Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No: 42 124-CN

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN Public Disclosure Authorized

IN THE AMOUNT OF US$lOO MILLION

TO THE

PEOPLE’S REPUBLIC OF

FOR A

JIANGXI SHIHUTANG NAVIGATION AND HYDROPOWER COMPLEX PROJECT Public Disclosure Authorized

August 14,2008

China and Mongolia Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized CURRENCY EQUIVALENTS

(Exchange Rate Effective January 28,2008)

CurrencyUnit = RMB RMB1 = US$O.1389 US$1 = RMB7.2

FISCAL YEAR January 1 - December 31

ABBREVIATIONS AND ACRONYMS cccc China Communications Construction Company CDM Clean Development Mechanism CFU Carbon Finance Unit CGC China Guodian Corporation CPS Country Partnership Strategy CQS Selection Based on Consultants’ Qualifications DA Designated Account DP Displaced Person DSP Dam Safety Panel DWTIdwt Deadweight Tons EA Environmental Assessment EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return EMP Environment Management Plan ENPV Economic Net Present Value EPP Emergency Preparedness Plan FM Financial Management FMS Financial Management Specialist FS Feasibility Study FSL Fixed Spread Loan FSR Feasibility Study Report FYP Five-Year Plan GDP Gross Domestic Product GOC Government of China ICB International Competitive Bidding IWT Inland Waterway Transport JANA Administration ofNavigation Affairs JPAO Jiangxi Provincial Audit Office JPCD Jiangxi Provincial Communications Department JPDRC Jiangxi Provincial Development and Reform Commission JPFD Jiangxi Provincial Finance Department JPMO Project Management Office for the Construction of Shihutang Navigation and Hydropower Complex JP WRD Jiangxi Provincial Water Resources Department FOR OFFICIAL USE ONLY LIBOR London InterBank Offered Rate MOT Ministry of Transport MOF Ministry of Finance MRLDC Mountain-River-Lake Development Commission MRLDO Mountain-River-Lake Development Office MRLDP Mountain-River-Lake Development Program Mtce Million tons of coal equivalent NBF Non-Bank Financed NCB National Competitive Bidding NDRC National Development and Reform Commission PDO Project Development Objective PMPO The Provincial Major Projects Office PRC People’s Republic of China QBS Quality-Based Selection QCBS Quality- and Cost-Based Selection RAP Resettlement Action Plan SBD Standard Bidding Documents SEPA State Environmental Protection Administration SOE Statements of Expenditure sss Single Source Selection TEU Twenty-Foot Equivalent Units VSL Variable Spread Loan

Vice President: James W. Adams, EAPVP Country Director: David Dollar, EACCF Sector Manager: Ede Jorge Ijjasz-Vasquez, EASCS Task Team Leader: Wenlai Zhang, EASCS

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.

CHINA Jiangxi Shihutang Navigation and Hydropower Complex Project

CONTENTS

Page

I. STRATEGIC CONTEXT AND RATIONALE ...... 1 A . Country and sector issues ...... 1 B . Rationale for Bank involvement ...... 2 C. Higher level objectives to which the Project contributes ...... 2

I1. PROJECT DESCRIPTION...... ,...... 2 A . Lending instrument ...... 2 B . Project development objective and key indicators ...... 3 C. Project components ...... 3 D. Lessons learned and reflected in the project design ...... 4 E . Alternatives considered and reasons for rejection...... 5 I11. IMPLEMENTATION ...... , ...... 5 A . Institutional and implementation arrangements ...... 5 B. Monitoring and evaluation of outcomes/results ...... 6 C. Sustainability...... 7 D. Critical risks and possible controversial aspects ...... 7 E. Loadcredit conditions and covenants ...... 9 IV. APPRAISAL SUMMARY ...... 10 A . Economic and financial analyses ...... 10 B. Technical ...... 10 C. Fiduciary ...... 11 D. Social ...... 12 E. Environment...... 12 F. Safety of Dams ...... 13 G . Safeguard policies ...... 13 H. Policy Exceptions and Readiness ...... 14

Annex 1: Country and Sector or Program Background...... 15 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 21 Annex 3: Results Framework and Monitoring...... 22 Annex 4: Detailed Project Description ...... 25 Annex 5: Project Costs ...... 31 Annex 6: Implementation Arrangements ...... 32 Annex 7: Financial Management and Disbursement Arrangements ...... 35 Annex 8: Procurement Arrangements ...... 41 Annex 9: Economic and Financial Analysis ...... 47 Annex 10: Safeguard Policy Issues ...... 61 Annex 11: Project Preparation and Supervision ...... 74 Annex 12: Documents in the Project File ...... 76 Annex 13: Statement of Loans and Credits...... 78 Annex 14: Country at a Glance ...... 82 Annex 15: Maps IBRD No. 35283, 35284R, 35285R, 35286R, 36005 ...... 84 CHINA

JIANGXI SHIHUTANG NAVIGATION AND HYDROPOWER COMPLEX PROJECT

PROJECT APPRAISAL DOCUMENT

EAST ASIA AND PACIFIC

EASCS

Date: August 14,2008 Team Leader: Wenlai Zhang Country Director: David R. Dollar Sectors: Ports, waterways and shipping (60%); Sector ManagedDirector: Power (40%) Ede Jorge Ijjasz-Vasquez Themes: Infrastructure services for private sector development (P); Other rural Project ID: P101988 development (P); Water resource management (S); Administrative and civil service reform (S) Lending Instrument: Specific Investment Loan Environmental screening category: Full Assessment Project Financing Data [XI Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:

For Loans/Credits/Others: Total Bank financing (USsm.): 100.00 Proposed terms: The loan is payable in 25 years, including 8 years of grace period, annuity repayment at six-month LIBOR-based US Dollar plus variable spread, and with all conversion options.

Borrower: People's Republic of China, represented by Ministry of Finance Responsible Agency: Jiangxi Administration of Navigation Affairs No.140, Yanjiangbei Road , Jiangxi Province, China 330006 Tel: (86-791) 681-7370 Fax: (86-791) 681-2936 E-mail: [email protected] I 4nnual I 30.90 I 34.78 I 20.64 I 8.68 I 5.00 I 0.00 I Zumulative] 30.90 I 65.68 I 86.32 I 95.00 I 100.00 I 100.00 I Project implementation period: Start: December 1, 2008 End: December 3 1, 20 13 Expected effectiveness date: January 30, 2009 Expected closing date: June 30, 2014

Does the project depart from the CAS in content or other significant respects? ,vao ry,

Does the project require any exceptions from Bank policies? Re$ PAD IKH. Have these been approved by Bank management? Is approval for any policy exception sought from the Board? [ ]Yes [ ]No Does the project include any critical risks rated “substantial” or “high”? [ ]Yes [XINO Re$ PAD III.D. Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ]No Re$ PAD IKH. Project development objective Re$ PAD II.B., Technical Annex 3 The development objective (PDO) of the proposed project is to improve utilization of the Gan River for more reliable freight transport and for cleaner energy production through: (a) improving inland waterway transport capacity and service levels for primary and secondary industries in the Nanchang- corridor of the Gan River; and (b) generating renewable electricity to help meet rapidly growing demand for energy in the region.

Project description [one-sentence summary of each component] Re$ PAD II.C., Technical Annex 4 The Project will include the following three components: Component A - Construction of Shihutang Complex, which is a single integral infrastructure unit consisting of 23 sets of sluice gates, one Grade I11 ship lock, one powerhouse of 120 MW installation capacity, and two sections of connection dam. Component B - Flood Protection Works, which consist of approximately 43km of dikes and 56km of diversion canals, about six sets of pumping stations, two sets of free drainage sluices and two sets of regulating sluices. Component C - Technical Assistance (TA), which consists of two technical studies and a capacity building program which aim to build the institutional and technical capacities of the implementing agency.

Which safeguard policies are triggered, if any? Re$ PAD IKG., Technical Annex 10 Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Physical Cultural Resources (OP/BP 4.1 1) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Significant, non-standard conditions, if any, for: Re$ PAD III.E. Board presentation: None.

Loadcredit effectiveness: The issuance of the relevant legal opinions.

Covenants applicable to project implementation: Safeguards: The Environment Management Plan (EMP) and Resettlement Action Plan (RAP), satisfactory to the Bank, will be implemented during the construction and the Bank will be allowed to supervise such works. A Dam Safety Panel (DSP) with at least three experts shall be maintained during the implementation until the full operation of the Shihutang Complex. Finan cial: The proceeds of the loan will be on-lent to Jiangxi Province on the same terms and conditions as the Bank loan, with the province bearing the foreign exchange risk. Project financial statements will be audited in accordance with consistently applied auditing standards acceptable to the Bank. The Jiangxi Provincial Audit Office (JPAO) has been identified as the auditor for this Project. Annual audit reports will be issued by JPAO. Retroactive financing will be available for this Project to the amount of US$lO Million for payments made under the Project prior to the date of the Loan Agreement and after July 1, 2008. A nti-Corruption : The Project shall be carried out in accordance with the provisions of the World Bank Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15, 2006. Reporting and Monitoring: Progress reports: Semi-annual progress reports within 45 days after the end of each semester, starting from Feb. 15,2009, shall be submitted to the Bank. Wan ’an Dam and Water Release: The upstream Wan’an Dam shall be operated and maintained at an acceptable standard of safety. The DSP will review all reports prepared by the Borrower’s dam safety agency with respect to the safety status of the Wan’an Dam, and carry out site visits, if necessary. A minimum of 150 m3/sof water from the Wan’an Dam shall be secured to meet the water needs of the Shihutang Complex in accordance with the Water Release Agreement. Transmission Line: A transmission line shall be constructed and operated to transmit power generated from the Shihutang Complex to the provincial grid. Adequate measures to address any adverse environmental and social impacts, and land acquisition and resettlement shall be implemented in a manner satisfactory to the Bank.

I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues

1. China’s inland waterway transport (IWT) network is the world’s largest, in terms of length and freight volume. Its higher standard waterways (Grade V and above) are approximately the same size as the EU’s and the USA’s commercially significant networks combined. Over the last five years, China’s IWT traffic has grown at 9 percent annually to 1.16 billion tons in 2006, slightly higher than the USA’s and EU’s IWT traffic tonnage combined. Although dominated by flows of bulk raw materials, China has been gradually developing a major IWT container operation with nearly 8 million twenty-foot equivalent units (TEU) a year. Mostly this is concentrated around the seaports in the lower reaches of the and Pearl Rivers, although container traffic between the coast and inland ports has nearly trebled in the last five years.

2. Nevertheless, freight density (tons per waterway km) and waterway utilization in China is lower than the USA and some of the EU countries, despite a dominance of production types and distribution patterns that should provide a clear competitive advantage to waterways in many of China’s transport corridors. China has about 37,000 km of Grade VI-VI1 inland waterways that are presently capable of carrying only small barges reliably. Only a small fraction of the potential capacity of these waterways is used, even though most of these graded waterways are conjoined with the main rivers and many serve major areas of population and economic production. There are a number of factors that explain this low utilization. Navigation infrastructure either has deficiencies or is of a low standard which prevents the passage of larger and more efficient vessels that serve the higher standard waterways. Also, historically there has been a low investment in IWT to improve these standards. Finally, institutional arrangements have made it difficult to attain coordinated actions to optimize IWT development on such waterways as most of them are administered by provincial governments.

3. The Government of China (GOC) wishes to increase the contribution of China’s waterways to its transport needs. The Ministry of Transport (MOT) has issued a series of plans to direct and promote IWT development. The GOC’s strategy recognizes the high energy efficiency and low greenhouse gas emissions associated with water transport, and the importance of conserving scarce land resources. China’s geographical features and the distribution of its population mean that inland water transport could claim a much larger volume of China’s inland transport market.

4. Jiangxi Province is a land-locked province in south-central China, one of the six economically underdeveloped central provinces supported by the GOC’s “Rise of Central China” initiative. Transport is one of the priorities in this development strategy. Over the past decade, the growth of IWT has lagged far behind road transport in the province. The province has now decided to pursue a more balanced transport strategy that gives more prominence to IWT. IWT can supplement road and rail transport by providing competitive services for bulk and low-value cargo. The priority for both the MOT and the province is to improve and facilitate the navigation capacity on the Gan River, particularly in its middle and lower reaches. 5. The GOC has taken a number of initiatives to address climate change and environmental problems and thereby maintain sustainable economic development. Hydropower, a clean and renewable power resource that reduces greenhouse gas emissions, has been given a key role in

1 scaling up installed capacity. Currently, Jiangxi Province does not have sufficient power to meet its needs and there is a strong demand for power generation, especially for clean and renewable hydropower.

B. Rationale for Bank involvement

6. The GOC, in response to a proposal from Jiangxi Province, has requested the Bank’s financial and technical support in implementing the Shihutang Navigation and Hydropower Complex Project (the Project). The Bank has provided financial and technical support to China’s inland waterway development over the past 10 years (five projects in six provinces) and is the leading international financial institution in the IWT sector of China. The Bank’s unique expertise and experience, both international and local, can greatly contribute to project implementation and to strengthening the institutional capacities of the IWT sector in Jiangxi Province. 7. The Bank’s involvement will support two of the five pillars of the Bank’s FY06-10 China Country Partnership Strategy (CPS). The Project addresses the pillar of ‘reducing poverty, inequality, and social exclusion’, by improving transport services and reducing costs between an economically underdeveloped inland province and the dynamic coastal area. As a result, the rural poor will benefit from improvements to transport. It also addresses a second pillar of ‘managing resource scarcity and environmental challenge, through reducing air pollution, conserving water resources, and optimizing energy use’, by generating energy from a clean renewable source to help meet the rapidly growing demand for energy in Jiangxi Province.

C. Higher level objectives to which the Project contributes

8. The higher level objective of the Project is to promote ‘clean’ economic development in the Gan River basin, a region with more than seventeen million people, by optimizing the use of its water resources for environmentally-friendly transport services and renewable electricity production. 9. The Project will reduce the costs of provincial, inter-provincial and international trade logistics for cities and communities located in the Gan River corridor and its hinterland, which have rich natural resources, including minerals for building materials, high quality sand and gravel, limestone, timber and non-ferrous metals such as tungsten, tin and cobalt. The processing industries that use these resources are growing rapidly. The region also has a heavy demand for inward bulk transport of coal and oil products. 10. The Project will also provide the opportunity to use direct container barge services to the seaport of for the transport of manufactured products, including car transmission systems, tobacco, wine, paper, footware, textiles and garments, new dry-process cement, pharmaceuticals, and electronics products.

11. PROJECT DESCRIPTION

A. Lending instrument

11. The Bank will finance the Project through a specific investment loan. The Borrower has selected the variable-spread loan (VSL) option in which the spread over London InterBank 2 Offered Rate (LIBOR) is reset each semester. The Borrower’s main reason for selecting a VSL rather than a fixed-spread loan (FSL) is because FSL charges are slightly higher than VSL charges. The Borrower will also select to retain the conversion options. VSL repayment terms are governed by the standard country terms.

B. Project development objective and key indicators

12. The development objective (PDO) of the proposed project is to improve utilization of the Gan River for more reliable freight transport and for cleaner energy production through: (a) improving inland waterway transport capacity and service levels for primary and secondary industries in the Nanchang-Ganzhou corridor of the Gan River; and (b) generating renewable electricity to help meet rapidly growing demand for energy in the region.

13. The indicators used to measure achievement of the PDO will include the improvement of transport capacity, the reduction of carbon emissions, the amount of electricity generated annually, and the area of crop land to be protected from flooding. (see Annex 3 for the results framework and indicators).

C. Project components

14. The Project will include the following three components: 15. Component A - Construction of Shihutang: Complex (Total US$209.47 million, IBRD US$ 91 -59 million). The Shihutang Complex is a single integral infrastructure unit that will form a reservoir with a designed normal pool water elevation of 56.5m and normal pool storage of about 166.8 million cubic meters. The Complex consists of the following main elements.

Sluice gates: 23 sets of dam sluice gates to regulate flows. 0 Ship lock: A Grade I11 (accommodating 1000-dwt vessels) single ship lock through the dam of 180 (length) x 23 (width) x 3.5 (depth) meters. 0 Powerhouse: The powerhouse built within the dam, with an installed capacity of 120 MW, to generate about 526.5 GWh of electricity per year. 0 Connection dam: Two sections of dam, with a total length of about 93 lm, will connect the structures with both river banks. One consisting of an about 83m long concrete gravity dam and an about 400m long earthen dam will connect the powerhouse to the right river bank; the other of about 448m long earthen dam will connect the ship lock to the left river bank. Dam crest access road: A dam crest access road across the top of the dam, including a 937m long crest bridge, will allow rural communities to cross the river. 16. Component B - Flood Protection Works (Total US$ 80.1 1 million of counterpart financing). The flood protection works consist of approximately 43km of dikes and 56km of diversion canals, about six sets of pumping stations, two sets of free drainage sluices and two sets of regulating sluices. 17. Component C - Technical Assistance (TA) (Total US$ 1.02 million, IBRD US$ 0.38 million). This component consists of the following elements which aim to build the institutional and technical capacities of Jiangxi Administration of Navigation Affairs (JANA) and the Project

3 Management Office for the Construction of Shihutang Navigation and Hydropower Complex (JPMO).

0 Optimization of Reservoir Operation - This study aims to maximize the benefits of navigation, power generation and flood protection of the Shihutang Complex. Optimum management solutions will be developed to direct the operation of the Shihutang Complex and the reservoir. In addition, the feasibility of a coordinated operation mechanism for the four interrelated dams, i.e. the existing Wan’an Dam, the proposed Taihe and Xiajiang dams and the Shihutang Dam, will be studied and constraints identified and solutions recommended. Technolorn for Waterway Treatment - This study aims to determine measures to overcome insufficient water depth at the 17km section of the river channel immediately below the Shihutang Dam which hinders the navigation of 1000-dwt vessels. The outcomes of the study will complement the engineering design of this Project, and provide reference and experience for other inland waterway projects facing similar problems in Jiangxi Province.

0 CaDacitv Building - To enhance the sustainable management of the investments, a well- tailored capacity building program will be included in the Project. The program consists of international and domestic training and study tours aimed at strengthening JANNJPMO’s capacities in IWT management, waterway development and maintenance, construction management, hydropower plant operation, and management of cumulative impacts at watershed level.

D. Lessons learned and reflected in the project design

18. The design of the Project reflects lessons learned from the previous five inland waterway projects (three completed and two ongoing), and recent hydroelectric and highway projects in China.

0 Institutional coordination: Previous projects have shown the importance of coordination and information exchange among the various agencies involved to maximize the benefits of water resources utilization. Close coordination with and support from the local government on land acquisition and resettlement is also critical to the smooth implementation of the projects. A due diligence review concluded that Jiangxi’s existing practice and coordination mechanism would enable effective cross-sector coordination in the project implementation. Market Demand and Traffic Proiection: A thorough assessment of market demand and a careful evaluation of traffic projections are essential for inland waterway projects. For the Project, a provincial navigation development plan based on an overall market forecast has been made available which sets out development targets. Traffic projection, which is based on a regional economic forecast with a derived total volume of cargo categorized into major commodity types, was assessed as reasonable. Responsiveness of shipping industry: Previous inland waterway projects have shown that users of China’s inland waterways are aware of the benefit of using larger vessels. With the MOT’Sfavorable policies on standardization and modernization of IWT vessels, the shipping industry has responded positively to the improvements in inland waterway capacity. It has successfully provided lower cost services with larger barges and has

4 marketed these to industrial customers. Measures to increase efficiency and cost effectiveness in the sector have been well received by the market. 0 Work variations: Previous Bank-funded inland waterway projects have experienced delays during the construction phase, which were mainly attributed to insufficient geotechnical investigation of dam foundations, and changes to primary design parameters. The JPMO has paid great attention to the quality of the engineering design, in particular the comprehensiveness of the geotechnical and hydrological investigations and the engineering optimization. Procurement delay: Previous inland waterway projects have also experienced delays in processing civil works procurement contracts, which resulted in delayed starts and late realization of project benefits. This risk has been addressed jointly with JPMO by developing a realistic procurement plan allowing reasonable time for processing procurement, strengthening the JPMO’s procurement capacity, and enhancing communication between the Bank and the JPMO on procurement. Safeh, ofDam: Previous inland waterway projects have proved the importance of involving a Dam Safety Panel (DSP) early to provide expert guidance on design, construction and operational issues. The JPMO has already appointed a three-expert DSP to review the design, supervise the construction and the early stage of the operation, and to comment on the safety plans prepared by the JPMO. The DSP has also reviewed the safety of the existing Wan’an Dam.

E. Alternatives considered and reasons for rejection

19. A series of engineering alternatives were considered in the course of the feasibility study (FS) and the engineering design. (See Table 4-4 in Annex 4 for details). Thorough analysis and evaluations were conducted with the aid of physical modeling and tests. The analysis adopted criteria tailored to each type of alternative to determine the optimal solution. The alternatives analysis focused on the key technical elements which are decisive for the financial viability and technical feasibility of the Project.

111. IMPLEMENTATION

A. Institutional and implementation arrangements

Executing Agency 20. Proiect Institutional Structure: The implementing agency of the Project is the JANA, which is one of the JPCD’s sub-administrations responsible for waterway development and maintenance. For the preparation and the day-to-day management of the project implementation, a specific implementation office, the JPMO, was established on December 3 1,2006. For the operation of the Complex, a separate operation entity reporting directly to the JANA will be established before the ship lock starts operation.

2 1. Institutional Coordination: Efficient institutional coordination among Gan River stakeholders is critical to achieving optimal utilization of Gan River water resources. Jiangxi Province has both the experience and the mechanisms needed for effective cross-sector coordination during the planning, preparation, implementation and operation of the Project.

5 0 Planning - All the related government agencies are involved in the making and updating of the comprehensive Gan River Water Basin Plan, to ensure that the interests of the various stakeholders are addressed in the programming stage.

0 Proiect Preparation - The project proposal and feasibility study must undergo an approval process which involves all the relevant government agencies. This is a coordination mechanism to ensure the interests of the various agencies are being reasonably addressed.

0 Project Implementation - The Provincial Major Projects Office (PMPO), an office that reports to a Jiangxi Vice-Governor, will assume responsibility for overseeing project procurement and implementation, and facilitating cross-sector coordination. Operation of Complex - The water release of the existing dam is regulated by the Jiangxi Provincial Flood Control and Drought Alleviation Office, a governmental entity which is part of the Jiangxi Provincial Water Resources Department (JPWRD) but reports directly to a Provincial Vice-Governor. A bilateral agreement between the JPMO and the China Guodian Corporation (CGC), the owner of the existing Wan’an Dam at upstream, has been reached on ensuring a minimum water release from the Wan’an Dam. The provincial power grid agency has agreed with the JPMO to build an 18km long transmission line before the Shihutang starts generating electricity, to connect power plant of the Project to the local power grid. One TA study under this Project will study the feasibility of establishing a coordinated dam operation mechanism which will support the decision-making of the provincial government on dam coordination in the future. Funds Flow 22. The Bank loan will be signed by the Bank and the People’s Republic of China (PRC) through its Ministry of Finance (MOF). MOF will on-lend the loan to the Jiangxi Provincial Communications Department (JPCD) through JPFD. 23. The Bank loan proceeds will flow from the Bank into a project designated account (DA) to be set up at and managed by Jiangxi Provincial Finance Department (JPFD). The Bank loan will flow from the DA to the JPMO against due contract payment or to the contractors and suppliers directly. Four disbursement methods: reimbursement, advance, direct payment and special commitment are available for the Project.

B. Monitoring and evaluation of outcomes/results 24. The achievement of the project objectives will be measured by a combination of indicators as shown in the Result Framework (Annex 3). These indicators will track final and intermediate project outcomes. JANA, as a key administrative entity of IWT in Jiangxi Province, has the capacity and instruments necessary for implementing the monitoring and evaluation under the Project. JANNJPMO will regularly collect and process the data required for monitoring and evaluation of outcomes and results. The Bank task team and JANNJPMO will review the contemporary results reflected in the project progress reports, and take appropriate corrective actions where needed.

6 C. Sustainability

25. The Bank’s Transport Business Strategy’ defines sustainability in transport systems as having financial, economic, operational, environmental and social dimensions. 26. The financial analysis indicates that the Project will generate sufficient revenue from sales of electricity over the loan period to finance operation and maintenance of the Complex, and to service debt. It is estimated that the Complex will not require any external cash injection. The Project is financially sustainable. However, given the total investment costs of the Project, the financial return is low though the Project will yield high economic benefits. The financial return may be improved through optimizing the reservoir operations which will be studied during the project implementation.

27. The Project is economically viable and its economic sustainability will tend to increase over time. Firstly, the transport cost saving versus other modes is likely to expand over time because productivity in the shipping industry is likely to grow faster than that in competing rail and road transport which are already well-developed. Secondly, the value of external benefits, such as reduced greenhouse gas emissions is expected to increase in the future. The surplus of economic benefit over pure financial return will therefore tend to widen, with increasing economic sustainability. 28. There are no obvious threats to operational sustainability. The technical requirements for operating waterways and navigation and hydropower complexes are well understood. China has clearly demonstrated its capacity in this area.

29. The combination of greater use of waterway transport and hydropower generation will contribute to greater environmental sustainability of China’s economic development in the Gan River basin because both transport and power generation components will generate lower greenhouse gas emissions than the alternatives that would be used in the absence of the Project. 30. The social sustainability of the project benefits will depend on the affordability of the transport services and electricity production that it offers. It is intended that electricity will be sold at standard rates for the region and that ship lock charge will be at levels accepted by the industry. The other major element of social sustainability will be the benefits of reduced flood damages and protected crop land from inundation by the flood protection works. 3 1. Moreover, the Bank’s involvement will enhance many aspects of sustainability. Lessons learnt from previous Bank-funded inland waterway projects can be carried forward to the Project with regard to inland waterway network planning, macro-economic considerations, cost-effective technical design, dam safety, institutional coordination, and environmental and social safeguards. Given the potential demands, the scope for applying previous experiences in China is significant.

D. Critical risks and possible controversial aspects

32. The overall risk rating of the Project is modest. The potential risks focus on four main elements: (a) construction-related risks including procurement delay and large variations; (b) the application of social and environment safeguards; (c) institutional capacity; and (d) financial management risk. The table below shows these risks and the proposed mitigation measures.

I World Bank Group Transport Business Strategy: Safe, Clean and Affordable Transport for Development, 2008 7 Risk ‘ Mitigation Risk Rating with Mitigation Large number of Enhance engineering designs based on sufficient variations/changes geotechnical/hydrological investigations, with appropriate to design and internal review process and the Bank team’s spot reviews on work quantities. critical design schemes. Tailor the bid package to the capacity of potential contractors, and ensure qualified and capable contractors are selected. Establish a practicable internal mechanism for reviewing and M clearing variations. Bank team will provide procurement training with emphasis on adequacy of bidding documents and how to handle variations in compliance with contracts and Bank Guidelines. Bank supervision will carry out review of variations and provide guidance on processing variations. Procurement Develop a realistic procurement plan that allows reasonable time delay for processing procurement. Provide training of the Bank’s procurement policies to JPMO. M Enhance communication regarding procurement between the Bank and JANA/JPMO. Hire tendering agent to help process procurement. Deficient 0 Independent external monitoring will be deployed for safeguards definition and compliance. application of A Dam Safety Panel (DSP) has been established to ensure the social and compliance with the Bank’s OP4.37 safeguards policy, and to M environmental enhance safety assurance for Project implementation. safeguards Bank safeguards specialists will be involved in project supervision to monitor implementation of the safeguards. JANA/ JPMO Ensure qualified JPMO staff are assigned and that they remain inexperience in stable. Bank projects Training programs on Bank procedures and other specific topics will be provided to strengthen implementation capacity. 0 Cross-fertilization will be continued with highway sector in M Jiangxi and with inland waterway agencies in other provinces. Involve expert panel and tendering agent to complement capacity in certain areas. Clear lines of ownership and responsibility for each component. The Bank loan is Each Bank loan disbursement will be reviewed by the JPFD, whose not used for the control and management upon Bank loan proceeds will further purposes intended. strengthen the fiduciary assurance. A financial management manual, prepared and acceptable to the Bank, will be adopted before implementation. N Financial transactions will be audited annually by the auditor acceptable to the Bank. Bank’s financial management specialist will keep reviewing the financial management system, and will provide training and guidance on financial management. Delay in execution Confirmation letter was obtained from the local power grid agency, of the linked which confirms that the transmission line is to be built before start of projects. power generation. Agreement was reached with the owner of Wan‘an Dam on the N minimum water release to meet water needs in Shihutang reservoir. JANA is committed and is responsible to treat the waterway section downside the Shihutang Dam to the Grade I11 standard.

8 The existing cross-sectoral coordination mechanism will play its role for enhancement when needed. High Risk (H) - Substantial Risk (S) - Modest Risk (M) - Low or Negligible Risk (N)

E. Loadcredit conditions and covenants

Effectiveness conditions: 0 The issuance of the relevant legal opinions.

Covenants: Safeguards 0 The Environment Management Plan (EMP) and Resettlement Action Plan (RAP), satisfactory to the Bank, will be implemented during the construction and the Bank will be allowed to supervise such works. 0 A Dam Safety Panel (DSP) with at least three experts shall be maintained during the implementation until the full operation of the Shihutang Complex. Financial 0 The proceeds of the loan will be on-lent to Jiangxi Province on the same terms and conditions as the Bank loan, with the province bearing the foreign exchange risk. Project financial statements will be audited in accordance with consistently applied auditing standards acceptable to the Bank. The Jiangxi Provincial Audit Office (JPAO) has been identified as the auditor for this Project. Annual audit reports will be issued by JPAO. 0 Retroactive financing will be available for this Project to the amount of US$ 10 Million for payments made under the Project prior to the date of the Loan Agreement and after July 1,2008. Anti-Corruption 0 The Project shall be carried out in accordance with the provisions of the World Bank Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants, dated October 15,2006. Reporting and Monitoring 0 Progress reports: Semi-annual progress reports within 45 days after the end of each semester, starting from Feb. 15,2009, shall be submitted to the Bank. Wan ’an Dam and Water Release 0 The upstream Wan’an Dam shall be operated and maintained at an acceptable standard of safety. The DSP will review all reports prepared by the Borrower’s dam safety agency with respect to the safety status of the Wan’an Dam, and carry out site visits, if necessary. 0 A minimum of 150 m3/s of water from the Wan’an Dam shall be secured to meet the water needs of the Shihutang Complex in accordance with the Water Release Agreement. Transmission Line A transmission line shall be constructed and operated to transmit power generated from the Shihutang Complex to the provincial grid. Adequate measures to address any adverse environmental and social impacts, and land acquisition and resettlement shall be implemented in a manner satisfactory to the Bank.

9 IV. APPRAISAL SUMMARY

A. Economic and financial analyses Economic EIRR = 14.9%; ENPV (at 12%) = RMB 456.6 million (US$ 63.4 million)

33. The Project will generate several types of economic benefits. The principal measured benefits considered in the economic evaluation are savings in transport costs by using inland waterway with large vessels, the economic value of the power, emission reductions, and the value of increased farm outputs resulting from reliable flood protection. The estimated overall economic internal rate of return (EIRR) for the project is about 14.9 percent; and the economic net present value (ENPV) is RMB 456.6 million based on a 12 percent discount rate. The detailed assessment is provided in Annex 9.

Financial FIRR = 0.2%; FNPV (at 5.1%) = RMB -883 million (US$ -122.6 million) 34. The JPCD intends to fund the Project from a combination of equity (54 percent) in the form of budget grants (national 18 percent and provincial 36 percent), and debt (46 percent) (World Bank loan 3 1 percent and local bank loan 15 percent). It plans to rely mainly on revenue from power sales to repay the loan. The government requires no dividends on the equity. The Project will generate sufficient revenue over the loan period to finance operation, maintenance and debt services with a constant annuity amortization schedule.

35. The JPCD has confirmed the availability of counterpart funds and its capacity to finance the capital investment and the future operating and maintenance expenses. The financial evaluation assumes that power sales are the sole Project revenue. The profitability in the early years of operation will be low resulting from government price regulations, which translates into a low FIRR for the capital investment. The Project, however, during its operational phase, will not require any external assistance and is expected to be able to maintain a healthy cash flow with a comfortable liquidity status for its entire life. All the financial indicators show that the financial risks are moderate. If the ship lock fee and/or the carbon credit are taken into consideration, the financial conditions improve further. A detailed assessment is provided in Annex 9.

B. Technical 36. According to the Jiangxi Gan River Water Basin Plan (1990) and the Jiangxi Inland Waterway Navigation Development Plan (2006), the Ganzhou-Nanchang corridor (450km) in the middle and lower reaches of the Gan River will be upgraded to Grade I11 to allow for year- round passage of 1,000-dwt vessels by 2020. The Project is one of the critical elements in achieving the navigation target set forth in the above mentioned two plans. 37. During the feasibility study and engineering design stage, a series of engineering alternative analyses were carried out with the necessary aid of physical modeling and tests. The analysis adopted criteria tailored to each type of alternative to determine the optimal solution.

10 38. The engineering design was based on reliable information obtained through detailed geological and hydrological investigations and physical model tests, which can help limit unforeseen physical elements during the construction period. 39. The timing to begin construction and construction duration has been carefully evaluated at the design stage. Alternative construction schedules have been developed. A reasonable construction schedule will be adopted in the tendering document based on the actual progress of project preparation.

40. A minimum water release from the upstream Wan’an Dam is essential for ensuring minimum channel depth to accommodate Grade I11 navigation and to meet water needs in the stretch of the Shihutang reservoir. An agreement between the owners of the two dams has already been signed to secure a minimum 150 m3/s water release from the Wan’an Dam.

C. Fiduciary 41. Financial Management: The adequacy of the project financial management system was assessed based on guidelines issued by the Financial Management Sector Board on November 3, 2005. The assessment concluded that the Project meets minimum Bank financial management requirements, as stipulated in BP/OP 10.02. The Project will maintain financial management arrangements that are acceptable to the Bank and that, as part of the overall arrangements that the borrower has in place for implementing the operation, provide reasonable assurance that the proceeds of the loan will be used for the purposes for which the loan was granted. The financial management risk is the risk that the World Bank loan will not be used for the purposes intended and is a combination of country, sector and project specific risk factors. The overall FMrisk rating proposed for this Project at the appraisal is modest.

42. Procurement: Procurement activities will be carried out by the JPMO under the supervision of the JPCD and the PMPO. The overall project risk for procurement is average. The identified key Project procurement issue and risk is the JPMO’s inadequate experience in World Bank financed projects. The agreed corrective measures are to employ a procurement agent, and for the Bank’s procurement specialist to provide training to relevant JPMO and design institute staff. Advance procurement and retroactive financing may be adopted for some of the contracts.

43. Retroactive financing: Retroactive financing will be available for this Project to the amount of US$ 10 Million for payments made under the Project prior to the date of the Loan Agreement and after July 1,2008.

44. Carbon finance: The Bank’s Carbon Finance Unit (CFU) has approved the inclusion of the Project into the Clean Development Mechanism (CDM) Facility portfolio. The Bank intends to purchase the reduced C02 emission arising from the clean and renewable hydropower generation of the Project on behalf of the participants of the Carbon Funds. Carbon finance preparation is planned to begin upon the signing of the Letter of Intention by the Bank and the JANA.

45. Commercial loan from local bank: A line of credit from the China Merchants Bank was secured as counterpart commercial loan to finance approximately 15 percent of the total project costs.

11 D. Social 46. Major social impacts of the Project relate to land acquisition and house demolition for the construction of the dam and the flood protection works. The JPMO engaged Jiangxi Water Conservancy Design Institute and Hubei Water and Hydropower Design Institute to study the social aspects of the Project. The two consultants conducted a socio-economic survey, screened the project impacts and carried out resettlement planning. The social survey found that land acquisition and resettlement for the run-off reservoir and protection dikes would have a moderate potential social impact. The survey covered gender issues and fishery impacts, and also confirmed that the Project would not trigger the Bank’s OP 4.10 on indigenous People. The socioeconomic survey, covering 227 sampled households, confirmed that there are no ethnic minority communities/groups in the project areas.

47. Measures will be taken to reduce the reservoir inundation, and minimize house demolition and land acquisition. The flood protection dikes will greatly reduce the inundation impact. The project will affect some 53 villages and one state-owned farm in Taihe County. Permanent land acquisition of collective land is estimated at about 9,222 mu (61 5 ha) including 2,910 mu (194 ha) farmland, and temporary land acquisition accounts for about 4,954 mu (330 ha) including 1,180 mu (78 ha) farmland. The Project will require the relocation of about 597 people in 169 households. Four small enterprises and some infrastructure will be affected. The estimated cost of resettlement is about RMB 200 million. Itemized budgets for all the resettlement actions also have been made and integrated into the project investment plan. 48. Resettlement planning is based on extensive consultation with stakeholders, including various levels of government and village leaders. The final draft Resettlement Action Plan (RAP) was placed in the county library for public disclosure in early January 2008 with a newspaper announcement in Jiangxi Province. Project resettlement will be managed by a designated group of resettlement staff who will be provided with necessary training. The JPMO will formulate periodic progress reports on resettlement implementation. An independent external agency will be engaged to supervise and monitor the resettlement implementation and report to the WB as soon as resettlement commences.

E. Environment 49. The Project is classified as Category A due to the magnitude of the issues involved, the coverage area, and the nature of the proposed investments. The Environmental Impact Assessment (EIA) was prepared by the Second Harbor Consultants Co. Ltd of China Communications Construction Company (CCCC), a Class A environmental impact assessment consultant certified by the State Environmental Protection Administration (SEPA). The Bank’s comments are incorporated in the report revision and the final EIA report submitted to the Bank, comprising: (a) Environmental Impact Assessment Report, (b) Environmental Management Plan for Flood Control Areas; (c) Environmental Management Plan for NavigatiodHydro Complex, and (d) EA Executive Summary. 50. The Project will improve the Gan River’s inland waterway transport capacity and service levels, and generate clean renewable electricity to help meet rapidly growing demand for energy in the region. However, the construction of the Project will have adverse environmental impacts on river and terrestrial ecology, water and air quality, acoustic environment, soil erosion and community life. Such impacts can be properly mitigated with measures developed in the EMP. Operational impacts mainly include river hydrology, water quality, segregation of fish habitats,

12 etc. It is concluded that as a navigation-oriented dam and run-off type of complex, the operation modality will not have an unacceptable impact on river hydrology and water quality. The impact on fish habitats will be mitigated with the establishment of fish channel and a fish breedinghelease center (see details in Annex 10). 5 1. Two rounds of public consultation have been carried out according to the Bank’s OP4.01 by means of public meetings and questionnaire surveys, while public feedback has been addressed in EIA reports and in the project design. The EIA information and simplified report have been disclosed through the internet on April 10 and June 12,2007 following national regulations. The full EIA report was disclosed in the Taihe County Government Shihutang Project Office with announcement published in the Jinggangshan Daily (largest local newspaper in the project area) on October 16,2007. In addition, simplified EIA reports were made available in government offices of Wanhe, Tangzhou, Yanxi and Mashi counties and Wushan Farm office. The EA documents were also disclosed in Bank’s Infoshop on January 3,2008.

F. Safety of Dams 52. The Bank’s OP4.37-Safety of Dams is triggered due to the 25m height of the Shihutang Dam and the related existing Wan’an Dam upstream. An independent dam safety panel (DSP), consisting of three experts, has been established to assist the JPMO to ensure the Project’s compliance with the OP 4.37. The DSP will review and comment on the investigation, design, and construction of the Project and the start of operations, as well as comment on the four safety assurance plans required in the OP 4.37, and also comment on prequalification of bidders at tendering stage. 53. The DSP has conducted an inspection and review on the safety situation of the existing Wan’an Dam before the appraisal of the Project. The review concluded that the Wan’an Dam operates under safe conditions. The DSP will review the report of the safety inspection of Wan’an Dam to be conducted by the dam safety agency of the Borrower during the implementation of the Shihutang Project. 54. The four detailed safety assurance plans have been developed by the JPMO and will be adopted in the project implementation.

G. Safeguard policies Safeguard Policies Triggered by the Project Yes No

Environmental Assessment (OP/BP 4.0 1) [XI~~ Natural Habitats (OP/BP 4.04) [XI Pest Management (OP 4.09) [I Physical Cultural Resources (OP/BP 4.1 1) [XI Involuntary Resettlement (OP/BP 4.12) [XI Indigenous Peoples (OP/BP 4.10) [I Forests (OP/BP 4.36) El Safety of Dams (OP/BP 4.37) Ex1 Projects in Disputed Areas (OP/BP 7.60)* [I Projects on International Waterways (OP/BP 7.50) [I

By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties‘ claims on the disputed areas 13 H. Policy Exceptions and Readiness

55. The Project entails no policy exceptions. The Project meets regional criteria of readiness for implementation.

14 Annex 1: Country and Sector or Program Background CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

A. Inland Waterway Transport in China

1. China’s inland waterway transport (IWT) network is the world’s largest, in terms of length and freight volume. Its higher standard waterways (Grade V and above) are approximately the same size as the EU’s and the USA’s commercially significant networks combined. Over the last five years, China’s IWT traffic has grown at 9 percent annually to 1.16 billion tons in 2006, slightly higher than the USA’s and EU’s IWT traffic tonnage combined. Although dominated by flows of bulk raw materials, China has been gradually developing a major IWT container operation with nearly 8 million TEU a year. Mostly this is concentrated around the seaports in the lower reaches of the Yangtze and Pearl Rivers, although container traffic between the coast and inland ports has nearly trebled in the last five years.

2. Nevertheless, freight density (tons per waterway km) and waterway utilization in China is lower than the USA and some of the EU countries, despite a dominance of production types and distribution patterns that should provide a clear competitive advantage to waterways in many of China’s transport corridors. China has approximately 37,000 km of Grade VI-VI1 inland waterways that are currently capable of carrying only small barges reliably. Only a small fraction of the potential capacity of these waterways is used, even though most of these graded waterways are conjoined with the main rivers and many serve major areas of population and economic production. The factors explaining this low utilization include deficiencies and low standard of navigation infrastructure which prevent the passage of larger and more efficient vessels that serve the higher standard waterways; historically low investment in IWT to improve these standards; and institutional arrangements that have made it difficult to attain coordinated actions to optimize IWT development on such waterways, most of which are administered by provincial governments.

3. As part of the 1lth Five-Year Plan (1 lthFYP), the Government of China (GOC) wishes to increase the contribution of China’s waterways to its transport needs. The Ministry of Transport (MOT) has issued a series of plans to direct and promote IWT development. During the 11 th FYP, the GOC plans to invest more than RMB 20 billion in IWT industry development, in the form of a central government subsidy, half of which will go to waterway improvements.

4. The GOC’s strategy recognizes the high energy efficiency and low greenhouse gas emissions associated with water transport, and the importance of conserving scarce land resources. Efficient IWT has competitive transport costs, particularly for bulk commodities and concentrated containerized freight downriver to sea ports. China’s waterways could play a greater role in providing low cost transport to spread the benefits of development from the richer coastal belt and international ports to the poorer central and western provinces. China’s geography and distribution of its population are particularly favorable to inland water transport. IWT has the potential to claim a larger share of China’s inland transport market.

15 B. Inland Waterway Transport Industry in Jiangxi

5. Jiangxi Province, with a population of over 43 million, is a land-locked province in south-central China. With per capita Gross Domestic Product (GDP) at about 66 percent of the national average, it is one of the six economically underdeveloped central provinces supported by the GOC’s “Rise of Central China” initiative. Reflected in the national 1lth Five-Year Plan, the initiative aims to coordinate development between eastern, central, and western areas. Transport is one of the priorities in this development strategy. Jiangxi Province has decided to promote IWT development in pursuit of a more balanced transport strategy in its 1lth FYP.

6. IWT Network. Historically, IWT used to be the most important transport mode in the province. Industry and urbanization is generally oriented along river valleys. In particular, energy, water and bulk freight-consuming industrial enterprises and development zones are all located in the river valleys. Jiangxi’s IWT network connects ten of its eleven largest cities. These cities, along with their immediate hinterlands, have a total population of about 10.2 million. As of 2006, the network consists of 5,638 km of navigable channels including 156 km of the Yangtze River, plus five main interconnected river systems: the Gan River, , , Rao River and Xiu River systems. Of this total, the provincial classified (Grade VI1 and above) waterway channels measure 2,349 km in length.

7. The volume of freight carried by IWT within the province has increased from 20.5 million tons (6.6 billion ton-kms) in 1995 to 39.5 million tons (8.6 billion ton-kms) in 2006. In 2006, the freight traffic and ton-kms carried by inland waterway accounted for 11 percent and 9 percent respectively of the total transport volume carried by all transport modes in Jiangxi. The main cargo types carried by IWT are bulk freights, a feature of strong economic growth in a fast developing economy, such as construction materials, coal, petroleum products, timber, cement and others. However, the export-oriented economic development of Jiangxi Province has also fostered an increase in IWT-carried containers from 495 TEU in 1995 to 23,252 TEU in 2006.

8. Nevertheless, the growth of IWT has been far lower than that of road transport in the province. For the past decade in the province, as elsewhere in China, policy and investment attention has been concentrated on road development with minimal investment in IWT. The province’s highway expansion program has added about 1,700 km of new highways in the last ten years. During the same period, some waterway channels were upgraded but no classified waterways were added. The province has now decided to pursue a more balanced transport strategy that provides new importance to IWT, in particular, the development of the navigation capacity of the Gan River, the longest river in Jiangxi.

9. Ports: There are 56 inland river ports in the province (38 of them on the Gan River system) for a total of 1,743 berths of various kinds. Discounting the numerous small landing stages, the ten large and medium-size cities (Ganzhou, Wan’an, Taihe, Ji’an, Jishui, Xiajiang, Xingan, Zhangshu, Fengcheng, and Nanchang) along the Gan River have a total of 136 berths for general cargo, 302 berths for dry bulk and 20 berths for liquid bulk. The total designed capacity of the berths aggregate to 6.14 million tons for general cargo, 9.38 million tons for dry bulk and 0.89 million tons for liquid bulk - a total throughput of 16.41 million tons.

10. Most of the port facilities were built and are owned by the public sector but operated by the private sector. A modality of public sector ownership and private sector operation is clearly 16 emerging. At present, the ports generally lack necessary cargo handling equipment and have poor access to the terminals. A port facilities development plan to complement waterway improvements is underway, aiming to increase handling capacity by some 4 million tons of cargo and 30,000 TEU of containers by 2010. Together with the existing capacity, it will be sufficient to meet the expected increase in throughput of waterborne traffic arising from the upgrading of the navigation channel along the Gan River.

11. Shipping: A variety of vessel types are registered in the province. However, the general technical performance of the vessels is relatively poor, and there are few specialized vessels. Between 2000 and 2006, the registered vessel tonnage in the province has increased from about 398,000 deadweight tons (dwt) to 986,000 dwt. The average vessel tonnage has increased from 59 dwt in 1995 to 179 dwt in 2005. Vessels above 1000 dwt are mainly operated along the Changjiang (Yangtze River), while those between 500-1000 dwt mainly in the Gan River and the area downstream ofNanchang. Vessels of 300-500 dwt are mainly operated in the medium flood period along the Gan River upstream from Nanchang to Zhangshu. Vessels operating upstream of Zhangshu and in other rivers are usually below 300 dwt. The average vessel size reflects navigation possibilities.

Fleet 1995 2005 Motorized barges 6,212 5,364 Dumb barges 504 127 Total vessels 6,7 16 5,491 DWT (tons) 397,155 986,042 Average DWT 59 179

12. The local shipping industry is rapidly evolving from state to private ownership and has been upgrading vessels in terms of size and mobility. Local shipping companies provide a variety of services including vessel management, chartering and line services along the Gan River and the Yangtze. These companies play an important role in local trade logistics by providing a viable option to freight forwarders for the transportation of goods.

13. The Project will facilitate the use of much larger vessels and more specialized vessels. Experience of previous Bank-funded inland waterway projects and practice in the province suggest that the shipping industry will respond positively to improvements in inland waterway capacity. Encouraged by favorable MOT and provincial government policies, the shipping industry is modernizing and standardizing vessels to provide lower cost services with larger vessels and barges and to market these to industrial customers.

C. The Gan River Development Plans

14. The Gan River is one of the largest tributaries of the Yangtze and the longest river in the province. With a length of about 780 km and a drainage basin of about 80,948 sq km, it is a sizable river by world standards. The Gan River and its tributaries have about 2,335 km of navigable waterway, nearly half of Jiangxi’s IWT network. The Gan River passes through the narrow but long hinterland in Jiangxi Province from south to north and, via the Yangtze, connects the Gan River hinterland with seaports and major cities in East China.

17 15. Nonetheless, the Gan River is not fully utilized in its middle and upper reaches due to navigational infrastructure deficiencies. Currently, the upper reaches of the river (south of Ganzhou) can accommodate vessels ranging from only 15-50 tons and the middle reaches (from Ganzhou to Zhangshu) from 100-300 tons. The result is that the province’s hinterland south of Nanchang, a region that contains some 15 million people, and that has major bulk transport needs such as building materials, coal, petroleum products, agricultural products, fertilizers and timber, derives no benefits from low cost shipping transport despite its proximity to the river.

16. Jianmi Gun River Water Basin Plan (1 990). The development of the Gan River is described by the government in a comprehensive river management plan called the “Jiangxi Gan River Water Basin Plan (1 990)”. This Plan intends to optimize the use of the water resources of the Gan River through the enhancement of navigation and improved flood protection and hydropower generation while minimizing negative impact on environment, land or inhabitants.

17. The Plan recommends two cascade dam development options, with 8 dams and 10 dams respectively. Both options have the same cascade development plan along the Ganzhou- Nanchang corridor in the middle and lower reaches of the Gan River, which include six cascade dams (see Map-IBRD35285 which shows the 8-dams option). So far, only the Wan’an Dam has been built and gone into operation in 1993, Three of the remaining seven are planned to be built before 2020. However, there are currently no plans to commence building the other four - the two farthest upstream and the two farthest downstream dams - because of high potential inundation impacts.

18. Jianmi Inland Waterwav Navigation Development Plan (2006). The Gan River is an important part of the high standard waterway network under the MOT’S nationwide Inland Waterways and Ports Layout Plan. The MOT has recently approved the Jiangxi Inland Waterway Navigation Development Plan (2006), which is a mid-term navigation development plan (2005-2020) for the IWT sector of Jiangxi Province. This document lays out the planning, financing, implementation, and operation of waterway channels, ship locks and ports needed to meet the Gan River transportation objective. According to this Plan, the middle and lower reaches of the Gan River along the Ganzhou-Nanchang corridor (450 km) will be upgraded to Grade I11 (allowing for year-round 1,000-dwt vessels) by 2020. Among the six complexes in the Ganzhou-Nanchang corridor, as planned in the comprehensive Water Basin Plan (1 990), the Wan’an Dam has been built and is operational; the Taihe, Shihutang and Xiajiang Complexes are planned to be built before 2020; the Yongtai and Longtoushan Complexes farthest downstream are yet planned to be built due to high inundation impacts. Instead, the downstream section will be upgraded through channel rectification measures such as dredging and river training.

19. The development plan for the Ganzhou-Nanchang IWT corridor and the current development status are illustrated in more details in Annex 4.

D. Other Transport Modes

20. Transport alternatives include a high standard expressway and a main railway line running parallel to the Gan River between Ganzhou and Nanchang. The Gan River valley north- south rail line has a junction with east-west lines at Nanchang and also north of . It is the main competitor for the type of bulk, less time-sensitive traffic that is forecast for IWT in this Project. But these are more expensive alternatives for bulk goods. The rail line, like many in 18 China, is very heavily used with little spare capacity. Road transport is not only substantially less economic for bulk transport but (based on European experience) uses 4-5 times as much energy per ton-km as efficient barge transport, and generates 4-5 times the level of greenhouse gases. IWT can supplement road and rail transport by providing competitive services to bulk and low-value cargos.

21. Analysis indicates that, on average, the cost per-ton-km of transport by IWT for bulk commodities such as coal and building materials by 100-dwt barges is about 20 percent higher than the equivalent average freight rate/ton-km charged by China Rail. However, at 300 tons and over, IWT gains the advantage, while for a 1000-dwt barge, the unit cost reduces to only two-thirds of the average rail rate. Of course, with any one type of commodity there will be a range of customers with different logistics needs, differing proximities to rail or river, different origin-destination flows, and different abilities to benefit from backloads which all have an impact on cost. At one extreme, it is likely that virtually all sand and gravel (the largest traffic) will use IWT and at the other extreme, only a very small proportion of consumer goods would be attracted to IWT. In between, the relative advantages of one mode over another will differ in each segment. Generally, IWT will be preferred for consignments which are (a) large enough to justify regular use of large barges (b) shipped to/from sources closest to the river (c) neither perishable nor particularly time sensitive, and (d) most sensitive to transport costs (because of relatively low value). It appears that the upper reaches of the Gan River generate (inward or outward) relatively large quantities of traffic that meet these criteria: sand and gravel, coal, bulk oil, timber, cement, fertilizer etc. Containerized cargo has traditionally faced strong competition from road transport and will increasingly face competition from rail transport as China Rail improves rail container services. However, container traffic represents less than 2 percent of total traffic projections.

E. Energy Sector in China and Jiangxi

22. China’s primary commercial energy consumption has more than tripled from 600 million tons of coal equivalent (Mtce) in 1980 to about 2,220 Mtce in 2005. Rising energy demand has been met largely by domestic coal. Coal consumption has increased from 1.OS billion tons in 1980 to 2.1 billions tons in 2005. More than 50 percent of the coal consumed in 2005 was used for electricity generation. China’s electricity generation capacity and electricity generation reached a level of 508 GW and 2,475 TWh respectively in 2005. Coal accounted for 69 percent of generation capacity and 80 percent of electricity generation. Even with an aggressive fuel diversification policy to develop nuclear power, hydropower, gas and other renewable energy, coal will continue to be the dominant energy source for the foreseeable future. The rapid expansion of the power generation system and its primary reliance on coal has contributed to China’s severe air pollution.

23. The GOC is fully aware of the need to address environmental problems and government strategy and policy call for sustainable economic development proceeding in tandem with environmental protection. Accordingly, efforts are being made both to increase the supply of cleaner energy and enhance efficiency of energy use. The government is making assertive efforts to diversify its energy sources, including an accelerated nuclear power development program, an ambitious gas development and penetration plan and a significant hydropower and renewable energy development scheme. The proportion of renewable energy is planned to increase from the current 7 percent of total energy consumption to 10 percent by 2010 and to 15 19 percent by 2020. Hydropower is expected to play a key role in the scaling up with installed capacity increasing from the current 130 GW to around 300 GW by 2020.

24. Jiangxi Province had installed capacity of 6,505 MW in 2005 with 1, 175 MWfor hydropower and 5,330 MWfor thermal power. Annual power generation amounted to about 39,550 GWh. However, along with the development of the province’s economy, the demand for electricity has increased dramatically in recent years. Demand in the province is forecast to reach 60,300 GWh by 2010, of which 6,000-7,000 GWh will be purchased from the Three Gorges while the remainder is to be generated locally. According to the power development plan, power demand will reach 1.2 million GWh in 2020. It is predicted that 9,000-10,000 MW of new capacity will be installed during the period 20 10-2020. According to the power supply- demand forecast, the province will have a significant demand for power generation, especially for clean and renewable hydropower.

F. Contribution of the Project

25. The Shihutang Navigation and Hydropower Complex Project is a critical element in achieving the navigation target set forth in both the comprehensive Water Basin Plan (1 990) and the Navigation Development Plan (2006). The Project has been approved by the MOT and the Jiangxi Province for development in the period of the 11 th FYP. In addition to the navigation target, the Project aims to generate hydropower as well as improve flood control. Electricity generation will provide the biggest monetary benefit. It is therefore a multi-purpose project which has a range of benefits helping to defray the costs of achieving the strategic transport goals.

20 Annex 2: Major Related Projects Financed by the Bank and/or other Agencies CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

Latest Supervision Sector Issue Projects (PSR) Ratings' Implementation Development 3ank-financed Progress (IP) Objective (DO)

0 Remove transport bottlenecks by improving IWT facilities

0 Remove transport bottlenecks by improving IWT facilities 0 Construct power-generating facilities as part of integrated powerhousehhip lock complex

0 Develop inter-modal transportation serving inland (completed) provinces 0 Remove highway capacity bottlenecks 0 Institutional strengthening and training 0 Rural roads and poverty alleviation Highway safety 0 Operation and maintenance of high-grade highways Highway (completed) Cost recovery

0 Improve access to irrigation, drainage and market

0 Promotion of competitive power market among independent power producers 0 Corporate restructuring for small hydro generators in poor areas

Notes: 1, The IP/DO Ratings are: HS (Highly Satisfactory), S (Satisfactory), MS (moderately satisfactory), U (Unsatisfactory), MU (Moderately Unsatisfactory), HU (Highly Unsatisfactory).

21 Annex 3: Results Framework and Monitoring CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

Results Framework

Use of Project Outcome PDO Project Outcome Indicators Information

Improve utilization of the Can Navigation: Assess the efficacy and benefit of River for more reliable freight Increase in volume of cargo and channel improvements. transport and for cleaner energy container along the Gan River. production. Increase in volume of cargo Assess the contribution to climate passing the Shihutang ship lock change control by generating during low water season. renewal hydropower. Hvdrouower: Reduction of carbon emission.

Intermediate Outcome Use of Intermediate Intermediate Outcomes Indicators Outcome Monitoring Intermediate Result - 1: Improving IWT capacity and service Increase in navigable time for Assess the navigation output of the levels for primary and secondary 1,000-dwt vessels on the 38km Project, and ensure the navigation industries in the Nanchang-Ganzhou channel to be upgraded. capacity to be upgraded. corridor of the Gan River. Intermediate Result - 2: Generating clean renewable Annual output of hydropower Assess the hydropower output, and electricity to help meet rapidly generation. ensure the financial capacity of the growing demand for energy in the Project to be viable using the power region. revenue. Intermediate Result - 3: Protecting crop fields in the vicinity a Area of crop fields to be protected Assess the progress and effect of the of reservoir from inundation and against 10-year flood. flood protection works. flooding. Intermediate Result - 4: Building the institutional and a Solutions to optimal operation of Assess the utilization of outputs of technical capacities of the the Shihutang Complex are the TA studies. JANA/JPMO. developed and adopted by JANA; a Measures identified to treat 17km Assess the implementation status river channel downside and the effect of the training on the Shihutang Dam are approved and capacity strengthening. accepted by JANA. a Number of trainees who start adopting the learnt international and domestic experiences in the business.

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I Annex 4: Detailed Project Description CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

A. Staged Development Plan for the Ganzhou-Nanchang Corridor along the Gan River

1. The Gan River flows south to north, passing through the major cities ofGanzhou, Ji’an, Zhangshu, Nanchang and Jiujiang, before joining the Yangtze at a point some 820 km upstream from the port of Shanghai. The total length from the river source to the Yangtze is 861 km which includes 780 km ofthe Gan River and 8 1 km ofthe navigable segment in Poyang Lake at the confluence ofthe Yangtze. The River is divided into three sections: (see Map IBRD 35284R & 35285R).

Upper reaches (350km) - river source to existing Wan’an Dam. Middle reaches (263km) - Wan’an Dam to Zhangshu City. Lower reaches (248km) - Zhangshu City to the Yangtze at Jiujiang.

2. According to the two principal plans governing the development of IWT on the Gan River (see Annex 1 Part C), the middle and lower reaches of the Gan River along the Ganzhou- Nanchang corridor (450km) are to be upgraded to Grade I11 standard by 2020. Navigation capacity is a matter of sufficient water depth and width for predictable periods of the year. The MOT has a standardized national classification of river navigation, described in the National Standard ofInland Waterways, and summarized in Table 4-1.

Table 4-1 : Standard Classification for Navieational Channel Channel Grade I I1 I11 IV V VI VI1 Ship Tonnage (t) 3,000 2,000 1,000 500 300 100 50 Water Depth (m) 3.5-4.0 2.6-3.0 2.0-2.4 1.6-1.9 1.3-1.6 1.0-1.2 0.7-0.9

3. The following paragraphs describe by segments the current navigation status and the planned improvements to obtain Grade I11 or better navigation potential on the Gan River from Ganzhou City downstream to Hukou City (see Table 4-3 and Map-IBRD35285).

Seament I - (Upside Wan ’an Backwater) - Ganzhou Citv to Wan ’an Backwater

4. Since it began operating in 1993, the Wan’an reservoir has never reached its normal pool level of 98.lm due to two constraints. One is the conflict between the designed pool level and the elevation ofthe sewerage and flood release facility ofthe old part ofGanzhou City. The latter is about four meters lower. The other constraint is the remaining land acquisition and resettlement within the ultimate reservoir inundation limits. Due to the above constraints, the Wan’an reservoir has been running at lower intermediate elevations (see Table 4.2).

25 Stage Pool Elevation (m) Designed Normal Pool Elevation 98.1 Intermediate (dry season) 94.1 Intermediate (rainy season - March to June) 85.1 Required for Grade I11 navigation to the port of Ganzhou 92.2

5. As a result, Grade I11 navigation cannot be secured at a 26 km long section between Ganzhou City and the reservoir backwater during March-June, when the reservoir should be lowered to provide flood control reserve capacity. Therefore, Grade I11 navigation on that 26 km section is possible only for about 88 percent of the time. When Ganzhou City moves Ganzhou Port 8km downstream as planned, the section affected will be shortened to 18 km.

6. The Wan’an owner, China Guodian Corporation (CGC), and Ganzhou City have been negotiating over solutions to the constraints, but agreement has not yet been reached. JANA has developed an alternative plan which is to treat the 18km channel by dredging and channel training work to achieve year-round Grade I11 navigation at the section in question. Planning for these works is expected to be implemented and completed by 2020, in line with the planned schedule for Grade I11 navigation throughout the Ganzhou-Nanchang corridor.

Segment 2 - Wan’an Reservoir) - Wan ’an Backwater to Wan ’an Dam

7. The Wan’an reservoir can accommodate year-round Grade I11 navigation. However, the capacity of the existing ship lock for Wan’an is 500 ton which is substandard for Grade I11 navigation. The size of the Wan’an ship lock is 175 (length) x 14 (width) x 2.5 (depth) meters. Though the draft for a 1,000 ton vessel is only 2 meters and the existing Wan’an ship lock at 2.5 meters allows for this draft, the reduced width limits the barge arrangement of certain types of 1,000 ton vessels. Wan’an was designed to accommodate a second ship lock on the right side of the river adjacent to the existing ship lock. The second ship lock will be added in the future as transport demand increases and if other means to facilitate larger vessels are not found.

Segment 3 - (Taihe Reservoir) - Wan ’an Dam to Taihe Dam

8. The Taihe Dam, to be developed by the CGC, is planned to be completed before 2020. Appropriate planning of the normal pool elevation and location of Taihe Dam will allow for Grade I11 navigation throughout the length of the Taihe reservoir from Wan’an Dam to Taihe Dam. The CGC has sought to optimize the design characteristics to maximize power production while securing navigational and other needs. According to cross-sector approval practice, JANA has taken part in the review of the Taihe design to represent the navigation requirements of the IWT sector.

Segment 4 - (Shihutann Reservoir) - Taihe Dam to Shihutang Dam

9. The Shihutang Complex will be constructed as part of this Project. The Shihutang reservoir elevation will allow for Grade I11 navigation from the proposed location of Taihe Dam downstream to the Shihutang Dam, about a 38km length of the Shihutang reservoir.

26 Segment 5 - (uuside Xiajiann Backwater) - Shihutang Dam to the Xiaiiang Backwater

10. The Xiajiang Dam is to be developed by the Jiangxi Provincial Water Resources Department (JPWRD). The planned Xiajiang Dam will maintain its normal pool level 2 meters lower than the recommended level in the Water Basin Plan (1 990) to reduce potential inundation and resettlement. This change will result in the Xiajiang backwater not reaching Shihutang Dam, leaving a gap of approximately 17 km for Grade I11 navigation. It is uneconomic at this stage to rearrange the location of the complexes to compensate for this gap. One TA study under this Project will determine engineering measures to overcome the water depth constraint along this section. It is anticipated that channel rectification measures, such as dredging and training works, will be carried out as a separate project to achieve Grade I11 standard along the 17 km section.

Segments 6 and 7 - (Xiaiiang Reservoir) - Xiajiang Backwater to Xiaiiang Dam

1 1. These two segments, on either side of Ji’an City, currently support Grade VI and Grade V navigation respectively. The Xiajiang Dam has been included in the 1lth Five Year Plan of the Jiangxi Province and the Ministry of Water Resources. As planned, Grade I11 navigation will be provided along the entire length of the Xiajiang reservoir with the exception of the 17 km gap (Segment 5) described above.

Segments 8 and 9 - Xiajiang Dam to Nanchang Citv

12. Two complexes were planned in these two segments under the Water Basin Plan (1 990), Yongtai and Longtoushan. But given the large potential inundation within a relatively populated area and the low potential for hydropower due to the low head, these two complexes are considered unrealistic for implementation in the near future. Instead, river training and dredging works will be carried out to accommodate Grade I11 navigation. Segment 8, Xiajiang Dam to Zhangshu City, will be upgraded by 2020 after the completion of the Xiajiang Complex. Channel rectification works on Segment 9, Zhangshu to Nanchang, have already commenced and are expected to be completed and available for Grade I11 navigation by 2008.

Segment IO- Nanchang to Hukou

13, The final segment, Nanchang to Hukou, includes the Poyang Lake section (8 1km) at the convergence of the Gan River and the Yangtze. This segment is currently Grade I11 navigable and will be upgraded to Grade I1 before 20 10.

27 Table 4-3 Current and Planned Navigational Grades along the Gan River (Ganzhou to Hukou)

B. Project Components 14. The Shihutang Project is located in the middle reach of the Gan River, 82 km downstream from the existing Wan’an Complex. It is an integrated infrastructure to improve inland waterway navigation, generate renewable hydropower and enhance flood protection standards in the vicinity of the reservoir. The Project consists of the following three components. 15. Component A - Construction of Shihutane Complex (Total US$209.47 million, IBRD US$ 91.59 million). The Shihutang Complex is a single integral infrastructure unit that will form a reservoir with a designed normal pool water elevation of 56.5 meters and normal pool storage of 166.8 million cubic meters. The Complex consists of the following main elements. Sluice gates: 23 sets of dam sluice gates to regulate flows. Ship lock: A Grade I11 (accommodating 1000-dwt vessels) single ship lock through the dam of 180 (length) x 23 (width) x 3.5 (depth) meters. Powerhouse: The powerhouse built within the dam, with an installed capacity of 120 MW, to generate about 526.5 GWh of electricity per year. Connection dam: Two sections of dam, with a total length of about 93 lm, will connect the structures with both river banks. One consisting of an about 83m long concrete gravity dam and an about 400m long earthen dam will connect the powerhouse to the right river bank; the other of about 448m long earthen dam will connect the ship lock to the left river bank. Dam crest access road: A dam crest access road across the top of the dam, including an about 937m long crest bridge, will allow residents of rural communities to cross the river 16. Component B - Flood Protection Works (Total US$ 80.1 1 million of counterpart financing). The flood protection works consist of approximately 43km of dikes and 56km of

28 diversion canals, about six sets of pumping stations, two sets of free drainage sluices and two sets of regulating sluices. 17. ComDonent C - Technical Assistance (TA) (Total US$ 1.02 million, IBRD US$ 0.38 million). This component consists of the following elements aiming to build the institutional and technical capacities of the JANA and the JPMO. Optimization of Reservoir Operation - This study aims to maximize the benefits of navigation, power generation and flood protection of the Shihutang Complex. Optimum management solutions will be developed to direct the operation of the Shihutang Complex and the reservoir. In addition, the feasibility of a coordinated operation mechanism for the four interrelated dams, i.e. the existing Wan’an Dam, the proposed Taihe and Xiajiang dams and the Shihutang Dam, will be studied and constraints identified and solutions recommended. Technology for Waterway Treatment - This study aims to determine measures to overcome insufficient water depth at the 17km section of river channel immediately below the Shihutang Dam which hinders the navigation of 1000-dwt vessels. The outcomes of the study will complement the engineering design of this Project, and provide reference and experience for other inland waterway projects facing similar problems in Jiangxi Province. Capacity Building - To enhance the sustainable management of the investments, a well- tailored capacity building program will be included in the Project. The program consists of international and domestic training and study tours which aim to strengthen JANNJPMO’s capacities in IWT management, waterway development and maintenance, construction management, hydropower plant operation, and management of cumulative impacts at watershed level.

18. An 18-km long transmission line will be built to transmit the generated power from Shihutang Dam to the power grid of Taihe County. The local grid entity will be responsible for funding and building the transmission line in accordance with a schedule to be agreed with the JPMO. A written confirmation on this arrangement has been received from the local grid entity.

C. Technical Evaluations 19. Alternative Analysis. A series of engineering alternative analyses were carried out, with the necessary aid of physical modeling and tests, during the feasibility study (FS) and the engineering design. The analysis adopted criteria tailored to each type of alternatives to determine the optimal solution. The alternative analysis focused on the key technical elements which are decisive for the financial viability and technical feasibility of the Project. Table 4-4 highlights the major elements subject to alternative analysis, alternatives developed and the conclusions.

29 Analysis Description Alternatives Proposed for Analysis Conclusion Dam site and axis A- 1 : upper dam site and upper axis; A-1 : upper dam site A-2: upper dam site and lower axis; and upper axis B-1: lower dam site and axis. Dam configuration FS - A: ship lock (right) and powerhouse (left); C: ship lock (left) B: ship lock (right) and powerhouse (right); and powerhouse Preliminary design - (right) C: ship lock (left) and powerhouse (right); D: ship lock (right) and powerhouse (left). Design NPL (m) Preliminary FS - 55.5, 56.0, 56.5 and 57.0; 56.5 FS - 56.0, 56.2, 56.5 and 56.8; Preliminary design - 56.5, 56.8, 57.0 and 57.2 Installation Capacity FS - 1 1 1, 1 14,117 and 120; 120 (MW) Preliminary design - 1 17, 120 and 123 Size of ship lock (m) I 180~23~3.5,260~18~3.5,and 260~16~3.5 180~23~3.5 Sluice gates (nos.) I FS - 23,24 & 25; 23 nos. I Preliminary design - 22,23 & 24.

20. Water Release Aneement. A minimum water release from the upstream Wan’an Dam is essential to ensure minimum channel depth accommodating Grade I11 navigation and to meet water needs in the stretch of the Shihutang reservoir. An agreement between the owners of the two dams has already been signed on securing a minimum 150 m3/swater release from the Wan’an Dam. 2 1. Geolonical and Hvdrolonical Investinations. Detailed geological and hydrological investigations were conducted during the engineering stage to facilitate a reliable design. Based on the findings, technical parameters were selected and corresponding engineering solutions were included in the engineering designs. The safety and durability of the structures were a priority during the design process. The same degree of attention was paid to the Shihutang Dam and the flood protection works in the reservoir. These design efforts will ensure the quality of the Project and limit work variations during implementation. 22. Construction Schedule. Construction scheduling of the navigation and hydropower complex is closely related to the seasons. The start and duration of construction have been carefully evaluated in the design. Alternative construction schedules have been developed. A reasonable construction schedule will be adopted in the tendering document based on the actual status of project preparation.

30 Annex 5: Project Costs CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

US1=RMB 7.20 Counterpart IBRD Total Total Financing Financing Project Cost By Component and/or Activity US$ US$ US$ RMB million million million million A. Construction of Shihutang Complex 117.88 91.59 209.47 1,508.19 1. Civil Works 49.26 41.19 90.45 65 1.24 2. M&E and Goods 44.65 50.40 95.05 684.38 3. Land acquisition and resettlement 2.13 0.00 2.13 15.31 4. Design, Supervision and Consulting 13.65 0.00 13.65 98.26 5. Others 8.19 0.00 8.19 59.00 B. Flood Protection Works 80.11 0.00 80.1 1 576.82 1. Civil Works 44.33 0.00 44.33 319.17 2. M&E and Goods 2.14 0.00 2.14 15.42 3. Land acquisition and resettlement 28.65 0.00 28.65 206.29 4. Design, Supervision and Consulting 3.30 0.00 3.30 23.78 5. Others 1.69 0.00 1.69 12.16 C. Technical Assistant (TA) 0.64 0.38 1.02 9.98 1. TA studies 0.47 0.00 0.47 6.00 - Optimization of Reservoir Operation 0.12 0.00 0.12 3.50 - Technology for Waterway Treatment 0.35 0.00 0.35 2.50 2. Capacity Building - Training and Study Tours 0.17 0.38 0.55 3.98

Total Baseline Cost 198.64 9 1.97 290.61 2,095.00 Physical & Price Contingencies 12.99 0.00 12.99 93.56 Total Project Costs 211.63 91.97 303.60 2,188.56 Interest during construction 7.37 7.78 15.15 109.1 1 Front-end Fee 0.00 0.25 0.25 1.80 Total Financing Required 219.01 100.00 319.01 2,299.47

'Identifiable taxes and duties are US$6.1 million, and the total project cost, net oftaxes, is US$ 297.50 million. Therefore, the share ofproject cost net of taxes is 93.26 percent.

31 Annex 6: Implementation Arrangements CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

PROJECT INSTITUTIONAL STRUCTURE 1. The implementing agency of the Project is the JANA, which is one of the JPCD’s sub- administrations responsible for waterway development and maintenance. For the preparation and the day-to-day management of the project implementation, a specific implementation office, the JPMO, was established on December 3 1,2006. Mainly staffed by personnel from JANA, the JPMO is organized into four divisions, which are comprehensive (administration), financial and audit, technical and oversight (See Figure 6-A). The JPMO will have about 35 staff, including 25 technical staff, during the peak implementation period. Upon completion of the Project, the Shihutang Complex will be taken over by a separate operation entity reporting directly to JANA, which will be established before the ship lock starts operation.

Figure 6-A: Project Institutional Structure

ps JPMO DSP 7 H I I

2. The JPCD has successfully completed two Bank-financed highway projects, with implementation of a third underway. Though JANA has not previously managed a Bank- financed project, it has implemented three domestic-funded navigation and hydropower complexes in Jiangxi Province. JANA’s experience in the inland waterway industry will benefit project implementation.

3. A well-tailored training program will be a part of the project to strengthen the capacities of JANA, the JPMO and the future operation entity in the areas of waterway management and maintenance, navigation and hydropower complex construction management, and hydropower plant operation, etc. As part of a cross-training effort during the preparation of the project, the JPMO has organized staff visits and consultations to on-going Bank inland waterway projects in other provinces, and to the Bank’s highway projects in Jiangxi Province. This allowed the JPMO to gain experience of preparing and implementing a Bank-funded project. This type of transfer of knowledge and experience sharing will continue during the project implementation.

INSTITUTIONAL COORDINATION 4. A river basin not only sustains the natural ecology but also supports multiple users including agriculture, fisheries, navigation, water resources, and hydropower. In addition, the environmental flow of a river has an impact on flooding and land use. Managing a river basin such as the Gan River Basin involves a multitude of governmental institutions. Efficient

32 coordination among these agencies is critical for optimizing utilization of the river water resources. Jiangxi Province has experience in this regard, and has an existing mechanism to enable effective cross-sector coordination during the planning, implementation and operation of the Project.

5. Mountain-River-Lake Development Program (MRLDP). The Gan River is unique in China in that its development has been guided by a Provincial level commission founded in 1985 called the Mountain-River-Lake Development Commission (MRLDC) which was responsible for overseeing the implementation of the Mountain-River-Lake Development Program (MRLDP). This Program was a series of interventions aimed at comprehensive development that preserves the environment and ecology, while facilitating economic growth and poverty alleviation. The geographical region of the MRLDP is the watershed of Poyang Lake which is closely demarcated by the provincial boundaries of Jiangxi. The Gan River Basin, the primary tributary to Poyang Lake, constitutes roughly two thirds of the Poyang Lake Basin. The executing agency for the MRLDC was the Mountain-River-Lake Development Office (MRLDO) which was to implement the MRLDP while providing policy advice for sustainable development of the Poyang Lake Basin.

6. Comprehensive Planning of Development of Gan River - Utilization of the water resources of the Gan River, including the development of the cascade dams, are planned and guided by the “Jiangxi Gan River Water Basin Plan (1 990)” (see also Annex 1). This comprehensive river basin management plan was authored by the JPWRD under the guidance of the Yangtze River Basin Management Commission. The Commission, a subsidiary of the Ministry of Water Resources, is responsible for managing the water resources development over the Yangtze River and all its tributaries. All governmental departments and agencies related to the utilization and protection of the Gan River Basin were involved in the making and approval of the Plan. Early involvement of the various stakeholders in this planning process ensures that their interests are addressed in the programming stage. An update of the comprehensive Plan has been initiated and is to be completed by 2009.

7. Cross-sector Coordination during; Project Preparation. All major development projects on the Gan River, such as the Shihutang Complex, must undergo an approval process during the project proposal and engineering stages, with the involvement of all government agencies related to water and land utilization and environment protection. The approval process is a coordination mechanism which ensures that the interests of the various agencies are addressed and cross- sector coordination achieved. For the project to be approved by the agencies, the project owner must make sure the project is properly designed to achieve an optimal utilization of water and land resources with minimum adverse impacts.

8. The first stage of the process is the approval of the project proposal by the Jiangxi Provincial Development and Reform Commission (JPDRC) and the National Development and Reform Commission (NDRC). The proposed project is checked against the “Jiangxi Gan River Water Basin Plan (1 990)” for consistency. The second stage is the approval of the feasibility study report (FSR). Prior to JPDRC pre-appraising the FSR, various provincial government entities must individually approve relevant aspects of the Project. In support of these approvals, a series of special study reports which relate to specific project impacts are prepared by the project entity and submitted together with the FSR. The JPDRC is responsible for coordinating

33 with relevant entities to ensure their concerns and interests are appropriately addressed. The NDRC is responsible for final appraisal and approval of the FSR. Thereafter, the preliminary engineering design is reviewed and cleared by the JPDRC and MOT, while the detailed design is cleared by the JPCD.

9. Government Coordination during Proiect Implementation. During project implementation, the Provincial Major Projects Office (PMPO), an office that reports to the Jiangxi Vice-Governor, will assume responsibility for oversight over project procurement and implementation, and facilitate coordination between the project entity and other related government entities, including the local government office responsible for land acquisition. The PMPO is responsible for the projects designated as major in terms of project size and importance to the provincial economy. The Shihutang Complex is considered to be a major project by these standards. 10. Coordination with Other Complexes at Operation Stage. Currently there is only one operating complex on the Gan River, the Wan’an Complex, completed in 1993 and owned and operated by the CGC, a state-owned power company. Three complexes, including Shihutang Complex, are under preparation and are planned to begin operation by 2020. Each of these will be owned and operated by a different entity, Taihe by CGC, Shihutang by JANA and Xiajiang by the JPWRD. In the future, an effective coordination between the complexes will be necessary to optimize the utilization of the water resources. Coordinated operation of the eventual four complexes is a target. One of the TA studies under this Project will study the feasibility of establishing a coordinated dam operation mechanism. It will identify the constraints and recommend solutions to overcome the constraints. The outputs of the study will support the future decision-making ofthe provincial government on coordination of dam operation. 11. At present, the release of water from the Wan’an is regulated by the Jiangxi Provincial Flood Control and Drought Alleviation Office, a governmental entity which is part of the JPWRD but which reports directly to a Provincial Vice-Governor. Its role, as the name indicates, is to ensure that the existing dams regulate their water release to facilitate flood control and alleviate drought downstream. Each year the Office holds a meeting, attended by the relevant entities, to agree on the principles of regulated water release including the necessary reservoir level to mitigate possible flooding and drought. 12. The Shihutang reservoir requires a minimum water release from the upstream dams during the dry season to ensure navigation, power generation and irrigation needs. As a short- term arrangement before the establishment of a group dam coordination mechanism, a bilateral agreement between JPMO and CGC has been reached to ensure a minimum water release from the existing Wan’an Dam. The Shihutang Dam will also provide a minimum water release to meet the needs of downstream water users. 13. The provincial power grid agency has agreed with the JPMO to build an 18km long transmission line before the Shihutang starts generating electricity, to connect power plant of the Project to the local power grid.

34 Annex 7: Financial Management and Disbursement Arrangements CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

EXECUTIVE SUMMARY

1. The adequacy of the project financial management system was assessed based on guidelines issued by the Financial Management Sector Board on November 3,2005. The Bank assessment concluded that the project meets minimum Bank financial management requirements, as stipulated in BP/OP 10.02. The Project will maintain financial management arrangements that are acceptable to the Bank and, as part ofthe overall arrangements that the Borrower has in place for implementing the operation, provide reasonable assurance that the proceeds of the loan will be used for the purposes for which the loan was granted. The financial management risk is the risk that the World Bank loan will not be used for the purposes intended and is a combination of country, sector and project specific risk factors. The FMrisk rating proposed for this Project at the appraisal is modest.

2. Funding sources for the Project include Bank loan and counterpart funds. The Bank loan will be signed by the Bank and the People's Republic of China through its Ministry of Finance (MOF). MOF will on-lend the loan to Jiangxi Provincial Communications Department (JPCD) through JPFD. The Bank loan proceeds will flow from the Bank into the project designated account (DA) to be set up and managed by the Jiangxi Provincial Finance Department (JPFD). The Bank loan will flow from the DA to JPMO against due contract payment or to the contractors and suppliers directly. Counterpart funds consist of government appropriation and commercial debt. A line of credit from the China Merchants Bank was secured as commercial loan to finance approximately 15 percent of the total project costs.

3. No outstanding audits or audit issues exist with any of the above implementing agencies involved in the Project. The task team will continue to monitor financial management issues during project supervision.

AUDIT ARRANGEMENTS 4. The Bank requires that project financial statements be audited in accordance with standards acceptable to the Bank. In line with other Bank-financed projects in China, the Project will be audited in accordance with International Auditing Standards and the Government Auditing Standards of the People's Republic of China. The Jiangxi Provincial Audit Office (JPAO) has been identified as the auditor for this Project. Annual audit reports will be issued by JPAO.

5. The annual audit report of the project financial statements will be provided to the Bank within 6 months after the end of each calendar year. This requirement is stipulated in the loan agreements. The responsible agency and timing are summarized as follows:

Audit Report Submitted by Due date Project financial statements JPMO June 30

35 DISBURSEMENT ARRANGEMENTS 6. Funds flow for the Bank loan will follow the Bank and MOF requirements. One designated account (DA) will be established and managed by JPFD. The funds flow is as follows:

The DA Contractors World managed JPMO and Bank - byJPFD - - suppliers

Amount of the Loan Percentage of Category Allocated Expenditures (in US$ mil. ) to be financed (1) Civil works under Component A 41.19 60% (2) Goods’ under Component A 50.40 100% (3) Consultants’ services and training under 0.38 100% Component C (4) Interest during construction 7.78 I (5) Front-end fee 0.25 Total 100.00

8. Four disbursement methods: reimbursement, advance, direct payment and special commitment are all available for the Project. The minimum value of applications for reimbursement, direct payment, and special commitment has been agreed during negotiation.

9. For expenditures against contract amounts as indicated in the table below, Statements of Expenditure (SOE) will be furnished as supporting documentation to request reimbursement and report eligible expenditures paid from the DA.

Expenditure Category Contracts Less than US$ Equivalent Civi 1 Works 5,000,000 Goods 500,000 Consulting firm 100,000 Individual Consultant 20,000 Training All

10. For contract amounts subject to Bank prior review as indicated in the table below, the list of payments against the contracts, and records evidencing eligible expenditures, e.g., copies of receipts, supplier invoices, will be furnished as supporting documentation to request reimbursement and report eligible expenditures paid from the DA.

36 Expenditure Category Contracts Equivalent or More than US$ Equivalent Civil Works 5,000,000 Goods 500,000 Consulting firm 100,000 Individual consultant 20,000

1 1. One Designated Account (DA), a segregated US$ account, will be established in JPFD. The authorized allocation of DA is proposed to not exceed US$ 10 million. The Bank loan proceeds could be paid from DA to JPMO against due contract payment or be disbursed to the contractors directly. Frequency of reporting eligible expenditures paid from the DA is monthly.

12. The JPFD will be directly responsible for the management, monitoring, maintenance and reconciliation of the DA activities of the Project. To be consistent with the on-lending arrangement and using the government appropriations channel, the flow of withdrawal application is proposed as follows:

I JPMO JPFD WorldBank

FINANCIAL MANAGEMENT AND REPORTING ARRANGEMENTS

Risk Assessment and Mitigation

13, The following risks with corresponding mitigating measures have been identified upon assessment at the appraisal:

Conditions of Risk Mitigating Measures Incorporated into Negotiations, Project Design Board or Effectiveness

Legal and institutional framework is acceptable and current Public Financial Management systems are functioning reasonably well. See the following mitigating measures utilized in the Project. 0 SectorLevel LOW It is the fourth Bank-financed transport project implemented by JPCD. It has extensive experience in implementing the Bank-funded projects and has knowledge about compliance with Public Financial Management and Bank procedures. Project Level High Detailed project implementation will be conducted by the JPMO, which is mainly staffed by JANA personnel. Most of the project staff are new to Bank project. To provide them with knowledge and 'information in managing the project, FM training has been provided to the project financial staff at appraisal stage and a FM manual is established to standardize their financial work. Control Risk

37 The FMS will work with all the relevant implementing I agencies to improve budget preparation and execution, and actual variation monitoring and evaluation. Accounting policies and procedures are already in place. Circular # 13 has been issued by MOF and adopted for all Bank-financedprojects. Necessary training will be provided to the accounting staff to improve their knowledge and qualifications. Internal Modest Internal control procedures and policies are Control documented in the FM manual for all project implementing agencies to follow. In addition, internal audit activities will be conducted regularly by JPCD and will focus on compliance and transaction examinations. FundsFlow Low Funds flow arrangement is straight forward. To avoid delayed disbursement, related requirements and procedures are documented in the FM manual for all concerned parties to follow. Financial Low Financial reporting responsibilities are established. Reporting The form, content and periodicity of financial reports are well defined by MOF and understood by all the reporting agencies. Auditing The external auditor JPAO has extensive experience in I auditing Bank-funded projects. The audit will be conducted in accordance with acceptable auditing standards. Annual audit reports will be due to the 7-Bank by every June 30". 14. Therefore, the overall Financial Management (FM) risk rating of this Project at the appraisal stage is modest. The Bank's Financial Management Specialist (FMS) will monitor the project FMrisk during project implementation.

15. Strengths. The JPFD has managed several Bank-financedprojects and has accumulated extensive experience in project financial management and disbursement. The JPFD's disbursement review and close monitoring will help ensure proper usage of project funds.

16. Weaknesses and Action Plan. Besides the FM risks identified in para. 13 above, no other significant weakness are identified.

Implementing Agencies

17. The project implementing agency is JANA, one of JPCD's sub-administrations responsible for waterway development and maintenance. The JPMO , a specific implementation office, was established for the preparation and the day-to-day management of the project implementation. For the operation of the Shihutang Complex, a separate entity reporting directly to JANA will be established. Budgeting 18. In accordance with project implementation plan and construction progress, the JPMO will plan for an annual budget, which will be reviewed and approved by the JPCD, JPFD and the JPDRC. Based on the approved budget, JPCD will provide annual government appropriations

38 and JANA will arrange domestic loans. Budget variances arising during execution will require authorization and monitoring. Timely and accurate information on variances will be used as the basis for mid-term adjustments. Accounting

19. The administration, accounting and reporting ofthe Project will be set up in accordance with Circular #13 “Accounting Regulations for World Bank Financed Projects” issued in January 2000 by MOF. The Circular provides in-depth instructions about accounting requirements for project activities and covers the following:

0 Chart ofaccount Detailed accounting instructions for each project account Standard set ofproject financial statements Instructions on the preparation ofproject financial statements

20. The project financial reporting package, including detailed formats and project financial statement content was agreed by the Bank and MOF. The project financial reporting package includes the following:

Balance Sheet 0 Summary of Sources and Uses of Funds by Project Component Uses ofLoans by Project Category 0 Designated Account (DA) Activity Statement 0 Notes to Financial Statements

21. The JPMO will be managing, monitoring and maintaining all project accounting records. The JPMO will also prepare the project financial reporting package and submit it to the Bank for review and comments on a regular basis.

22. Project financial staff with qualified educational background and work experience commensurate with the assigned work is a key factor to successful implementation ofproject financial management. Based on the assessment on the capacity ofthe JPMO financial staff, the task team noted that they are qualified and appropriate for the work they are expected to assume. Since most ofthe project financial staff are new to Bank projects, FM and disbursement training was provided to the staff during the project appraisal.

23. To strengthen financial management capacity and achieve consistent quality of accounting work, a project Financial Management Manual (the Manual) was prepared. The Manual provides detailed guidelines on financial management, internal controls, accounting procedures, fund and asset management and withdrawal application procedures, etc. The first draft of the Manual was reviewed and commented by the Bank during the appraisal. The Manual will be finalized and distributed to all the relevant financial staff before loan negotiation.

24. The JPMO will manually keep the accounting books. The task team will monitor the establishment ofthe chart ofaccounts and processing of accounting work, especially in the initial stage, to ensure that complete and accurate financial information is provided in a timely manner.

39 Internal Control and Auditing

25. The project has established internal control procedures and policies, including approval and authorization controls, segregation ofduties, clear staff functions, and safeguarding assets. The funds flow will be arranged and monitored through JPFD channel and will include substantive review. 26. Both the JPCD and JANA have their own internal inspection divisions, who will function as the internal audit for this Project, conducting compliance and transaction-oriented examinations on a regular basis. During project implementation, the Bank supervision team will review the project examination reports, monitor the result of the internal audit and provide guidance as necessary. Financial Reporting

27. The format and content ofthe project financial statements represent the standard project financial reporting package agreed by the Bank and MOF, and have been discussed and agreed by all parties concerned.

28. The JPMO will prepare financial statements on implemented components and then consolidate the DA information managed by JPFD to prepare the overall project financial statements, and submit to the Bank for review and comment on a regular basis. In line with the updated World Bank Operation Manual, the interim un-audited project financial statements should be submitted as part ofprogress report to the Bank on a semi-annual basis.

Retroactive Financing 29. The civil works ofthe Project will possibly begin before the signing ofthe Loan Agreement. Therefore, retroactive financing will be available for this Project to the amount of US$ 10 Million for payments made under the Project prior to the date ofthe Loan Agreement and after July 1,2008. Finan cia1 Covenants 30. No additional financial covenants are proposed other than the standard financial covenants, (e.g. maintaining project accounts in accordance with sound accounting practices, audit requirement and SOE), as described in the legal agreements.

Supervision Plan

3 1. The supervision strategy for this Project is based on its FM risk rating, which will be evaluated on a regular basis by the FMS and in consultation with the task team leader.

40 Annex 8: Procurement Arrangements CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

A. General 1. Procurement for the proposed project would be carried out in accordance with the World Bank's "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004 and revised in October 2006; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 and revised in October 2006, and the provisions stipulated in the legal agreements. The various items under different expenditure categories are described in general below. For each contract to be financed by the Bank loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank and so reflected in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual status of the project implementation and the institutional capacity.

2. Procurement of Works: The main works procured under the Project would include: construction of the dam, powerhouse, ship lock and sluice gates; construction of flood protection works, and construction of auxiliary works and buildings. The procurement will be done using the Bank's Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) and the national SBD for the National Competitive Bidding (NCB) as agreed with or satisfactory to the Bank.

3. Procurement of Goods: The goods procured under this Project would include: supply and installation of generating units together with accessories; supply and installation of hoisting equipment for gates; supply and installation of gates; supply and installation of main transformers; power switchyard equipment; powerhouse bridge crane; supply and installation of powerhouse control and monitoring system; water level monitoring system; powerhouse auxiliary systems; dam electrical appliance; ship lock electric appliance; pumping stations electrical equipment. The procurement will be done using the Bank's SBD for all ICB and the national SBD for the NCB as agreed with or satisfactory to the Bank.

4. Procurement of Non-consulting Services: Nil.

5. Consulting Services: Consultants are required for engineering design, project supervision, technical assistance and institutional strengthening, and research work. All the consulting services, except for the overseas training, are non-Bank financed (NBF) and therefore financed by the counterpart funds.

6. Operating Costs: Nil.

7. Others: Nil.

8. The procurement procedures and SBDs to be used for each procurement method, as well as model contracts for works and goods procured, are available in the JPMO office.

41 B. Assessment of the Agency’s Capacity to Implement Procurement 9. Procurement activities will be carried out by the JPMO under the supervision ofthe JPCD and the PMPO. To complement the JPMO’s procurement capacity, a tendering agent has been employed. An assessment ofthe procurement capacity ofthe JPMO has been carried out by the team’s procurement specialist. The assessment reviewed the organizational structure for implementing the Project and the relevant experience ofthe staff responsible for procurement.

10. The key issue and risk concerning procurement is the JPMO’s lack ofexperience in Bank-financed projects. The corrective measures which have been agreed and taken are (1) to employ a tendering agent by the JPMO; (2) to provide training to the relevant JPMO and design institute staff by the Bank’s procurement specialist. Two training sessions have already been provided on August 3 1, 2007 and February 14,2008 respectively, in Nanchang. More training may be provided as requested and necessary.

1 1. The overall project risk for procurement is average.

C. Procurement Plan

12. The JPMO has developed a Procurement Plan which provides the basis for the procurement methods. This latest version ofthe Plan was agreed between JPMO and the Bank task team before the negotiation, and is attached at the end ofthis Annex. It will also be available in the project database and on the Bank’s external website. The Procurement Plan will be updated in agreement with the Bank task team annually, or as required, to reflect actual status ofthe project implementation and the institutional capacity.

D. Frequency of Procurement Supervision

13. In addition to the prior review to be carried out from Bank offices, the assessment of the JPMO’s capacity has led to the recommendation that post review missions of procurement actions be carried out in the field once every six months.

E. Details of the Procurement Arrangements Involving International Competition

14. Goods, Works, and Non-Consulting Services

(a) List of contract packages to be procured following ICB and direct contracting:

42 11 2 3 4 15 6 7 8 9 Ref. Contract Estimated Procurement Preference by Bank Date’for Bid Comments No. (Description) Method P-Q million) (y es/n 0) (Prior / Post) Invitation Construction of w4 dam and 63.21 ICB Yes no I Prior 1 10/21/2008 1 powerhouse I Construction of W5 dam and ship 32.50 ICB Yes Prior 1 10/21/2008 1 1 lock no I Supply and installation of hoisting 5.68 ICB no Prior 7/10/2009 ‘1 I equipment for 1 I I Yes &ice gates and ship lock Supply of generating units 44.72 ICB Yes Prior 12/2/2008 G2 1 together with 1 1 no I accessories I I

(b) ICB contracts estimated to cost above US$ 5,000,000 per contract for works and above US$ 500,000 per contract for goods and all direct contracting will be subject to prior review by the Bank.

(c) Advance procurement and retroactive financing may be adopted for some of the contracts. The eligible expenditures incurred after July 1 2008 and within one year before the date of the Loan Agreement would be retroactively financed by the Bank loan. The amount for retroactive financing is US$10 million. Procurement of the contracts subject to retroactive financing shall be carried out in accordance with the Bank’s Guidelines.

15. Consultants’ Services

(a) List of consulting assignments with shortlist of possible international firms: Nil.

(b) Consultants’ services estimated to cost above US$ 100,000 for firms and US$20,000 for individual per contract, and single source selection (SSS) of consultant (either firm or individual) for assignments estimated to cost above US$ 10,000 will be subject to prior review by the Bank.

(c) Shortlists of consultants for Bank-funded services estimated to cost less than US$ 300,000 equivalent per contract, may comprise entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

43 Thresholds for Procurement Methods

Description Thresholds >=us$20,000,000 ICB I Civil Works I ~us$20,000,000 NCB =US$500,000 ICB \ Goods I =us$200,000 QCBS, QBS

Thresholds for Prior Review

Description Thresholds

I, The first NCB contract irrespective of contract sum Prior Review Goods >=US$500,000 Prior Review I I The first NCB contract irrewective of contract sum Prior Review I Consultancy Firm >=US$lOO,OOO; SSS >=US$lO,OOO Prior Review Individual >=US$20,000; SSS>=US$ 10,000 Prior Review

44 Ref. Contract Procurement Review by Invitation Contract Contract Description Estimate Cost No. 1 1 No. 1 1 Method 1 (Pri:;/n!ost) I forBid 1 Award

(million RMB) (million US$) BRZ HR%Z Shihulang Main Complex Works (1) c.?i&#&@&SdBXiW I I I WI I Preparation ofsite C~Z-ZP) I 13.58 I 1.94 I NBFiWorks I NIA I I 2008-10-1 Buildings Works of Complex 2 w2 13.54 1.93 NBFiWorks NIA 2008-11-1 (BaEEERIm Buildings Works in the Jian City 3 w3 7.03 1 .oo NBFiWorks NIA 201 1-8-1 (b$rnFiE@R)

2009-2-20

2009-2-20 I I I 1 Flood Protection Works (2) tWT#Iim

River Bank Protection Works in Wanhe & 127.66 18.24 NBFiWorks 2008-1 1-20 I6I w6 I Zhangtang (E%-##ffiPEI@) I NIA 1 River Bank Protection Works in Yanxi 57.92 8.27 NBFiWorks 2008-1 1-20 7 w7 (#WwEIR) NIA River Bank Protection Works in Taihe 8 w8 68.34 9.76 NBFAVorks 2010-4-30 (S8rnPKIEd) NIA River Bank Protection Works in Jingtan 134.91 19.27 NBFAVorks NIA 2010-4-30 I I w9 I (&RrnFEI@) I I I I I 4 contract O+*R~)

Complex M&E Equipment Supply (J) (&@&&&%WE) Hydraulic Hoists for Flood Gates and Ship 10 41 84 5 98 ICB/Goods Prior 2009-7-10 2009-10-10 lock (%&I%.ffiR%EE;WJaC&) Turbine Sets and its automation element 11 G2 329 41 02 ICB / Go d Prior 2008-12-2 2009-4-2 (finla$r;fi%%l+at&) 15 o s Speed Goveror and oil pressure unit 12 G3 3 60 0 51 NBF/Goods N/A 2009-7-1 (MB&B%ESE)

Automatic excitation regulator 13 G4 4 80 0 69 NBFiGoods NIA 2009-7-2 ( E aWI.6tPflalffSi) Crest Lifting Machinery of Protection 0.70 0.10 NBFlGoods 2009-6-20 I l4 I G5 I Works (ffiPE#f&ftfi&) 1 1 I NIA I Gantry Crane & Crest Lifting Machinery 13.78 1.97 NBFlGoods 2009-10-20 of Powerhouse (TESlKLbrla#Zb&Wl) I I I NIA I 16 G7 1 Trash Rack Equipment(%fltfi&) 1.08 0.15 NBFlGoods NIA 2009-1 1-20 Main Transformers and other dry 13.75 1.96 NBFiGoods 2010-8-10 transformers (&%EtBTb%E&) I 1 I NIA I

45 18 G9 I Switchyard Equipment (K#%M&) I 10.47 1 SO NBFiGoods NIA 2010-8-1 1 19 I G10 I Isolated-phase bus (&@&H%f!Rt&) I 10.22 1.46 I NBFiGoods I NIA I 2010-8-12 High/Low voltage switchgear and switch 20 GI1 16.71 2.39 NBFIGoods 20 1 0-8- 1 3 1 I I power panel (SiNBKKXBBaAI) I I N/A I I1 Cable for power and electnc wire 21 GI2 2010-8-14 I I I (E$ABaAE$%) 1 1623 Relay protection systems 22 10.32 1.47 NBFIGoods NIA 2010-10-20 G13 (IE$%P%B) Control & Monitoring System of Complex 23 10.52 1 SO NBFiGoods N/A 2010-10-2 1 G14 (@BBBBas%)

Automatic Forecast of Water Situation 24 G15 3.20 0.46 NBFIGoods NIA 201 0-1 0-22 System (*# Q $I#!J%)

Dam Safety monitoring system 25 G16 2.74 0.39 NBF/Goods NIA 201 0-1 0-23 (ktm*+B#l%B) I 26 I GI7 I CommunicationSystem (%%%E) I 2.30 I 0.33 I NBFiGoods I NIA I I 2010-10-24 I Remote contra1 and information system 21 G18 (%mmIl) 3.09 0.44 NBFiGoods NIA 201 1-2-3 Powerhouse Auxiliary Systems 28 G19 10.79 1.54 NBFiGoods N/A 2010-6-1 (E$pCiMm*P%%)

Installation of generating units and other 29 G20 M&E equipment in Hydro-plant 23.90 3.41 NBFIGoods NIA 2009-10-1 1 1 1 (r$tmE$iQ&a%Il) 1 1 I ll Electrical Equipment for Ship Lock & 30 G21 2 84 Oil LFIGoods 2010-6-1 I I I Flood Gates (ffiRER$lb$iQ&) 1 1 1 I NIA 1 I 1 Electrical Equipment of Protection Areas 31 G22 10.43 1.49 NBFiGoods 2009-3-1 I I I (EPKh#t&&$R&) I I NIA I G23 Pump-set of protection areas 32 10.90 1.56 NBFIGoods NIA 2009-1-I CEPKSBI) 33 G24 Others (X.8) 33.05 4.72 NBFiGoods NIA I I (4) Consultant Service (pfrW&F> Study on Reservoir Optimizing Control 34 cI 2.72 0.39 NBFIServices N/A 2009-6-30 (*mMME%afR, Research on Downstream Water Level 2.49 0.36 NBFIServices NIA 2007-12-20 I 35 I c2 I Connection (T;#7k!ilt#jtb%R) I I 1 I c3 Overseas TrmninglTechnical Assistance 36 3 56 0 51 CQSIServices Prior 2009-1-I ( H9bHY~l) 37 c4 Survev and Desim ($b@liQdttt) 59 60 8 51 NBFIServices NIA 2007-6-5

Supervision Services for Construction of 38 c5 w4 & w5 14.91 2.13 NBFIServices NIA 2008-10-10 (W4 ;ia w5 kBI@?&IBE) Construction Suvervision Services for 39 C6 Flood Protection Works 5.30 0.76 NBFIServices NIA 2008-10-10 (EEIR?&I&B) Supervision for major Equipments 4.97 0.71 NBFiServices N/A 2008-10-1 0 I 40 I c7 I Manufacturing(ff8&@%) 1 1 1 1 41 C8 I Bidding Agent (%'#%fiB) 5.10 0.73 NBFIServices NIA 2007-12-12

46 Annex 9: Economic and Financial Analysis CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

A. Economic Analysis

1. The Shihutang Navigation and Hydropower Complex Project (the “Project”) will generate several types of economic benefits, mainly savings to inland waterway transport cost, power generation, emission reductions as well as flood protection for cultivated land and residential properties.

2. A single economic rate of return (EIRR) is calculated for the Project because the splitting ofjoint cost between navigation and power is arbitrary. The cost and benefit used in this evaluation reflect December 2007 prices and a project life of 20 years. The financial costs have been converted to economic costs by eliminating the price contingency and taxes and custom duty on imported materials. The resulting overall economic cost is about 90 percent of the financial cost.

Shihutang Ship Lock and Waterway Transport

3. Overview: The Gan River (780 km) is the longest and most important river in Jiangxi Province. It runs from south to north across the entire province towards Poyang Lake, which is the largest freshwater lake in China, located in the northern part of Jiangxi, adjacent to the Yangtze River. The tributaries of the river cover almost half of the province. Almost all the main cities in the province are located along the river. The Shihutang Complex is located in the middle section of the Gan River, 82 km downstream from the existing Wan’an Dam. Currently, the waterway section where the Project is located is classified as a Grade VI navigation standard, and can accommodate 1OO-dwt vessels.

4. Traffic analysis: Inland waterway transport (IWT) is the cheapest and most environmentally friendly of all transport modes, particularly for low value, non time-sensitive dry bulk cargo, such as coal, ore and construction materials (sand, stone, bricks and tiles). There are many quarries and mines along the Gan River. This cargo which makes up approximately two thirds of total river traffic, is transported to industrial and residential users in Nanchang and to the more affluent coastal areas. However, the Gan River carries only a small portion of the 2 1.5 million tons of cargo transported in the project area. In 2006, it carried only 20 percent of the total tonnage in the project area. Most, approximately 75 percent, went by road while a vastly smaller amount, 5 percent, was carried by railway. Rail traffic with other origins and destinations has reached 75 percent of its design capacity. The improved waterway would divert part of low value bulk cargo to the more economical inland waterway transport and relieve traffic on the existing highway networks. The traffic figures are summarized as follows:

47 2006 Traffic bv Modes (‘000 ton) Waterway Road Railway Total Total Traffic: Upbound (to North) 2,048 6,553 1,028 9,629 Downbound (to South) 2,225 9,471 140 11,836 Total (a) 4.273 16,024 1.168 21.465 Modal split 19.9% 74.7% 5.4% 100.0% Ofwhich: Dry bulks Construction materials 2,774 620 13 3,407 Coal 100 80 850 1,030 Ores 58 20 70 148 Subtotal (b) 2.932 -720 -933 4,585 Total dry bulks/ Total traffic (b/a) 68.6% 4.5% 79.9% 21.4% Sources: JPCD, the Bank staff,

5. Traffic forecast: Between 2000 and 2006, river traffic at the project site grew 25 percent annually, much higher than the local economy as a whole, which has grown at 11-12 percent per year. The current waterway capacity is almost fully utilized. Traffic Origin-Destination estimates indicate that, despite the congestion of the waterway, waterway traffic may reach 5.3 million tons in 2014 from 4.3 million tons in 2006. Unless the current bottleneck is eased, some low-value dry bulk will have to be transported by other more expensive means, or not sold at all.

6. Traffic projections undertaken by consultants for the Project showed an average growth rate to/from Ganzhou and other ports north of Shihutang of about 5.0 percent annually to 2020 and 4.7 percent annually between 2020 and 2030. Estimates of future traffic were based on a regional economic forecast with a derived total volume of cargo categorized into major commodity types. Based on their origins and destinations, cargo with a distinct cost advantage when being carried on inland waterway is assigned to that mode. Projections for individual traffic segments were based on the expected growth in the specific industries, past statistics, interviews with key enterprises and took into account the relative costs of IWT versus road and rail transport. The projections also presume, on the supply side, the implementation of the Jiangxi Inland Waterway Navigation Development Plan, in particular that:

0 Grade I11 navigation is achieved throughout the section from Ganzhou to Nanchang by 2020 as planned, to allow the river to handle barges up to 1000-dwt vessel with 95 percent reliability; 0 industry adaptation to this opportunity by 2020 through investments in larger vessels to handle this traffic; and e enhancement of port capacity as planned to be able to handle the bigger vessels and higher cargo throughput.

7. The inland waterway traffic forecast at the project site is summarized as follows:

48 Inland waterway Traffic Summary (‘000 ton) 1995 2000 2004 2005 2006 2011 2015 2020 2030 Total Traffic: Upbound 188.6 603.8 1,467.3 1,785.0 2,047.7 2,085.0 2,570.0 3,740.0 5,700.0 Downbound 105.9 514.2 1,434.1 1,765.0 2,225.3 2,385.0 3,060.0 4,690.0 7,630.0 Total -294.5 1.1 18.0 2,901.4 3,550.0 4.273.0 4,470.0 5.630.0 8.430.0 13.330.0 Of which: Dry bulks Construction materials 115.0 646.3 1,845.9 2,215.0 2,774.0 2,913.0 3,030.0 5,160.0 8,720.0 Coal 19.3 31.0 45.5 50.0 100.0 139.0 180.0 220.0 300.0 Ores 0.0 5.7 47.8 80.0 58.0 69.0 80.0 90.0 100.0 Subtotal 134.3 683.0 1.939.2 2,345.0 2,932.0 3,121.0 3,290.0 5.470.0 9,120.0 Sources: JPCD, the Bank staff.

Economic Benefits

8. Inland waterway: The expected shift of traffic from small to larger vessels, including combination of dump barges and a tow, will reduce the cost of river transport. It will also generate up to 1.3 million tons of extra traffic that otherwise would have had to be carried by more costly transport means, or not at all. The estimated transport cost of using 100-dwt vessels is RMB 0.217 per ton-km, but with larger barges (500-dwt vessels) the unit cost of transport can be reduced below RMB 0.13 1 per ton-km. This calculation takes into account ship investment, depreciation, maintenance, operating and management costs. Based on current practice on the Gan River, it is estimated that 40 percent of cargo will use the larger vessels by year 20 11 - the year the ship lock opens, and this number will increase by about 5 percent per year to 70 percent by the year 201 7 and stabilize thereafter. Today the typical transport cost from Ji’an City to Nanchang is RMB 69.4 per ton-trip for a 100-dwt vessel. The transport cost for a 500-dwt vessel would be about RMB 41.9 per ton-trip, a saving of RMB 27.5 per ton-trip. It is estimated that the total transport cost saving for 2014 would be RMB 77 million. By 2020, total transport savings accruing to the Jiangxi economy are expected to reach RMB 148 million per year.

9. Floodprotection: At the project site, land width along the river is between approximately 600-1,400 meters and all local commercial and economic activities are concentrated on this limited area. Without better flood protection facilities, the unregulated river flow constantly threatens local farmland, fruit orchards and households along the river. Some rich soil land is left uncultivated because of the uncertainty of the river. The flood protection dikes and water pumping stations included in the Project will regulate the flood peaks and reduce land loss from floods. It is estimated that annualized total flood losses can be reduced by at least RMB 26.6 million per year. Reduced farmland loss would represent 52 percent of this figure, reduced residential loss 36 percent and orchards 12 percent.

10. Power generation: In 2006, the total power shortage for Jiangxi Province was about 4,480 GWh or 11.4 percent of total electricity demand, a rise of 4.9 percent on 2005. Power shortages occur every month and there is no seasonal fluctuation. The province had to constantly import electricity from outside to meet the needs of a local economy growing at 11 - 12 percent annually. The total annual power generation of the Project is designed to be about 526 GWh by 2014. Net of internal use and operation loss of 5.1 percent, all the power will be sold to the local

49 power company. It will be used mainly for base load during wet spring months, and peak load during dry winter months.

1 1. The economic value ofthe incremental power to be generated by the Project is estimated by reference to the next cheapest alternative sources which is coal and gas-fired thermal energy. All the major parameters and methodologies used in quantifying the economic benefits for the power house adhere to (or are scaled up from) those used in the economic evaluation ofthe Bank-financed “Fifth Inland Waterway Project” (September 2005) and adjust its output in peak periods.

12. The energy replaced by the proposed Project consists of about 120 MW ofcoal-fired thermal as base load, combined with cycle gas as shoulder load and gas turbine as peak load. The economic value of the power is estimated to be RMB 0.4 per KWh, or about RMB 275.4 million per year.

13. Emission reductions: In Jiangxi, about 85 percent oftotal power output is generated by coal and Jiangxi has a shortage of coal. In the project area, the total coal demand is about 6 million tons per year. Total local coal production of 1.4 million tons per year can only furnish 23 percent ofdemand. Compared with the alternative of coal- and gas-fueled plants, hydropower will reduce the emission of air pollutants, including sulfur dioxide, nitrogen oxide, carbon dioxide, and suspended particulates (soot). The net environmental benefits are estimated at about RMB 42 million per year.

Overall Economic Evaluation of the Project

14. The overall EIRR ofthe Project ranges between 12.1 percent and 14.9 percent, depending on expectation about the pace ofthe shift to larger vessels, the delay ofproject completion by one year, cost increase, benefit decrease, no environmental benefits, less ship cost savings and less economic value on power. The results, together with sensitivity tests and switching values, are summarized as follows:

The EIRR, Sensitivity Tests and Switch Value Summary EIRR (Oh) ENPV (12Y0, RMB million) The best scenario 14.9 456.6 Sensitivity test: Delay of the completion by one year 14.3 373.0 Higher capital cost (+lo%) - (a) 13.6 259.7 Lower benefits (-10%) - (b) 13.4 214.0 Combine (a) and (b) 12.1 17.1 Zero value of environmental benefits 13.7 254.0 Less ship cost savings (15%) 14.6 359.3 Less economic value on power (1 5%) 14.2 339.6 Slow switch to larger shipment (1 5%) 14.8 429.8 Switching values: YOincrease Cost increase to reduce EIRR to 12% - (c) 125% Benefit reduction to reduce EIRR to 12% - (d) 80% Combine (c) and (d) to reduce EIRR to 12% Cost: 1lo%, benefits 89%

50 15. In addition, the sensitivity tests with variations in costs and benefits of the Project are evaluated. The results are summarized below.

0% 3.3% 5.9% 8.1% 10.0% 11.8% 13.4% 14.9% 16.4% 10% 2.3% 4.8% 6.9% 8.8% 10.5% 12.1% 13.6% 14.9%

16. Additional benefits expected from the Project, not included in the EIRR calculation, are increased family income for rural people living in the poor and/or mountainous regions along the river and increased accessibility to local schools and hospitals. The quantifiable beneficiaries are estimated at (a) about 2,000 extra children attending school (about 10 percent of the total number of the existing students) and (b) about 490 extra people attending health services (about 10 percent of the poor people living in the project area).

17. Project risks: The JPCD has successfully completed two Bank-financed highway projects, with implementation of a third underway. JANA has implemented three domestic- funded navigation and hydropower complexes in Jiangxi Province. The above experiences will thereby minimize the technical risks associated with the implementation of the Project. The main tangible risk is of prolonged delays affecting the construction schedule. The impact of uncertainty was tested by means of a probabilistic risk analysis.

18. Probabilistic risk analysis: The sensitivity test has various limitations. For example, the test cannot determine the degree of uncertainty. Thus, a probabilistic risk analysis, using Monte Carlo techniques, was carried out. In a Monte Carlo analysis, each uncertainty factor is allowed to vary at random between set limits and all uncertainty factors are allowed to change simultaneously. Monte Carlo simulations provide probability distributions of the potential outcomes of decisions. By analyzing these distributions, we can assess the risk associated with making various decisions (or probabilistic risk analysis). The outcome of the analysis is a judgment on the possible range of the decision variable, and on the likelihood of each value within this range.

19. Eleven uncertainty factors have been identified: (a) inland waterway traffic, (b) ship cost, (c) power generation, (d) switch to larger vessel, (e) cost of other transport means, (f) capital investment, (g) energy value, (h) environmental savings, (i)flood protection, (i) seasonal power differences and (k) delay of the operation by one year. The results of probabilistic risk analysis showed that the EIRR is 14.8 percent for the most likely scenario, 14.3 percent for the low scenario and 15.4 percent for the high scenario. The standard error of the mean is 0 percent for EIRR and RMB 5.5 million for ENPV. The detailed results of the Monte Carlo test and probabilistic risk analyses are summarized as follows:

51 Summary of Probabilistic Risk Analyses Standard error Range Most likely of the mean EIRR 14.3% - 15.4% 14.8% 0.0% ENPV (12%. RMB million) 358 - 549 45 1 5.5

B. Financial Analysis

20. Preface: The financial evaluation ofthe Project is comprised oftwo sections: (a) an assessment ofthe revenue earning entity of the Shihutang Complex focusing on consolidated financial statements, and (b) the financial evaluation ofJPCD, including the fiscal impact ofthe proposed Project. The financial cost ofcapital for the Project is assumed to be 5.1 percent (3 1 percent from the Bank at 4.5 percent, 15 percent from the local bank at 7.05 percent, and 54 percent from grants at 5.0 percent).

Financial Evaluation of the Project

2 1. Operation: A financially independent entity will be established before use ofthe ship lock to operate the facilities. The entity will be responsible for day-to-day management, operation and maintenance and for the loan repayment. Financial revenue will come solely from the sale ofpower. The government will regulate the charges on power sale prices. An official document, issued by the provincial government, has guaranteed to pay a tentative price of 0.34 RMBKWh for the power generated by the Project. This tentative price will be subject to further evaluation and approval but is reasonable, in that it is consistent with the current power pricing charges on a similar scale inland waterway project financed by the Bank in the adjacent province of (0.3 13 RMBKWh).

22. Profitability: It is estimated that the Complex will be able to generate sufficient revenue over the loan period. Low profits are expected in the early years of operation due to the loan servicing costs and low growth in power prices. For example, in 2013, the estimated interest payments (RMB 56 million) will be about 1.9 times total working costs (RMB 29 million), consuming about 38 percent oftotal revenue (RMB 147 million) in that year. Growth in power prices is conservatively assumed to be 10 percent over a five-year period or 1.9 percent per year (See Attachment 1).

23. Cash flow: Despite low profitability in the early years and financial repayment pressures for the Bank’s and domestic loans, the Complex’s cash flow should be sufficient to meet all project needs because ofthe large sum of depreciation reserves. In 2013, for example, the depreciation reserve (RMB 42 million) will represent more than 1.4 times total working cost, thereby generating strong internal cash flow and providing sufficient funds for the operations, maintenance expenses and loan repayments. Also, 30 percent ofthe principal repayment for the Bank’s loan will be paid by JPCD. After full completion ofthe Project, it is estimated that the Complex will not require any additional external cash injection and be able to maintain available cash ofat least RMB 42 million per year for the life ofthe Project. If a ship lock fee is imposed and/or carbon credits can be approved, the cash flow will be further improved. Without these

52 incomes, the cash flow remains strong and will be able to maintain the debt service coverage ratio to be 1.1 and above (See Attachment 2).

24. Leverage and Liquidity: The relatively high proportion of grants (54 percent) will provide sufficient equity for the Project and translate into a debt/equity ratio (the financial leverage of the company) of less than 50 percent after 201 5. The strong cash flow status also ensures that the current ratio will be in the sound range of 2.3 and higher (a minimum threshold of 1.O needs to be maintained to avoid short-term solvency problems) (See Attachment 3). For operating funds, the JPCD has reiterated its full commitment to guarantee the financial viability of the Project by releasing an official document to the Bank confirming its full financial support. The major financial assumptions are listed in Attachment 4.

25. Financial Internal Rate ofReturn (FIRR): With the tentative price of power sales, the Project should not require any external cash injection. But low profitability will cause a low FIRR (0.2 percent) with a Financial Net Present Value (FNPV) of RMB -883 million, at the discount rate of 5.1 percent to the capital investment. Because of the low profitability in early years, the FIRR and FNPV will not change significantly if the completion is delayed by one year (-0.3 percent and RMB -967 million, respectively).

26. Financial urobabilistic risk analysis: The six most uncertain factors which may affect the financial evaluation are: (a) power generation, (b) the power sales price, (c) the total working cost, (d) rate of growth of power prices, (e) capital investment, and (f)one-year delay in operation of the power plant. The risk analysis reveals that the most likely FIRR would be -0.3 percent, while the worst and the best FIRR would respectively be -0.8 percent and 0.4 percent. The standard error of the mean is 0 percent for FIRR and RMB 2.8 million for FNPV. The results are summarized as follows.

Summary of Financial Sensitivity and Probabilistic Risk Analysis Financial Sensitivity Tests Financial Simulation and Risk Analysis Open in Open in. Range of Most Likely Std. Error of 2013 2014 FIRR / FNPV FIRR / FNPV the Mean FIRR (in %) 0.2 -0.3 -0.8 - 0.4 -0.3 0 FNPV (5.1%, RMB million) -883 -967 -1,035 - -884 -967 2.8

Scenario Analysis

27. There are two proposed incomes that are excluded from the financial evaluation: (a) ship lock fee, and (b) carbon credits. Three financial scenarios have been tested on the bases of these two assumptions.

i. The first scenario: Subject to government approval, the Project plans to collect a ship lock fee of RMB 1.O/ton from its users. Since (1) most Bank-financed inland waterway projects are free for users, and (2) some ship locks charge a lower fee of RMB 0.3-0.4 /ton, a tentative ship lock fee of RMB O.S/ton will be tested. ii. The second scenario: It is estimated that the Project will reduce C02 emissions by 172,000 - 429,000 ton per year. The total value of carbon credits (201 1-2022) is

53 estimated to be RMB 12.4- 3 1.O million per year. Since this amount is yet to be approved, the scenario analysis will test the financial impact of this income. iii. The third scenario will test the combined financial impact of the first and second scenarios.

28. The results of three financial scenarios reveal that the financial impacts on the Project are modest and summarized as follows:

Financial Scenario Summary FIRR (in %) FNPV (5.1%, RMB million) The first scenario 0.5 -824 The second scenario 0.3 -871 The third scenario 0.6 -81 1

Financial Evaluation of the JPCD

29. The JPCD provided its consolidated financing plan covering the 1 1th Five-Year Plan (FYP 2006-2010) and 12th FYP (201 1-2015). The plan has three main features:

a decrease in funding of new construction from 73.1 percent of total revenue in the 11 th FYP to 62.4 percent in the 12th FYP; an increase in investment in inland waterways and port construction from 3.1 percent of total revenue in the 1 1th FYP to 5.6 percent in the 12th FYP, and a decrease in MOT grants from 12.5 percent of total revenue in the 1 lth FYP to 10.1 percent in the 12th FYP.

30. During the same period, a moderate self-financing ratio (total internal cash generation against total revenue) for 201 1-20 15 (73.2 percent) will ensure the implementation of the development plan even without MOT grants. This ratio has improved by about 18 percent from 55.3 percent for 2006 - 2010.

3 1. For long-term viability of inland waterway development with the resources allocated, the average yearly increase in investment will be about 27.7 percent. Focusing on the upgrading of navigation standard, rather than expansion in the total length, the investment per kilometer will increase from RMB 23,630h in 2006 to RMB 60,27O/km in 2010. This trend should continue from 20 11 to 201 5 (See Attachment 5 revenue and expenditures during 2006-20 15).

32. Fiscal impact: The fiscal impact of the Project is focused on JPCD maintaining sound financial practice to minimize the financial risks, i.e. the lack of counterpart funds for the construction, including the future maintenance and operating expenses of the Complex, as well as the loan repayments.

33. The JPCD budget forecasts show that the capital required for the investments, maintenance and operations of the Project constitute only a small fraction of JPCD’s funds flow. Based on JPCD’s plan, the annual capital investments of the Project will require less than 3.2 percent of the projected JPCD annual total revenue in any given year during the construction

54 period. The total capital required for the entire project represents only 2.6 percent of the total revenue during 2008-2012. In addition, the annual maintenance and expenditure of the Complex is less than 4.7 percent of its annual budgeted maintenance expenditure. The total maintenance required for the Complex represents only 3.5 percent of the total budgeted maintenance expenditures of JPCD during 201 1-2015. These low ratios indicate that the Project presents a very modest financial risk with regards to the availability of counterpart funding for the construction and the future maintenance and operating of the Complex. The figures are summarized as follows:

JPCD: Investments, Revenue and Maintenance Expenditures (RMB million) 2008 2009 2010 2011 2012 2013 Investment and Revenue: Total Capital Investments - (a) 398.87 723.53 679.47 373.36 143.77 -- Total JPCD Revenue - (b) 23,604 22,530 21,536 21,347 22,828 24,456 Ratios (a)/(b) 1.7% 3.2% 3.2% 1.7% 0.6% -- Maintenance Expenditures: Total Project Operating Cost - (c) -- __ -- 21.77 46.52 70.84 Total Budgeted Maintenance - (d) 2,237 1,967 1,545 1,638 1,737 1,842 Ratios (c)/(d) ______1.3% 2.7% 3.8% Sources: JPCD and Bank staff.

34. About 46 percent of the total project cost is to be financed in the form of loans (the Bank 3 1 percent and local commercial bank 15 percent). For the loan repayments, JPCD will also budget sufficient reserves to meet its financial obligations. In 2013, for example, the total loan repayment of the Project (principal and interest payments for foreign and domestic loans) is estimated to be RMB 102.66 million which constitutes only 1.6 percent of JPCD’s total budgeted loan repayment reserves (RMB 6,252 million) that year. The total loan repayments only represent 0.4 percent of JPCD’s total revenue. These low ratios indicate the loan repayment of the Project will not put any financial pressure on JPCD’s cash flow. All the financial indicators show that the fiscal impact and risks are modest. Detailed data are provided in Attachment 5 and summarized as follows.

JPCD: Fiscal Impact (RMB million) 2013 Total Loan Repayment of the Project - (a) 102.66 Total Loan Repayment Reserves - (b) 6,252 Total JPCD Revenue - (c) 24,456 Ratio (a)/(b) 1.6% Ratio (a)/(c) 0.4% Sources: the JPCD and the Bank staff,

55 Attachment 1

Shihutang Navigation and Hydropower Complex: Income Statement (RMB million, year ending December 31)

2011 2012 2013 2014 2015 2016 2017 2018

Ship lock Traffic (million tons) 4.47 4.74 5.02 5.32 5.63 5.97 6.32 6.69 Power Generation (GWh) 66.89 178.51 456.23 526.53 526.53 526.53 526.53 526.53 Power Sales (GWh) 63.48 169.41 432.96 499.68 499.68 499.68 499.68 499.68

ODeratine Revenue Power 19.68 52.52 147.21 169.89 169.89 169.89 169.89 186.88 Ship lock Total --~~----19.68 52.52 147.21 169.89 169.89 169.89 169.89 186.88

Business Taxes Value-added tax 0.98 2.63 7.36 8.49 8.49 8.49 8.49 9.34 City construction tax 0.05 0.13 0.37 0.42 0.42 0.42 0.42 0.47 Education levy 0.03 0.08 0.22 0.25 0.25 0.25 0.25 0.28 Total 1.06.067.959.169.169.169.1610.09

Net Sales ------18.62 49.68 139.26 160.73 160.73 160.73 160.73 176.79

ODeratine Costs: Salaries, wages and benefits 3.00 3.15 3.31 3.48 3.65 3.83 4.02 4.22 Fuel and power 0.60 0.63 0.66 0.69 0.72 0.76 0.80 0.84 Equipment maintenance 17.40 19.78 19.79 19.80 19.81 19.83 19.84 19.85 Pumping and compensations 0.12 0.32 0.82 0.86 2.54 2.67 2.80 2.94 Others 0.65 1.73 4.41 4.63 4.63 4.63 4.63 4.63 Total working costs ------21.77 25.61 28.99 29.46 31.35 31.72 32.09 32.48 Depreciation - 20.91 41.85 62.80 62.84 62.88 62.91 62.96 Total operating costs ------21.77 46.52 70.84 92.26 94.19 94.60 95.00 95.44

ODeratine Profit: (3.15)3.1668.4268.4766.5466.1365.7381.35 Financial charges: The IBRD - 31.94 30.03 28.05 25.97 23.78 21.51 The Local Bank - 23.90 23.55 22.84 22.14 21.43 20.73 Non-operating income (net)

Profit Before Taxes (3.15)3.1612.5814.8915.65220.5239.11 Income tax - 3.15 3.72 3.91 4.51 5.13 9.78 Other taxes

Net Profit After Tax

Operating Ratio

56 Attachment 2

Shihutang Navigation and Hydropower Complex: Sources And Applications of Funds (RMB million, year ending December 31)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Sources: Net profits (3.15) 3.16 9.43 11.17 11.74 13.51 15.39 29.33 Depreciation - 20.91 41.85 62.80 62.84 62.88 62.91 62.96 MOT contribution 72.93 132.29 124.23 68.26 26.29 Provincial contribution 143.79 260.83 244.95 134.60 51.83 Borrowing: The IBRD 123.84 224.64 210.96 115.92 44.64 The Local Bank 58.3 1 105.77 99.33 54.58 21.01 Others 12.55 13.12 13.71 14.34 14.99 15.68 Total 398.87 723.53 679.47 --370.21 167.84 --63.83 87.09 88.29 90.73 93.29 107.97 Applications: Capital expenditures 398.87 723.53 679.47 373.36 143.77 2.43 2.55 2.68 2.81 2.95 3.10 Other expenditures Repayment of principal: -The IBRD 41.82 43.73 45.71 47.79 49.98 52.25 -The Local Bank 5.00 10.00 10.00 10.00 10.00 20.00 Change in working capital - (1.00) (6.31) (1.51) 0.01 0.01 - (1.12) Total 398.87 723.53 679.47 --373.36 142.77 --42.94 54.77 58.40 60.61 62.93 74.23

: 25.07 20.89 32.32 29.89 30.12 30.36 33.74 - (3.15) 21.92 42.81 75.13 105.02 135.14 165.50 CiosingBalance - (3.15) 21.92 42.81 75.13 105.02 135.14 165.50 199.24 Debt Service Coverage Ratio ______-- 1.1 1.2 1.2 1.2 1.2 1.2

57 Attachment 3

Shihutang Navigation and Hydropower Complex: Balance Sheet (RMB million, year ending December 31)

2011 2012 2013 2014 2015 2016 2017 2018

&&

Fixed Assets At cost 1,740.18 1,855.26 1,857.37 1,859.58 1,862.24 1,865.02 1,867.94 1,871.01 Less: depreciation - 20.91 62.76 125.56 188.40 251.28 314.19 377.15 Subtotal 1,740.18 1,834.35 1.794.61 1.734.02 1,673.84 1,613.74 1.553.75 1,493.86

Current Assets Cash (3.15) 21.92 42.81 75.13 105.02 135.14 165.50 199.24 Inventory 8.70 9.89 9.90 9.90 9.91 9.92 9.92 9.93 Receivables 1.97 5.25 14.72 16.99 16.99 16.99 16.99 18.69 Subtotal -7.52 -37.06 -67.43 -102.02 -131.92 -162.05 -192.41 -227.86

Other assets

Total Assets 1.747.701.871.411.862.041,836.041.805.761.775.791.746.161.721.72

Equity-State knds 751.07 803.66 825.32 849.27 874.70 902.52 932.87 977.85 Long-tern debt: The IBRD 675.36 720.00 678.18 634.45 588.74 540.95 490.97 438.72 The Local Bank 3 17.99 339.00 334.00 324.00 3 14.00 304.00 294.00 274.00

Current liabilities 3.28 8.75 24.54 28.32 28.32 28.32 28.32 31.15

Other liabilities

Total Liabilities & Equity 1.747.701.871.411.862.041.836.041.805.761.775.791.746.161.721.72

Current Ratio 2.3 4.2 2.7 3.6 4.7 5.7 6.8 7.3 Debt/ (debt+ equity) Ratio 56.9 56.9 55.1 53.0 50.8 48.4 45.7 42.2

58 Attachment 4

Shihutang Navigation and Hydropower Complex Major Financial Assumptions

1. Power sales and ship lock traffic As in Income Statement.

2. Tariff Rates: 10% increases every 5 year. Power Trial period (20 1 1-20 12) 0.3 1 RMB/ KWh. Full operation (after 2013) 0.34 RMB/ KWh.

3. Business Taxes (average): Value-added tax (VAT) 5.0%of total operating revenue. City construction tax 5.0%of total VAT. Education levy 3.0%of total VAT.

4. Operating Costs: 5 % increase per year. Salaries, wages and benefits Total 178 persons, 12,000 RMB /person/ year and 40% for benefits. Fuel and power 5 RMB /kW. Equipment maintenance 1.O% of fixed assets. Pumping and compensations RMB 2.54 million after 2015. Others RMB 4.4 1 million after 20 13.

5. Depreciation 30 years straight- line method,

6. IncomeTax 25% after the income tax credit.

7. Loans: The IBRD 4.5% LIBOR-Based signal currency in US$ loan. 17 year maturates including 4 year grace The Local Bank 7.05% pa, flexible principal payment.

59 Attachment 5

The I1th Five-year Plan The 12th Five-year Plan

Revenue I Road maintenance fee 2.230 2.477 2.753 3,059 3.399 13.918 3.758 4.157 4.601 5.096 5.648 23.260 2 MOC subsidy 2,151 3,555 3,345 2,626 2,318 13,995 2,364 2,412 2,460 2,509 2,659 12,404 3 Toll revenue 4,552 5,629 6,191 6311 7,492 30,675 8,241 9,065 9,971 10,968 12,065 50,310 4 Operation transfer 350 500 350 385 423 2,008 466 512 564 620 682 2,844 5 Local funds 216 333 252 272 294 1,367 216 233 252 272 294 1,267 6 Bond 463 391 332 349 366 1,901 359 351 345 338 331 1,724 7 Bank loan 5,430 10,814 7,880 6,327 4,326 34,777 3,028 3,180 3,338 3,506 3,581 16,633 8 City funds 1,356 1,864 1,581 1,708 1,845 8,354 1,789 1,735 1,683 1,633 1,584 8,424 9 Private investment 788 1,252 920 993 1,073 5,026 1,126 1,183 1,242 1,304 1,369 6,224

Total ---17,536 26,815 23,604 22,530 21,536 112,021 21,347 22,828 24,456 26,246 28,213 123,090

Exuenditure: 1 Administration 778 801 825 850 876 4,130 919 965 1,013 1,064 1,117 5,078 2 Maintenance 1,511 2,625 2,237 1,967 1,545 9,885 1,638 1,737 1,842 1,954 2,075 9,246 3 Trunk road construction 7,079 16,637 13,134 10,545 7,2 IO 54,605 7,570 7,949 8,346 8,764 9,202 41,831 4 Road network construction 892 1,620 1,557 1,532 1,530 7,131 1,683 1,851 2,036 2,240 2,464 10,274 5 Rural road construction 4,474 3,074 3,074 3,074 3,074 16,770 3,228 3,389 3,559 3,736 3,923 17,835 6 Inland waterway and ports 129 369 723 1,183 1,023 3,427 1,125 1,238 1,362 1,498 1,648 6,871 7 Transport supporting system 18 175 155 55 40 443 42 44 46 49 51 232 8 Repayment of interest and principal 2,655 1,514 1,899 3,324 6,238 15,630 5,142 5,655 6,252 6,941 7,733 3 1.723

Total ------___--17,536 26,815 23,604 22,530 21,536 112,021 21,347 22,828 24,456 26,246 28,213 123,090 Total Waterway Network (km) -(a) 5,700 5,700 5,700 5,700 5,700 -- 5,700 5,700 5,700 5,700 5,700 -- Total waterway expenditure /1 (million RMB) -(b) 129 369 324 459 344 -- 752 1,094 1,362 1,498 1,648 -- Average waterway expenditure (‘000 RMB/km)- (b)/(a) 22.63 64.74 56.86 80.61 60.27 -- 131.87 191.97 238.95 262.81 289.12 -- Average annual increase -- 186.0% -12.2% 41.8% -25.2% 27.7% 118.8% 45.6% 24.5% 10.0% 10.0% 21.7%

/1:Exclude the project investment

Sources: JPCD and Bank staff,

60 Annex 10: Safeguard Policy Issues CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

I. SOCIAL SAFEGUARDS

A. Introduction

1. The Shihutang Complex comprises a single integral infrastructure forming a run-off reservoir, and flood protection works alongside the reservoir banks. The construction of the infrastructure will require land acquisition and resettlement. The JPMO engaged the Jiangxi Water Conservancy Design Institute, the Hubei Water and Hydropower Design Institute, and the Water Design Institute for the assessment of social aspects of the Project. The three consultants conducted a socio-economic survey, screened the project impacts and carried out resettlement planning. Resettlement planning work was started in September 2006. A draft Resettlement Action Plan (RAP) was completed in January 2007, and the final RAP was provided to the Bank in December 2007. The RAP was slightly revised in February 2008 to reflect comments from the Bank’s safeguards review.

B. Socio-economic Survey

2. The socio-economic survey covered a sample of 54 families to be relocated and 173 families who will be affected by land acquisition in project-affected villages. The survey included a sample household questionnaire, village meetings in all impacted villages, focus groups discussions with women, the elderly and the poor as well as individual interviews, including interviews of local leaders and villager representatives. Relevant staff at provincial, county and township levels, as well as JPMO staff, were involved in the survey. The survey, covering 227 sampled households, confirmed that there is no ethnic minority community/group living in the project area. Therefore, the Project does not trigger the Bank’s OP 4.10 on Indigenous People, but triggers OP 4.12 on Involuntary Resettlement.

3. Gender issues: The social survey found that women accounted for approximately 50 percent of the population, and that there are no special gender issues in the project area.

4. Vulnerable people: The social survey found that about 2 percent of households are vulnerable because of age, illness, or disability. Special measures will be explored to assist in the restoration of their households and livelihood.

5. Fishery impacts: The survey indicated that the Project would have both adverse and positive impacts on fishery. Fish resource is likely to decrease downstream of the dam, while the large water area upstream of the dam will create an opportunity for fisheries. To mitigate the potential negative downstream impacts, measures such as building a fish passage are to be taken.

C. Resettlement Impacts

6. Resettlement planning was carried out for the following project components: Shihutang Complex (including powerhouse, ship lock, sluice gates and dam), flood protection works and reservoir inundation. In the process of project planning and design, measures were taken to

61 minimize house demolition and land acquisition and other resettlement impacts. The construction of the flood protection dikes will greatly reduce the impact of inundation. The Project will affect some 53 villages and one state-owned farm in Taihe County. Permanent land acquisition of collective lands is estimated at about 9,222 mu (615 ha), including 2,910 mu (194 ha) farmland, while the area of temporary lands is about 4,954 mu (330 ha) including 1,180 mu (78 ha) farmland. The Project will require the relocation of about 597 people in 169 households. Four small enterprises and some infrastructure will be affected. The socio-economic survey also confirmed that there are no ethnic minority communities in the project area.

D. Resettlement Policies

7. The RAP policies and entitlements are based on national, provincial and municipal regulations, as well as requirements in the Bank’s OP 4.12. The following key considerations and activities were conducted in project planning and design and in RAP preparation:

Optimizing the normal pool level to minimize losses due to inundation. Minimizing the extent of land acquisition and resettlement by optimizing project design and providing flood protection works. Surveying socio-economic baseline conditions, and identifying all displaced persons (DP) in households, enterprises and others. Entitling all DPs, including those who have no household registration, business licenses or other legal documentation, to compensation or other forms of resettlement assistance so that their incomes and living standards can be improved or at least restored. Determining compensation for land, structures, and other fixed assets at replacement cost, and submitting the option of compensation either in cash or in kind. Consulting with DPs on arrangements for compensation and assistance. Establishing a mechanism to address complaints and grievances for the DPs, including discussions, negotiations, arbitration, and legal proceedings. Arranging supervision and monitoring to ensure the RAP compliance and to address other issues that may arise during RAP implementation.

8. Land compensation has been calculated in accordance with Chinese laws and regulations, and in compliance with the Bank’s replacement cost criteria. In consultations, the collective owners of the land have accepted the rates of compensation as reasonable. Compensation for affected structures was determined for various categories at replacement cost. Compensation for other fixed assets and transitional supports to meet relocation costs were also defined in the RAP. Compensation for temporary land use during construction has been included in the budget for civil works.

E. Resettlement and livelihood rehabilitation

9. The resettlement and rehabilitation strategies and action programs were formulated based on technical investigations in the field and through a consultation process with the affected villages. They are summarized as follows:

62 10. Livelihood development: The Project will permanently acquire about 2,9 10 mu (1 94 ha) offarmland from 53 villages, which will result in an approximate 6 percent decrease ofland holdings in the affected villages. Measures such as land redistribution, cash Compensation, and land improvement were explored following consultation with the affected villagers. About 1, 180 mu (78 ha) of farmland will be used temporarily and returned to the villagers after restoration by the civil works contractors under close supervision. Further, the RAP determined that advance compensation is to be paid and monitored according to compensation rates defined in the RAP to ensure full income restoration ofthe people affected. These measures will be implemented, monitored and evaluated by the resettlement management system, including external monitoring.

1 1. Household relocation: About 169 affected households comprising about 597 persons will be relocated. 95 ofthese households will build their new houses in their current villages and 74 households will be moved into newly constructed villages, after receiving compensation, including the replacement cost for their original houses, movement subsidies and resettlement allowance. During the house restoration process, the local government will provide assistance in addition to specific investment for the planned infrastructure within these villages.

12. Enterprises restoration: The Project will affect four small enterprises. These do not need to be relocated and will be able to reopen for business in their current locations. The Project will provide compensation for loss ofassets and cost ofrestoration as well as a transitional subsidy for loss of wages or profits during restoration. The employment ofthe workers will not be affected.

13. Infrastructure restoration: The Project may inundate or demolish some local infrastructures and public facilities in the vicinity ofthe reservoir and at the dam site. The reconstruction costs ofthe affected infrastructures and facilities will be fully compensated to the respective owners, who will be responsible for the reconstruction or restoration ofthe affected infrastructures. The compensation costs for the restoration have been estimated and included in the project budget.

14. Health issues: The RAP includes an environmental protection plan in the project resettlement areas, covering health-related construction measures, to educate the resettlers about how to protect themselves and their environment.

15. Linkage project: As a linkage project involving minor land acquisition, the 18km transmission line from the powerhouse to the local grid will be planned and built by the power grid authority. Accordingly, it will be covered by the project supervision and monitoring to ensure that its resettlement implementation complies with the requirements ofthe Bank policy.

F. Resettlement Budget and Funding

16. The RAP contains a resettlement budget and funding plan developed on the basis of the inventory and compensation rates. The total resettlement budget is estimated at approximately RMB 222 million, which includes land compensation and any contingencies. The resettlement cost will be financed by the counterpart funds.

63 G. Resettlement Implementation Arrangements

17. As a leading resettlement management authority, the Jiangxi Provincial Resettlement Office has reviewed and approved the TOR for the project resettlement planning. The RAP is subject to approval by the provincial government after the NDRC’s approval ofthe FSR, and before the commencement of the resettlement actions.

18. Organizational management: The JPMO and Taihe County will set up resettlement offices as outlined in the RAP. The staff of the offices will be trained to develop management capacity. The RAP sets out training and resource requirements for these offices. The JPMO will coordinate implementation of the RAP by the county government via its resettlement office. The PMPO will facilitate the coordination with the local government regarding the resettlement when needed.

19. Resettlement monitoring: Internal and external monitoring mechanisms for RAP implementation will be set up prior to project implementation. Internal monitoring, to be conducted by the JPMO resettlement office and county resettlement office, will focus primarily on physical progress. An external monitoring agency will be engaged to report on the process of resettlement every six months. Apart from physical progress, external monitoring reports will assess household relocation and livelihood restoration as well as transitional measures for affected enterprises, schools and others. The RAP describes monitoring purposes, responsibilities, indicators, methodology, procedures and reporting requirements.

20. Resettlement implementation schedule: The resettlement implementation is scheduled to begin in mid 2008 and be completed by 20 10.

H. Consultation and Disclosure

2 1. The RAP was based on extensive consultation with stakeholders, including diverse levels of government and village leaders. The affected households, enterprises and schools were identified through the census and inventory. Project information was provided to the affected people via various channels such as newspaper, TV, posters and public meetings. The socio- economic survey, involving about 227 households, provided baseline information and migration patterns, etc. Meetings were held between local authorities and JPMO staff on resettlement policies and mitigation of negative impacts. Focus group discussion and extensive key informant interviews were conducted with local government officials and the affected villages to finalize compensation rates, relocation arrangements and livelihood restoration measures. The measures ensure that the DPs participate in the resettlement planning process, particularly in the census, inventory and the formulation of the relocation and rehabilitation programs. The results of these consultations, especially on people’s needs and concerns, have been reflected in the RAP, which has been disclosed in the Bank’s Infoshop and the county library in early January 2008, with a newspaper announcement in Jiangxi Province. The revised RAP received during the appraisal was re-disclosed locally and in Infoshop in late February 2008.

64 11. ENVIRONMENTAL SAFEGUARDS

A. Introduction

22. The Project is classified as Category A due to the magnitude of the issues involved, the coverage area, and the nature of the proposed investments. The EIA was prepared by the Second Harbor Consultants Co. Ltd of CCCC, a Class A environmental impact assessment consultant certified by the SEPA. The first draft EIA report was developed in May 2007, and reviewed and commented on by the Bank task team. It was also reviewed by the Environmental Protection Office of MOT and a national environmental expert panel (invited from the pool of SEPA EIA reviewing experts) in July 2007. Comments have been incorporated into the report revision and the final EIA report was approved by SEPA in January 2008. The English version of the following environmental assessment documents were submitted to the Bank in November 2007: Environmental Impact Assessment Report Environmental Management Plan for Flood Protection Areas Environmental Management Plan for NavigatiordHydro Complex EA Executive Summary

23. The preparation of EA documents followed relevant national laws, regulations, guidelines and standards applicable to the Project as well as ten Bank safeguards policies. Based on screening, five Bank safeguards policies are triggered: (1) OP4.0 1 Environmental Assessment; (2) OP4.04 Natural Habitats; (3) OP4.12 Involuntary Resettlement; (4) OP4.37 Dam Safety; (5) OP4.11 Physical Cultural Resources.

B. Baseline Environmental Conditions

24. Climate. The Gan River basin is located in the center of Jiangxi Province, southeast China. The project area has a subtropical humid climate, influenced by the east Asia monsoon. The annual precipitation is 1,300 -1,800 mm, with 41 -5 1 percent falling from April to June. The multi-yearly average temperature is 17.2-19.3'C.

25. Hydrology. The Gan River is the largest river of the Poyang Lake system. The length is 780km, with a total catchment area of about 80,948 km2. The project site is located in the middle reaches of the Gan River, with an upstream catchment area of about 43,770 km2. The multi-year average flow of the dam site is 1,150 m3/s(max. 153,000 m3/s, min. 47.9 m3/s), There are three upstream tributaries in the scope of the reservoir: Shushui, Yunting and Guanyuan rivers, with catchment areas of 1,305 km2, 763 km2 and 558 km2respectively.

26. Ecology. The project area is a mainly flat plain and low hilly area, with secondary and planted vegetation. A detailed ecological survey has been conducted by analyzing drawings, statistical books, topographic maps and satellite remote sensing maps, and consulting with relevant authorities. There are no national-level protected plant species, while 1 1 provincial- level protected plant species are scattered over the region. A detailed ecological survey showed that there are 2 15 old trees, mostly in a small, county-level, nature reserve by the river banks. No protected animal or fish species have been identified in the project-impacted area. Studies from several decades ago reported the presence of three fish spawning sites between the proposed dam site and the existing Wan'an Dam upstream. The fish are common species of

65 herring, grass carp, silver carp, bighead fish etc. These are often referred as the Four Major Farm Fish Species. The presence of several protected and migratory fish species (Acipenser dabryanus, Psephurus gladius, Myxocyprinus asiaticus, Anquilama japonica J etas,Coilia ectenes Jets.) was recorded in the 1980~~but they have since disappeared. Overall, the fish population in the area has greatly declined.

27. Cultural relics. A cultural relics survey has been conducted by Jiangxi Provincial Cultural Heritage and Archeology Institute for the dam site and the reservoir vicinity. Three classified cultural relics sites (one national, one provincial and one county level protection site) have been identified, but they are outside the impact scope of the Project. There are other two unclassified sites (one old ferry site and one old town site) in the impact area. Though these two sites are not considered significant (there is no physical evidence on the site, just local memory and records), further refinement of dike alignment during the preliminary design stage has avoided inundation of these two sites.

28. Water quality. Baseline survey indicated fairly good water quality in the Gan River, which is in compliance with Class I1- 111 standards. There are two water intakes at 20 km and 25.5 km upstream of the dam site, within the water backup scope of the reservoir.

29. Water Basin Plan. According to the Gan River Water Basin Plan, two cascade development options are recommended, with 8 dams and 10 dams respectively. Both options have the same six-cascade-dam development plan downstream of Ganzhou City. The existing Wan’an Dam, completed in 1993, is about 82km upstream of the Shihutang site. Two other dams (Taihe Dam 41km upstream and Xiajiang Dam 90km downstream) are in the early planning stage.

30. Socio-economic situation. The project site is located in Ji’an city of Jiangxi Province. Without flood control measures, the land inundation area will cover 5 townships and part of Taihe County, with a total area of about 78.5km2 (including 4,580 ha farmland) and resettlement of about 53,700 people. With the flood, protection works, the land inundation area will be reduced to 6.15 km2,and resettlement will be reduced to about 597 people.

C. Main Environmental Impacts and Mitigation Measures

3 1. The EIA report includes comprehensive impact assessment and develops the mitigation measures necessary to avoid, minimize, mitigate and compensate the identified adverse impacts. The adverse environmental and social impacts will be scaled back to an acceptable level provided that the mitigation measures are adequately implemented. The impacts and mitigation measures include:

Planning Stage

32. Land acquisition and resettlement. To minimize the inundation and resettlement area, flood protection dikes have been designed for 5 areas. This will reduce inundation of land from 78.5 km2to 6.15 km2,limited to the strip of land along the existing river bed. The resettlement

66 ofpeople will be reduced from about 53,700 to 597. A RAP has been developed in accordance with OP4.12. Details are in the Social Safeguards section ofthis Annex.

33. Safety of Dams. The design was conducted by a consortium ofqualified institutes to ensure that adequate safety measures are integrated into the project design. An independent three-experts DSP was established to review the investigation, design, and construction of the dam and the start ofoperations. Panelist qualifications have been confirmed by the Bank. A safety review ofthe existing Wan’an Dam upstream ofthe proposed project has been conducted by the DSP, with the conclusion that the Wan’an Dam operates under safe conditions. Safety assurance plans, as required in the Bank’s OP4.37, have been developed and will be adopted in the project implementation.

Construction Stage

34. Negative impacts during construction include dust, noise, land acquisition and resettlement, damage ofsurface vegetation, soil erosion and waste material disposal, construction wastewater, traffic impact, social disturbance and safety, etc.

35. Social disturbance. Construction vehicles and material hauling will have an impact on local road traffic and disturb the daily lives oflocal people. There will also be a short non- navigation period due to dam construction, but this will be only a temporary impact and will cease after the completion ofthe project. The impact will be mitigated by selecting an access road that avoids residential areas, well planned traffic management measures with dedicated staff and clear signage. Coordination with the navigation channel management authority will ensure safe navigation during construction.

36. Surface water. There will be a temporary impact on the water quality of the Gan River due to earth excavation and filling, wastewater from the construction site and material processing and camp sites, and wastewater from construction barges. Cofferdams will be built in two stages, and water flow will not be diverted away from the existing river course. Wastewater during construction will be mitigated through establishment ofwastewater settling, oil separation facility and installation ofan integrated sewage treatment system. Wastewater cannot be directly discharged into the Gan River.

37. Air pollution. Construction activities will cause the temporary impact ofairborne dust. Mitigation measures include frequent water spraying on the construction site and access road to suppress dust; covering oftrucks transporting bulk materials and timely site clean-up after construction; dust control facility for material processing and mixing tower; personal protection equipment (e.g. mask) will be provided to workers as needed.

38. Noise. Project construction will have a temporary noise impact on local communities. Main mitigation measures will include the use oflow noise equipment and proper maintenance; installation of noise reduction facilities for material processing, air compressor, chiller system; careful scheduling ofconstruction activities near sensitive sites; speed limits and signs prohibiting the use of vehicle horns will be installed for access road sections near four villages

67 and one school; restriction ofnight-time material hauling for roads nearby residential areas (30m); provision ofpersonal protection facility to relevant workers.

39. Ecological environment. The project construction will cause the loss ofsome surface vegetation along the river banks. Since there is no rare or endangered species in the project area and no valuable natural habitat will be affected, the project will not have a destructive impact on plant resources and biodiversity. There are about 200 old trees in a small Zhujiacun Nature Reserve but this is outside the scope ofconstruction activities, so no impact upon the trees is expected. There are 11 provincial-level protected plant species scattered over the project region, but again these are not on the project site. Earth excavation will create a significant amount of suspended solid particles and have a temporary impact on benthonic organism. The formation of the reservoir will have very little impact on fish species. The fish species in the Gan River are all common species which capable ofadapting to new segregated habitats. The spawning sites are all 20km upstream and 90km downstream ofthe dam site, therefore there will be no impact on them by construction activities. The mitigation measures mainly include environmental protection education to workers; inspection and supervision ofdedicated staff on old trees and protected plants identification and protection; relocation ofprotected old trees as necessary and plantation ofnew trees along the roadside.

40. Soil erosion. A temporary retaining wall will be constructed to prevent earth and stone falling into the water body. A wastewater collection and interception ditch will be dug in the material processing area. Spoil disposal sites will have proper drainage, retaining structure and timely leveling and reclamation.

41. Cultural heritage. No impact is expected on the three classified heritage sites due to their distance from project activities. Dike alignments were carefully chosen to avoid the other two unclassified sites. Chance-find procedures will be put in place as required by national regulations and the Bank policy.

42. Public health. The large workforce will increase the risk ofintroduction of new and/or infectious diseases. Mitigation measures will include regular hygiene inspection ofliving/office areas, drinking water resources, dinner rooms, solid waste collection sites and toilets; education to workers on health (including local epidemic, HIV/AIDS etc.); annual health inspection of workers; vaccination for workers; and on-site storage ofmedicines for common infectious diseases such as diarrhea, malaria, TB and virus hepatitis.

Operation Stage

43. River ecology. The formation ofthe reservoir will increase habitats for fish species that prefer wide open water. The sedimentation effect in the reservoir will lead to an increase of benthonic organisms downstream, and increase the fish population living on benthonic organisms. The Project will possibly lead to a change in spawning sites. However, since the Four Major Farm Fish Species spawning time coincides with high flood flow during April-July when the Shihutang Dam spillways will be open to keep the river flow to nearly natural status, this will reduce the adverse impact on fish spawning. However, the dam will segregate habitats and block the migration ofcertain fish species (the Four Major Farm Fish Species are semi-

68 migratory species). Mitigation measures include building a fish channel; establishing a fish breeding and release center; establishing an artificial “fish nest” by planting 140 ha water plant in three shallow areas; continuous monitoring of fish species, spawn and fish quantities, and habitats for two spawning sites; and monitoring the effects on the breeding centre. With these measures, the impacts on river ecology will be not only properly mitigated, but also significantly enhanced.

44. Hydrology. The Shihutang Dam will increase navigation capacity upstream and maintain current navigation capacity downstream. Due to its weak flow regulation capacity (only daily regulation), the average annual, monthly and daily flow after dam construction will remain unchanged. The day-cycle flow will be slightly modified. The peak flow will be slightly reduced and the low flow increased. Water release will not have an impact on water use and environmental demand downstream. With coordination and agreement with the Wan’an Dam, a minimum water release sufficient for normal navigation, water use and environmental demand in Shihutang reservoir has been secured.

45. Water quality. It has been concluded that, after construction of the Shihutang Dam, water quality lOOOm upstream of water intake facilities will still comply with Class I1 standard. Eutrophication is not expected. The potential impact comes from sewage from dam administration buildings, wastewater from ships, and new industrial developments in the reservoir area.

46. Solid waste. Solid waste during operation mainly comes from administration buildings and ships. This will be mitigated by installation of a solid waste collection facility and regular transportation will be organized to the landfill for final disposal.

47. Noise. Due to the distance between the dam site and nearby village (more than 400m), there will be no noise impact from the dadhydro complex. Signs prohibiting the use of vehicle horns will be installed both upstream and downstream of the ship lock to avoid noise impact.

48. Soil erosion and bank safety. There will be routine maintenance of bank protection structures and side slope plantation to minimize soil erosion. Regular monitoring of bank stability will be conducted for risk identification and timely remediation.

49. Environmental risk. The main risk during operation is dam safety and oilhazardous material spills from ships. Mitigation measures include: development of dam Operation and Maintenance Plan and Emergency Preparedness Plan and training and implementation of Preparedness Plan for Inland Waterway Accidents of Ji ’an City.

50. Socio-economy. The implementation of the Project will promote development of waterway navigation which is an environmentally-friendly transportation alternative; provide renewable energy; speed up economic development of poor areas in Jiangxi Province; increase flood control standard for five flood protection areas from 1 in 2-5 years to 1 in 10-20 years capacity.

69 5 1. Cumulative impacts. A Strategic Environmental Assessment was developed in 2005 for Jiangxi Inland Waterway Development Plan, which addressed the cumulative environmental impacts. Based on this report, the cumulative impacts from cascade dam development were studied in the project EIA report, and it is concluded that the cumulative effects of multiple- phase construction are significant. The negative impacts are mainly on aquatic life, especially on migratory fishes, semi-migratory fishes and spawning sites. Multiple-phase construction will cause floating and semi-floating spawn to flow into static waters too early during drifting and hatching process, thus affecting their growth. Since the cascade dam development is mainly to upgrade an existing navigation channel, concerns about an adequate environmental flow will not be an issue. The positive impacts ofthe cascade dams are promoting the economic development ofthe Gan River basin, especially poor counties along the river. The Project will bolster the capacity to manage cumulative impacts at watershed level through a specific training under the TA component ofthe Project.

52. Linkage projects. There are two projects directly linked to the Shihutang Project. These are the existing upstream Wan’an Dam and the 18km transmission line from the powerhouse to the grid which will be constructed by local power authority separately at the later stage of Shihutang Project. For the existing Wan’an Dam, the DSP has already reviewed the dam safety situation and concluded that the Wan’an Dam operates under safe conditions. During the implementation ofthe Shihutang Project, the DSP will further review the report ofthe safety inspection to be conducted by the dam safety agency ofthe Chinese Government during the period 20 10-2015. For the 18 km transmission line, as the Chinese requirements are broadly comparable to the Bank Policy requirements, the task team will carry out a due diligence exercise on the EIA ofthe transmission line and their compliance with the Chinese regulations. The JPMO will make available a copy of EIA for the Bank review. Given the low sensitivity of the project area, the transmission line is not expected to raise any significant environmental or social issues.

D. Alternative Analysis

53. Planning stage. The Gan River water basin development planning was initiated in the 1950s and approved in 1990. More than five cascade dam development options were considered. Option I(8 dams) and Option V (10 dams) were recommended. For both options, the lowest 6 dams (including Shihutang) are the same.

54. Without-project. The “without-project” scenario was considered during EA preparation. From an environmental perspective, construction ofthe Shihutang Complex will have an ecological and social impact, but this is considered manageable. From the macro perspective, the Project will promote IWT which is more environmentally friendly than other modes, and improve economic growth ofpoor counties along the river. It will also provide cleaner renewable energy which, otherwise, would be generated from coal-fired power plants. The environmental and social impact of the Project can be contained at an acceptable level with adequate implementation ofEMP and RAP.

55. Project design stage. During the project feasibility and design stage, alternatives were considered for alignment offlood protection dikes, dam location and layout, and normal pool

70 level. A comprehensive comparison was conducted covering environmental, social, technical and financial factors, and final selection was based on overall optimum consideration.

Zhuiiacun Nature Reserve. Original flood protection dike cuts through the core zone and buffer zone ofthe small Zhujiacun Nature Reserve (about 200 old camphor trees). The dike alignment was optimized to avoid the reserve during the EA preparation. Dam location. Two dam sites were considered: one is Shihutang (upper location) and one is Fangzhou (lower location, about 6km downside). The Shihutang site was selected due to less land acquisition and resettlement, smaller inundation area, less eartWstone works, shorter dikes, fewer old trees to be protected, and better geological conditions. Dam layout. Three alternatives were considered: 1) ship lock to the left and powerhouse to the right; 2) ship lock to the right and powerhouse to the left; 3) ship lock and powerhouse on the right. The first alternative was selected due to smooth connection with the natural channel, slightly less eartWstone works, less spoil disposal and soil erosion, and easier accommodation for a second future lock. Normal pool level. Four different normal reservoir pool levels were considered during FS and EA stage: 56.0m, 56.2 my56.5m and 56.8m. After detailed comparison, the 56.5m level was selected due to adequacy for Grade I11 navigation channel standard, and relatively less land inundation and people resettlement. Ship lock confiwration. Three ship lock dimensional configurations were considered. All three have a similar environmental impact. The smallest size capable of meeting the targeted objectives was selected.

E. Environmental Management Plan

56. Two stand-alone Environmental Management Plans were developed, one for the dam site and one for flood protection areas. The two EMPs detailed the environmental management organization and responsibilities, mitigation measures, capacity training plan, monitoring plan, and budget estimates for EMP implementation. The EMPs will be incorporated into bidding documents and contracts to ensure effective implementation.

57. The project construction will be directly managed by the JPMO. An environmental management unit will be established in the JPMO with dedicated environmental staff. Qualified environmental staff will be assigned to contractors and supervision engineer teams to ensure effective EMP implementation.

58. A two-tier monitoring program has been developed for this Project: daily and regular monitoring to be carried out by contractors and supervision engineers, and periodical compliance monitoring by professional monitoring stations.

F. Public Consultation and Information Disclosure

59. Two rounds of public consultation were conducted. The first round was conducted in October 2006 during the EA preparation stage, which included seventeen public meetings and distribution ofquestionnaires among project-affected people, local village committees, township governments, and Taihe county environmental protection, water resource, forestry and transport

71 agencies. A total of 132 people were consulted. The concerns raised related to adequate resettlement compensation and life restoration, recruitment of local labor, flood protection works, less land occupation, water-logging concerns, farmland protection, possible traffic over the dam crest. All these concerns were addressed in the RAP and EINEMPs.

60. The second round of public consultation was conducted in May 2007 after the draft EIA reports had been prepared, to explain the results of the impacts assessment, mitigation measures and environmental management plan. Fourteen public meetings were organized among the project-affected villages and relevant local governments, with 156 attending people. A total of 190 questionnaires were collected. The main concerns included the desire to recruit local labor, the suggestion that Pingshang village’s Zuci building be protected during resettlement, adequate and timely resettlement compensation, engineering quality control, early start of construction, protection of farmland, dam-top transportation etc. These were addressed in the EINRAP, and reflected in the project design and implementation.

61. Disclosure. The first round of information disclosure was conducted along with the first round of consultation via the internet on April 10, 2007. Brief project information and potential environmental issues were presented. After the draft EIA had been prepared, a simple version of the EIA report was made available on the internet on June 12, 2007. The full EIA report was disclosed in the Taihe County Government Shihutang Project Office with an announcement published in the Jinggangshan Daily (the largest local newspaper in project area) on October 16, 2007. In addition, simplified EIA reports were made available in Wanhe, Tangzhou, Yanxi and Mashi county government offices and Wushan Farm office. The EA documents were also disclosed in the Bank’s Infoshop on January 3,2008.

111. SAFETY OF DAMS

62. The Project includes the construction of a 25m high dam which is an integral infrastructure consisting of a powerhouse, ship lock, sluice gates and dam sections with a total length of about 93 1 meters. The dam forms a run-off type of reservoir with normal pool storage of about 166.8 million cubic meters. The Bank’s OP4.37-Safety of Dams is triggered due to the height of the dam. In addition, the Project is located about 82km downstream of the existing Wan’an Dam, which is a 46m high dam with normal pool storage of 2.22 billion cubic meters. The safety situation of the Wan’an Dam will substantially affect the normal operation of the Shihutang Dam. Therefore, a dam safety assessment of the existing dam is required according to OP4.37.

63. An independent dam safety panel (DSP), consisting of three experts, has been established to assist the JPMO in ensuring that the Project complies with requirements of OP 4.37. For the Shihutang Dam, the DSP will (a) review and comment on the investigation, design, and construction of the dam and the start of operations; (b) review and comment on the four safety- related plans required in the OP 4.37 and prepared by the JPMO; (c) comment on prequalification of bidders at tendering stage. For the upstream Wan’an Dam, the DSP has conducted an inspection and review on the safe status of the dam during the appraisal of the Project. The review concluded that the Wan’an Dam operates under safe conditions. During the implementation of the Shihutang Project, the DSP will again review all related reports of the

72 safety inspection to be conducted by the dam safety agency of the Borrower, and will conduct site visits if necessary.

64. The JPMO will prepare and implement the following four detailed plans according to the timing and requirements in OP 4.37: (a) Plan for Construction Supervision and Quality Assurance; (b) Instrumentation Plan; (c) Operation and Maintenance (O&M) Plan; and (d) Emergency Preparedness Plan (EPP).

73 Annex 11: Project Preparation and Supervision CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

Planned Actual ~~~ PCN review March 23,2007 March 23,2007 Initial PID to PIC April 27,2007 May 7,2007 Initial ISDS to PIC May 25,2007 May 15,2007 Appraisal January 24,2008 February 13,2008 Negotiations July 24,2008 July 30,2008 BoardRVP approval September 25,2008 Planned date of effectiveness January 30,2009 Planned closing date June 30,2014

Key institutions responsible for preparation of the Project:

JANNJPMO is responsible for preparation of the Project, assisted by the following design institutes and firms: 0 China Pearl River Water Resources Planning, Designing & Surveying Co., Ltd. CCCC-China Water Transportation Consultants Co., Ltd. Sichuan Communications Surveying & Designing Institute 0 Jiangxi Water Conservancy Design Institute 0 Jiangxi Provincial Navigation Surveying & Designing Institute Hubei Water Design Institute CCCC-No.2 Navigation Engineering Survey & Design Institute

Bank staff and consultants who worked on the Project included:

Name Title Unit Wenlai Zhang Transport Specialist, TTL EASCS John Scales Senior Transport Specialist EASCS Syed I.Ahmed Lead Counsel LEGES Mei Wang Senior Counsel LEGES Han-Kang Yen Financial and Economic Specialist EASTE Jianjun Guo Procurement Specialist EAPCO Yi Geng Financial Management Specialist EAPCO Junxue Chu Senior Finance Officer LOAFC Haiyan Wang Finance Officer LOADM Xuan Peng Team Assistant EACCF Xiaofeng Li Senior Program Assistant EACCF Peishen Wang Senior Environment Specialist EASCS Juan Quintero Senior Environment Specialist EASRE Songling Yao Social Specialist EASCS Chaohua Zhang Senior Social Specialist EASSO Ximing Zhang Water Resources Specialist EASCS Alessandro Palmieri Lead Dam Specialist OPCQC

74 Paul Amos Transport Adviser, Consultant EASCS Kek Choo Chung Waterway Specialist, Consultant EASCS Jiang Dai Hydropower Specialist, Consultant EASCS Jianming Zhao Geotechnical Specialist, Consultant EASCS Hongkun Yang Hydro-engineering Specialist, EASCS Consultant Jianping Zhao Lead Energy Specialist, EASCS Quality Reviewer Marc Juhel Lead Transport Specialist, ETWTR Peer Reviewer Jose Barber0 Senior Transport Specialist, LCSTR Peer Reviewer

Bank funds expended to date on project preparation: Bank resources: US$246,000 Trust funds: Nil Total: US$ 246,000

Estimated Approval and Supervision costs: Remaining costs to approval: US$ 54,000 Estimated annual supervision cost: US$ 65,000

75 Annex 12: Documents in the Project File CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

Technical Studies

1. Report of Preliminary Design in Chinese 2. Summary Interim Report of Preliminary Design in Chinese and English 3, Interim Report of Preliminary Design in Chinese 4. Task document of the hydraulic model test at preliminary design stage (Sep. 2007) in Chinese 5. Review Comments on FSR by MOT in Chinese, October 3 1,2007 6. Inception Drawings of Preliminary Design for Flood Protection Works in Chinese 7. Revised Feasibility Study Reports in Chinese 8. Feasibility Study Reports in Chinese 9. Pre-feasibility Study in Chinese, May 2006 10. Supplementary Analysis on Water-level Connections with Other Dams in Chinese

Safeguards

1 1. Draft and final RAPSin Chinese and English 12. Draft and final EA, EMPs, EIA and EA Summary in Chinese and English 13. Preliminary Opinion on Distribution of Cultural Relics On the Inundated Area in Chinese 14. Culture Relics Survey Report in Chinese 15, Special Report on Protected Wild Plant in Chinese 16. Comments on the Special Report on Protected Wild Plant in Chinese 17. Dam safety check results of Wan’an Dam in Chinese 18. Plan for Construction Supervision and Quality Assurance (final) 19. Instrumentation Plan (final)

Procurement

20. Draft and updated procurement plans in Chinese and English

Financial

2 1. Financing Scheme for the Project in Chinese 22. Statistics e-book of Jiangxi Province 2006 in Chinese 23. Total transport revenue and expenditure of JPCD (2006- 20 15) in Chinese 24. Financial guarantee letter for the Project in Chinese 25. Financial Management Manual (final)

Others

26. Jiangxi Gan River Water Basin Plan (1 990) in Chinese 27. Jiangxi Inland Waterway Navigation Development Plan (2006) in Chinese and English

76 28. Agreement on Minimum Water Release of Wan’an Complex 29. The Program of Mountain-River-Lake in Chinese 30. NDRC’s Regulations on Electricity Generating by Renewable Energy in Chinese 3 1. Letter of Intention on Power Sale Price in Chinese by JPDRC, May 24,2007 32. Brief introductions on Gan River navigation development, channel maintenance management, waterway emergency rescue, and navigational information system in Chinese 33. Navigation Standard of Inland Waterway in Chinese 34. Introduction of Function and Responsibility of JANA and its Organization Chart in Chinese

77 Annex 13: Statement of Loans and Credits CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd PO85376 2008 CN-Migrant Skills Dev. and Employment 50.00 0.00 0.00 0.00 0.00 50.00 0.00 0 00 PO87224 2008 CN- Urban Environment 84.00 0.00 0.00 0.00 0.00 84.00 0.00 0 00 PO84874 2008 CN- Energy Efficiency Financing 200.00 0.00 0.00 0.00 0.00 200.00 0.00 0 00 PO91949 2008 CN-Gansu Cultural & Natural Heritage 38.40 0.00 0.00 0.00 0.00 38.40 0.00 0 00 PO92631 2008 CN-Xi'an Sustainable Urban Transport 150.00 0.00 0.00 0.00 0.00 150.00 0.00 0 00 PO93882 2008 CN-Shandong Flue Gas Desulfurization 50.00 0.00 0.00 0.00 0.00 50.00 0.00 0 00 PO84437 2008 CN-Rural Health 50.00 0.00 0.00 0.00 0.00 50.00 0.00 0 00 PO93963 2008 CN- Transport 100.00 0.00 0.00 0.00 0.00 99.75 0.00 0 00 PO96925 2008 CN- Bengbu Integrated Environment 100.00 0.00 0.00 0.00 0.00 100.00 0.00 0 00 Improv PO99224 2008 CN-Liaoning Med. Cities (LMC) 111 191.00 0.00 0.00 0.00 0.00 191.00 0.00 0 00 PO99112 2008 CN-Anhui Highway Rehab & 200.00 0.00 0.00 0.00 0.00 200.00 0.00 0 00 Improvement PO99062 2008 CN-ShiZheng Railway 300.00 0.00 0.00 0.00 0.00 300.00 0.00 0 00 PO75613 2007 CN-Shaanxi Ankang Road Development 300.00 0.00 0.00 0.00 0.00 290.00 28.70 0 00 PO77752 2007 CN-SHANDONG ENVMT 2 147.00 0.00 0.00 0.00 0.00 102.53 -34.41 0 00 PO88964 2007 CN-Guangxi Integrated Forestry Dev 100.00 0.00 0.00 0.00 0.00 60.10 -34.40 0 00 PO86515 2007 CN-3rd National Railway 200.00 0.00 0.00 0.00 0.00 200.00 32.00 0 00 PO91020 2007 CN-Fujian Highway Sector Investment 320.00 0.00 0.00 0.00 0.00 245.00 -9.00 0 00 PO92618 2007 CN-LIAONMG MED CITIES INFRAS 2 173.00 0.00 0.00 0.00 0.00 173.00 5.00 0 00 PO81776 2007 CN-GUANGDONGPRDZ 96.00 0.00 0.00 0.00 0.00 96.00 9.00 0 00 PO83322 2007 CN-SICHUAN URBAN DEV 180.00 0.00 0.00 0.00 0.00 163.40 46.40 0 00 PO95315 2007 CN-W. Region Rural Water & Sanitation 25.00 0.00 0.00 0.00 0.00 25.00 0.50 0 00 PO96285 2007 CN-MSE Finance 100.00 0.00 0.00 0.00 0.00 100.00 100.00 0 00 PO85124 2006 CN-Ecnomic Reform Implementation 20.00 0.00 0.00 0.00 0.00 17.11 6.1 1 0 00 PO84742 2006 CN-IAIL 111 200.00 0.00 0.00 0.00 0.00 53.91 -27.96 0 00 PO85333 2006 CN-5th Inland Waterways 100.00 0.00 0.00 0.00 0.00 50.81 25.81 0 00 PO86629 2006 CN-Heilongjiang Dairy IOO.00 0.00 0.00 0.00 0.00 89.08 27.58 9 58 PO93906 2006 CN-3rd Jiangxi Hwy 200.00 0.00 0.00 0.00 0.00 92.79 -42.2 1 0 00 PO96158 2006 CN-Renewable Energy II (CRESP 11) 86.33 0.00 0.00 0.00 0.00 71.09 37.48 0 00 PO99992 2006 CN-Liaoning Medium Cities 2 18.00 0.00 0.00 0.00 0.00 169.77 -13.23 0 00 Infrastructure PO81348 2006 CN-HENAN TOWNS WATER 150.00 0.00 0.00 0.00 0.00 139.63 27.13 0 00 PO81255 2006 CN-Changjianflearl River Watershed 100.00 0.00 0.00 0.00 0.00 90.55 20.55 0 00 Reha PO75732 2006 CN-SHANGHAI URBAN AF'L2 180.00 0.00 0.00 0.00 0.00 144.90 34.90 0 00 PO70519 2006 CN- Nantai Island Peri-Urban Dev 100.00 0.00 0.00 0.00 0.00 98.25 28.25 0 00 PO71094 2005 CN - Poor Rural Communities 100.00 0.00 0.00 0.00 0.00 59.24 40.54 0 00 Development PO69862 2005 CN - Agricultural Technology Transfer 100.00 0.00 0.00 0.00 0.00 68.43 37.73 0 00 PO68752 2005 CN-Inner Mongolia Highway & Trade 100.00 0.00 0.00 0.00 0.00 18.18 -21.82 0 00 Corrid PO67828 2005 CN-Renewable Energy Scale-up Program 87.00 0.00 0.00 0.00 10.00 0.93 9.93 0 00

78 PO57933 2005 CN-TAl BASIN URBAN ENVMT 61.00 0.00 0.00 0.00 0.00 20.80 12.45 0.00 PO8 1346 2005 CN-LIUZHOU ENVIRONMENT MGMT 100.00 0.00 0.00 0.00 0.00 49.58 0.88 0.00 PO75730 2005 CN-HUNAN URBAN DEV 172.00 0.00 0.00 0.00 0.00 149.50 64.50 0.00 PO86505 2005 CN- WATER & ENVMT 130.00 0.00 0.00 0.00 0.00 69.23 -8.77 0.00 PO81161 2005 CN-CHONGQMG SMALL CITIES 180.00 0.00 0.00 0.00 0.00 121.70 34.70 0.00 PO66955 2004 CN-ZHEJlANG URBAN ENVMT 133.00 0.00 0.00 0.00 0.00 80.52 48.59 0.00 PO65463 2004 CN-Jiangxi Integrated Agric. Modern. 100.00 0.00 0.00 0.00 0.00 44.54 30.03 0.00 PO69852 2004 CN- Urban Transport 200.00 0.00 0.00 0.00 1.00 42.83 43.83 2.61 PO65035 2004 CN-Gansu & Xinjiang Pastoral 66.27 0.00 0.00 0.00 0.00 9.14 3.32 0.00 Development PO77137 2004 CN-4th Inland Waterways 91.00 0.00 0.00 0.00 0.46 32.02 25.48 24.98 PO8 1749 2004 CN-Hubei Shiman Highway 200.00 0.00 0.00 0.00 1.oo 3.69 -5.31 0.00 PO73002 2004 CN-Basic Education in Western Areas 100.00 0.00 0.00 0.00 0.00 27.19 25.52 0.00 PO75728 2004 CN-GUANGDONGPRD UR ENVMT 128.00 0.00 0.00 0.00 0.64 68.38 45.62 0.00 PO40599 2003 CN- URB DEV I1 150.00 0.00 0.00 0.00 0.00 1 19.29 92.56 5.53 PO58847 2003 CN-3rd Xinjiang Hwy Project 150.00 0.00 0.00 0.00 0.00 4.58 4.58 0.00 PO767 14 2003 CN-2nd Anhui Hwy 250.00 0.00 0.00 0.00 0.00 11.16 11.16 0.00 PO70191 2003 CN-SHANGHAI URB ENVMT APLl 200.00 0.00 0.00 0.00 0.00 55.66 37.86 0.00 PO68058 2003 CN-Yixing Pumped Storage Project 145.00 0.00 0.00 0.00 0.00 36.19 30.69 0.00 PO7 1 147 2002 CN-Tuberculosis Control Project 104.00 0.00 0.00 0.00 0.00 38.61 3 1.91 0.00 PO68049 2002 CN-Hubei Hydropower Dev in Poor Areas 105.00 0.00 0.00 0.00 0.00 7.50 7.80 0.00 PO64729 2002 CN-Sustainable Forestry Development 93.90 0.00 0.00 0.00 0.00 6.08 1.08 0.00 PO56596 2001 CN- Urban Transport 100.00 0.00 0.00 0.00 0.00 26.72 26.72 0.00 PO5 1859 2001 CN- BASIN 100.00 0.00 0.00 0.00 0.00 8.48 8.48 0.00 PO64730 2000 CN-Yangtze Dike Strengthening 210.00 0.00 0.00 0.00 0.00 44.39 44.39 44.39 PO49436 2000 CN- URBAN ENVMT 200.00 0.00 0.00 0.00 29.50 24.40 53.90 -4.91 PO42 109 2000 CN- ENVIRONMENT 11 349.00 0.00 0.00 25.00 28.02 81.37 109.39 -2 1.42 PO51856 1999 CN-Accounting Reform & Development 27.40 5.60 0.00 0.00 0.00 5.23 5.02 5.07 PO42299 I999 CN-Tec Coop Credit IV 10.00 35.00 0.00 0.00 5.84 8.46 11.56 0.00 PO03507 1996 Ertan 11 Hydroelectric Project 400.00 0.00 0.00 0.00 0.15 33.33 5.78 0.00 Total: 9,25 1.30 40.60 0.00 25.00 76.61 5,363.48 1,138.24 65.83

CHINA STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars

Com m itted Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. 2002 ASIMCO 0.00 IO.00 0.00 0.00 0.00 10.00 0.00 0.00 2006 ASIMCO 0.00 0.00 4.12 0.00 0.00 0.00 3.61 0.00 2005 BCCB 0.00 59.21 0.00 0.00 0.00 59.03 0.00 0.00 2003 BCIB 0.00 0.00 12.04 0.00 0.00 0.00 0.00 0.00 2006 BUFH 8.14 0.00 0.00 0.00 8.14 0.00 0.00 0.00 2005 Babei 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00

79 Babei Necktie 11.00 0.00 0.00 6.00 8.94 0.00 0.00 4.88 1999 Bank of Shanghai 0.00 21.76 0.00 0.00 0.00 21.76 0.00 0.00 2000 Bank of Shanghai 0.00 3.84 0.00 0.00 0.00 3.84 0.00 0.00 2002 Bank of Shanghai 0.00 24.61 0.00 0.00 0.00 24.67 0.00 0.00 2005 BioChina 0.00 3.70 0.00 0.00 0.00 3.13 0.00 0.00 2002 CDH China Fund 0.00 2.02 0.00 0.00 0.00 0.00 0.00 0.00 2005 CDH China I1 0.00 17.99 0.00 0.00 0.00 11.38 0.00 0.00 2006 CDH Venture 0.00 20.00 0.00 0.00 0.00 0.51 0.00 0.00 2005 CT Holdings 0.00 0.00 40.00 0.00 0.00 0.00 0.00 0.00 2004 CUNA Mutual 0.00 10.53 0.00 0.00 0.00 0.00 0.00 0.00 2006 Capital Today 0.00 25.00 0.00 0.00 0.00 0.32 0.00 0.00 2005 Changyu Group 0.00 18.07 0.00 0.00 0.00 18.07 0.00 0.00 1998 Huarong 3.36 3.20 0.00 3.13 3.36 3.20 0.00 3.13 2004 China Green Ener 20.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 2004 China Re Life 0.00 0.27 0.00 0.00 0.00 0.27 0.00 0.00 1994 China Walden Mgt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.00 2006 Chinasoft 0.00 0.00 15.00 0.00 0.00 0.00 10.00 0.00 2004 Colony China 0.00 15.3 1 0.00 0.00 0.00 9.29 0.00 0.00 2004 Colony China GP 0.00 0.84 0.00 0.00 0.00 0.49 0.00 0.00 2006 Conch 81.50 40.93 0.00 0.00 81.50 0.00 0.00 0.00 2006 Dagang Newspring 25.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2002 Darong 10.00 0.24 0.00 8.00 6.67 0.24 0.00 5.33 2006 Deqingyuan 0.00 2.85 0.00 0.00 0.00 2.85 0.00 0.00 1994 Dynamic Fund 0.00 2.2 1 0.00 0.00 0.00 2.01 0.00 0.00 2007 Epure 0.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 Fenglin 17.64 0.00 6.00 13.47 13.64 0.00 6.00 12.53 2006 Fenglin HJ MDF 0.23 0.00 0.00 3.27 0.00 0.00 0.00 0.00 2005 Five Star 0.00 0.00 7.00 0.00 0.00 0.00 0.00 0.00 2006 GDIH 50.85 0.00 0.00 0.00 50.85 0.00 0.00 0.00 2003 Great Infotech 0.00 I.73 0.00 0.00 0.00 1.03 0.00 0.00 2006 RCB 0.00 10.85 0.00 0.00 0.00 0.00 0.00 0.00 2005 HiSoft Tech 0.00 4.00 0.00 0.00 0.00 3.00 0.00 0.00 2006 HiSoft Tech 0.00 4.34 0.00 0.00 0.00 1.74 0.00 0.00 2004 IB 0.00 52.18 0.00 0.00 0.00 52.18 0.00 0.00 2004 Jiangxi Chenming 40.00 12.90 0.00 18.76 40.00 12.90 0.00 18.76 2006 Launch Tech 0.00 8.35 0.00 0.00 0.00 8.33 0.00 0.00 2001 Maanshan Carbon 5.25 2.00 0.00 0.00 5.25 2.00 0.00 0.00 2005 Maanshan Carbon 11.00 1 .oo 0.00 0.00 5.00 1 .oo 0.00 0.00 2005 Minsheng 15.75 0.00 0.00 0.00 7.00 0.00 0.00 0.00 2006 Minsheng & IB 25.09 0.00 0.00 0.00 0.00 0.00 0.00 0.00 200 I Minsheng Bank 0.00 23.50 0.00 0.00 0.00 23.50 0.00 0.00 2005 Minsheng Bank 0.00 2.80 0.00 0.00 0.00 2.79 0.00 0.00 2001 NCCB 0.00 8.94 0.00 0.00 0.00 8.82 0.00 0.00 1996 Kumho 0.00 3.81 0.00 0.00 0.00 3.81 0.00 0.00 2004 Nanjing Kumho 3 1.38 2.23 0.00 0.00 31.38 2.23 0.00 0.00 2006 Neophotonics 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.00 2001 New China Life 0.00 5.83 0.00 0.00 0.00 5.83 0.00 0.00 2005 New Hope 0.00 0.00 45.00 0.00 0.00 0.00 0.00 0.00 1995 Newbridge Inv. 0.00 0.22 0.00 0.00 0.00 0.22 0.00 0.00

80 2005 North Andre 8.00 6.74 0.00 0.00 0.00 4.25 0.00 0.00 2003 PSAM 0.00 2.01 0.00 0.00 0.00 0.00 0.00 0.00 RAK China 13.00 0.00 0.00 0.00 13.00 0.00 0.00 0.00 2006 Renaissance Sec 0.00 0.00 20.04 0.00 0.00 0.00 0.00 0.00 2006 Rongde 0.00 35.00 0.00 0.00 0.00 3 1.38 0.00 0.00 SAC HK Holding 0.00 1.60 0.00 0.00 0.00 I.oo 0.00 0.00 2003 SAIC 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2006 SBCVC 0.00 20.00 0.00 0.00 0.00 2.00 0.00 0.00 2000 SEAF SSIF 0.00 3.74 0.00 0.00 0.00 3.37 0.00 0.00 SH Keji IT 3.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2004 SHCT 38.18 0.00 0.00 28.64 29.04 0.00 0.00 21.78 2004 SIE3FI 0. I4 0.07 0.00 0.00 0.00 0.07 0.00 0.00 1998 Shanghai Krupp 19.25 0.00 0.00 36.75 19.25 0.00 0.00 36.75 2006 Shanshui Group 50.00 5.50 2.20 0.00 50.00 5.50 0.00 0.00 1999 Shanxi 12.61 0.00 0.00 0.00 12.61 0.00 0.00 0.00 SinoSpring 0.00 0.00 20.00 0.00 0.00 0.00 0.00 0.00 Stora Enso 20.83 0.00 0.00 4.17 11.00 0.00 0.00 0.00 2005 Stora Enso 29.17 0.00 0.00 20.83 0.00 0.00 0.00 0.00 2006 Stora Enso 50.00 0.00 0.00 175.00 0.00 0.00 0.00 0.00 2006 TBK 4.00 0.00 0.00 0.00 2.00 0.00 0.00 0.00 2006 VeriSilicon 0.00 1.oo 0.00 0.00 0.00 I.oo 0.00 0.00 Wanjie High-Tech 9.89 0.00 0.00 0.00 9.89 0.00 0.00 0.00 2004 Wumart 0.00 1.62 0.00 0.00 0.00 1.62 0.00 0.00 2003 XACB 0.00 17.95 0.00 0.00 0.00 0.64 0.00 0.00 2004 Xinao Gas 25.00 10.00 0.00 0.00 25.00 10.00 0.00 0.00 2006 Zhejiang Glass 50.00 24.96 0.00 18.00 0.00 0.00 0.00 0.00 2003 Zhengye- ADC 10.43 0.00 0.00 4.87 10.43 0.00 0.00 4.87 2002 Zhong Chen 0.00 4.78 0.00 0.00 0.00 4.78 0.00 0.00 2006 Zhongda-Y anjin 21.89 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Total portfolio: 733.58 577.30 181.40 340.89 470.95 371.06 29.61 108.03

Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2002 SML 0.00 0.00 0.00 0.00 2004 NCFL 0.00 0.00 0.02 0.00 2007 Xinao CTC 0.04 0.01 0.00 0.14 2004 China Green 0.00 0.00 0.01 0.00 2006 Launch Tech 0.01 0.00 0.00 0.00 2005 MS Shipping 0.00 0.01 0.00 0.00 2003 Peak Pacific 2 0.00 0.01 0.00 0.00 Total pending commitment: 0.05 0.03 0.03 0.14

81 Annex 14: Country at a Glance CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

East Lower- POVERTY and SOCIAL A6la L mlddle- evelo pment dlamo nd' China Paclflc Income > 2006 Population, mid-year (mil/ions) 13118 1900 2,276 Life expectancy GNipercapita (Atlas method, US$) 2,000 1863 2,037 GNi(Atias method, US$ billions) 2,623.6 3,539 4,635 - Average annual growth, 2000-06 Population (Sy 0.6 09 09 Laborforce (%,I 10 13 14 Most recent estimate (latest year avallable, 2000.06) Poverty (%of population below national PO verty line) Urban population (K o f to tal po pulatio n) 41 42 47 Life expectancy at birth (pars) 72 71 71 I Infant mortality (per 1000 live births) 23 26 31 Childmalnutrition (%ofchi/dmnunder5) 8 15 0 Access to imDrOVedWatersource Access to an improvedwater source (%ofpopulation) 77 79 61 Literacy (Kofpopuiation age S+) 91 91 89 Gross primary enrollment (%of school-age population) m M 10 -China M ale m m M Lowr-middle-income group Female m m M KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1986 1996 2005 2006 Economlc ratlos. GDP (US$ billions) 295.7 858.1 2,243 9 26447 Gross capital formation/GDP 38.6 40.4 43 9 446 Trade Exports of goods and servIces/GDP 118 20.1 37 3 40 1 Gross domestic savings/GDP 35.8 42.5 49 4 52 5 Gross national savings/GDP 35.9 413 510 54 1 Current account baiance/GDP -2.8 0.8 72 94 Domestic Capital Interest paymentsiGDP 0.2 0.5 01 savings fo rmatio n Total debt/GDP 8.0 150 f26 Total debt servlce/exports 8.2 8.7 30 Present value of debt/GDP 123 Present value of debt/exports 30 6 Indebtedness 1986-96 1996.06 2006 2006 2006-M (average annual gro Mh) GDP 0.1 9.0 0.4 0.7 D.6 -China GDP percapita 8.6 6.2 9.7 0.1 9.9 -Lover-middle-income grow Exports of goods and services 0.0 218 24.3 23.3 U.4

STRUCTURE of the ECONOMY

I986 1996 2005 2006 Growth of capital and GDP (Oh) (%of GDP) Agriculture 27.1 8.5 125 117 2o T Industry 44.0 47.5 47 5 48.4 Manufacturing 35.2 33.5 33 5 services 28.9 33.0 39 9 39.9

04; ~ ;::I Household final consumption expenditure 493 435 36 1 33.2 01 02 03 04 05 Og General gov't final consumption expenditure 149 140 145 14.3 -GCF -GDP Imports of goods andservices 147 80 317 32.2

1986-96 1996-06 ZOO5 2006 Growth of exports and Imports (K) (average annualgrowth) Agriculture 43 35 52 5.0 40 T Industry 05 01 n7 2.5 M anufactunng P6 02 P1 services 94 B8 05 0.3 Househo Id final consumption expenditure 09 78 56 6.3 General gov't final consumption expenditure 04 95 n6 D.9 01 02 03 04 05 M Gross capital formation 119 02 n6 0.2 -Exports -Inport8 Imports of goods and services 119 85 n4 14.3

Note 2006 data are preliminaryestimates This table was producedfrom the Development Economics LDB database 'Thediamonds showfourkey indicators inthecountry(in bold) compared withits Income-groupaverage if data are missing thediamondwll be incomplete

82 China

PRICES andGOVERNMENT FINANCE 1986 1996 2005 2006 Inflation (%) Domestic prices 1 (%change) Consumer pnces 83 18 15 implicit GDP deflator 46 64 42 36 Government finance (%of GDP, includes current grants) Current revenue 00 m5 I72 84 Current budget balance -ff7 02 24 30 Overall surplus/deficit -248 -14 -13 -07

TRADE 1986 1996 2005 2006 (US$ millions) Total exports (fob) 30,942 251048 761,999 969,073 Food 4,448 0,231 22,481 25,722 M ineral fuels, iubncants, and related matenal! 3,683 5,931 77,621 ff.776 Manufactures 9,670 P9,P3 7P.960 96,#7 Total imports (cif) 42,904 138,833 660,128 7916W Food 1625 5,672 9,388 9,997 Fuel and energy 504 6,877 63.957 89,002 Capital goods 6.781 54,763 290,628 357,x)7 Emort pnce index (2000=WO) 59 P2 104 m7 Import pnce index (2000=WO) 76 138 118 P4 Terms of trade (2000=#0) 77 113 88 87

BALANCE of PAYMENTS 1986 1996 2005 2006 Current account balance to GDP (Oh) (USS millions) Exports of goods and services 34,952 ff1678 836,888 1061.681 imports of goods and services 43,453 254,P7 7P,090 852,769 Resource balance -8,501 ff,551 P4.798 208.9P Net income -23 -P,437 x),635 11755 Net current transfers 378 2.P9 25,385 29,200 Current account balance -8,?46 7,243 60,818 249,867 Financing items (net) 6.49 24,462 46.98 -2.842 Changes in net reserves 1,727 -31705 -207,016 -247,025 1 00 01 02 03 04 05 06 Memo: Reserves including gold (US$ millions) m,7n 831427 1046,465 Conversion rate (DEC, local/US$) 35 83 8.2 8.0

EXTERNAL DEBT and RESOURCE FLOWS 1986 1996 2005 2006 /Composition of 2005 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 23,78 P8.877 281612 IBRD 965 7.66 Ill40 11415 I A 11,140 IDA 774 7579 9,741 9,997 B 9741 Total debt sewice 2,973 25.756 27,361 IBRD 66 840 1,139 1443 IDA 8 73 296 36 G Compositionof net resource flows 148 267 Official grants 155 245 332 Official creditors 1.65 4,401 844 Pnvate creditors 3,693 6,454 5,%4 Foreign direct investment (net inflows) 1,875 40,280 79 P7 Portfolio equity(ne1 inflows) 0 0 20,346 World Bank program Commitments 1,PO 1,900 1,277 0 A. IBRD E- Bilateral Disbursements 607 2,097 ID1 Iff0 B . IDA D - Other nultilsteral F. Private Pnncipai repayments 0 364 1,004 ll44 C-IMF G- Short-terr Net flows 607 1734 P7 27 ' Interest payments 75 549 430 615 Net transfers 532 1,185 -303 -588

Note This lablewas producedfrom theDevelopment Economics LDB database 9/28/07

83 Annex 15: Maps CHINA: Jiangxi Shihutang Navigation and Hydropower Complex Project

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Taihe Dam (Planned) Taihe Gan River Gan CHINA MASHI To Sandu To To Suichuan JAPAN PACIFIC OCEAN National Capital Province Boundaries International Boundaries Japan Sea of Sea East KOREA REP. OF REP. China KOREA D.P.R. OF D.P.R. JILIN Sea TAIWAN HEILONGJIANG Yellow SHANGHAI PHILIPPINES ZHEJIANG LIAONING JIANGSU FUJIAN TIANJIN Shihutang Dam HONG KONG ANHUI CHINA SHANDONG MACAO INUNDATION AREAS INUNDATION PROTECTED AREAS AREAS ELEVATED DIKES DIVERSION CHANNELS MAIN ROADS JIANGXI HEBEI GUANGDONG BEIJING BEIJING HENAN HUBEI HUNAN

IIIIII NEI MONGOL NEI SHANXI HAINAN

GUANGXI This map was produced by the Map Design Unit of The World Bank. This map was produced by the Map Design Unit of The World The boundaries, colors, denominations and any other information Bank on the part of The World shown on this map do not imply, or any Group, any judgment on the legal status of territory, endorsement or acceptance of such boundaries.

SHAANXI CHONGQING NINGXIA GUIZHOU VIETNAM IMPACT OF RESERVOIR INUNDATION IMPACT GANSU HYDROPOWER COMPLEX PROJECT MONGOLIA SICHUAN RUSSIAN FEDERATION P.D.R. LAO YUNNAN JIANGXI SHIHUTANG NAVIGATION AND NAVIGATION JIANGXI SHIHUTANG QINGHAI CHINA JIANGXI SHIHUTANG NAVIGATION AND HYDROPOWER COMPLEX PROJECT

CURRENT STATUS AND PLANNED IMPROVEMENTS ON THE GAN RIVER (GANZHOU CITY DOWNSTREAM TO HUKOU)

I Nanchang City City Wucheng Hukou City

II Xiajiang Dam (Planned) Ji’an City Zhangshu City Ganzhou City Dam (Existing) Wan’an Dam (Planned) Taihe Shihutang Dam

III LEGEND:

IV 2005 2006-2010

Navigation Grade V 2011-2015 2016-2020 VI

1 2 3 4 5 6 7 8 9 10 Segments

VII 600 500 400 300 200 100 0

Distance from Hukou City (km)

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.

PROFILE OF CASCADE PLAN ON GAN RIVER (OPTION 1: EIGHT CASCADE-DAMS)

LEGEND: Shihutang Dam

200 Future Dams Existing Dam Xiashan 158.11

150

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Distance from Hukou City (km) IBRD 35285R JUNE 2008 CHINA JIANGXI SHIHUTANG NAVIGATION AND HYDROPOWER COMPLEX PROJECT

WATER SYSTEM ON THE GAN RIVER SELECTED CITIES PROVINCE CAPITAL SHIHUTANG DAM GRADE I NAVIGATIONAL CHANNEL EXISTING EXPRESSWAYS EXISTING DAMS GRADE II NAVIGATIONAL CHANNEL EXPRESSWAYS UNDER CONSTRUCTION FUTURE DAMS NATIONAL ROADS GRADE III NAVIGATIONAL CHANNEL GAN RIVER BASIN RAILROADS PROVINCE BOUNDARIES

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QINGHAI NINGXIA AnyuanAnyuan JIANGSU GANSU SHAANXI HENAN East 25° ANHUI 25° XunwuXunwu China LongnanLongnan SHANGHAI HUBEI Sea SICHUAN ZHEJIANG DingnanDingnan QuannanQuannan Area of CHONGQING JIANGXI Map HUNAN GUIZHOU FUJIAN This map was produced by the Map Design Unit of The World Bank. The boundaries, YUNNAN TAIWAN colors, denominations and GUANGXI GUANGDONG

any other information shown PACIFIC IBRD 35284R on this map do not imply, on HONG KONG OCEAN the part of The World Bank MACAO JUNE 2008 Group, any judgment on the GUANGDONG legal status of any territory, LAO VIETNAM or any endorsement or acceptance of such P.D.R. HAINAN 114° 115° 116° boundaries. PHILIPPINES 100° 110° RUSSIAN FEDERATION CHINA

JIANGXI SHIHUTANG NAVIGATION AND Gulian HEILONGJIANG

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This map was produced by the Map Design Unit of The World Bank. 35283 IBRD DEM. REP. The boundaries, colors, denominations and any other information JUNE 2008\ HAINAN shown on this map do not imply, on the part of The World Bank THAILAND Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. PHILIPPINES

100° 110° 120° CHINA JIANGXI SHIHUTANG NAVIGATION AND HYDROPOWER COMPLEX PROJECT SHIHUTANG DAM LAYOUT

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Gan RiverG Dikes Upstream ApproachU endorsement or acceptance of such boundaries. p a s t r n e a

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