fund allocationis assumedto increasewith local inflation. AWEX 6.9

ERTANI4YOROCC PRJCT

Sihbuam Electric Powor Adlnltration ProJectd Ioe S t (191-2000 mYlI I on)

191 1992 1998 1894 1996 1s" 1997 1998 1999 2000 Sales lncroa ) 10.9 EnorgWsales 6.6 6.7 6.8 6.7 6.5 7.5 (Blib) 26,60t.0 27,871.0 29,197.0 81,192.0 6.8 6.6 6.6 88,278.0 85,487.0 88,110.0 40,505.0 48,192.0 45,9.0 Average pries/kWl (fan) 18.6 21.6 27.8 28.8 29.0 27.9 28.7 26.4 82.2 85.7 Opora-tina Revenues 4.766.4 5.979.8 6,122.0 $.J82.0 9.686.? 9.89.4 10.928.6 11.604.9 13,912.0 16.420.? * sratin Cost Go Fuel 806.8 924.4 1,019.5 *V Purchased pover 1,160.7 1,2B6.2 1,478.2 1,558.8 1,717.8 1,483.9 1,060.6 1,82.2 1,558.0 1,671.8 1,768.7 1,919.5 1,374.2 Operation A emintonmnmc 850.5 886.6 2,497.6 3,207.4 5,625.8 7,589.2 Adainlistration 488.8 561.2 647.1 716.7 794.7 889.4 142.6 154.0 166.8 179. 194.0 985.8 1,008.8 Sales tax 1,024.8 1,286.5 209.6 226.2 244.3 268.9 285.0 Oaprociation 1,746.2 1,896.9 2,071.9 2,128.2 2,849.6 2,478.6 288.0 260.8 899.8 560.6 2,991.1 8,680.6 626.7 899.3 782.4 849.2 875.6 906.4 Total Oasratina Costs 3.809.7 4.B92.5 5.807.0 8.042.3 6,606. 7.146.8 6.209.2 0.861.7 12.175.S 14,708.0 Operating Inc... 1,158.6 1,868.8 Interet 2,764.5 2,789.7 8,026.2 2,782.2 2,719.8 2,148.2 58.8 121.8 496.1 615.6 1,786.4 1,717.7 648.6 641.9 614.6 604.7 897.8 294.6 Not Incoe. before Incometax 1,102.6 1,465.5 Infc.. te 2,259.4 2,278.9 2,479.4 2,210.8 2,104.5 1,868.6 488.5 649.2 641.5 766.5 1,386.6 1,428.1 679.6 65.6 50.1 264.4 164.5 215.6 Nbt Ilcboo 619.8 816.8 1,417.6 1,507.8 1,599.6 1,659.5 1,604.4 1,874.1 1,154.8 1,207.8 AI6X .10

am RTAM HW0RaELC POWECT

Si¢hOn Electris Poer Adminalnl0stfln PrelectAd 5" Shee (1l0 CT of I Io)

18 1997 1on 1699 2o 11 1992 1993 1994 196

Asset 1,513.5 1,743.9 1,881.2 2,089.4 2,21.8 Cuorret 94.2 M.6 1,054.2 1,69.6 1,858.0 829.2 852.2 Cah 2a4.7 25.1 288.7 287.6 307.8 M. 205.0 219.8 168.5 141.6 1S.4 280.6 Invetories 84.0 114.1 124.0 115.1 139.0 Accounts RlIvdblo 66.9 2.430.4 2.&14.0 2l-4.2 1.M83e 1.29.s 1.79.5 1.i. 2.139.9 Total Current A.t PW S1.146.6 1,621.0 2,634.6 22,140.0 25,179.5 7,043.4 12,919.9 14,61U.1 16,871.1 12,2Q1.1 (8,2t2.7) Plant In servico 6,619.9 (4,180.0) (4,679.8) (5,661.6) (6,510.8) (7,363) t (2,843.6) (2,64.4) (8,00°.7) (8,654.3) 14,758.7 14,9136.8 (logs): Accu. dpreclCtlon 11,066.6 12,493.a 18,412.6 15,164.4 15,123.7 pleat 3,685.2 4,419.0 9,910.2 8,113.4 8,639.9 8,72.0 4,283.0 Operation 3,60.5 4,643.? 6,T38.S 5,466.0 6,706.9 c- Coosructi, oW 7,60.1 16.7ZW. 13.62U. 1Z9.101.6 14._0.0 16.480.1 1%?943.1 19.121.? 1M.2_7. Total Fixed Aosts 11.815.8 18.09.5 644.4 708.0 746.1 769.3 458.8 404.9 435.4 619.9 609.1 Spocial fund asats 460.4 f.IfLj 21.6S_.e 22.7m.3 16.862.S 18,444.0 20207.6 21.852.0 21.111.0 Total Asset L2.7U.4 L4,

41.7 44.2 Curve II;b1 t^I iaE 11.2 13.0 a5.0 37.1 59.4 _nusnt 26.2 27.7 29.4 267.4 507.s 329.0 352.0 ODu to Gov 204.9 219.2 284.6 261.0 2.6 Account payablo 191.5 146. 170.7 . 2 Total Current 248.6 7 4.0 806 824.5 .lebm%LftI0 217.7 2M2,6 148.0 248.0 243.0 248.0 187.0 161.0 1.0 191.0 213.0 7,425.0 Working capital fund 116.0 10,908.2 9,916.8 8,913.7 9,215.9 8,034.4 9,694.1 10,245.5 11,011.9 1,471.9 4,440.5 4,684.9 Logp-tors ds ,009.3 a,283.5 1,91.2 4,004.1 4,812.6 2,325.4 2,149.7 2,679.7 6,624.4 9,081.7 6,715.9 10,14.2 Oovornoct funds 2,284.9 8,027.6 8,938.0 4,997.1 6,640.9 Special tfu*dfntWrprico fund 2,014.9 UJ.U.9 21.M.9 22.. ttl Lbiti tl*io 16.2.S 1.444.0 20.20?.6 .. 0 21.111.0 a f y ""12.?29.4 14,. 48(52 42/5 83182 8/67 67/U 64(86 81(89 58(42 61149 Doquity ratio 64/86 6.7s 7.01 7.06I 7.20 4.92 5.53 5.71 6.12 6.13 Currant ratio 4.33 ANNEX6.11

CHINA ERTANHYDROELECTRIC PROJECT

Sichuan ElectricPower Administration

ProjectedFunds Flow Sttepente (1991-2000) (Y million)

1991 1992 1998 1994 1996 1996 1997 1998 1999 2000

Sources of funds Not income before interest 619.8 816.8 1,417.8 1,607.8 1,599.6 Depreciation 1,659.6 1,604.4 1,374.1 1,164.3 1,207.3 288.0 260.8 899.8 650.6 626.7 699.3 Maintenance SF 782.4 849.2 875.6 906.4 allocation 177.0 196.8 265.2 319.7 868.7 899.4 442.9 Conamer connection SF 408.2 611.0 642.3 217.6 289.8 263.8 289.6 818.5 850.4 388.4 424.0 488.4 518.0 Total internal funds 1,248.9 1,612.7 2,385.6 2,867.8 2,902.6 8,007.7 Total borrowings 8,215.1 3,130.4 3,007.2 3,189.0 1,937.8 1,964.7 1,498.2 1,910.5 1,851.2 744.1 543.6 482.8 604.5 528.3 Total Sources of Funds 3.184.B 8.497.4 3.8U.8 4.t77.7 4,668.8 8.751.7 B.7S8.6 8.613.2 3.611.7 3.897.2 0 Application of Funds Construction expenditures 1,605.6 1,607.2 1,348.6 1,748.2 1,477.0 578.5 532.6 Interest during construction 445.0 528.0 418.0 482.8 477.6 149.8 167.8 174.2 166.8 11.1 37.8 78.5 112.8 Subtotal 1.987.8 1.984.7 1,498.2 1.910.5 1.651.2 744.1 543.6 482.8 604.5 628.3 OsOrational Reouiremsnts Inc/dec in working capital 41.6 7.9 28.8 5.6 3.9 -2.7 1.2 Inc/dec in speciol fund assets 26.0 63.0 65.8 4.1 -7.1 -48.4 80.5 34.6 89.2 34.4 60.4 42.2 28.2 Debt service 287.1 826.1 946.9 1,144.0 1,191.2 Remittances to 1,312.7 1,631.6 1,484.4 1,802.3 1,319.2 Government 287.6 412.8 558.7 484.8 563.7 861.2 Special fund exponditures 221.3 10.2 28.5 25.0 572.6 611.7 662.0 886.8 926.0 1,086.8 1,191.4 1,337.1 1,452.9 1,568.9 Total OoerationalResuir3=¢nte 1.148.0 1.860.3 2.188.0 2.561.? 2,719.8 2.847.2 2.979.8 2.918.1 2.878.9 2.987.1 Total Apolicetions of Funds 8.080.8 8.388.0 8.686.2 4.462.1 4.870.6 3.591.2 8.s28.3 3.400.9 3.483.4 3.616.3 Increasoem/croaeeIn c-ah 108.9 182.4 197.6 115.6 183.2 160.5 236.3 212.3 128.3 181.9 Annual debt service coverage 1.4 1.4 1.8 1.8 1.8 1.8 1.3 1.3 1.4 1.5 -151 - AN4EX 7.1 Page 1

CHINA

ERTAN HYDROELECTRICPROJECT

Economic Justificationof the ProJect as a Least-CostAlternative

1. The least-costexpansion sequence (Plan A) includingthe Ertan Project is detailed in Annex 4.5. An alternativeleast-cost sequence (Plan B) without Ertan is described in the Project File 1/ and suvmarizedbelow. It is worth noting that this sequence has more severe environmentalimpacts that are describedseparately (Annex 7.3), but not accounted for in the least-cost analysis presentedhere.

ALTERNATIVECAPACITY EXPANSION (MW)

Year: 1998-2000 2001-05 2006-10

Hydro Pengshui 1,200 - - Longtoushi 500 Pubuguou - 2,800 - Dagangshan - - 1,500 Gongzui - - 1,400 Jinpingdi - - 1,500

Thermal Huangjiaozhang 800 - Jiang You 600 - Luo Huang 300 - Chuan Nanxin 600 1,200 1,800 Chuan Dongwin 600 600

2. The cash flows of investmentand operating costs for this alternative sequence and the sequencewith Ertan have been calculated for the period 1991-2017 and discountedto January 1998 at a 10 percent discount rate. The resultingpresent values (PV) are shown in Table 1 (page 3) along with the factors utilized to convert financialprices into economic prices. Table 1 also shows an update of these costs discounted to January 1998 at financial and economic prices of 1990 with a shadow exchange rate of Y 5.5 per US dollar. The key unit prices used in the evaluationare summarizedbelow3

11 "EconomicAnalysis of Ertan HydropowerPower Plant Based on the Optimiza- tion of the Sichuan System," Beijing Economic Research Instituteof Water Resourcesand Electric Power, September1988. All commissioningdates in the study are postponed two years to reflect the situationprevailing at end-1990. - 152 - ANNEX 7.1 Page 2

Financial Conversion price Economicprice factor Item (Yuan) Yuan US$ (Yuan/Yuan)

Thermal plants (kW) 1,680 2,710 493 1.61 Standard coal (ton) 135 200 38 1.55 Hydro plants (kW) 2,700 3,875 705 1.44 Power transmission(kW) 730 856 156 1.17

3. At economic prices and before project costs are added, the sequence with Ertan has a PV of Y 56,547 million before project costs, that without Ertan a PV of Y 75,466 million, hence a supply cost savings of Y 18,918. The PV of Ertan investmentand O&M costs is Y 14,050. The net savings, Y 4,868 million, are 35 percent of the investment.

4. Levelized figures in fen/kWh are obtained by dividing the above by the PV of the project output (121,093GWh). The project unit cost is 11.6 fen/kWh as against an alternative"avoided" cost of 15.6 fen/kWh. This "avoided"cost is analyzed and broken down into capacity and energy components as followst

Concept fen/kWh 1

Contributionto firm power 5.2 33 Additional peaking value 2.9 18 Average energy value 7.6 48

Total 15.6 100

5. At full commissioning,the project contributionto the firm power of the grid is 1,000 MW (dry season) and the peaking capability is 2,760 MW. Firm power is valued at the annualizedprice of base coal-firedcapacity net of outages (Y 650/kWj and the peaking capabilityin excess of firm power is valued at the price of incrementalpeak power at other hydro sites (Y 250/kW). The balance of the avoided cost is the alternativefuel cost. This alternativefuel cost correspondsto a price of Y 180/ton of standard coal. The alternativewould break even with the Ertan project only if the alternativefuel cost correspondedto a coal price of Y 84/ton. Details of this analysis are presented in Table 2 (page 4). ANNE 7.1 Page 3

Table 1: CASH4FUL DISCOU0E AT JAM 1, 199 (Y mlI lion)

Other Investmnt utilays Other Ospratne Outlays. Project Thermal Hydro Transmission Subtotal Project Therml Hydro Subtotol Total

With the Proi 1988 PV of cost for Plan A at 1/1/96 6,856 6,261 10,626 1,681 24,168 855 14,M51 1,211 15,772 8,080 1968 conv.factors 1.12 1.44 1.22 1.22 1.10 1.19 1.10 1980 conv.factors 1.18 1.61 1.44 1.17 1.06 1.55 1.06 PV at commissioning At financialpricos 11,166 5,064 13,097 1,718 31,024 1,377 18,686 1,671 19,684 50,708 At economic pricos 12,60s 8,187 18,860 18,860 41,612 1,44S 26,786 1,755 28,986 70,598 Averase i nereoentol csta

At financial prices 9.21 18,860 1.14 1.38 10.88 At economic prices 10.41 1.19 1.46 11.60 Without the ProJect 1988 PV of costs for Plan B at 1/81/9 8,849 14,853 532 24,284 18,030 1,728 12J58 43,992 1188 cony. factors 1.44 1.22 1.22 1.19 1.10 Iz'qo cony. factors 1.61 1.44 1.17 1.55 1.06 PW es commissioning At financial prices 8,617 18,481 004 27,603 20,600 2,386 22,984 50,687 At economic prices 13,713 26,613 707 41,032 81,929 2,804 34,433 75,486 Suool-vCost Sevinas

At financialprices 3,463 6,384 -1,118 7,734 3,983 713 4,677 12,411 At economic prices 5,676 7,753 -1,802 12,028 6,143 749 6,892 18,919 Averse. incrementalcosts rfonlkwh, At financial prices 2.88 4.45 -0.92 6.39 8.27 0.59 3.86 10.25 At economicprices 4.60 6.40 -1.08 9.93 5.07 0.62 6.69 15.62

Source: For a comissioning over1996-98 accordingto 'EconomicAnalysis of ErtanProject Basedon the Optimizationof Sichuan Systee,2 atterResources and ElectricPover Economic Research Institute, Beijing, September 1988. AN=EX7.1 Page 4

!'tbie_2:ANALYSIS OF ALTNATIVE POM SUPLY COSTS

Peking Fire Avora Capabil Thermal Base Peeking I ty Power output COaI enrgy (M capacity hydro 1)W) Altornative suaolv cgsg a/ton) (fen/kWh) - (7/kU/ver) - 1988unit costa 180 5.5 S00 1a 1968 conversion factr8 1.19 1.19 1.46 1.15 196 conversion factors 1.27 1.27 1.60 1990 unit costa 1.60 Pr.Y. 28,569 9,664 121,098 at financial prices 18; 5.7 407 156 At economic prices 210 8.6 6I5 250 Yoar Coal Mixedhydro- oquiv. Average 1998 920 920 Fira Additional 2,800 therm altornative YIton nrory capacity Peak Total 1999 2,800 1,000 10,600 2000 2,760 1,000 14,560 At financialprices 6805S 8,932 2,174 12,411 At economicprices 9,148 6,291 3,478 18,916 At financialprices 124 5.2 8.2 1.8 10.2 At economicprices 160 7.6 5.2 2.9 15.6 Share 48X an8 16a 1005 ErtanHydroelectric Prolact

At financialprices 8,42 3,9832 2,174 12,582 At economicprices 4,261 6,291 3,478 14,051

At financialprices 126 5.8 3.2 1.8 10.3 At economic prices 84 3.5 6.2 2.9 11.6 Share 305 465 265 1005

Source: Missionostisates and September1986 9WEPERI's analysis, OD. Cit. ANIEX 72

MAN HYMaV C U

Egono;c Rat, of Rpturn A. Ra.d on Covonated riff

FullI Convtengenci and 1-Veer delay Sjao 14.Ca.. r ~~~~I:S- *0 r'etIl:1805I 14.20l Projecti (ku ayets u Pro roe butlaye Cwb Yeve, itvost. DA Flow lnvest. DM Flaw Invzt. 0N4 Flw In.. InvIt.. Floe

Beforo .991 S1 -511 487 199 -487 81S -613 558 -E 887 -W 684 -484 824 -024 731 -75 1992 ,6Se6 -I1sss ,493 -1,403 1993 1.8. -1882 1.71 -144 8 >7-72 0 -se 1,04 -1'o46 953 90 1994 8-28 789 -789 199 994 -994 905 -90C 907 007 884 -864 1.08 -1,068 992 -W2 196 1,207 -120 1,150 -1,150 I"99 1,440 -1,448 8474? 1,143 -1,145 1.090 -1.090 1,874 -1,374 847 -47 1998 0.16 2,900 455 485 123 -153 462 117 -124 S8 148 -274 1999 0.17 10.800 847 -47 1,834 87 129 1,85 362 123 1.859 444 154 1,255 1.34 .549 1I4 1.181 2000 0.15 14.560 2568 229 18 2,201 218 126 2,219 275 2001 0.17 14.560 159 2,129 2.583 414 141 2.008 2,475 132 2,343 i2n 2,349 159 2.316 2.475 250 144 2.001 2002 0.1f 14,660 2,330 2,197 126 2.204 IN 2,171 2005 0.16 14,560 2,30 144 2,12 2.830 182 2 197 126 2,2D4 15 2,171 2.3aS 144 2.103 2004 0.16 14.580 2,32 132 2,197 126 2.204 159 2,171 2.330 2005 0.16is5.00 2.48D 132 2,348 144 2,3l5 2006 126 2,384 159 2.321 2,480 144 2:3l6 0.18 15,500 2.480 182 2,343 12 2.354 189 2.821 2.480 2007 0.16 15,500 2,480 132 2,348 144 2,888 2008 126 2,9S4 S9 2,321 2.480 144 2.3n6 016 15.500 2.480 132 2,348 128 2,384 U15 2.21= 2009 0.16 2,448 144 2,836 15.500 2.480 13 2,348 126 2,354 1^59 2 321 2.480 144 2,386 n -S010-27 0.16 17,000 2,720 382 2.58S 126 2.594 139 2,561 2.720 144 2,57

8. fasd an Tariff for Noo al--fired Plant.

FullI Contengni es and 1-Veer delay 9"aa Ca.. !l: 17.48 P 2 -I.i Iblet 1R: U.15., 16.4§8 ... fr.j32...... Pr-oject Out *rys Cah roe Vera r sys ojet Out. a osh protect (uttayr Cash YIkdSll ^$ n^ Invest. OIUAi FIa. Inveet. D6 Flo Invest- 0MO Flow xncmm Invest. ^ m FPlaw

Before 1991 511 -511 487 1991 -487 813 -618 558 -558 687 -687 654 -o54 824 -24 751 -751 19C2 1,568 -1.868 1,495 -14'3 1,882 -1,82 1993 872 1,714 -1,714 194 -872 8o0 -830 1,046 -1,046 983 -'03 82B -828 789 -789 94 -994 0905 -90 1995 907 -907 884 1996 .-864 1,068 -1.088 992 - 1,27 -27 1,10 -1,150 1,440 -1,44 347 8 1997 1.145 -1,145 1.090 -1.090 1,m74 1"99 0.21 -1,374 847 847 2,900 609 485 126 1 462 117 80 Sl2 148 -121 847 -847 1999 0.21 10.600 2.826 370 129 1,727 m 123 1.751 444 20D0 0.21 154 1,62 2.226 549 t4 1,543 14,560 3,058 229 132 2,698 218 126 2,714 275 159 2,624 3.056 414 141 2,595 2001 0.2'1 14,560 3.058 132 2.926 126 2.932 159 2,8" 2002 0.22 14,560 3.058 3,058 20 144 2.6 152 2.925 126 2.902 15 2,899 3.058 144 2,918 2003 0.21 14.560 3056 12 2.9^5 126 2.932 159 2004 0.21 14.560 2.899 3.0S 144 2,913 3.3 Z2 2,923 16 2,932 159 2,899 3805 44 2,0 2005 0.21 1.5.500 s.255 13 3.=2 12 3 12 2006 0.21 1.59 3,096 3,265 1" 3,21 15 500 3.265 132 3 123 126 3 129 19 3,096 3,255 144 3,2.1 2W07 0.21 15.500 3,255 132 3,128 126 3.129 15 C,9 2008 0.21 15.500 3,255 3A,25 ]14 3 .4 1S2 3 121 126 3 129 15 a.09 3,255 144 3S1. 2009 0.2.1 is.500 3,255 13 3.12 126 3,12 2010-27 0.21 17.000 I59 3,096 3,255 144 8,11 3,570 n2 A4A 126 8,444 159 8,411 3,570 144 3,436 - 156 - ANNEX 7.3

CHINA

ERTAN HYDROELECTRICPROJECT

EnvironmentalImpact of Coal-FiredAlternative

".oject Reference Unit Alternative

Installedcapacity (KW) 600.0 3,600 Net yearly output (TWH) 3.6 17.0 Raw coal equivalent (Mt) '.0 9,7

Case 1 Case 2 Case 1 Case 2

Atmosphericemissions (X) Sulfur dioxide La 1.72 4.92 1.72 4.92 Nitrogen oxides 0.91 0.91 0.91 0.91 Solid wastes 19.40 34.80 19.40 34.80

Incrementalimpact (thousandstons/year) Sulfur dioxide /a 40.8 120.0 166.4 476.1 Nitrogen oxides 18.6 18.6 68.1 88.1 Fly ash /b 1.4 1.4 6.8 6.8 Solid wastes 1,877.1 3,367.2 1,877.1 3,367.2 Water consumption 129.6 874.8 613.3 4,139.5

Incrementalland use (ha/year) 70.0 70.0 1,155.5 1,155.5 of whicht Open pit mining 67.0 67.0 1,141.3 1,141.3 Waste disposal 3.0 3.0 14.2 14.2

Power plant site (ha) 100.0 450.0 600.0 2,700.0

La Flue Gas Desulfurizationnot included,would cost about $150/kW. lb Electrostaticprecipitators included with 99 percent operatingefficiency.

Note: Case 1--coolingtowers, water recycling. Case 2--coolingponds, no water recycling. 157- NEX8.1 Page 1

CHINA

ERTAN HYDROELECTRICPROJECT

Selected Documents and Data Available in the Project File

A. Selected reports and Studies Related to the Project

1. Economic analysis of the Ertan HydroelectricProject September 1989 based on the Optimizationof the Sichuan System by WREPERI

2. Materials for Preappraisalof the Ertan Hydroelectric May 1988 Project prepared by SOEPA

3. Ertan HydroelectricProject, Cost Estimates by CHIDI May 1988

4. Ertan HydroelectricProject, Environmental May 1988 Aspects and Human Resettlementby CHIDI

5. Ertan HydroelectricProject, Statementon May 1988 EnvironmentalImpact by CHIDI

6. Ertan HydroelectricProject, Reservoir Submersion May 1988 by CHIDI

7. Ertan HydroelectricProject, Report on Construction May 1988 Planning by CHIDI

8. Report on Ertan HydroelectricProject Prequalifica- August 1988 tion Evaluation for Tendering of the Civil Works for Lot I and Lot II, MOE

9. Tender Documents for Lot I, Arch Dam Works, CHIDI September1988

10. Tender Documents for Lot II, UndergroundPowerhouse September1988 Works, CHIDI and Harza

11. Ertan HydroelectricProject, EnvironmentalImpact March 1989 Statement,CHIDI/MOE

12. Ertan HydroelectricProject, Resettlementand March 1989 EnvironmentalAspects, EHDCICHIDI

13. Ertan HydroelectricProject, Reservoir Submersion March 1989 and resettlement,EHDCICHIDI

14. Ertan HydroelectricProject, Resettlement March 1989 Implementationand Management - 158 - ANNEX 8.1 Page 2

15. Ertan Hydroelectric Project, Report on Reservoir March 1989 Submersion Disposal and Resettlement Planning, CHIDI

16. Ertan Hydroelectric Project, Downstream Effects March 1989 During Ertan Project Operation, EHDC/CHIDI

17. Ertan Hydroelectric Project, Upper Catchment March 1989 Area Land Use, EHDC/CHIDI

18. Ertan Hydroelectric Project, Environmental Impact March 1989 of the High Voltage Transmission Lines, EHDC/CHIDI

19. Ertan Hydroelectric Project, F.nvironmental March 1989 Management System, EHDC/CHIDI

20. Environmental Monitoring and Its Costs, EHDC/CHIDI March 1989

21. Human Health in Reservoir Region and Environmental March 1989 Sanitation in the Construction Area. EHDC/CHIDI

22. Resettlement and Environment, EHDC/CHIDI September 1989

23. Information for Appraisal, EHDC/CHIDI September 1989

24. EHDC Charter September 1989

25. Updated Information for Staff Appraisal Report (EHOC) February 1991

26. Environmental Impact Summary 1990

B. Selected Work Sheets

1. Work Sheets for EHDC's and SCEPA's Financial Forecast

2. Cost Tables and Working Sheets for the Project

3. Implementation Schedules and CPM Charts - 159 - Chart I

CHINA ERTANHYDROELECTRIC PROJECT Orpnlzaflon Chortdl the Minis"t o Energ

X--i6

of~v Be ovo___ Oe*u of. .

of~~~~~~~~~t

Or""mftwofmCoat

wal CHINA ERTANHYDROELECTIC PROJECT Organizatlon of Ertan Hydroelectric DevelopmentCorporation (EHDC)

| dBesoardof Dleto 7

~~~~~~~~~~~~~~~~~I C

A Xar L=I1 Pann r.~4 Deptof~ ~ ~ w wf o

{~~~~~~~IW Of F-L C.i

_eD oont

GeIM DIon of D1 Of Divisionof O.wi WO= onnai

AU-. - 161 -Cht3

Chr3

iE391':Y~~~~~~

E~~~~~~~~

FEg#H I ~~~~~~~~~~ CHINA ERTANHYDROELECTRIC PROJECT Implementation Schedule

No. ITEM Years 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Quarters 1 2 f3 14 1 2 13 4 1 1213 4 1 2 3141 1 2 3 4 1 2 13 4 12 3 4 1 j13 4 12 1314 1234 2 34112!34 ol Prnartoiy Works (Roads. Bridges, Commncation,Power Supply). ** ~

02 Resetement,LandRequistion. 2 Z2522* *s 5 2 2U+ 03 ContractAward and Signing Contract for CivilWorks (Lot I anidLot 1I.) 04 Issueof CommencementOrder (Lot I andLot II). 05 tMoBZInoftheContractors for . I Wot andB MainWorks Constructi_n. El 25 06 PreparafionofTender Documents for the flrs Groti of PermanentE/M

07 ConMrmatlonof TenderDocuments by fth Bankand $180.

08 Issueof TenderDocuments for GroupI.of E/M Equlpment 09 Openngof Bidsfor Grup 1. 10 $91n11Cornract, ManufacUe for _ _ _ _ _1 ii Preparationof TenderDocuments for GroupIet Et/SEquipment. 12 ConfImationof Tender Documents by the Bankand 8EC. 13 Issu of the TenderDocuments for Grotipli1. 14 Openingof Bidsfor GroupII. 15819nkContrack Manufacturfor

18 RIverClour (Dec.1998) 17 tnstajatlonofthe FlrsUnIt.m m . 18 Commissioningof the FirstUni. * 19 CommIssiondngof fth SixthUnIL 20 Compleio of EftanHydroelectric

- elect. . - - * . 5 . ~~~ 5 - * * ft- CHINA ERTANHYDROELECTRIC PROJECT GENERALLAYOUT

iS3~*t tMain T__ _fomaierSwith O,)

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