Completion Report

Project Number: 43025-013 Loan Number: 2760 October 2020

People’s Republic of China: Gansu Tianshui Urban Infrastructure Development Project

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – yuan (CNY)

At Appraisal At Project Completion (2 June 2011) (12 August 2019) CNY1.00 = $0.1544 $0.1416 $1.00 = CNY6.4780 CNY7.0624

ABBREVIATIONS

ADB – Asian Development Bank CHP – combined heat and power plant DMF – design and monitoring framework EIA – environmental impact assessment EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return GAP – gender action plan GPG – Gansu Provincial Government GTEZ – Guanzhong–Tianshui Economic Zone LAR – land acquisition and resettlement NMT – nonmotorized transport O&M – operation and maintenance PIA – project implementing agency PRC – People’s Republic of China THC – Tianshui Heating Company TMG – Tianshui Municipal Government TPMO – Tianshui project management office TUCIC – Tianshui Urban Construction and Investment Group Co. Ltd WACC – weighted average cost of capital

WEIGHTS AND MEASURES km – kilometer m – meter m2 – square meter m3 – cubic meter mu – 666.67 square meters

NOTE

In this report, “$” refers to United States dollars.

Vice-President Ahmed M. Saeed, Operations 2 Director General James P. Lynch, East Asia Department (EARD) Director Yolanda Fernandez Lommen, People’s Republic of China Resident Mission (PRCM), EARD

Team leader Xinjian Liu, Senior Project Officer (Energy), PRCM, EARD Team members Zhuoga Ciwang, Social Development Officer, PRCM, EARD Ning Li, Environment Officer, PRCM, EARD Ye Song, Senior Safeguards Officer, PRCM, EARD Fang Wang, Senior Project Officer (Financial Management), PRCM, EARD Xianyu Zhang, Associate Project Analyst, PRCM, EARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA i I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 2 A. Project Design and Formulation 2 B. Project Outputs 3 C. Project Costs and Financing 4 D. Disbursements 4 E. Project Schedule 5 F. Implementation Arrangements 5 G. Technical Assistance 6 H. Consultant Recruitment and Procurement 6 I. Gender Equality 7 J. Safeguards 7 K. Monitoring and Reporting 9 III. EVALUATION OF PERFORMANCE 9 A. Relevance 9 B. Effectiveness 10 C. Efficiency 11 D. Sustainability 11 E. Development Impact 12 F. Performance of the Borrower and the Executing Agency 13 G. Performance of the Asian Development Bank 14 H. Overall Assessment 14 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14 A. Issues and Lessons 14 B. Recommendations 15

APPENDIXES

1. Design and Monitoring Framework 16 2. Project Cost at Appraisal and Actual 19 3. Project Cost by Financier 20 4. Disbursement of ADB Loan Proceeds 22 5. Projected and Actual Implementation Schedule 23 6. Chronology of Main Events 25 7. Contract Awards of ADB Loan Proceeds 26 8. ADB-Financed Contract Packages 27 9. Gender Action Plan Evaluation 29 10. Environmental Impact Analysis 35 11. Land Acquisition and Resettlement 39 12. Status of Compliance with Loan Covenants 44

13. Economic Reevaluation 56 14. Financial Reevaluation 62 15. Social Development Action Plan Achievements Matrix 65

BASIC DATA

A. Loan Identification 1. Country People’s Republic of China 2. Loan number and financing source Loan 2760, ordinary capital resources 3. Project title Gansu Tianshui Urban Infrastructure Development Project 4. Borrower People’s Republic of China 5. Executing agency Tianshui Municipal Government 6. Amount of loan $100 million 7. Financing modality Project loan

B. Loan Data 1. Appraisal – Date started 14 Sep 2010 – Date completed 1 Feb 2011 2. Loan negotiations – Date started 25 May 2011 – Date completed 26 May 2011 3. Date of Board approval 29 Jun 2011 4. Date of loan agreement 25 Oct 2011 5. Date of loan effectiveness – In loan agreement 23 Jan 2012 – Actual 14 May 2012 – Number of extensions 2 6. Project completion date – Appraisal 30 Jun 2016 – Actual 31 Dec 2018 7. Loan closing date – In loan agreement 31 Dec 2016 – Actual 31 Dec 2018 – Number of extensions 1 8. Financial closing date – Actual 12 Aug 2019 9. Terms of loan – Interest rate LIBOR + 0.6% − 0.3% – Maturity (number of years) 25 – Grace period (number of years) 5 10. Terms of relending (if any) – Interest rate LIBOR-based – Maturity (number of years) 25 – Grace period (number of years) 5 – Second-step borrower Government of Gansu Province

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11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 10 Oct 2012 20 Dec 2018 75 months

Effective Date Actual Closing Date Time Interval 14 May 2012 12 Aug 2019 88 months

b. Amount ($ million) Increased Canceled during during Original Implementa Implementa- Last Revised Amount Undisbursed Allocation -tion tion Allocation Disbursed Balance Category (1) (2) (3) (4 = 1 + 2 – 3) (5) (6 = 4 – 5) 01a-Works-Heating 19.25 5.66 0.00 24.91 23.87 1.04 Network 01b-Works-Roads, 62.38 (0.164) 0.00 62.22 62.22 0.00 Bridges and Flood Control Facilities 02-Equipment 11.67 (4.59) 0.00 7.08 6.82 0.26 03-Institutional 1.43 (0.23) 0.00 1.20 1.00 0.20 Strengthening and Training 04-Interest and 5.27 (0.68) 0.00 4.59 4.59 0.00 Commitment Charge Total 100.00 0.00 0.00 100.00 98.50 1.50 ( ) = negative.

C. Project Data 1. Project cost ($ million) Cost Appraisal Estimate Actual Foreign exchange cost 21.0 18.8 Local currency cost 208.5 185.7 Total 229.5 204.5

2. Financing plan ($ million) Cost Appraisal Estimate Actual Implementation cost Borrower financed 61.4 103.0 ADB financed 94.7 93.9 Other external financing 54.8 0.0 Total implementation cost 210.9 196.9 Interest during construction costs Borrower financed 0.0 3.0 ADB financed 5.3 4.6 Other external financing 13.4 0.0 Total interest during construction cost 18.7 7.6

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3. Cost breakdown by project component ($ million) Component Appraisal Estimate Actual A.1 Qinzhou district heating network 52.7 49.8 A.2 Chengji road and flood control facilities 86.3 98.9 A.3 Tianshui urban transport improvements 39.7 47.2 A.4 Institutional strengthening and capacity building 1.4 1.0 Subtotal (A) 180.1 196.9 B. Contingencies 30.8 0 C. Financing charges during implementation 18.6 7.6 Total 229.5 204.5

4. Project schedule Item Appraisal Estimate Actual Date of contract with consultants 1 Sep 2011 10 Oct 2012 Completion of engineering designs 30 Dec 2016 30 Dec 2018 Civil works contract Date of award 10 Nov 2011 28 May 2012 Completion of work 30 Dec 2016 30 Dec 2018 Equipment and supplies 30 Dec 2015 7 Apr 2016 Dates First procurement 10 Nov 2011 28 May 2012 Last procurement 30 Apr 2016 24 Aug 2018 Completion of equipment installation 30 Oct 2016 30 Dec 2018 Start of operations Completion of tests and commissioning 15 Nov 2016 30 Sep 2016–15 Nov 2018 Beginning of start-up 15 Sep 2016 30 Sep 2016–1 Nov 2018 Other milestones

5. Project performance report ratings Implementation Period Ratings From 12 May 2012 to 30 June 2012 Potential Problem From 1 July 2012 to 30 September 2012 Actual Problem From 1 October 2012 to 31 March 2013 On Track From 1 April 2013 to 30 September 2013 Potential Problem From 1 October 2013 to 12 August 2019 On Track

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Members Loan Inception 16–21 December 2012 3 15 a, b, c Loan Review 17–24 June 2013 2 11 b, c Midterm Project Review 28 October–5 November 2013 2 12 b, c Loan Review 20–24 October 2014 2 8 c, d Loan Review 4–6 May 2015 3 9 c, e, f Loan Review 11–15 April 2016 3 12 f, g, h Loan Review 21–24 August 2017 4 11 f, g, h, i Loan Review 2–5 July 2018 4 12 f, g, j, k Loan Review 9–14 December 2018 3 15 f, g, h Project Completion Review 24–29 November 2019 6 24 g, h, j, l, m, n a = principal public management specialist, b = project analyst, c = urban development specialist, d = project analyst, e = senior project assistant, f = senior project assistant / associate project analyst, g = senior project officer, h = senior safeguard officer, i = senior procurement officer, j = senior environment officer, k = consultant, l = senior project officer (financial management), m = associate social development officer, n = associate project analyst.

I. PROJECT DESCRIPTION

1. Gansu Province in 2009 had the second-lowest gross domestic product per capita in the People’s Republic of China (PRC). Its Tianshui municipality’s 3.6 million inhabitants included 640,000 urban dwellers in Qinzhou and Maiji districts with an estimated urban poverty rate of 13.5% (2009).1 Development barriers included poor infrastructure and Gansu’s remote inland location. Transport links were being improved by expressway and rail construction, and in July 2009 the State Council approved establishment of the Guanzhong–Tianshui Economic Zone (GTEZ). The GTEZ was intended by 2020 to become the northwest PRC’s economic backbone. Tianshui’s urban population was set to grow as rural migrants seized economic opportunities in the GTEZ, and this influx of industries and migrants would pressure Tianshui’s infrastructure.

2. Although positioned as an economically developed, environment-friendly, and livable city, Tianshui faced development challenges. These included inadequate district heating and air quality, seasonal flooding, and inadequate urban transportation. The many small boilers of Tianshui’s Qinzhou District were energy inefficient. During winter, pollutants from these coal- fired boilers and single-family heating stoves worsened air quality. Poor service quality and limited heating coverage especially affected women and the urban poor. For instance, women were more likely to have greater exposure to pollutants from heating stoves. In addition, the Xi and Wei rivers that converged in Tianshui flooded seasonally. Tianshui’s urban population was growing by more than 4% annually. Public transport and nonmotorized transport (NMT) facilities were inadequate, traffic management and safety poor, and urban road development slow.

3. The Gansu Tianshui Urban Infrastructure Development Project was prepared to address these urban development challenges and enable Tianshui to accommodate urbanization pressures and maximize GTEZ-related benefits. 2 The project aimed to promote balanced, environmentally sustainable urbanization while improving living conditions in Tianshui, a second-tier city in the province. It was to support restructuring and expansion of the Qinzhou district heating network; construction of urban roads, bridges, and such related services as better flood control; and strengthening of urban management capacity. Its expected impact was better living conditions in the municipality. The outcome was improved heating, transport, and flood control services. The Asian Development Bank (ADB) Board approved a loan of $100 million from its ordinary capital resources for the project on 29 June 2011. The loan was closed on 31 December 2018.

4. The project consisted of four outputs: (i) Qinzhou District’s upgraded heating network operating to improve energy efficiency, operational effectiveness, and quality of district heating services; (ii) Chengji road and flood control facilities operating with annual probability of seasonal flooding along the Chengji road flood embankment to fall from 10% to 1%; (iii) Tianshui urban roads and bridges are opened to traffic and related services are operating to improve transportation for all vehicles using the improved corridors; and (iv) capacity developed and institutions strengthened for Tianshui project management office (TPMO) and project implementing agencies (PIAs).

1 Bulletin on 2009 Tianshui National Economic and Social Development Statistics provided by the Tianshui Municipal Statistics Bureau. By comparison, 4.2% of the PRC’s rural population was living below the national poverty line in 2008 (ADB. 2010. Basic Statistics 2010. Manila). 2 ADB. 2011. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the People's Republic of China for the Gansu Tianshui Urban Infrastructure Development Project. Manila.

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II. DESIGN AND IMPLEMENTATION

A. Project Design and Formulation

5. The project was highly relevant to the government and ADB sector strategies at appraisal and completion. At appraisal, it was consistent with the PRC’s Twelfth Five-Year Plan, 2011–2015, which targeted energy conservation, reduced carbon dioxide emissions, and regional development, particularly in the western region. The project’s components comprised part of the 2020 Tianshui City Master Plan approved by Gansu Provincial Government in July 2009 and Tianshui Municipal Government (TMG) investment programs. The project was aligned with ADB’s country partnership strategies for the PRC that identified as priorities urban energy efficiency and improvement of the urban environment.3 It supported ADB’s urban sector strategy and the PRC’s urbanization strategy, which promoted rural–urban integration and infrastructure investments in dynamic settlements. It also supported ADB’s Climate Change Program by reducing greenhouse gas emissions from coal-fired heating boilers and lower vehicle emissions per trip. 4 The design of urban road components conformed to ADB’s Sustainable Transport Initiative and its related institutional and capacity development assistance.5

6. The project was ADB’s third urban development project in Gansu Province and the first foreign-financed urban development project in Tianshui. The project design reflected lessons from previous ADB-financed urban development projects in the PRC, including to act upon the need for early support on ADB policies and procedures, as past interventions had been particularly effective when part of well-conceived and broader urban development master plans and sector master plans and accompanied by capacity building to strengthen management and implementation capacity.

7. The project had the following innovative features: (i) holistic urban road design and road safety audit improved access to NMT facilities and ensured infrastructures were designed and constructed to best-practice road safety requirements; (ii) people-centric urban transport planning improved TMG’s ability to plan and manage the urban road network to meet rapidly evolving urban development and traffic demands; (iii) urban infrastructure management and maintenance systems significantly enhanced road maintenance planning, prioritization, funding, and monitoring; and (iv) the environment-related project grievance redress mechanism was designed through intensive consultation with the authorities and public. The resultant structures and procedures had been embraced and were already used as a model for other ADB-financed projects in the PRC (para. 41).

8. The project design was formulated with project preparatory technical assistance (TA) and included support for project management and implementation through national and international consultants' inputs and on-the-job training (para. 25). 6 During project implementation, minor changes in the project were made in response to issues emerging during implementation.7 The minor changes accommodated the design changes even as the project

3 ADB. 2012. Country Partnership Strategy (2011–2015), People’s Republic of China. Manila. 2016. Country Partnership Strategy–Transforming Partnership: People’s Republic of China and Asian Development Bank, 2016– 2020. Manila. 4 ADB. 2008. ADB’s Climate Change Program. Manila. 5 ADB. 2010. Sustainable Transport Initiative: Operational Plan. Manila. 6 ADB. 2009. Technical Assistance to the People’s Republic of China for the Gansu Tianshui Urban Infrastructure Development Project. Manila (TA 7344-PRC, approved on 11 September, for $700,000). 7 During implementation, the following changes were made and approved by ADB on 9 September 2015: (i) TMG to fully fund and build its own heat source plant because originally planned project associated heat source plant was cancelled, and adjust and optimize the heating network (para. 11); (ii) partial cancellation of roads in Maiji road

3 objectives as envisaged during appraisal remained unchanged. The project design was appropriate to help achieve the outcome, and the formulation was adequate. The project design and monitoring framework (DMF) at appraisal, along with the achievements at completion against the framework’s targets and indicators, is in Appendix 1.

B. Project Outputs

9. The project included four outputs as described below.

10. Output 1: Qinzhou district heating network. At appraisal, the project was to upgrade Qinzhou district heating network by decommissioning 199 outdated coal-fired boilers, building a 33.7 kilometer (km) primary heat transmission network, constructing 78 heat-exchange stations, and increasing district heating coverage from 8.79 million square meters (m2) to about 20 million m2. The heat source plant would be a combined heat and power plant (CHP) about 10 km north of Tianshui. It would be financed and constructed separately but in coordination with TMG by a state-owned enterprise, China Huaneng Group, and deemed a project-associated facility.

11. China Huaneng Group later cancelled construction of the originally planned CHP, however, TMG decided to fully fund and build its own new heat source plant to supply Qinzhou District. The related minor change of project scope was approved by ADB in September 2015 (para. 8). Due to the change in heat source, the design of the project’s heating network was also adjusted and optimized, with revised targets of decommissioning 194 outdated coal-fired boilers, building a 33.8 km primary heat transmission network, constructing 76 heat-exchange stations, and increasing district heating coverage from 8.79 million m2 to about 15 million m2.

12. At project completion in 2018, the new Qinzhou heat source plant was constructed and fully operational, and the Qinzhou District’s heating systems had been upgraded by decommissioning 194 outdated coal-fired boilers, building a 41.4 km primary heat transmission network, constructing 76 heat-exchange stations, and increasing district heating coverage from 8.79 million m2 to about 11.91 million m2. Further coverage increase to 14.94 million m2 by 2021 was expected in order to reach the targeted total district heating area of about 15 million m2.8

13. Output 2: Chengji road and flood control facilities. At appraisal, the project would construct 12 km of Chengji road and 10.6 km of flood control embankment along the Xi River’s north bank, including two large bridges and related facilities. The detailed design for road section K0+600-K1+605 was changed to reduce land acquisition and disturbance to the Yanjiahe landslide area. At completion, the 12 km Chengji road and 10.6 km flood control embankment along the Xi River’s north bank, including two large bridges, were completed. The roads and bridges opened to traffic in June 2016.

14. Output 3: Tianshui urban transport improvements. At appraisal, the components were to improve urban roads and related facilities by constructing four new roads totaling 4.9 km and rehabilitating about 2.0 km of another; constructing three bridges; and developing such

network to minimize the impacts of land acquisition and resettlement (para. 13); (iii) change of funding source that the China Development Bank domestic loan was not availed of and the required financing was covered by TMG; and (iv) change of procurement packaging for capacity development and institutional strengthening (para. 15). 8 By 2021, the upgraded Qinzhou district heating systems will comprise (i) a new district heating system implemented by THC for 11.0 million m2; (ii) natural gas boiler district heating system for 2.11 million m2; and (iii) other district heating system for 1.83 million m2. The new district heating system implemented by THC began operation in 2017, and district heating service area covered by the THC’s new district heating system reached 6.23 million m2 in 2017, 8.48 million m2 in 2018, and 9.60 million m2 in 2019.

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related services as drainage pipelines and sewers, energy-saving lighting, public green areas, and road safety features. After optimizing the detailed design to minimize land acquisition and resettlement (LAR) impacts, 1.97 km of Maiji District new road network was dropped and Shetang Bridge was changed from an at-grade intersection to an overpass. All other outputs were achieved at completion. The roads and bridges were opened from June 2014 to July 2016.

15. Output 4: Capacity development and institutional strengthening. Under the component, consulting services were provided for the TPMO and two PIAs of Tianshui Heating Company (THC) and Tianshui Urban Construction and Investment Group Co. Ltd, including improving construction management, financial management, and domestic and overseas study tours and trainings. The original procurement packaging for capacity development and institutional strengthening was changed to streamline the consulting packages, and this was approved during the minor change of project scope in September 2015.9

16. A series of domestic study tours, workshops, seminars, and training were organized to introduce modern concepts and best practices relating to corporate governance and management for capacity building and knowledge transfer during 2012 to 2018. On-the-job trainings for TPMO and PIA staff were conducted. Comprehensive trainings were provided on road safety audit, emergency management, asbestos management, and soil erosion protection.

C. Project Costs and Financing

17. At appraisal, the project cost was estimated at $229.5 million equivalent, comprising $21.0 million of foreign exchange costs (9.1%) and $208.5 million equivalent of local currency costs (90.8%). At project completion, project costs totaled $204.5 million, including $18.8 million of foreign exchange costs (9.2%) and $185.7 million equivalent of local currency costs (90.8%). ADB loan of $98.5 million against the total amount of $100.00 million was used. The project costs at appraisal and at completion are in Appendix 2. A detailed cost breakdown by project financier is in Appendix 3.

18. Compared with the appraisal estimate, costs for LAR, institutional strengthening and capacity building, survey, research, design and project management, and interest during construction were lower, but costs for civil works, mechanical, and equipment were higher. Loan proceeds were reallocated between cost categories and subcategories to optimize and maximize utilization of ADB loan proceeds during implementation. The China Development Bank domestic loan envisaged at appraisal was not availed of and the required financing was fully covered by TMG (footnote 7). Total project expenditures were 10.9% lower compared to the appraisal estimate, and the project did not use contingencies budgeted at appraisal.

D. Disbursements

19. Loan proceeds totaling about $98.5 million were disbursed from October 2012 to December 2018 in accordance with the provisions in the loan agreement and ADB’s Loan Disbursement Handbook (2007, as amended from time to time). The Gansu Provincial Finance

9 Consultant packaging was changed from five packages to one since (i) startup consultants (packages CS2 and CS3) were no longer needed as the loan implementation consulting firm was already mobilized in 2012; (ii) tasks under packages CS4 and CS1 overlapped as TMG made a contract variation to package CS1 in 2013 by adding inputs of package CS4; and (iii) the contents of package CS5 were no longer relevant and this package was cancelled in 2015, due to the prolonged recruitment process for CS5, which had started in 2013 and was still at submission 4 stage as of May 2015, and the fact that the urban transport network and asset management system had been planned and established already.

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Department adopted advance fund procedure. 10 The interval between initial and final disbursements was 75 months against the 88 months between the actual effectiveness date and the loan closing date. Of the amount disbursed, $86.09 million was for civil works, $6.82 million for equipment, $1.00 million for institutional strengthening and capacity building, and $4.59 million for interest during construction and commitment charges. The last transaction was made in July 2019 for the refund of unused advance.

20. The provincial finance department used the advance fund procedure for most withdrawals of loan proceeds. It was responsible for setting up and maintaining the advance fund. The department reported no problems in using the advance fund procedure and made regular replenishments to the advance fund during the project implementation period, although with varying frequency. The external auditors provided unqualified opinions on the project financial statements during the entire project implementation period and raised no significant issues regarding management of the advance fund. The initial advance fund for the project was $10 million, based on a 6-month estimate of expenditures submitted from the Gansu Provincial Government to ADB after loan effectiveness. Utilization efficiency of the ADB loan was satisfactory, with average annual turnover ratio for the advance account over the project implementation period about 1.7.

21. The loan closing date was extended from 31 December 2016 to 31 December 2018. Disbursement of expenses incurred before the loan closing date was completed during the winding-up period, with the last transaction made on 24 July 2019. Cumulative disbursement of the project was $98,499,005.39, and $1,500,994.61 of loan savings were cancelled after final liquidation of the advance account at loan financial closing date of 12 August 2019. Projected and actual disbursements are in Appendix 4.

E. Project Schedule

22. The project was approved on 29 June 2011. The loan and project agreements were signed on 25 October 2011 and became effective on 14 May 2012. Following minor change of scope, the loan and project agreements were amended effective 14 March 2016. The original loan closing date was 31 December 2016 and the actual loan closing date was extended to 31 December 2018. Preconstruction and construction activities, including detailed design, preparation of bidding documents, tendering, and awarding of contracts, started in 2011. The Chenji road and flood control facilities component and Tianshui urban transport improvements component were completed by 2016. Due to China Huaneng Group’s cancellation of the originally planned CHP, the loan had to be extended to 31 December 2018 for TMG to build a new heat source plant and complete the Qinzhou district heating network component (para. 11). The actual project implementation took about 7 years. The planned and actual implementation schedules are in Appendix 5. A chronology of major events is in Appendix 6.

F. Implementation Arrangements

23. TMG was executing agency for the project. A project leading group, headed by TMG’s vice mayor, was established to direct the project and provide policy guidance during implementation. The TPMO was set up under the project leading group and located in the Tianshui municipal finance bureau. The TPMO was responsible for day-to-day operations and for coordinating implementation of project activities on behalf of TMG, recruiting the tendering

10 All references to advance fund and advance account refer to formerly termed imprest fund and imprest account.

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company, recruiting and managing the consulting services, and implementing the capacity building and institutional strengthening component.

24. The project had two implementation agencies: (i) the Tianshui Urban Construction and Investment Group for the Chenji road and flood control facilities component and Tianshui urban transport improvements component; and (ii) THC for the Qinzhou district heating network component. The implementation agencies were responsible for day-to-day implementation activities with the support of design institutions, tendering agents, consultants, and supervising engineers. The implementation arrangements were satisfactory, effective, and consistent with the design envisaged at project appraisal.

G. Technical Assistance

25. Project preparatory TA approved on 11 September 2009 helped formulate the project (para. 8). The TA supported TMG in preparation of the project design, feasibility study, and implementation arrangements. The TA conducted technical, environmental, economic, financial, and social appraisal of the project components, covering urban roads and bridge infrastructure and district heating system infrastructure and services. Extensive stakeholder participation and consultations were undertaken during project design. The TA provided all the inputs needed to prepare the project for ADB financing. After the project was approved on 29 June 2011, the TA completion date was extended to 30 September 2011 to support preparation of the first set of national competitive bidding and international competitive bidding documents.

H. Consultant Recruitment and Procurement

26. To support project implementation and management, ADB-financed consulting services were designed at appraisal to assist and advise the executing and implementing agencies in undertaking their responsibilities. The project originally planned five consulting packages. During implementation, these were streamlined into one package (para. 15). The project implementation consulting firm was selected through quality- and cost-based selection and a time-based contract was awarded in October 2012. Consulting contract variations and extension were granted to accommodate the actual project needs and loan extension. At completion, the project implementation consulting firm had provided 22 person-months of international consulting services and 89.5 person-months of national consulting services.

27. External monitoring agencies were engaged to monitor LAR, environmental protection, and social impacts under the project. Design institutes and construction supervision agencies were also engaged using domestic funds to assist the PIAs in detailed design and construction supervision. A procurement agent was recruited using domestic funds to assist the TPMO and PIAs in procuring goods and civil works.

28. The contract awards of ADB loan proceeds are shown in Appendix 7. At completion, 19 contract packages had been procured following ADB’s Procurement Guidelines 2007 (as amended from time to time), including 15 civil works packages, 3 equipment packages, and 1 consulting package. Three contract packages were procured through international competitive bidding, 13 through national competitive bidding, and 2 through shopping. The procurement mode did not change during implementation, and no significant problems occurred in contract packaging, bid document preparation, or bid evaluation. Variations were processed for a few civil works contracts due to unexpected LAR problems and the design institute’s missing items in the bill of quantities. Appendix 8 shows the ADB-financed contract packages.

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I. Gender Equality

29. The project gender classification was effective gender mainstreaming for gender equality. A gender action plan (GAP) was prepared and gender-specific measures were prepared to meet the specific targets for women in employment, participation, and capacity- building opportunities. The project DMF had four gender-related performance indicators. The project successfully implemented the GAP, completed 13 activities (100%), and achieved 8 (100%) quantitative targets. The project has positive impacts on women, including (i) access to cleaner, safer, and reliable heating system whereas women are more likely to have greater exposure to pollutants from heating stoves; (ii) reduced domestic chores workload and time spent for space heating; (iii) reduced incidence of respiratory diseases related to indoor air pollution; and (iv) reduced travel time and increased mobility. Overall, implementation of the GAP was satisfactory (paras. 53–55). A GAP evaluation is in Appendix 9.

J. Safeguards

30. Environment. ADB classified this project as Category A for the environment, mainly because of the flood management and district heating components. A consolidated environmental impact assessment (EIA), including an environmental management plan (EMP) in line with ADB’s Safeguard Policy Statement (2009), was posted to the ADB website on 20 December 2010. The consolidated EIA concluded that adverse environmental impacts of the project could be reduced to an acceptable level through implementing the EMP. Due to the change of heating source plant during project implementation, environmental due diligence was undertaken during 2013–2014. An updated domestic EIA was approved in May 2014 by Gansu Provincial Environmental Protection Department. An addendum to the consolidated EIA including a revised EMP was approved and disclosed by ADB in May 2015. A comprehensive set of mitigation measures was prepared and carried out during project implementation. Minor changes in an intersection of Chengji road and partial cancellation of Maiji road network to minimize LAR impacts were made in 2014. These did not affect the EMP.

31. Ten semiannual environmental monitoring reports were prepared and submitted to ADB, detailing the progress made against the EMP. The monitoring results concluded that adverse environmental impacts were mitigated adequately throughout the project, and no significant environmental damage occurred during construction (Appendix 10).

32. Land Acquisition and Resettlement. The project comprises three construction components involving LAR, including Qinzhou district heating network, Chengji road and flood control facilities, and Tianshui urban transport improvements. Two separate resettlement plans were prepared during project preparation in 2011: one for roads and bridges components and another for heating supply components. The resettlement plans were updated and disclosed in 2013 and 2014, respectively. According to the updated resettlement plans, the project would permanently acquire 1,054.2 mu of land. 11 Building demolition would be 45,341.50 m2 of residential building and 4,638.50 m2 of business and institutions. As a result, 1,117 households (5,301 persons) would be affected by permanent acquisition and 203 households (934 persons) and 12 enterprises or institutions (53 employees) would be affected by house demolition.

33. LAR began in 2014 and was completed by the end of 2018. A total of 915.5 mu of land was acquired permanently (12.3% less than in the resettlement plan); 20,437.7 m2 of residential structures (54.9% less than planned) and 9,193 m2 of nonresidential buildings (98.2% more than

11 A mu is a Chinese unit of measurement, the equivalent of 666.67 m2.

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planned) were demolished. Accordingly, 889 households and 4,390 persons were affected by permanent land acquisition, 101 households and 408 persons by residential structure demolition, and 12 enterprises with 34 employees by nonresidential structure demolition. The lower permanent land acquisition and residential house demolition was caused by cancellation of a 1.97 km road section of the Tianshui urban transport improvements component and Chengji road design adjustment. In addition, two small enterprises were totally demolished after consultation with affected units. This led to the significantly higher business house demolition. Layout of the heating control center was also changed to avoid house demolition to affect two households under the district heating supply component.

34. Land compensation standards were formulated according to the integrated land price, while house compensation standards were evaluated by the assessment agency. The land acquisition agreements with affected villages or households were reached on the basis of intensive consultation. All affected villages and people were aware of the adopted compensation rates and were paid all compensation as per the agreement. The actual land compensation rates were CNY84,000–125,000/mu, which is higher than the CNY72,000–92,160/mu indicated in the resettlement plans. For 101 households affected by house demolition under the road component, cash compensation or resettlement houses were given as options. The new resettlement houses were sold to affected persons at the rate of CNY2,270–4,810/m2 with apartment area of 90–120 m2. The compensation for house demolition was determined by evaluation and was in the range CNY5,365–CNY5,474/m2 for main residence. In addition, relocation subsidy of CNY300/person was paid to registered affected persons.

35. Many work opportunities were provided after completion of Chengji road so that living standards of affected villagers were improved. In particular, Tianshui Commercial and Trade City and shopping malls built in Yuquan Town and Huaniu Town offered 350 job openings to affected persons in the project area. Villagers who lost land restored their livelihoods through house rental, small businesses, purchasing construction machinery, opening small shops, developing cultural undertakings, developing township enterprises, and purchasing productive tools such as transport vehicles and taxis. The per capita income of affected persons increased from CNY4,952 in 2012 to CNY14,503 in 2018.

36. Internal monitoring of resettlement-related issues was conducted by the TPMO and PIAs. The progress of resettlement activities, resettlement policy, compensation rates, and resettlement cost disbursement were reported through quarterly progress reports to ADB. The external resettlement monitoring and evaluation had been conducted regularly since 2014. ADB received 12 monitoring and evaluation reports and uploaded these to its website. The actual impacts, including permanent land acquisition, house and building demolition, and numbers of project affected people, were stated in these reports and the project progress reports.

37. Generally, project LAR was implemented successfully in compliance with national and local regulations, resettlement plans, loan covenants, and ADB’s Safeguard Policy Statement (2009). LAR impact was minimized by optimizing construction design. Affected persons were actively involved through an extensive participatory program and consultation procedures. Most affected persons now enjoy higher incomes, easy access to public services, and more employment opportunities. The loan consultants and external resettlement monitoring specialist provided regular monitoring reports. The monitoring and evaluation completion report concluded that the incomes of affected persons had been restored. Appendix 11 provides a detailed evaluation of LAR implementation.

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K. Monitoring and Reporting

38. The loan covenants were considered adequate. The project complied with majority of covenants, except that THC was in noncompliance on financial performance indicators (para. 48). The implementation arrangements were adequately set up and the ADB loan was appropriately used and disbursed. The TPMO submitted the necessary reports, audited project accounts, and financial statements to ADB as required in the loan agreements. The reports were generally acceptable to ADB. In general, project financial management was satisfactory. Annual project financial statements audited by the Gansu Provincial Audit Office were submitted on a timely basis. The auditor issued an unqualified auditor’s opinion every year. Local counterpart funds for project components were generally mobilized on time as required for the project implementation, which was in compliance with the loan covenant. Loan covenants compliance is summarized in Appendix 12.

39. The project design required that the TPMO and PIAs use a project performance monitoring system to monitor and evaluate project impact, outcomes, and outputs. With the project implementation consultant’s assistance, a project performance monitoring system was established, and performance was monitored and reported. Project progress and monitoring reports were submitted to ADB generally on time.

III. EVALUATION OF PERFORMANCE

A. Relevance

40. The project’s expected impact at appraisal—better living conditions in Tianshui municipality—remained relevant at completion. The project was fully aligned with the Twelfth and Thirteenth Five-Year Plans of the PRC (2011–2015 and 2016–2020) prioritizing energy efficiency improvement and emissions reduction and with ADB’s country partnership strategies for the PRC (2011–2015 and 2016–2020) with continuous emphasis on resource efficiency and environmental sustainability to support socially inclusive, environmentally sustainable, and economically competitive development.12 The project was also consistent with ADB’s urban sector strategy, which supports infrastructure investment to promote economic growth, employment creation, innovation, and social services. It was in synergy with the PRC’s twelfth and thirteenth five-year plan objectives to develop infrastructure for economic growth and poverty reduction. The project components comprised part of the 2020 Tianshui City Master Plan, enabled Tianshui to meet urbanization pressures and maximize GTEZ-related benefits, and reinforced Tianshui’s flood control embankment system to the 100-year standard.

41. The project design incorporated lessons learned from ADB’s previous projects and included innovative and demonstrative features (paras. 6–7). The loan modality was appropriate and contributed to smooth project implementation. The project innovative features and approaches, such as holistic urban road design and road safety audit for improved access to NMT facilities, people-centric urban transport planning, project grievance redress mechanism design through intensive consultation with stakeholders, and project loan modality had been followed in the other ADB-financed urban projects in Gansu.13

12 Government of the PRC. 2011. People’s Republic of China Twelfth Five-Year Plan (2011–2015). Beijing; Government of the PRC. 2016. People’s Republic of China Thirteenth Five-Year Plan (2016–2020). Beijing. 13 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the People’s Republic of China for Gansu Urban Infrastructure Development and Wetland Protection Project. Manila (Loan 2903-PRC); ADB. 2013. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the People’s Republic of China for Gansu Jiuquan Integrated Urban Environment Improvement Project.

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42. China Huaneng Group’s cancellation of the associated CHP heat source plant was not foreseeable during project preparation, and the scope was changed during implementation for TMG to fully fund and build its own new heat source plant (paras. 8 and 11). The change of project scope fit within the original DMF, strengthened the project relevance, and facilitated achieving the project outcome. The results chain was sound, the indicators and targets at various levels were generally laid down well, the quality of indicators and targets for measurement was good, and the project DMF was formulated and updated to monitor and capture the project’s results and outcomes.

43. The project built on ADB’s continuing engagement with Gansu Province in the urban sector (para. 6). Following the project, ADB is continuously supporting urban projects in Gansu as Gansu maintains rapid urbanization (footnote 13). Being the first foreign-funded urban development project in Tianshui, the project was well implemented. It was recognized by ADB on 6 December 2019 as 2018’s best performing project in the PRC.14 Overall, the project is rated highly relevant.

B. Effectiveness

44. Overall, the project was effective in achieving the intended outcome: improved heating, transport, and flood control services in Tianshui municipality. By project completion in 2018, all the envisaged outcome targets as updated by change of project scope were achieved, fully achieved, or overachieved, as detailed in Appendix 1. When the Chengji flood embankment was completed by 2016, the annual probability of seasonal flooding along the embankment was reduced from 10% to 1%, fully achieving the target. With Shetang, Xiakou, Shuangqiao, and Shuangguo bridges opened to traffic during 2014–2016, travel distances were reduced by 82% (from 17.8 km to 3.2 km), fully achieving the target. During project implementation 2,364 jobs were created and during operation 668 jobs, with 40% targeted for women and 21% for the poor, thus overachieving the targets of creating 1,466 jobs during implementation and 658 jobs during operation, with 30% targeted for women and 15% for the poor. The target to reduce heating-related carbon dioxide (CO2) emissions from 1,082,200 to 559,023 tons per annum was about 80% achieved by 2018 as actual heating-related carbon dioxide emissions were reduced to 666,797 tons per annum. Further reduction to 559,023 tons by 2021 should fully meet the target while achieving the total district heating area target of about 15 million m2 (para. 11). All updated project outputs were completed, except that the district heating area and coal savings reached about 80% of the targets by 2018. These targets are expected to be fully achieved by 2021.

45. The project safeguard plans were adequate, updated, and disclosed on a timely basis. Implementation of such plans was monitored regularly, and disclosure of monitoring reports was timely. Affected people were properly compensated and their incomes were increased compared to before the project. There are no outstanding safeguard-related issues and complaints.

Manila (Loan 3003-PRC); ADB. 2014. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the People’s Republic of China for Gansu Baiyin Integrated Urban Development Project. Manila (Loan 3202-PRC). 14 The award recognizes projects demonstrating effective institutional setup, timely implementation start-up, smooth disbursement and procurement, strict compliance with loan covenants, and effective delivery of scheduled outputs.

11

C. Efficiency

46. The project is rated efficient. Despite its implementation period longer than envisaged at appraisal, the project delivered the planned outputs. As shown in Appendix 13, the reevaluated economic internal rate of return (EIRR) for the Qinzhou district heating network component is 32.7%, which is higher than the appraisal estimate of 15.2%. The reevaluated EIRR for the Chengji road and flood control facilities component is 13.0%, as compared to the appraisal estimate of 16.2%. The reevaluated EIRR for the Tianshui urban transport improvements component is 9.7%, lower than the appraisal estimate of 18.2%. The EIRR for the whole project is 15.5%, also lower than the appraisal estimate of 16.8%. The Qinzhou district heating network component, the Chengji road and flood control component, and the project as a whole are economically viable because their EIRRs exceed 12%. Sensitivity analysis was used to test robustness of the project’s economic viability under three scenarios: (i) a 10% benefits decline, (ii) a 10% operation and maintenance (O&M) cost increase, and (iii) a combination of both. The analysis shows the project remaining viable in all tested scenarios. The change of project scope and loan extension made during implementation accommodated changes and completion of the district heating component. Counterpart funds were adequate and provided in a timely manner. The project was completed within the extended loan closing date with lower costs. The project is therefore rated efficient for implementation process.

D. Sustainability

47. The project is rated likely sustainable. The technical designs of all outputs and technologies adopted were sound. The project facilities were constructed in accordance with the required engineering standards and specifications. Their quality was sufficient to meet the design service life and ensure sustainable benefits within their lifetime. Sufficient training was provided to the TPMO and PIAs to have adequate capacity to manage the O&M of project facilities. Adequate fiscal budget has been and should be allocated annually for those nonrevenue-generating components to ensure their O&M.

48. Financial internal rate of return (FIRR) was recalculated for the revenue-generating heating component at completion (Appendix 14). The Qinzhou district heating network’s reevaluated FIRR was 11.6%. That is higher than the updated weighted average cost of capital (WACC), indicating that the component is financially viable. Compared with the appraisal estimate of 9.1%, this higher FIRR reflects inclusion of connection fees during 2017–2025 and a proposed heating tariff increase. It is in spite of higher O&M costs as a result of the change of heat source from the planned CHP to the newly constructed Qinzhou heat source plant. A sensitivity analysis tested three scenarios: (i) revenues decrease by 5%, (ii) O&M costs increase by 5%, and (iii) combination of (i) and (ii). The resulting FIRRs marginally exceeding the WACC indicate that the component will remain financially viable in the case of (i) or (ii). It would not be viable in the case of (iii). The component is thus very sensitive to unfavorable changes in costs or revenues. According to the project agreement, TMG shall ensure that THC achieves and maintains from the new district heating system’s second year of full operation (i) a debt– equity ratio not exceeding 70:30, and (ii) a debt service coverage ratio of not less than 1.2. As of end 2019, both ratios were not yet achieved, mainly due to THC’s high debt. With a heating tariff increase expected in 2020 and the new district heating system’s achieving the targeted heat area by 2021, the situation is expected to improve. As the only district heating supplier in the project area, THC’s operation will continue to be supported by TMG.

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E. Development Impact

49. By 2018, the annual per capita disposal income of urban households in Tianshui had risen by 12.0% per annum from CNY9,932 in 2009 to CNY26,704, and there were 31%, 24%, and 24% drops in emissions of air pollutants sulfur dioxide (SO2), nitrogen oxides (NOx), and particulate matter 10 micrometers or less in diameter (PM10), respectively, from 0.068, 0.039, and 0.082 milligrams/cubic meter in 2009 during heating seasons. The project’s intended impact of better living conditions in Tianshui municipality is being achieved. Adverse environmental impacts during construction were minor and adequately mitigated. The project effectively implemented safeguard measures for LAR and generated positive social development impacts. Overall, the project development impact is rated satisfactory.

50. Social impact. The project had significant social impact. It created 2,364 jobs during construction and 668 permanent new jobs during operation, of which 268 (40%) were taken by women and 21% by the poor. The job creation together with the impacts of local procurement and associated multiplier effects in the labor market boosted employment opportunities and income of the local residents. The project has contributed to addressing TMG’s challenges in improving urban infrastructure and municipal service provision to meet the needs of the growing urban population while ensuring balanced and environmentally sustainable urbanization.

51. Construction of the Chengji road between Qinzhou and Maiji districts and flood control facilities helped TMG develop an efficient, safe, and sustainable urban transport system, including facilities for public transportation, pedestrian crossings, and traffic management. About 1,348,200 urban residents living in Qinzhou and Maiji districts are benefiting from an efficient urban transport system and bridge network with improved public access and mobility, road safety, and reduced travel time. A total 372,073 urban residents have benefited directly from the district heating system through efficient, cleaner, and reliable heating services. The district heating coverage was expanded from 60% in 2015 to 86% in 2018 in Qinzhou District. With reduced annual coal use, improved energy efficiency, and better operational effectiveness, the incidence of respiratory diseases and other air pollution-related health risks is expected to diminish significantly in the long term. The project benefit evaluation survey showed that women, children, and the poor (who are more vulnerable to various health risks) benefited more from the improved heating service. With the increased heating coverage, TMG established a heating subsidies fund to support low-income households.

52. Reemployment of the affected workers due to shutting down of 194 low-efficiency, highly polluting small coal-fired boilers was arranged by the PIA by 2018. No affected boiler worker experienced a loss of job and decrease in salary due to closure of the small boilers. All affected workers were trained and remained with the original company in similar jobs. No complaints were received from the affected boiler workers. A social development action plan was prepared to ensure that important social issues were addressed during project implementation and to enhance project social benefits. Appendix 15 details that plan’s achievements.

53. Gender impacts. GAP implementation had positive impacts on women’s lives in project areas (para. 29). Economic empowerment and employment for women has been secured through permanent employment opportunities and short-term construction works. Women had equal opportunity to apply for jobs created under the project. During construction, 2,364 jobs (487 skilled jobs and 1,877 unskilled jobs) were created. Among these, 745 jobs went to women and included 50 (10% of total) skilled and 695 (37%) unskilled jobs. Given the intensive physical demand of some work, women tended to take jobs such as financial and administrative staff,

13 site safety inspector, or controller. The project has created 668 permanent new jobs, of which 268 (40%) were taken by women. Of these, 146 (39%) are skilled and 122 (41%) unskilled jobs.

54. Of 1,348,200 urban residents in total, 647,136 (48%) women benefited directly from gender-responsive service delivery of the urban transport network, as well as improved public transport and mobility. Travel times were reduced by 10–55 minutes, depending on travel method and distance. Women benefited as reduced traffic hazards, pedestrian crossings, NMT access, and greater road safety let them feel more comfortable and safer in going out for social activities.

55. Of 372,073 urban residents in total, 178,596 (48%) women directly benefited from the centralized district heating systems through reliable and efficient heating services in Qinzhou District. With free connection to the centralized heating system, women benefited more from the reliable heating supply in terms of the time burden of space heating and caring for family members suffering from illnesses, because women take more responsibility in household activities. Women were also more likely to enjoy health benefits brought by the clean heating supply, and particularly those (27,840 women out of 58,000) who shifted from single-family stoves because indoor pollution affects women more who spend more time at home. The project benefits monitoring survey conducted in 2018 found that women in the project areas no longer had to spend time on space heating due to the centralized district heating services. The resulting time savings (an average of 23 minutes) enabled women to spend less time on household chores but more time on childcare, self-development, and social activities.

56. Environmental impact. The project created significant environmental benefits in the project area. It improved Tianshui’s air quality by constructing an environmentally friendly district heating system with advanced emission control equipment. The system consumes less coal and replaced 194 small, polluting, and inefficient coal-fired boilers and thousands of single-family heating stoves. The project could reduce annual coal consumption by 237,120 metric tons annually, resulting in annual reduction in CO2 emissions of 402,600 tons, and in emissions of SO2, NOx, and flue dust by 3,300 tons, 5,130 tons, and 8,900 tons, respectively, by 2021. The flood control standard for all river embankments of the Xi and Wei rivers and of new structures (such as bridges) under this project was raised to 1 in 100 years flood resilience as an essential component of the Tianshui urban flood control plan. The project also contributed to vehicle emission reductions through more efficient motor vehicle operation and shorter travel times.

F. Performance of the Borrower and the Executing Agency

57. The performance of the borrower, executing agency, TPMO, and PIAs is considered satisfactory. All parties fulfilled their obligations during the project cycle. The borrower, represented by the Ministry of Finance, fulfilled its responsibilities, including to sign the loan agreement and amendment and submit official requests to ADB for change of project scope, extension of loan closing date, reallocation of ADB loan proceeds, and increase of ADB disbursement percentage for some civil works contracts to maximize utilization of ADB loan proceeds. The executing agency, TPMO, and PIAs retained strong ownership and commitment to the project. The project leading group, headed by the vice mayor of Tianshui, held periodic meetings to review implementation progress and provided policy guidance during implementation. TMG provided counterpart funds in a timely manner. The TPMO played a critical role in coordinating among different government agencies and with ADB. The Gansu Finance Department managed the advance account and processed fund withdrawal and reimbursement applications in a timely and effective manner. The internal coordination among government agencies was effective and efficient.

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G. Performance of the Asian Development Bank

58. ADB’s performance is considered satisfactory. It conducted 10 review missions during implementation, and hands-on training in procurement and contract management were provided during these missions. The missions addressed various requirements for project implementation, such as procurement, disbursements, LAR, project management, changes to project scope, loan reallocations, and loan extension. ADB processed procurement-related reviews in an efficient manner and processed withdrawal applications efficiently. The project team provided clear and detailed guidance to the project and enabled full compliance with all relevant safeguards covenants and requirements. The TPMO viewed ADB’s review and supervision of project implementation as adequate. The TPMO and PIAs have expressed appreciation for ADB’s timely actions in resolving project implementation issues.

H. Overall Assessment

59. The project is rated successful overall based on its ratings for the four core evaluation criteria. It was highly relevant, effective, efficient, and likely sustainable. All components were implemented and are operating satisfactorily. The project was highly relevant to the government’s development plans and ADB’s country partnership strategies at both appraisal and completion. The project is also aligned with ADB’s urban sector strategy, which supports infrastructure investment that provided backbone for economic growth, employment creation, and sources of social services. The project was rated effective because it substantially achieved its intended outcome and outputs. It was completed with confirmed economic viability and within budget and the extended implementation period, and it was rated efficient. The project’s likely sustainable rating was based on several factors: the positive results of the financial sustainability analysis, adequate staff capacity for project facilities operation, and absence of adverse environmental and social impacts. Local governments accorded adequate importance to developing safeguards plans and ensured compliance with the ADB Safeguard Policy Statement (2009). The project has had a strong and positive environmental and social development impact. Due to its high performance, the project was selected as the best performing project in the PRC for 2018.

Table 1: Overall Ratings Criteria Rating Relevance Highly relevant Effectiveness Effective Efficiency Efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of Asian Development Bank Satisfactory Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons

60. China Huaneng Group’s cancellation of the originally planned CHP heat source plant was beyond TMG’s control and not foreseeable during project preparation. The project scope was changed during implementation so that TMG could fund and build its own new heat source plant for completion of the district heating component, albeit with a 2-year extension of

15 implementation period. To avoid the risks that prolonged LAR implementation could adversely affect project implementation, design of roads and bridges components was optimized and timely measures were taken to minimize the LAR impacts. Engineering design works could be improved with more detailed on-site survey and adequate geological exploration to minimize contract variations during implementation due to unexpected geological conditions and missing items in the bill of quantities.

61. The project was successfully implemented through the joint and coordinated efforts of all parties, including the TPMO, PIAs, construction companies, supervision agents, and consultants. There were savings in project costs compared to the appraisal estimates. Properly administered bidding processes were vital in obtaining advantageous bid offers. Proactive project management, both in equipment procurement and construction, enabled capital cost savings and ensured the quality of construction and equipment supply. The external supervision mechanism that was adopted effectively also played an essential role in improving the quality of the project. The selection and hiring of competent international and national consultants ensured that the quality standards required for projects were met.

B. Recommendations

1. Project Related

62. Future monitoring. Although the geotechnical survey conducted between Chengji road and Beishan Mountain concluded that the area is generally stable and not prone to mudslide or landslides, two areas were identified with more elevated risk (Yangpo and Yangjiahewan). A mudslide monitoring plan was prepared in 2014 for implementation. TMG shall continue to use the monitoring system to respond to any possible mudslides in future.

63. Covenants. The covenants in the loan and project agreements were pertinent and relevant. The covenants will be maintained in their existing form during operation.

64. Further action or follow-up. To ensure sustainability of the revenue-generating district heating component, TMG shall closely monitor and further cause THC to achieve (i) a debt– equity ratio not exceeding 70:30, and (ii) a debt service coverage ratio of not less than 1.2. It shall do so through implementing a phased plan for increasing heating tariff to achieve full cost recovery of heating services and continuously expanding the heating area to achieve full capacity of the new district heating system.

65. Timing of the project performance evaluation report. A project performance review may be conducted in 2022 or later. By that time, all components should have been in operation for more than 4 years and the targeted district heating area should have been fully achieved.

2. General

66. During project preparation, ADB and the executing agency should fully analyze risks to avoid designing a project that is dependent on another project’s implementation not within the control of the project executing and implementing agencies.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Performance Indicators and Performance Indicators and Summary Targets (appraisala) Targets (updatedb) Project Achievements Impact By 2020 (baseline year 2009) in By 2020 (baseline year 2009) in Better living Tianshui municipality Tianshui municipality conditions in Average annual per capita disposal Average annual per capita disposal The annual per capita disposal Tianshui income of urban households is income of urban households is income of urban households was Municipality increased by 6% per annum from increased by 6% per annum from increased by 12.0% per annum CNY9,932. CNY9,932. from CNY9, 932 to CNY26,704 by 2018.

Average of 20% reduction in air 15%, 30%, and 10% reduction in air 31%, 24% and 24% reduction in pollutants SO2, NOx, and PM10 pollutants SO2, NOx, and PM10 air pollutants of SO2, NOx, and 3 from 0.068, 0.039 and 0.082 mg/m respectively from 0.068, 0.039 and PM10 respectively from 0.068, during heating seasons. 0.082 mg/m3 during heating seasons. 0.039, and 0.082 mg/m3 during heating seasons by 2018. Outcome Improved By 2016 (baseline year 2009) in By 2018 (baseline year 2009) in heating, Tianshui municipality Tianshui municipality transport, and Heating-related carbon dioxide Heating-related carbon dioxide Heating-related carbon dioxide flood control emissions reduced from 1,082,200 emissions reduced from 1,082,200 to emissions reduced from services in to 654,400 tons per annum. 559,023 tons per annum 1,082,200 to 666,797 tons per Tianshui annum by 2018, and will be municipality further reduced to 559,023 tons per annum by 2021.

Annual probability of seasonal Annual probability of seasonal Construction of Chengji flood flooding along Chengji flood flooding along Chengji flood embankment was finished in embankment reduced from 10% to embankment reduced from 10% to 2016. The annual probability of 1%. 1%. seasonal flooding along Chengji flood embankment was reduced from 10% to 1%. Area with reduced flood risks was about 5,000 mu, i.e. 333 ha.

Defined point-to-point traveling Defined point-to-point traveling Shetang, Xiakou, Shuangqiao distances are reduced by 82% from distances are reduced by 82% from and Shuangguo bridges were 17.8 km to 3.2 km. 17.8 km to 3.2 km. opened to traffic during 2014- 2016. Traveling distances were reduced by 82% from 17.8 km to 3.2 km.

1,466 jobs during project 1,466 jobs during project 2,364 jobs during project implementation and 658 jobs implementation and 658 jobs during implementation and 668 jobs during operation are created, with operation are created, with 30% during operation were created, 30% targeted for women, and 15% targeted for women, and 15% for the with 40% targeted for women, for the poor. poor. and 21% for the poor. Outputs By 2016 (baseline year 2009) in By 2018 (baseline year 2009) in 1. Qinzhou Tianshui municipality Tianshui municipality district's 33.7 km of main heating 33.8 km of main heating transmission 41.4 km of main heating upgraded heating transmission pipe and 78 heat pipe and 76 heat exchange stations transmission pipe and 76 heat network is exchange stations are constructed. are constructed. exchange stations were operating constructed.

199 outdated coal-fired boilers are 194 outdated coal-fired boilers are 194 outdated coal-fired boilers closed. closed. closed.

District heating coverage increased District heating coverage increased District heating coverage from 8.79 million m2 to 20.00 from 8.79 million m2 to 15.00 million increased from 8.79 million m2 to million m2. m2. 11.91 million m2 by 2018, and will

Appendix 1 17

Design Performance Indicators and Performance Indicators and Summary Targets (appraisala) Targets (updatedb) Project Achievements be further increased to 14.94 million m2 by 2021. Overall, 372,073 urban residents including 178,596 (48%) women directly benefited from the centralized district heating systems in Qinzhou District through reliable and efficient heating services.

Percentage of households using Percentage of households using Percentage of households using single-family heating stoves single-family heating stoves reduced single-family heating stoves reduced from 28.5% to 13.0% (sex from 28.5% to 13.0% (sex reduced from 28.5% to 8.2% disaggregated for head of disaggregated for head of including 2.5% women-headed household). household). households (sex disaggregated for head of household).

Coal inputs for Qinzhou district Coal inputs for Qinzhou district Coal inputs for Qinzhou district heating reduced by 252,000 tons heating reduced by 237,120 tons per heating reduced by 188,261 tons per annum. annum. by 2018, and will be further reduced to 237,120 tons by 2021.

100% of workers redeployed or 100% of workers redeployed or All affected 251 formal workers reemployed under implementation reemployed under implementation of including 35 female workers of the labor reemployment plan the labor reemployment plan (sex finally remained in their wage (sex disaggregated). disaggregated). levels and job positions in their current institutions and enterprises without any re- employment. 2. Chengji road The new Chengji road (12 km) and The new Chengji road (12 km) and Chengji road (12 km) and flood and flood control flood control embankment (10.6 flood control embankment (10.6 km), control embankment (10.6 km) facilities are km), Sunjiaping Xi river bridge (320 Sunjiaping Xi river bridge (320 m), was completed on 28 July 2016 operating m), Xiakou Wei river bridge (380 Xiakou Wei river bridge (380 m), and and was then opened to traffic; m), and related services are related services are operating. Sunjiaping Xi river bridge (320 m) operating. was completed on 11 November 2014; Xiakou Wei river bridge (370 m) was completed on 28 November 2015. 3. Urban roads Maiji district's new road network, Maiji district’s new road network, Maiji district's new road network, and bridges are including four new secondary roads including four new secondary roads including four new secondary opened to traffic (4.9 km) and related services and (2.9 km) and related services and roads (2.9 km) and related and related urban infrastructures, is operating. urban infrastructures, is operating. services and urban infrastructures services are were completed in June 2016 operating Shetang Wei river bridge (320 m), Shetang Wei river bridge (320 m), Shetang Wei river bridge (331.4 including approach roads and including approach roads and related m), including approach roads and related services, is operating, services, is operating, which reduces related services were opened to which reduces traveling distances traveling distances from National traffic on 20 Nov. 2015, which from National Route G310 to the Route G310 to the town of Shetang reduced traveling distances from town of Shetang from 15.3 km to from 15.3 km to 2.4 km. National Route G310 to the town 2.4 km. of Shetang from 15.3 km to 2.4 km.

Shuangqiao Xi river bridge (800 m) Shuangqiao Xi river bridge (800 m) Shuangqiao Xi river bridge (807 and related services are operating, and related services are operating, m) and related services were which reduces traveling distances which reduces traveling distances opened to traffic in July 2016, from the south end of the bridge to from the south end of the bridge to which reduced traveling distances the north end of the bridge from 2.5 the north end of the bridge from 2.5 from the south end of the bridge km to 0.8 km. km to 0.8 km. to the north end of the bridge from 2.5 km to 0.8 km.

18 Appendix 1

Design Performance Indicators and Performance Indicators and Summary Targets (appraisala) Targets (updatedb) Project Achievements The rehabilitated Qinzhou Chiyu The rehabilitated Qinzhou Chiyu road The rehabilitated Qinzhou Chiyu road (2.0 km) and new Nanhegou (2.0 km) and new Nanhegou creek road (2.0 km) and new Nanhegou creek bridge are operating. bridge are operating. creek bridge were opened to traffic in June 2014.

At least three public consultations At least three public consultations Three consultation meetings on with at least 40% women on road with at least 40% women on road road safety design, pedestrian, safety design, pedestrian, and NMT safety design, pedestrian, and NMT and NMT access were held for access. access. 100 resident representatives with 42% women participation. 4. Capacity A 4-year (2011–2014) training plan A 4-year (2013-2016) training plan is The consulting packages for developed and is developed and implemented, developed and implemented, with a capacity development and institutions with a target for 30% female target for 30% female participation, institutional strengthening were strengthened participation, which along with which along with project streamlined during project implementation support, implementation support, enables implementation. A series of enables outputs 1–3 to be outputs 1-3 to be delivered on time, trainings were implemented for delivered on time, within budget, in within budget, in a sustainable capacity building and knowledge a sustainable manner, and to manner, and to prescribed quality transfer during 2012 to 2018 for prescribed quality standards and standards and policies. 398 participants, with 34% female policies. participation, which supported delivery of outputs 1-3.

Road safety audit, emergency Road safety audit, emergency Road safety audit, emergency management, asbestos management, asbestos management, management, asbestos management, and soil erosion and soil erosion training programs management, and soil erosion training programs implemented; implemented. training programs implemented. urban transport planning system operating, municipal parking management system operating, and urban pedestrian and bicycle traffic planning and management system operating. ha=hectare, km = kilometer, NMT = non-motorized transport, m = meter, m2 = square meter, mg/m3 = milligram per cubic meter, NOx = nitrogen oxides, PM10 = particulate matter 10 micrometers or less in diameter, PPMS=project performance management system, SO2 = sulphur dioxide. a Includes targets indicated in the design and monitoring framework of the Report and Recommendation of the President. b Includes revised targets made through a minor change of scope approved by the Asian Development Bank on 9 September 2015. Source: Asian Development Bank.

Appendix 2 19

PROJECT COST AT APPRAISAL AND ACTUAL ($'000)

Appraisal Estimate Actual Foreign Local Foreign Local Item Exchange Currency Total Cost Exchange Currency Total Cost A. Investment Costs 1. Civil Works 11.4 102.3 113.7 14.2 128.1 142.3 a. Heating Network 3.6 32.2 35.7 4.7 42.0 46.7 b. Roads, Bridge, and Flood Control Facilities 7.8 70.2 78.0 9.6 86.0 95.6 2. Mechanical and Equipment 2.3 9.3 11.7 0.0 13.6 13.6 3. Land Acquisition and Resettlement 0.0 41.7 41.7 0.0 31.5 31.5 4. Institutional Strengthening and Capacity Building 0.9 0.6 1.4 0.0 1.0 1.0 5. Survey, Research, Design and Project Management 0.0 11.6 11.6 0.0 8.4 8.4 Subtotal (A) 14.6 165.5 180.1 14.2 182.7 196.9 B. Contingencies 1. Physical 1.0 11.6 12.6 0.0 0.0 0.0 2. Price 0.2 18.1 18.2 0.0 0.0 0.0 Subtotal (B) 1.2 29.7 30.8 0.0 0.0 0.0 C. Financial Charges During Implementation 1. Interest During Construction 4.9 13.4 18.3 4.2 3.0 7.2 2. Commitment Charges 0.4 0.0 0.4 0.4 0.0 0.4 Subtotal (C) 5.3 13.4 18.6 4.6 3.0 7.6 Total (A+B+C) 21.0 208.5 229.6 18.8 185.7 204.5 Note: Numbers may not sum precisely because of rounding. Sources: Asian Development Bank and Tianshui Project Management Office.

20 Appendix 3

PROJECT COST BY FINANCIER

Table A3.1: Project Cost at Appraisal by Financier Asian Development China Tianshui Municipal Total Bank Development Government Cost Bank % of Cost % of Cost % of Cost Item Amount Category Amount Category Amount Category Amount A. Investment Costs 1. Civil Works 81.7 71.8% 13.8 12.1% 18.3 16.1% 113.7 a. Heating Network 19.3 53.9% 2.1 5.8% 14.4 40.4% 35.7 b. Roads, Bridge, and Flood Control Facilities 62.4 80.0% 11.7 15.0% 3.9 5.0% 78.0 2. Mechanical and Equipment 11.7 100.0% 0.0 0.0% 0.0 0.0% 11.7 3. Land Acquisition and Resettlement 0.0 0.0% 33.3 80.0% 8.3 20.0% 41.7 4. Institutional Strengthening and Capacity Building 1.4 100.0% 0.0 0.0% 0.0 0.0% 1.4 5. Survey, Research, Design and Project Management 0.0 0.0% 0.0 0.0% 11.6 100.0% 11.6 Subtotal(A) 94.7 52.6% 47.1 26.1% 38.3 21.3% 180.1 B. Contingencies 1 Physical 0.0 0.0% 3.2 25.0% 9.5 75.0% 12.6 2 Price 0.0 0.0% 4.6 25.0% 13.7 75.0% 18.2 Subtotal(B) 0.0 0.0% 7.7 25.0% 23.1 75.0% 30.8 C. Financial Charges During Implementation 1. Interest During Construction 4.9 26.8% 13.4 73.2% 0.0 0.0% 18.3 2. Commitment Charges 0.4 100.0% 0.0 0.0% 0.0 0.0% 0.4 Subtotal (C) 5.3 28.3% 13.4 71.7% 0.0 0.0% 18.6

Total Project Cost (A+B+C) 100 68.2 61.4 229.6 % Total Project Cost 43.6% 29.7% 26.7% 100.0% Note: Numbers may not sum precisely because of rounding. Sources: Asian Development Bank and Tianshui Project Management Office.

Appendix 3 21

Table A3.2: Project Cost at Completion by Financier

Asian Development China Tianshui Municipal Total Bank Development Government Cost Bank % of Cost % of Cost % of Cost Item Amount Category Amount Category Amount Category Amount A. Investment Costs 1. Civil Works 86.1 60.5% 0.0 0.0% 56.2 39.5% 142.3 a. Heating Network 23.9 51.2% 0.0 0.0% 22.8 48.8% 46.7 b. Roads, Bridge, and Flood Control Facilities 62.2 65.1% 0.0 0.0% 33.4 34.9% 95.6 2. Mechanical and Equipment 6.8 50.0% 0.0 0.0% 6.8 50.0% 13.6 3. Land Acquisition and Resettlement 0.0 0.0% 0.0 0.0% 31.5 100.0% 31.5 4. Institutional Strengthening and Capacity Building 1.0 100.0% 0.0 0.0% 0.0 0.0% 1.0 5. Survey, Research, Design and Project Management 0.0 0.0% 0.0 0.0% 8.4 100.0% 8.4 Subtotal(A) 93.9 47.7% 0.0 0.0% 103.0 52.3% 196.9 B. Contingencies 1 Physical 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 2 Price 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 Subtotal(B) 0.0 0.0% 0.0 0.0% 0.0 0.0% 0.0 C. Financial Charges During Implementation 1. Interest During Construction 4.2 58.3% 0.0 0.0% 3.0 41.7% 7.2 2. Commitment Charges 0.4 100.0% 0.0 0.0% 0.0 0.0% 0.4 Subtotal (C) 4.6 60.5% 0.0 0.0% 3.0 39.5% 7.6

Total Project Cost (A+B+C) 98.5 0.0 106.0 204.5 % Total Project Cost 48.2% 0.0% 51.8% 100.0% Note: Numbers may not sum precisely because of rounding. Sources: Asian Development Bank and Tianshui Project Management Office.

22 Appendix 4

DISBURSEMENT OF ADB LOAN PROCEEDS

Table 4.1: Annual and Cumulative Disbursement of ADB Loan Proceedsa ($ million) Annual Disbursement Cumulative Disbursement Amount Amount Year ($ million) % of Total ($ million) % of Total 2012 12.8 13.0% 12.8 13.0% 2013 14.2 14.4% 27.0 27.4% 2014 21.0 21.3% 48.0 48.7% 2015 13.9 14.1% 61.9 62.8% 2016 12.7 12.9% 74.6 75.7% 2017 8.5 8.6% 83.1 84.4% 2018 16.9 17.2% 100.0 101.5% 2019 -1.5 -1.5% 98.5 100.0% Total 98.5 100.0% ADB = Asian Development Bank. a Includes disbursements to advance accounts. Source: Asian Development Bank.

Figure 4.1: Projection and Cumulative Disbursement of ADB Loan Proceeds ($ million)

120

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0 2011 2012 2013 2014 2015 2016 2017 2018 2019

Cumulative Actual Disbursement Cumulative Projected Disbursement

Appendix 5 23

PROJECTED AND ACTUAL IMPLEMENTATION SCHEDULE Start Finish 2011 2012 2013 2014 2015 2016 2017 2018 Project Component J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D A. DESIGN AND MONITORING FRAMEWORK 1. Qinzhou District Heating 1.1 Design and biding document Jun-12 Jan-12 Jan-14 Jun-14 1.2 Land acquisition and resttlement Jul-12 Dec-12 Jun-12 Jan-12 1.3 Biding and contract award Oct-16 Oct-18 C Dec-16 Aug-18 1.4 Civil works Jan-13 Mar-14 C C C C C C C C C C C C C C C Dec-16 Nov-18 1.5 Equipment Mar-14 Nov-18 Jun-12 Jan-12 1.6 Testing and commissioning/completion Jun-15 Jan-16 Nov-17 Nov-18 1.7 Implement institutional restructuring Jul-12 Jan-12 Jan-16 Jun-16 2. Chenji Roads and Flooding Control Facilities 2.1 Design and biding document Aug-10 Apr-11 Aug-10 Feb-14 2.2 Land acquisition and resttlement Nov-10 Aug-11 Jun-12 Jan-12 2.3 Biding and contract award May-11 Nov-11 C C C C C C C Oct-11 Oct-12 2.4 Civil works Nov-11 Jun-15 C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C May-12 Jul-16 3. Urban Roads and Bridges 3.1 Maiji District New Roads Network 3.1.1 Design and biding document Aug-10 Apr-11 Aug-10 Apr-11 3.1.2 Land acquisition and resttlement Nov-10 Aug-11 Nov-10 Jun-14 3.1.3 Biding and contract award May-11 Nov-11 C C C C C C C Jul-12 Oct-12 3.1.4 Civil works Nov-11 Jun-14 C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C Nov-12 Jun-16 3.2 Shetang Wei River Bridge 3.2.1 Design and biding document Sep-10 Jun-11 Sep-10 Jun-11 3.2.2 Land acquisition and resttlement Nov-10 Aug-11 Nov-10 Aug-11 3.2.3 Biding and contract award Jul-11 Jan-12 C C C C C C C Jul-12 Oct-12 3.2.4 Civil works Feb-12 Dec-13 C C C C C C C C C C C C C C C C C C C C C C C Nov-12 Sep-15 3.3 Shuangqiao Xi River Bridge 3.3.1 Design and biding document Oct-11 Mar-12 Jun-12 Jan-12 3.3.2 Land acquisition and resttlement Apr-12 Sep-12 Jul-13 Sep-14 3.3.3 Biding and contract award Oct-12 Mar-13 C C C C C C Aug-13 Feb-14 3.3.4 Civil works Apr-13 Jun-15 Apr-14 Jun-16

24 Appendix 5

Start Finish 2011 2012 2013 2014 2015 2016 2017 2018 Project Component J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D 3.4 Qinzhou Chiyu Road 3.3.1 Design and biding document Sep-10 Sep-11 Sep-10 Sep-11 3.3.2 Land acquisition and resttlement Sep-10 Sep-11 Sep-10 Apr-13 3.3.3 Biding and contract award Oct-11 Mar-12 C C C C C C Jun-12 Oct-12 3.3.4 Civil works Apr-12 Dec-13 C C C C C C C C C C C C C C C C C C C C C Nov-12 Aug-14 4. Capacity Development and Institutional Strengthening 4.1 Recruit and mobilize consultants Feb-11 Sep-11 Feb-11 Sep-11 4.2 Develop training plan Oct-11 Dec-11 Oct-12 Dec-12 4.3 Conduct training Jan-12 Dec-15 C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C Nov-12 Dec-18 4.4 Develop urban road planning system Oct-11 Dec-13 C C C C C C C C C C C C Dec-13 Feb-14 4.5 Environmental monitoring Jun-11 Jun-16 May-12 Dec-18 4.6 Resettlement monitoring Jun-11 Jun-16 May-12 Dec-18 4.7 PPMS monitoring Jun-11 Jun-16 Nov-12 Dec-18 B MANAGEMENT ACTIVITIES 1 Develop contract package and procurement plan Feb-11 Sep-11 Feb-11 Sep-11 2 Consultant selection procedures Oct-11 Dec-11 Oct-11 Oct-12 3 Environment management plan key activities Jun-11 Jun-16 C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C May-12 Dec-18 4 Gender action plan key activities Jun-11 Jun-16 C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C C May-12 Dec-18 5 Communication strategy key activities Nov-10 Jun-16 Nov-10 Dec-18 6 Annual/mid-term review Oct-11 Jun-16 Jan-13 Dec-18 7 Project completion report Apr-16 Sep-16 Oct-18 Dec-18 Plan Actual Cancel

Appendix 6 25

CHRONOLOGY OF MAIN EVENTS

Date Events 11 Sep 2009 Project preparatory technical assistance approved 14 Sep 2010 Concept paper meeting held 1 Feb 2011 Management review meeting held 25 May 2011 Loan negotiations held 29 Jun 2011 Loan approved 14 May 2012 Loan effectiveness declared 16-21 Dec 2012 Loan inception mission 28 May 2012 First NCB civil works contract signed 28 May 2012 First ICB civil works contract signed 15 Oct 2012 Project implementation consulting service contract singed 19 Nov 2012 First disbursement processed 17-24 Jun 2013 Loan review mission 28 Oct – 5 Nov 2013 Loan midterm review mission 20-24 Oct 2014 Loan review mission 4-6 May 2015 Loan review mission 30 June 2015 Loan administration delegated to PRCM 9 Sep 2015 Minor change of project scope approved 14 March 2016 Loan and project agreements were amended effective 11-15 Apr 2016 Loan review mission 6 Jun 2016 Extension of loan closing date to 31 Dec 2018 approved 31 Dec 2016 Original loan closing date 21-24 Aug 2017 Loan review mission Nov 2017 Commissioning of three heating boilers of the heat source plant 2–5 Jul 2018 Loan review mission 7 Sep 2018 Approval of reallocation of loan proceeds and increase of ADB disbursement percentage 23 Oct 2018 First ICB Goods contract awarded 15 Nov 2018 Qinzhou heating network completed construction 9-14 Dec 2018 Loan review mission 31 Dec 2018 Loan closing 12 Aug 2019 Financial closing of the loan and partial cancellation of loan proceeds 24-29 Nov 2019 Project completion review mission ADB = Asian Development Bank, ICB = international competitive bidding, NCB=national competitive bidding, PRCM=Asian Development Bank People’s Republic of China Resident Mission. Sources: Asian Development Bank and Inner Mongolia Autonomous Region Project Management Office.

26 Appendix 7

CONTRACT AWARDS OF ADB LOAN PROCEEDS

Table 5.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds ($ million) Annual Contract Awards Cumulative Contract Awards Amount Amount Year ($ million) % of Total ($ million) % of Total 2012 49.4 52.6% 49.4 52.6% 2013 4.0 4.3% 53.4 56.9% 2014 10.0 10.6% 63.4 67.5% 2015 0.0 0.0% 63.4 67.5% 2016 5.6 6.0% 69.0 73.5% 2017 15.3 16.3% 84.3 89.8% 2018 14.7 15.7% 99.0 105.4% 2019 -5.1 -5.4% 93.9 100.0% Total 93.9 100.0% ADB = Asian Development Bank. Source: Asian Development Bank.

Figure 5.1: Projection and Cumulative Contract Awards of ADB Loan Proceeds ($ million)

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0 2011 2012 2013 2014 2015 2016 2017 2018 2019

Cumulative Actual CA Cumulative Projected CA

Appendix 8 27

ADB-FINANCED CONTRACT PACKAGES

Contract PCSS Procurement Contract Contract Value ADB Financing Contract Description Supplier Name No. No. Mode Date ($ equivalent) ($ equivalent) Chengji Road Civil Works for China Railway 20 Bureau Group C02 0001 ICB 28-May-12 $11,454,834.92 $9,468,612.17 Sunjiaping Bridge Co. Ltd. Civil Works for Chengji Road Lanzhou Municipal Construction C05 0002 NCB 28-May-12 $9,582,608.85 $7,524,392.65 Xiakou Bridge Group Co. Ltd. Project Implementation China General Consulting & CS1 0003 QCBS 10-Oct-12 $1,203,989.00 $1,001,895.80 Management Investment Co., Ltd Eight Mettalurgical Construction C03 0004 NCB Chengji Road 2 15-Nov-12 $8,190,514.04 $6,219,589.82 Group Co. Ltd. Gansu Xingcheng Construction C04 0005 NCB Chengji Road 3 15-Nov-12 $6,850,387.66 $5,327,773.36 Engineering. Co Ltd Gansu Fourth Construction C06 0006 NCB Maiji Roads 15-Nov-12 $7,913,868.98 $6,239,953.98 Group Co. Ltd. The Fifth Engineering Co. Ltd. C08 0007 NCB Shetang Wei River Bridge 15-Nov-12 $7,582,306.21 $6,431,967.19 CRSG Tianshui Changxing Municipal C09 0008 NCB Chiyu Road Rehabilitation 15-Nov-12 $8,163,989.20 $6,967,725.76 Engineering Co. Ltd. Jiangsu Construction C01 0009 NCB Chengji Road 10-Dec-12 $5,597,274.75 $4,010,498.41 Engineering Group Co., Ltd. Shuangqiao Xi River Bridge No.4 Engineering Corporation C07 0010 ICB 28-Apr-14 $12,678,019.34 $10,025,489.78 Project Limited of CR20G Beijing Tianlutong Technology G2 0011 Shopping Road Sweeper 07-May-16 $82,876.15 $82,876.15 Co., Ltd Hubei Chengli Special G8 0012 Shopping Multi-Function Sprinkler 19-Apr-16 $27,430.84 $27,430.84 Automobile Co., Ltd Primary Heat Pipeline Laying in The No.7 Construction Group CH5 0013 NCB Chengji Road, Huangcheng 09-Dec-16 $6,742,906.79 $4,349,758.97 Share Limited Road Primary Heat Pipeline Laying in Gansu No.1 Installation CH3 0014 NCB 17-Mar-17 $7,921,486.83 $5,100,678.56 Yingchi Road and Chengji Road Engineering Co., Ltd Primary Heat Pipeline in Xihuang Gansu Installation &Construction CH4 0015 NCB 18-Aug-17 $7,066,265.55 $5,729,817.71 West Road Group Corporation Construction and Installation Of Gansu Installation & Construction CH1 0016 NCB 12-Oct-17 $5,507,714.19 $2,679,143.34 46 Heat Exchange Stations Group Corporation Construction and Installation of Lanzhou Municipal Construction CH6 0017 NCB Primary Heat Pipeline in Minshan 02-May-18 $5,437,042.56 $3,025,198.59 Group Co. Ltd. And Xihuang Road Construction and Installation of Gansu Installation & Construction CH7 0018 NCB 25-Jul-18 $6,795,023.37 $2,988,214.59 The Control Center And 30 Heat Group Corpora

28 Appendix 8

Contract PCSS Procurement Contract Contract Value ADB Financing Contract Description Supplier Name No. No. Mode Date ($ equivalent) ($ equivalent) Exchange Stations

Automatic Control and Electrical Lanzhou LS Heat Exchange E1 0019 ICB Equipment for 46 Heat Exchange 23-Oct-18 $6,711,866.44 $6,711,866.44 Equipment Co. Ltd Stations Total $93,912,884.11 ICB=international competitive bidding, NCB=national competitive bidding, QCBS= quality-and cost-based selection. Sources: Asian Development Bank and Tianshui Project Management Office.

Appendix 9 29

GENDER ACTION PLAN EVALUATION1

A. Introduction

1. The project aimed to promote balanced and environmentally sustainable urbanization and improve the living conditions of urban residents in Tianshui municipality in Gansu Province. The expected project outcome was improved heating, transport, and flood control services in Tianshui municipality.

2. The project achieved the targeted outputs including (i) upgrading Qinzhou district's central heating network by decommissioning 194 inefficient coal-fired boilers and increasing district-heating coverage to 15 million square meters (m2); (ii) construction of Chengji road and flood control facilities including two large bridges; (iii) improving urban roads and related facilities by constructing four new roads and developing related services; and (iv) capacity development and institutional strengthening.

3. The project was categorized effective gender mainstreaming based on ADB’s Guidelines for Gender Mainstreaming Categorization of ADB Projects.2 A gender action plan (GAP) was prepared for the project by the project management office (PMO) to facilitate employment opportunities for women, improvement of livelihoods through training, and mitigate possible negative impacts of the project on women due to land acquisition, closing small coal-fired boilers and environmental impacts.

B. Gender Issues

4. Analysis of the survey and focus group discussion data at the project appraisal revealed that women were disproportionately affected by air pollution from inefficient boilers, use of home heating stoves, and the time burden of caring for family members suffering from respiratory illnesses. Women were also largely responsible for paying utility bills and managing the impact of increased costs on household budgets. Improvements to the urban transport network and attention to the needs of women in the planning of public transport, pedestrian, non-motorized transport (NMT) access and road safety programs are expected to provide positive benefits by reducing time burdens, increasing access, mobility and safety.

5. The assessments indicated that women strongly supported the project and anticipated benefits such as an improved living environment, new employment opportunities, traffic safety, and reduced time burdens. Women wanted to participate in consultations on urban infrastructure development and to actively participate in employment and capacity building opportunities. Focus group discussions (FGD) revealed that many women control household utility budgets and are more aware of the impacts of increased costs and opportunities for conservation.

C. Project Gender Features and Achievements

6. The project has positive impacts on women including (i) access to cleaner, safer, and reliable heating system while women are more likely to have higher exposure to pollutants from heating stoves; (ii) reduced domestic chores workload and time spent for space heating; (iii)

1 The report was prepared based on the executing agency’s project completion report and project completion mission findings. 2 ADB. 2012.Guidelines for Gender Mainstreaming Categories of ADB Projects. Manila.

30 Appendix 9 reduced incidence of respiratory diseases related to indoor air pollution; and (v) reduced travel time and increased mobility.

7. The implementation of the GAP enforced women’s participation and consultation to respond women’s demand to participate in the project. 152 (50%) women out of 300 local community representatives 3 were consulted about their views and suggestions on heating supply intervention including water temperature, service hours, heating cost, etc. Overall, 178,596 (48%) women out of 372,073 in total directly benefited from the centralized district heating systems in Qinzhou District through reliable and efficient heating services. The project benefit evaluation survey (BES) showed that the public satisfactory rate of the heating services reached 95%. More female interviewees reported that the air quality was improved, and their family members including children and elders suffered less from the respiratory related diseases. Although there were no official records of the declined incidence of respiratory diseases, it showed that the improved air quality due to the reduced coal consumption and pollutant emissions has significant impact on urban residents’ health and well-being, especially women, children and the poor who are more sensitive and vulnerable to various health risks.

8. According to the survey on affordability and willingness to pay (covering 200 households including five female-headed household) conducted in November 2018, the male and female respondents were 104 (48%) and 96 (52%) respectively. The survey results showed that 100% interviewees were satisfied with the existing heating charge which they believed reasonable and affordable. The results indicated that women had stronger willingness to pay for better heating services than men because they spent more time on household work and they take more responsibilities taking care of children and elders who are more vulnerable to the cold weather in winter. The survey showed that women in the project areas no longer had to spend time for space heating due to the free connection to the centralized district heating services, in which women used to spend an average of 23 minutes prior the project. Most interviewed women mentioned that they enjoyed much comfortable and warmer winter upon the operation of the project. The project reduced time and work burden of women due to the household chores and enabled women to spend more time in childcare, self-development, and other social activities.

9. Six workshops were organized, which involved 92 (38%) women representatives out of the total 240 community representatives to discuss the environmental protection plan of the project areas. Women’s views were taken into account in designing pedestrian, NMT access, streetlights and road safety, etc. 647,136 (48%) women out of 1,348,200 urban residents in total benefited from the urban transport network and improved public transport and mobility through gender-responsive service delivery. The reduced travel time varies from 10 minutes to 55 minutes depending on the travel method and distance. Women benefited from reduced traffic hazards, pedestrian, NMT access and road safety. The BES showed that women now feel more comfortable and safer to go out for social activities with increased accesses, safety and mobility.

10. To raise awareness among project staff, a total of 398 (person-time) people from PMO/ project implementation units were trained, among which 136 (34%) female staff received the capacity building training, including gender equality, safeguards, project management and planning. The PMO assigned two gender focal persons (female) to be responsible for coordination and management of the GAP implementation and reporting.

11. In summary, the gender action plan responded to the social and gender issues identified in the project area during the preparatory phase. As shown in GAP implementation

3 Community representatives were selected from community residential with balanced gender representation.

Appendix 9 31

achievements matrix attached, thirteen activities (100%) were implemented and completed. Eight (100%) quantitative gender related targets were fully achieved. The design and monitoring framework gender indicators’ achievements include (i) 745 (32%) jobs out of 2,364 were provided to local women during the project implementation and 268 (40%) out of 668 permanent jobs were taken by women during the project operation (target 30%); (ii) percentage of households using single-family heating stoves reduced from 28.5% to 8.2%, among which 45 (3%) female-headed households; (iii) all affected formal workers (251) including 35 female workers remained in their current institutions and enterprises without changes in their wage levels; and (iv) three consultation meetings were held on road safety design, pedestrian and NMT access, 42 (42%) women representatives participated in these meetings out of 100 community representatives. The overall implementation of the GAP is assessed successful.

D. Lessons Learned

12. For future projects, the qualitative targets and indicators need to be more specific and measurable, for example, in respect of women’s role in decision-making processes and its impact. Brief explanatory notes for specific indicators/activities in the GAP should be provided/required as footnotes to guide and help the PMO and EA/IAs better understand what are the activities that are considered gender responsive and what are the expected targets, which is significantly important for GAP implementation when the frequent staff shifting is common in many projects, particularly at the early stage of the project implementation. Furthermore, in light of the new criteria used for the gender rating at project completion, and GAP indicators link with Strategy 2030 Operational Plan for Priority 2 (OP2) indicator and report achievement, designing and identification of specific and clear GAP indicators/targets, particularly those that link to OP2 are deemed necessary to respond to and meet the above- mentioned requirements, and also to guide the executing and implementing agencies and relevant entities to successfully implement GAP and achieve project gender results.4

4 ADB. 2019. Strategy 2030 Operational Plan for Priority 2, Accelerating progress in Gender Equality, 2019–2024. Manila.

32 Appendix 9

Gender Action Plan Achievements Matrix1 Project Output Tasks Indicators Achievements Qinzhou district's Facilitate women’s QT1: Number of participants in 300 local community representatives under the improved heating supply upgraded heating participation during public meetings on district were consulted on their opinions and suggestions about heating supply network is operating consultations with the heating supply interventions intervention, of which 152 (50%) participants were women; public on district heating (Sex disaggregated. Target for Women’s views on district heating supply (for example the expectation of supply interventions. women = 30%) water temperature, heating cost and service hour) were considered and action were taken by improving the project design, implementation and Record of women’s views and quality; and actions taken 35 affected female workers (13.9%) out of 125 were consulted with their wage levels, job positions and willingness to be re-employment and major concerns. Conduct gender analysis Affordability analysis includes 178,596 (48%) women out of 372,073 in total, who had access to the on affordability of sex- disaggregated data which centralized heating system were satisfied with the existing heating bills of household heating tariffs is incorporated into subproject CNY21.2 per square meter; and provision of subsidies. reporting Affordability analysis were conducted in 2017 and 2018 through community representatives’ interviews, focus group discussions (FGD) and household Record of actions taken to survey; address gender disparities 39 (49%) local women out of 80 interviewees participated in 2017 survey; According to the survey on affordability and willingness to pay (covering 200 households including five female-headed households) conducted in November 2018, the male and female respondents were 104 (48%) and 96 (52%) respectively; and 27 women out of 48 interviewees participated in FGDs. Based on the survey, 96 interviewed female residents (including 1 female- headed household) who shifted from single-family heating stove to centralized heating system were very satisfied with the quality of heating services which offered reliable and better heating supply without increase of payment. No issues/concerns of affordability were raised during the survey. The provision of the subsidies was made available for people who are under the minimum living guarantee system with an annual CNY460 heating subsidy, which is paid by the Tianshui municipal and Qinzhou district government. Promote the creation of job QT2: Number of employees Under the centralized heating system component: 129 (30%) jobs out of 425 opportunities for women (disaggregated by sex and in total were provided to women during project construction. Female jobs during and after project position. Target for women = included cleaning, cooking, supply truck driver, casher, files keeper, finance implementation, and 30%) management and administration staff given the heavy physical demand of provide appropriate the construction.

1 This matrix was prepared based on the executing agency’s project completion report and project completion mission findings.

Appendix 9 33

Project Output Tasks Indicators Achievements training. Number and kind of outreach 135 (31%) jobs out of 440 in total were taken by women during project activities by gender specialist operation including positions such as heating fee collector, laboratory with contractors and Labor technician, water inspector and environmental sanitation. Bureau Ensure reemployment of QT3: Percentage of affected No affected boiler worker (including 35 female workers out of 251 people) women workers affected by workers shall be reemployed experienced a loss of job and decreased in salary due to the closure of the closure of small boilers. and trained for new positions small boilers. All affected workers were trained and retained in the heat- under the plan (sex exchange stations or remained with the original company at the similar jobs. disaggregated Target=100%) No complaints were received from the affected boiler workers. Ensure that women are QT4: Number of participants 190 (48%) women out of 400 community representatives participated in the included as participating (sex disaggregated. Target = meetings on heating supply plans. members in seminars, 30% women) workshops, and meetings on district heating supply Number of seminars, A total of 10 meetings/workshops were held in heating users’ communities in plans. workshops, meetings and the project district. Women’s specific concerns of heating supply were participants on heating plans collected including the heating cost, heating water temperature, heating (i.e., tariffs, meters, subsidies) capacity, maintenance, and heating fee collection, etc. Chengji road and Facilitate women‘s QT5: Number of consultations Five public consultation meetings with balanced gender representation were flood control facilities participation during and participants (sex held in project areas to understand residents’ concerns of project are operating consultations with the disaggregated. Target for construction and their views of urban road network improvement where 88 general public during public women = 30%) (49%) women representatives out of 180 community representatives Urban roads and hearings, in decision- participated in and were consulted with. bridges are opened to making processes, and in Record of women’s views and traffic and related any local decision-making actions taken Women’s views and concerns were collected in terms of road safety, services are bodies and structures on streetlights, road crosswalk systems, and traffic signals. operating urban road network and Their views were considered in the designing and planning. embankment construction. Ensure that women are QT6: Number of participants 92 (38%) of female out of 240 community representatives participated in included as participating (sex disaggregated. Target = workshops to discuss the environmental protection plan of the project areas. members in seminars, 30% women) workshops, and meetings Six workshops were held in the project communities with a total of 240 conducted to discuss Number of seminars, community representatives’ participated. environmental protection workshops, meetings, and plans of project areas participants These community representatives were selected from residentials who act as community coordinators and facilitators to collect and disseminate residents’ concerns and requests. Require the collection of Sex disaggregated data Collection of the sex disaggregated data were required and included in the sex disaggregated data identified and included in monitoring system and reported regularly in the project progress report with monitoring system limited reporting. Require livelihood training QT7: At least 50% of A total of 52,626 (person-time) affected people were trained in 83 various of women affected by participants in trainings are trainings; 26,418 (person-time) affected women received these trainings,

34 Appendix 9

Project Output Tasks Indicators Achievements resettlement in affected women accounting for 50%. 2 employment skills Livelihood training included agricultural technology and non-farming skills development such as green vegetable cultivation, prevention of crop diseases and pest control, full-film mulching technique, prevention and control of pig diseases, electrician, welder, excavator driving, nursery and other service job such as greening, housekeeping, elderly care etc. Ensure women’s QT8: At least 40% of 42 (42%) women participated in the consultation meetings out of 100 participation in participants are female community representatives in total. consultations on road 3 consultation meetings were held on road safety design, pedestrian and safety design, pedestrian Number and kind of outreach NMT access and women’s views were taken into the project design in terms and non-motorized activities of the streetlights, traffic signals and convenient access. transport (NMT) access Require that the executing At least one staff from Two gender focal persons (female) were assigned to be responsible for agency and implementing executing agency and coordination and management of the GAP implementation. The social agencies have special staff implementing agencies, consultant conducted training on gender and safeguards to project to work on implementation respectively, assigned to management offices (PMOs) and implementing agencies’ (IAs) staff to of the gender action plan manage GAP work promote the gender equality awareness and enhance the project (GAP). The staff shall be implementation in GAP and social development action plan (SDAP). trained on safeguard and gender impacts by consultants. Develop and implement a Training plan with gender A total of 398 (person/time) people from PMO/project implementation units 4-year training plan that targets (PIUs) and relevant staff were trained in project capacity building including has gender targets which gender equality, safeguards, project management and planning, including are monitored in the project Number of beneficiaries 136 (34%) female staff; performance management (disaggregated by sex and job system position) Female staff include those who worked as social and gender focal points, PMO office administrator, finance controller, quality controller etc. Conduct outreach with Number and kind of outreach 138 (person-time) people participated in 7 outreach activities with 45 (33%) female staff to build activities of female participation conducted in communities through propaganda, awareness on training community meetings, and on-the-job training etc. opportunities

2 Detailed information refers to LR evaluation.

Appendix 10 35

ENVIRONMENTAL IMPACT ANALYSIS

A. Environmental Categorization, Screening and Due Diligence

1. The Project includes four components: (i) Qinzhou district heating network (component A)—upgrading of Qinzhou district's central heating network by decommissioning 194 outdated coal-fired boilers, building a 3 kilometers (km) primary heat transmission network, constructing 76 heat-exchange stations, and increasing district-heating coverage by 14.94 million square meters (m2); (ii) Chengji road and flood control facilities (component B)—constructing the 12 km Chengji road and flood control embankment along the Xi river’s north bank, including two large bridges, with related public transportation facilities; (iii) Tianshui urban transport improvements (component C)—improving urban roads and related services especially for public transport and non-motorized transport (NMT) by constructing four new roads with a total length of 4.9 km, rehabilitating one road with a total length of 2.0 km, constructing three bridges, and developing related services, including drainage pipelines and sewers, energy-saving lighting, public green areas, and road-safety features; and (iv) Capacity development and institutional strengthening (component D)—providing support in two areas (a) to Tianshui Project Management Office and implementing agencies to ensure efficient and effective project implementation in compliance with Asian Development Bank (ADB) requirements; and (b) an urban transport capacity development program including holistic urban road design and road safety audit, people-centric urban transport planning, road network management and maintenance, and related training.

2. The project is classified as category A for environment by ADB mainly triggered by the enhanced flood management and district heating components. A consolidated environmental impact assessment (EIA) including environmental management plan (EMP) in line with ADB’s Safeguard Policy Statement (2009) was posted on the ADB website on 20 December 2010. Due to the change of heating source plant during implementation, an environmental due diligence was undertaken in 2013-2014. An updated domestic EIA was approved in May 2014 by the Gansu Provincial Environmental Protection Department. An Addendum to the consolidated EIA including a revised EMP was approved and disclosed in May 2015 by ADB. A set of comprehensive mitigation measures was prepared and carried out during project implementation. The minor scope changes in an intersection form optimization of Chengji road and partial cancellation of Maiji road network due to resettlement difficulty were done in 2014, which did not affect the EMP.

3. The construction of components B and C were completed and put into operation in June 2014 to July 2016, while component A in November 2018. The domestic environmental completion report was prepared in light of new requirements on environmental acceptance procedure introduced since October 2017.

B. Institutional Arrangement and Capacity Training for Environment Management

4. TMG was the executing agency (EA) for the project, and took overall responsibility for environmental management performance, including inspection, monitoring, reporting, and initiating corrective actions or measures. The two implementing agencies (IAs) of project components, i.e. Tianshui Urban Construction and Investment Group Co. Ltd and Tianshui Heating Company (THC), were responsible for relevant requirements of EMP to be part of design drawings and bidding documents, for the supervision of implementation of mitigation measures during construction and operation, and for coordination with external environment monitoring. Contractors, under the guidance of construction supervision companies, were responsible for the implementation of mitigation measures specified in the EMP during the

36 Appendix 10

construction period. The IAs or the operators were responsible for the implementation of mitigation measures during the operation. TPMO engaged China General Consulting and Investment Co., Ltd (CGCI) to provide consulting services in August 2012. The institutional set- up was adequate and the EA and IAs carried execution of tasks for the project environmental management as agreed at project appraisal.

C. Environmental Impacts and Mitigations

5. Soil erosion. The project involved large amount of earthworks: excavating about 759,200 cubic meters (m3) of earth and rocks from cut sections of the alignment, and the filling earth of 1.701 million m3; about 941,000 m3 of borrow earth. Soil erosion impacts were given close attention, as the project involved constructing five bridges and the alignment passed some areas with severe erosion risk (particularly Yanjiahewan and Yangpo sections). A soil erosion protection plan was developed, which included a range of engineering and management related mitigation actions and measures for subgrades and embankments, bridges, disposal sites, borrow sites, and temporary land use areas. Proper engineering measures were carried out at excavation sites, borrow and spoil pits. To ensure the stability of slopes, a range of protection measures were installed suitable to each specific location and condition along the Chengji road. Effective ecological and environmental protection measures were taken, and no major mudslide or landslide impact occurred. The environmental monitoring reports (EMR) and the 2016-2017 soil conservation monitoring results confirmed that the project met relevant requirements and technical specifications with regards to soil conservation.

6. Air quality. During construction, serious attention was given to dust control, particularly at excavation sites. Concrete mixing stations were carefully selected, and their emissions were monitored. Construction trucks were covered to mitigate dust generation. The project completion review mission confirmed that 194 small coal boilers have already been replaced with central heating system. The EMRs and the environmental completion report confirmed that adequate mitigation measures for air quality have been well implemented and ambient air quality monitoring showed that results met the Ambient Air Quality Standards (GB3095-2012).

7. Noise. The EMRs and the environmental completion report confirmed that adequate noise control measures were carried out during construction in various noise sensitive areas based on actual noise monitoring data. The results showed that all met the ambient noise standards both during the day and at the night. It is confirmed that no persistent complaints have been received regarding noise and it is concluded that noise mitigation measures were adequately carried out.

8. Water and wastewater. Extensive water protection measures were developed and carried out to mitigate impacts on water quality, particularly for the construction of bridges. Sediment tanks were installed, and construction wastewater was treated, recycled and reused to minimize any discharge to surface water bodies. Emergency response plans specifying prevention measures for risks of hazardous chemical spills and other types of risks/accidents that may pollute water resources were developed and strictly implemented. The records in EMRs and the environmental completion confirmed that contractors built settling ponds, treated oily wastewater using oil separators, and provided sanitary latrines at workers’ camps to mitigate impacts on local watercourses. After construction, all the temporary wastewater treatment methods were properly uninstalled and the sites were restored. Drainage and runoff collection systems were also installed at the bridges.

9. Asbestos containing materials (ACM) from outdated small boilers. In 2013, THC

Appendix 10 37

engaged a licensed institute (Gansu provincial environmental science research institute) in conducting asbestos risk assessment and preparing asbestos management plan for all 194 small boilers to be affected by the project. The asbestos risk assessment identified 12 boilers involved with ACM. In September 2017, THC engaged a licensed institute, Gansu province hazardous waste disposal center, who safely removed, transported, and finally disposed ACM in compliance with the asbestos management plan, under supervision by Tianshui Environmental Protection Bureau (TEPB).

D. Environmental Monitoring and Reporting

10. The local environment/soil erosion monitoring centers were engaged from 2012 to conduct environmental monitoring for air quality, water quality and noise level as well soil erosion status and they prepared semi-annual environmental quality/soil erosion monitoring reports. For EMP performance monitoring, TPMO engaged CGCI to carry out independent site inspection. A total of 10 semi-annual environmental monitoring reports were prepared and submitted to ADB between 2012 and 2018, which contained engineering progress, environmental management status including ranges of mitigation measures, environmental quality/soil erosion monitoring data analysis, and other independent site inspection records. The semi-annual EMRs confirmed overall compliance with the EMP.

E. Public Consultation and Grievance Addressed

11. During project implementation between 2012–2018, a range of public consultations were carried out to discuss the project impacts including environmental impacts. This included public consultation meetings, government consultation meetings, surveys, interviews, and information disclosure and feedback. During the preparation of the environmental completion report, a total of 200 questionnaires were distributed and collected (100% collection rate). A total of 90% of the respondents expressed their satisfaction on environmental protection works during project implementation and commented on their general satisfaction with the central heating service and road accessibility induced by the project. It is also confirmed that no major complaints were made during the construction and trial operation of the project.

F. EMP Implementation and Project Benefits

12. The environmental protection related costs, including costs for soil erosion protection, amounted to $6.64 million (CNY44.21 million), or 2.93% of the total capital investment of the project. Ongoing environmental monitoring during project operation is estimated at $30,700 per annum (CNY205,000).

13. The Qinzhou district heating network component significantly improved the city’s air quality by using an environmentally friendly central heating system with high-efficiency and advanced emission control equipment that consumed less coal to replace the 194 small, polluting, inefficient coal-fired boilers and thousands of single-family heating stoves. The reduction of single-family stoves as point sources for indoor air pollution had a significant impact on residents’ health and well-being, especially the poor. Component A: (i) increased the urban district heating services area to 14.94 million m2 by 2021; (ii) reduced traffic hazards caused by coal and slag transport vehicles in urban areas; (iii) improved public health and the living environment in areas affected by emissions, noise, and flue dust from small boilers and family heating stoves; (iv) reduced coal consumption by 237,120 tons per annum (t/a), resulting in carbon dioxide (CO2) emissions of 402,600 t/a; and v) brought pollutant emissions of sulphur dioxide (SO2), nitrogen oxides (NOx), and flue dust down by 3,300 t/a, 5,130 t/a and 8,900 t/a,

38 Appendix 10

respectively.

14. The road and flood control components (components B and C) helped the city establish an efficient, safe, and sustainable urban transport system including facilities for public transportation, pedestrian crossings, traffic management and landscaping which will benefit residents and the local economy. The components also contributed to vehicle emission reductions, improved ambient air quality through more efficient motor vehicle operation, and shorter travel times. It is estimated that the total gasoline savings in 20 years (2017-2036) will be about 746.62 million liters, with an average annual gasoline savings of 37.33 million liters, resulting in about 85,859 tons of greenhouse gas (CO2 equivalent) reduction on an annual basis. Component B also reinforced the city’s flood control embankment system to the 100-year standard.1

15. The project presented an opportunity to put sound environmental management systems in place before economic developments begin to take off, and to achieve sustainability in future developments through adequate institutional capacity for environmental management.

G. Conclusion

16. Overall implementation of the project environmental management is satisfactory. Institutional setting and arrangement were appropriate. A range of good engineering and management practices incorporating environmental protection measures were implemented. At the time of the project completion review, there was no pending issues in terms of environmental safeguards, related grievance or non-compliance issues of the project.

1 The analysis on the reduction of the annual seasonal flooding is based on historical river hydrograph and did not consider the computer modelling on the impact of climate change that was done in 2015 at the Key Laboratory on Water and Sediment Sciences, Beijing Normal University when the project was nearing completion.

Appendix 11 39

LAND ACQUISITION AND RESETTLEMENT

A. Background

1. The project comprises three construction components involved with land acquisition and resettlement, including Qinzhou district heating network, Chengji road and flood control facilities, and Tianshui urban transport improvements. Two separate resettlement plans were prepared for roads and bridges component and heating supply component during the project preparation in 2011. The resettlement plans (hereinafter RPs) were updated and disclosed in 2013 and 2014, respectively. According to the updated RPs, the project would permanently acquire 1,054.2 mu 1 of collective-owned land. The amount of building demolition would be 45,341.0 square meters (m2) of residential building and 4,639.0 m2 of business and institutions. As a result, 1,117 households or 5,301 persons would be affected by permanent acquisition, 203 households or 934 persons and 12 enterprises/institutions with 53 employees would be affected by house demolition.

B. Land Acquisition and Resettlement Impacts

2. Land acquisition and resettlement (LAR) began in 2014 and completed by the end of 2018. A total of 915.5 mu land was acquired permanently (decreased by 12.3% compared with the resettlement plan); 20,437.7 m2 of residential structures and 9,193 m2 of non-residential buildings were demolished, declined by 54.9% and increased by 98.2% respectively. Accordingly, 1,017 households and 4,390 persons were affected by permanent land acquisition; 101 households and 408 persons by residential structure demolition; and 12 enterprises with 34 employees by non-residential structure demolition. The detailed LAR impacts of the project are provided in Table A11.1.

Table A11.1: The Comparison of Project Impacts Between the RP and Actual

Heating Supply Road and Bridge Component Total Component Item Unit Variation Variati Variati RP Actual RP Actual RP Actual (%) on (%) on (%)

1. Permanent land 1,029. 14. 1,043. mu 900.8 -12.5% 14.7 0.0% 915.5 -12.3% acquisition 2 7 9

- 2. Building 48,97 29,630. 101 29,630 m2 -39.5% 0.0 100.0 49,980 -40.7% Demolition 0 7 0 .7 %

- 44,33 20,437. 101 20,437 Residential houses m2 -53.9% 0.0 100.0 45,341 -54.9% 1 7 0 .7 %

Business & Institutions m2 4,639 9,193.0 98.2% 0 0 0.0% 4,639 9,193 98.2%

3. Number of HH 1,307 1,110 -15.1% 13 8 -38.5% 1,320 1,118 -15.3% Affected Households

Land acquisition HH 1109 1009 -9.0% 8 8 0.0% 1,117 1,017 -9.0%

1 A mu is a Chinese unit of measurement, the equivalent of 666.67 m2.

40 Appendix 11

Heating Supply Road and Bridge Component Total Component Item Unit Variation Variati Variati RP Actual RP Actual RP Actual (%) on (%) on (%)

- Household Relocation HH 198 101 -49.0% 5 0 100.0 203 101 -50.2% %

4. Number of Unit 12 12 0.0% 0 0 0.0% 12 12 0.0% Business/Institutions

5. Number of Person 6,231 4,855 -22.1% 57 37 -35.1% 6,288 4,892 -22.2% Affected Persons

land acquisition person 5,265 4,353 -17.3% 36 37 2.8% 5,301 4,390 -17.2%

- Household Relocation person 913 468 -48.7% 21 0 100.0 934 468 -49.9% %

Business/Institutions person 53 34 -35.8% 0 0 0.0% 53 34 -35.8%

Note: 1 mu = 666.67 square meters. Plan means the updated resettlement plan.

3. The decrease of permanent land acquisition and residential house demolition was caused by the cancellation of 1.97 kilometers (km) road section of Tainshui urban road network and design adjustment of Chengji Road. The design optimization of the section k0+600 to k1+605 of Chengji road as the program of “road combined bridge” avoided potential risks of landslide and reduced land acquisition and house demolition of 133.2 mu and 6,109.0 m2, respectively. The affected households and affected persons declined as well accordingly. In addition, 10 households near Shuangqiao Bridge were not relocated through design adjustment after consultation. Two small enterprises were totally demolished after consultations with affected units, which led to the significant increase of business house demolition. The layout of heating control center was also changed to avoid the house demolition of 2 households to be affected by heating supply component.

C. Resettlement Policies and Compensation Standard

4. Land compensation standards of the project were formulated according to the integrated land price, while house compensation standards were evaluated by the assessment agency. The land acquisition agreements with the affected villages or affected households were reached on the basis of intensive consultation. All affected villages and people were aware of the adopted compensation rates and were paid all compensation as per the agreement. The actual land compensation rate was CNY84,000-CNY125,000/mu, which is higher than those indicated in the RPs, i.e. CNY72,000-CNY92,160/mu.

5. For 101 affected households by house demolition of road component, cash compensation and resettlement houses were two options. The new resettlement houses were sold to affected persons at the rate of CNY2,270-4,810/m2 with apartment area of 90 m2-120 m2. The compensation for house demolition is determined by evaluation, which ranged CNY5,365-CNY5,474/m2 for main residence. In addition, relocation subsidy was paid based on registered affected persons, which is CNY300/person. Three resettlement sites were provided to affected households, including 59 affected households in Shangshuijiayuan, 10 affected

Appendix 11 41

households in Hexiejiayuan and 28 affected households in Hongyuanxinju. Since most of the affected person’s original houses were larger, they can afford the new houses with compensation. The other 14 affected households chose cash compensation. All relocated households can choose more than one set of houses based on their original house area. Some households have addressed the house needs for their children, while others rent out extra houses for more income. Due to the need of urbanization of Tianshui city, these affected households are no longer mainly engaged in agricultural production, and they can get stable income by non-agricultural production.

D. Livelihood Restoration

6. Normally, the following rehabilitation and income restoration measures were adopted: (i) cash compensation packages for affected people based on acquired land; (ii) social pension and minimum living guarantee to the affected people; (iii) technical training, including welding, car mechanics, cooking, hair-dressing and embroidery; and (iv) service job opportunity, including security guard, greening, cleaning and sanitation work. Many job opportunities have been provided after the completion of road component to improve living standards of affected villagers. In particular, Tianshui Commercial and Trade City and shopping malls built in Yuquan Town and Huaniu Town offered 350 occupations to the affected persons in the project area. Villagers who lost land restored their livelihood through house rental, doing small business, purchasing construction machinery, opening small shops, developing cultural undertakings, developing township enterprises, and purchasing productive tools such as transport vehicles and taxis. The per capita income of affected persons increased from CNY4,952 in 2012 to CNY14,503 in 2018. Meanwhile, agricultural income accounted for the total income decreased from 9.23% in June 2012 to 0.39% in December 2018. The growth rate of household property in 2018 was 235.29% compared with 2012. The sample household income survey is shown in Table A11.4.

Table A11.2: Comparison of Livelihood Restoration Situation

Items Unit June 2012 Dec. 2016 June 2018 Growth Rate

Per capita income CNY/person 4,592 11,526 14,503 315.82%

Per household income CNY/HH 21,813 53,088 66,803 306.26%

Agricultural income portion 9.23% 0.49% 0.39% 4.18%

The growth rate of household property (internet, vehicle, No./person 1.28 2.76 3.00 235.29% mobile)

Source: Sample survey by external monitoring agency.

E. Resettlement Costs

7. The budget of resettlement migration for was CNY296,744,000, and the actual cost is CNY212,254,160, accounting for 71.52% of the total cost, decreased by 28.48% from the plan. The main reasons were house demolition reduced due to the design change of Chengji road and Maiji road network and houses of 10 households in Shuangqiao were not demolished. In addition, the house demolition induced by heating supply component was avoided the rough design adjustment. This project resettlement funds have been raised by TUCIGC and Tianshui Xinyuan Heating Co, Ltd. The funds were provided in time, which met the requirements of

42 Appendix 11

engineering construction.

Table A11.3: Resettlement Cost Comparison Unit: CNY10,000 Project Component Planned Actual Ratio

Road and Bridge 29,041.9 20,674.1 71.19% District Heating 632.53 551.1 100.00%

Total 29,674.4 21,306.6 71.80%

F. Organizational Arrangement

8. Tianshui Qinzhou House Demolition and Compensation Service Center is responsible for house demolition of Road Construction Subcomponents. Tianshui Xinyuan Heating Co, Ltd. has one staff in charge of LAR implementation. Staff from each subcomponent resettlement unit took the lead in coordinating the planning, implementation, financing, and monitoring of LAR. They worked closely with village and street officials, land administration bureaus, and house demolition offices, and were responsible for supervising and monitoring resettlement (e.g., delivery of entitlements, selection of new housing sites, and restoration of incomes, among other economic measures). The institutional arrangements for LAR were well organized and efficient, and the staff responsible for implementation were well trained.

G. Monitoring and Evaluation

9. School of Economics and Management, Tongji University has been engaged as independent monitoring and evaluation agency and finished 12 monitoring and evaluation reports. At the same time, Tianshui ADB Project Management Office, IA (TUCIGC, Tianshui Xinyuan Heating Co, Ltd.) established internal monitoring network from township to village. Internal resettlement monitoring was included in the project progress report by the implementation support consultants between 2014 and June 2018.

H. Participation and Information Disclosure

10. TUCIGC and Tianshui Xinyuan Heating Co, Ltd. paid great attention to participation and information disclosure. Policies concerning LAR were publicized through the combination of modern media such as broadcast television and traditional promotion methods such as putting up propaga slogan, which received good effects.

11. During implementation, many consultation meetings were held with local governments, village and street committees, and representatives of affected households to discuss issues such as (i) the selection of relocation sites, (ii) the distribution and use of community compensation funds, and (iii) compensation for and rebuilding of demolished community facilities. To ensure that the affected persons could obtain redress for grievances related to any aspect of LAR, detailed procedures for this purpose that were included in the resettlement plans, were instituted. Since the entire resettlement and rehabilitation program was carried out with the participation of the affected persons, no major grievances arose during implementation.

Appendix 11 43

I. Conclusions and Suggestions

12. Generally, project LAR was implemented successfully in compliance with national and local regulations, resettlement plans, loan covenants, and ADB’s Safeguard Policy Statement (2009). In particular, LAR impacts were minimized through the optimization of construction design. Active involvement of affected persons through the extensive participatory program and consultation procedures were conducted. Most affected persons now enjoy higher incomes, easy access to public services, and more employment opportunities. The Monitoring and Evaluation completion report concluded that the incomes of the affected persons had been restored.

44 Appendix 12

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Reference in Loan Covenant Agreement Status of Compliance

(a) The Borrower shall, through GPG, cause TMG to carry LA, Art. IV, Complied with. out the Project with due diligence and efficiency and in Section 4.01 conformity with sound applicable technical, financial, business, and development practices. (b) In the carrying out of the Project and operation of the Project facilities, the Borrower shall perform, or cause to be performed, all obligations set forth in Schedule 5 to this Loan Agreement and the Schedule to the Project Agreement.

The Borrower shall, through GPG, cause TMG to make LA, Art. IV, Complied with. available, promptly as needed, and the funds, facilities, Section 4.02 services, land and other resources, as required, in addition to the proceeds of the Loan, for the carrying out of the Project.

The Borrower shall ensure that the activities of its LA, Art. IV, Complied with. departments and agencies with respect to the carrying out Section 4.03 of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

The Borrower shall take all action which shall be necessary LA, Art. IV, Complied with. on its part to enable TMG, through GPG, to perform its Section 4.04 obligations under the Project Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

Implementation Arrangements LA Sch. 5, Complied with. PAM was carried out The Borrower shall, through GPG, cause TMG to ensure para. 1; PA, as a handbook during project that the Project is implemented in accordance with the Sch., para. 1 implementation. Project detailed arrangements set forth in the PAM. Any implementation was in accordance subsequent change to the PAM shall become effective only with the arrangements in the PAM. A after approval of such change by GPG, TMG and ADB. In minor change of project scope and the event of any discrepancy between the PAM and this two-year extension of loan closing Loan Agreement, the provisions of this Loan Agreement date were approved in 2015 and shall prevail. 2016, respectively.

Counterpart Financing LA Sch. 5, Complied with. TMG provided all The Borrower shall, through GPG, cause TMG to ensure para. 2 counterpart funds in a timely manner that (i) all counterpart funds are made available to THC and and prepared the funds for the TUCIC in a timely manner; and (ii) operation and operation and maintenance of the maintenance of all Project facilities is fully funded. project facilities. TMG has invested about CNY200 million for the Tianshui heating source plant to supply heat for the project heating network.

Implementation Arrangements PA, Sch.: Complied with. GPG and TMG shall ensure that the Project is implemented Execution of in accordance with the detailed arrangements set forth in Project; the PAM. Any subsequent change to the PAM shall Financial become effective only after approval of such change by Matters, para. GPG, TMG and ADB. In the event of any discrepancy 1 between the PAM and this Project Agreement, the provisions of this Project Agreement shall prevail.

Appendix 12 45

Counterpart Financing PA, Sch.: Complied with. TMG shall cause the Implementing Agencies to provide Execution of counterpart funding in a timely manner, including any Project; additional counterpart funding required for any shortfall of Financial funds or cost overruns, and costs for the operation and Matters, para. maintenance of the Project facilities. 2

Tariffs and Cost Recovery PA, Sch.: Complied with. TMG has caused TMG shall cause THC to develop and implement a phase Execution of THC to develop and implement a plan to achieve full cost recovery of heating services in Project; phase plan to achieve full cost accordance with the respective provisions in the PAM. Financial recovery of heating services, and the Matters, para. heating tariff increase by 2020 is 3 expected.

Financial Management PA, Sch.: Not complied with. Both ratios were TMG shall ensure that THC achieves and maintains from Execution of not complied with as of 2019. With the second year of full operation of the new district heating Project; the proposed heating tariff increase system (i) a debt-equity ratio of not more than 70:30; (ii) a Financial by 2020 and full operation of the debt service coverage ratio of not less than 1.2. Matters, para. new district system by 2021, the 4 situation is expected to improve.

TMG and the Implementing Agencies shall establish and PA, Sch.: Complied with. Separate project maintain sound financial management systems in Execution of accounts were established since accordance with ADB's Guidelines on the Financial Project; 2013 and timely settlement were Management and Analysis of Projects, including the Financial made. establishment of separate project accounts and the Matters, para. maintenance of minimum balances to ensure smooth cash 5 flow and the timely settlement of project construction liabilities and future debt servicing.

Urban Transport PA, Sch.: Complied with. Public transport and TMG shall cause TUCIC to cooperate with all relevant Execution of traffic safety issues have been fully agencies to promote public transport and NMT, and traffic Project; considered in design documents. safety provisions for all roads and bridges constructed Financial This was further addressed under under the Project, including the provision of public transport Matters, para. holistic urban road design and road and NMT, adequate traffic and safety signage, signal 6 safety audit. lamps, median separators, traffic control and other necessary facilities. TMG shall conduct holistic urban road design which nurtures public transport and NMT services, and shall coordinate all agencies concerned to improve utility management along urban roads. TMG shall also cause TUCIC to ensure that traffic safety education activities are conducted through radio and television broadcast and traffic safety booklets to enhance the local awareness of traffic safety.

TMG shall (a) coordinate urban transport planning PA, Sch.: Complied with. TUCIC and THC improvements with all agencies concerned, (b) assign Execution of have coordinated with the Qinzhou responsibilities to agencies concerned, (c) coordinate Project; Reform and Development urban transport planning and management including sub- Financial Committee and Planning planning and management systems, (d) discuss policies Matters, para. Department. and regulations, and (e) establish measures to implement 7 proposed coordinated urban transport planning and management.

TMG shall prepare and implement a sustainable road and PA, Sch.: Complied with. Chiyu road, Chenji bridge maintenance program in accordance with the Execution of road, Maiji road network, Shetang, respective provision in the PAM to ensure sound and Project; Xiakou, Sunjiaping bridge sustainable operations of roads and bridges under the Financial maintenance guidelines have been Project. Matters, para. done. The responsibility of operation 8 and maintenance for all roads and bridges were transferred to the

46 Appendix 12

Tianshui Municipal Management Bureau.

Environment PA, Sch.: Complied with. PRC’s environmental TMG shall cause each Implementing Agency to construct, Execution of laws and regulations, ADB’s operate, maintain, and monitor the project facilities in strict Project; Safeguard Policy Statement (2009) conformity with (i) the Borrower's all applicable laws and Financial were complied with. All regulations, including national, provincial, and municipal Matters, para. environmental mitigation and laws and regulations and standards on environmental 9 monitoring measures have been protection, district heating, health, labor, and occupational incorporated into the design and safety, and ADB's Safeguard Policy Statement; and (ii) all bidding documents and construction environmental mitigation and monitoring measures detailed contracts. in EIAs, Project EIA and EMP under the guidance of TEPB or other designated environmental monitoring centers. Environmental protection costs have TMG shall cause the Implementing Agencies to incorporate been identified and special costs for such mitigation and monitoring measures into the design appropriate environmental protection and bidding documents and construction contracts. and pollution prevention have been guaranteed. TMG shall ensure that facilities associated with the Project PA, Sch.: Complied with. The associated are constructed, operated, maintained, and monitored in Execution of facility of CHP was cancelled. The strict conformity with (a) all applicable laws and regulations, Project; domestic EIA report was prepared in including national, provincial, and municipal laws and Financial accordance with PRC environmental regulations and standards on environmental protection, Matters, para. regulations. An EMP including district heating, health, labor, and occupational safety; and 10 environmental monitoring program (b) all environmental mitigation and monitoring measures was developed, and an detailed in the applicable environmental impact environmental due diligence review assessments for the associated facilities under the was undertaken correspondingly in guidance of the TEPB or other designated environmental accordance with ADB’s Safeguard monitoring centers. Policy Statement (2009). The changes in the associated facility are reflected in the revised EMP of October 2013, which has been disclosed on ADB’s website on January 2014.

TMG shall cause the Implementing Agencies to ensure that PA, Sch.: Complied with. EMP was sufficient resources and fulltime personnel are provided in Execution of implemented, monitored, and monitoring EMP implementation, under the guidance and Project; reported. A grievance redress supervision of the TEPB or other environmental monitoring Financial mechanism was established and centers. TMG, through PMO, shall submit to ADB, the EMP Matters, para. operational. progress reports and information on Project implementation 11 and the environmental performance of the Works contractors, the Implementing Agencies and the loan implementation environmental consultants. These reports shall include (a) semiannual environmental performance reports on EMP implementation, and (b) environmental compliance monitoring and audit report of the completion of each major component. TMG shall ensure that ADB may request that further environmental mitigation actions be taken, as deemed necessary, and may determine further mitigation measures for different stages, if necessary. TMG shall establish a grievance review mechanism as provided in the EMPs to receive affected peoples' concerns, complaints, and grievances about the Project's environmental impacts.

In response to requirements under ADB's Safeguard Policy PA, Sch.: Complied with. 10 semi-annual Statement, the environment performance of the Project Execution of EMRs were submitted to ADB. shall be verified by an external monitor, which will review all Project; environment reports, including internal and compliance Financial monitoring reports and the semi-annual environment Matters, para. performance report, and prepare a semi-annual 12

Appendix 12 47 environment monitoring verification report. The report shall confirm the Project's compliance with the EMP, the conditions to the issuance of the environmental clearance and the Borrower's legislated standards, and shall identify any environment-related implementation issues and necessary corrective actions.

TMG, through PMO, shall ensure that the capacity-building PA, Sch.: Complied with. From October 2012, program described in the EMP is implemented as planned Execution of the consultants provided 10 trainings from June 2011 until physical completion of the Project. Project; for the EMP in accordance with the Financial project training plan. Matters, para. 13

TMG shall ensure that the deconstruction and disposal of PA, Sch.: Complied with. old coal-fired boilers and single-family heating stoves, as Execution of well as the pedestrian bridge under the Project, follows Project; national regulations on disposal of construction waste, and Financial are done with approval and supervision by TEPB. Matters, para. 14

In case that presence of asbestos is identified by the PA, Sch.: Complied with. In 2013, THC asbestos risk assessment, TMG shall ensure that an Execution of engaged a licensed institute in asbestos management plan is developed for all affected Project; conducting asbestos risk boiler houses. TMG shall cause THC to ensure that the Financial assessment and preparing asbestos contractors receive adequate training on asbestos Matters, para. management plan for all 194 small management, occupational health and safety, and that the 15 boilers to be affected by the Project. rehabilitation or deconstruction of asbestos containing The asbestos risk assessment boiler houses is conducted and supervised in conformity identified 12 boilers involved with with the ADB approved asbestos management plans. asbestos containing materials. In September 2017, THC engaged a licensed institute that safely removed, transported, and finally disposed asbestos containing materials in compliance with the asbestos management plan, under supervision by Tianshui Environmental Protection.

TMG shall engage an expert geological team to conduct a PA, Sch.: Complied with. Gansu Zhongjian thorough soil condition evaluation along the Chengji Road Execution of Municipal Engineering Investigation and delineate the areas that have potential risks for Project; Design Institute, as a qualified mudslides before project implementation. Based on the Financial institution, did the geotechnical evaluation results, TMG shall develop a detailed land use Matters, para. investigation including soil condition. plan for the entire area between the Xi River and Beishan 16 In addition, the monographic study Mountain. TMG shall ensure that areas with high potential on Xiaoyanzhai, Yanji Village and risk of mudslides are clearly defined and marked as a non- Yangpo was done. Tianshui Land urban development zone. Resource Bureau attended the expert review meeting.

TMG shall ensure that a mudslide monitoring system is PA, Sch.: Being complied with. The installed in the Beishan Mountain to record rainfall, surface Execution of geotechnical survey conducted water flow, unusual noise, earth cracks, deformation and Project; between Chengji road and Beishan movement. TMG shall also ensure that an emergency Financial Mountain concluded that the area is response plan is developed and implemented to respond to Matters, para. generally stable and not prone to any possible mudslides. 17 mudslide or landslides. However, two areas were identified with more elevated risk (Yangpo, Yangjiahewan). The mudslide monitoring plan was prepared in February 2014 for implementation prior to rainy season (July to

48 Appendix 12

September). Meanwhile, the contractors conducted irregular on- site observation. In January 2016, TUCIC informed that the relevant constructors undertook mudslide monitoring during construction stage. TMG shall continue to use the monitoring system to respond to any possible mudslides in future 20 years.

TMG shall ensure that the hydrological monitoring stations PA, Sch.: Complied with. The hydrological in Tianshui, Nanhechuan and Beidao regularly monitor the Execution of monitoring data of 2013 is available. Xi River's and Wei River's hydrology, river bed morphology Project; The rainfall monitoring station under and sediment transport, and share the monitoring data with Financial TUCIC monitors rainfall in Tianshui PMO. Based on such monitoring data, PMO shall assess Matters, para. city. Further Tianshui Flood the risks to and potential impacts on, the safety of affected 18 Prevention Office under TWRB communities during construction and operation and shall monitors the hydrological status of Xi establish preventive measures and plans to address them River and Wei River. Once in a manner commensurate with the identified risks and unexpected emergency occurs, impacts. Tianshui Flood Prevention Office assesses the potential impacts and risks, also notice PMO and other relevant agencies if required.

Land Acquisition and Resettlement PA, Sch.: Complied with. (a) All land and TMG shall ensure and cause the Implementing Agencies to Execution of rights-of-way required by the Project ensure that (a) all land and rights-of-way required by the Project; are made available in a timely Project are made available in a timely manner and any land Financial manner and any land acquisition acquisition under the Project is implemented in accordance Matters, para. under the Project is implemented in with the RPs, all applicable laws and regulations, and 19 accordance with the RPs, all ADB's Safeguard Policy Statement; (b) the RPs are applicable laws and regulations, and updated based on the detailed design and detailed ADB’s Safeguard Policy Statement. measurement survey and submitted to ADB for approval Being complied with, the completed prior to award of civil works contract; (c) such updated RPs covenants have been complied. (b) are (i) disclosed to the relevant Affected Persons in The RPs were updated based on the accordance with ADB's disclosure requirements applicable detailed design and detailed for resettlement-related activities; and (ii) implemented measurement survey and submitted efficiently in accordance with its terms, all applicable laws to ADB for approval prior to award of and regulations, and ADB's Safeguard Policy Statement; civil works contract. (d) ADB is promptly advised of any new project activity that (c) Such updated RPs were updated has resettlement impacts and, in such circumstances, and approved by ADB. (d) ADB was submit a revised RP to ADB for approval; and (e) all promptly advised of any new project Affected Persons are consulted and given adequate activity that has resettlement opportunity to participate in resettlement planning and impacts. The due diligence report on implementation to enhance, or at least restore, the the associated project component of livelihoods of all Affected Persons in real terms relative to the new Heat Source Plant was pre-project levels, and to improve the standards of living of completed. (e) All affected persons the poor and other vulnerable groups. were consulted and given adequate opportunity to participate in resettlement planning and implementation to enhance, or at least restore, the livelihoods of all affected persons in real terms relative to pre-project levels, and to improve the standards of living of the poor and other vulnerable groups. The productivity and living standards of affected persons have shown no negative impact by external monitoring.

Appendix 12 49

TMG shall ensure and cause Implementing Agencies to PA, Sch.: Complied with. (a) Counterpart funds ensure that (a) counterpart funds are provided on a timely Execution of were provided on a timely basis for basis for land acquisition and resettlement activities, and Project; land acquisition and resettlement any obligations in excess of resettlement plan budget Financial activities, and any obligations excess estimates are met; (b) compensation and resettlement Matters, para. of resettlement plan budget assistance is given to Affected Persons prior to 20 estimates were met. (b) dispossession and displacement to ensure that the Compensation and resettlement Affected Persons will be at least as well off as they would assistance are given to affected have been in the absence of the project; (c) adequate staff persons prior to dispossession and and resources are committed to resettlement monitoring displacement to ensure that the and supervision; (d) the Implementing Agencies report affected persons were at least as resettlement implementation to TMG and ADB through well off as they would have been in semiannual progress reports, a resettlement completion the absence of the project; Internal report, and a project completion report; and (e) an and external monitoring revealed no independent monitoring agency, acceptable to ADB, is outstanding issues. (c) Adequate engaged to carry out monitoring and evaluation, including staff and resources are committed to data disaggregated by gender where applicable, and resettlement monitoring and forward semiannual reports to ADB during resettlement supervision; (d) The implementing implementation and annually for 2 years after completion of agencies report resettlement resettlement. implementation to TMG and ADB through semiannual progress reports, a resettlement completion report, and a project completion report. (e) an independent monitoring agency, acceptable to ADB, was engaged to carry out monitoring and evaluation, including data disaggregated by gender where applicable, and forward semiannual reports to ADB during resettlement implementation and annually for 2 years after completion of resettlement activities. Shanghai Yiji Construction and Engineering Co. LTD. was conducting the external monitoring on resettlement. External monitoring reports on resettlement and land acquisition have been submitted in a timely manner. 12 resettlement monitoring reports were submitted to ADB.

Works contracts shall have provisions that (a) Works PA, Sch.: Complied with. Works contractor contractor specifications include requirements to comply Execution of specifications included requirements with the plans and entitlements for permanent and Project; to comply with the plans and temporary impacts to Affected Persons, and (b) contractors Financial entitlements for permanent and are supervised to ensure compliance with requirements of Matters, para. temporary impacts to affected the plans, applicable laws and regulations, and ADB's 21 persons. Complied with. During Safeguard Policy Statement. TMG shall establish a construction phase, the rights are grievance review mechanism as provided in the RPs to protected for affected persons. receive and facilitate resolution of Affected Persons' Issues raised from complaints have concerns, complaints, and grievances about the Project's been resolved. Contractors were land acquisition and resettlement impacts. supervised to ensure compliance with requirements of the plans, applicable laws and regulations, and ADB’s Safeguard Policy Statement. TMG established a grievance review mechanism as provided in the RPs to receive and facilitate resolution of affected persons’ concerns, complaints, and grievances about the Project's land acquisition and

50 Appendix 12

resettlement impacts. Contractors had the grievance review mechanism in force.

Gender and Other Social Matters PA, Sch.: Complied with. PIAs implemented in TMG shall cause the Implementing Agencies to implement Execution of full the Gender Action Plan and in full the Gender Action Plan as agreed for the Project. In Project; ensured compliance. particular, TMG shall ensure that: (a) women participate in Financial decision-making processes during consultations with the Matters, para. general public, and in any local decision-making bodies 22 and structures; (b) where appropriate, a gender sensitive approach is taken when analyzing affordability of household heating tariffs and subsidies; (c) job opportunities for women are prioritized during and after project implementation, and women are provided with appropriate training; (d) female workers affected by closure of small boilers are reemployed; (e) women are included as participating members in project-related seminars, workshops, and meetings; (f) sex disaggregated data are collected, where appropriate; (g) there is women participation and consultation during pedestrian and non- motor travel access studies; and (h) TMG and Implementing Agencies assign suitable staff to work on implementation of the Gender Action Plan. The staff shall be trained on safeguard and gender impacts by the Project implementation consultants. TMG shall also ensure that PMO and the Implementing Agencies monitor the Project's impacts on women during project implementation and report them in the Project performance monitoring system.

TMG shall cause the Implementing Agencies to implement PA, Sch.: Complied with. PIAs implemented in a timely manner the Social Development Action Plan as Execution of the Social Development Action Plan agreed for the Project, including (a) actions to enhance Project; and ensured compliance. local employment for construction work and other services; Financial (b) actions to control HIV/AIDS and sexually transmitted Matters, para. infections; (c) activities to protect local communities from 23 construction disturbances and ensure safe construction practices; (d) livelihood training to assist income recovery for people affected by land acquisition and resettlement; (e) tourism promotion program; and (f) promoting non-farming employment.

TMG shall cause Implementing Agencies to ensure that PA, Sch.: Complied with. PIAs ensured sound sound employment practices will be specified in the bidding Execution of employment practices. document for Works contracts in accordance with the Project; respective provisions in the PAM. Financial Matters, para. 24

TMG shall ensure and cause THC to ensure that (a) the PA, Sch.: Complied with. (a) The Labor Labor Re-employment Plan is implemented in a timely Execution of Reemployment Plan was manner as agreed with ADB; (b) adequate staff, resources Project; implemented in a timely manner as and budget are committed for monitoring and supervision Financial agreed with ADB. (b) Adequate staff, of the labor re-employment plan; and (c) implementation of Matters, para. resources and budget were the labor re-employment plan is reported to TMG and ADB 25 committed for monitoring and through semiannual progress reports, Project completion supervision of the labor re- reports and semi-annual resettlement external monitoring employment plan. The labor program reports. had been largely revised due to the change of project scope where the number of affected workers had been identified, existing status of affected workers had been assessed

Appendix 12 51

and labor re-employment plan and schedule had been developed. (c) Implementation of the labor re- employment plan was reported to TMG and ADB through semiannual progress reports, project completion reports, and semi-annual resettlement external monitoring reports. The priority of new job positions of heating cashier and laboratory technicians were provided for women worker. Some positions of automatic control were also provided for those women having relatively higher education level.

Public Awareness PA, Sch.: Complied with. TMG has caused the TMG shall cause the Implementing Agencies to undertake Execution of PIAs to undertake public awareness public awareness campaigns through information Project; campaigns though information disclosure, education and consultation on the Project and Financial disclosure, education and its benefits, including but not limited to information related Matters, para. consultation on the project and its to the PRs, EMPs, Gender Action Plan and Social 26 benefits, including but not limited to Development Action Plan under the Project. information in the RP, EMPs, Gender Action Plan and Social Action Plan under the Project.

District Heating PA, Sch.: Complied with. THC completed all TMG shall cause TUC to ensure that heating distribution Execution of the works. systems to individual end-users are established, operated Project; and metered in a manner that would minimize any Financial unaccounted-for-heat supplies once the heating network Matters, para. under the project has been constructed and is in operation. 27

Governance and Anticorruption PA, Sch.: Complied with. GPG and TMG GPG and TMG (a) acknowledge ADB's right to investigate, Execution of followed relevant requirements and directly or through its agents, any alleged corrupt, Project; ensure compliance. fraudulent, collusive or coercive practices relating to the Financial Project; and (b) agree to cooperate, and shall cause the Matters, para. Project Executing Agency, and all other government 28 offices, organizations and entities involved in implementing the project to cooperate, fully with any such investigation and to extend all necessary assistance, including providing access to all relevant books and records, as may be necessary for the satisfactory completion of any such investigation. In particular, GPG and TMG shall ensure that (a) periodic inspections of the project contractors' activities related to fund withdrawals and settlements are carried out; (b) relevant provisions of ADB's Anticorruption Policy (1998, as amended to date) are included in all bidding documents for the project; and (c) contracts, financed under the project, include provisions specifying the right of ADB to audit and examine the records and accounts of TMG, TUCIC, THC, PMO, contractors, suppliers, consultants, and other service providers as they relate to the project.

In particular, TMG shall undertake the following PA, Sch.: Complied with. TMG implemented anticorruption actions: (a) to maintain the operation of a Execution of the anticorruption actions. supervisory body to prevent undue interference in business Project; practices with adequate resources made available for its Financial effective operation; (b) to involve the agencies responsible Matters, para. for oversight of bidding processes and supervision of 29

52 Appendix 12 construction to enhance construction quality control; (c) to undertake briefing between PMO and the Prosecutor's Office on a regular basis to share information on or warnings about any corrupt practices detected; (d) to introduce a dual-signing system in which the civil works contract winner also signs an anticorruption contract with the employer; and (e) to periodically inspect the contractor's activities related to fund withdrawals and settlements.

Project Performance Monitoring PA, Sch.: Complied with. With the project PMO shall be responsible for monitoring and reporting on Execution of implementation consultant's project performance. At the start of project implementation, Project; assistance, project performance PMO and Implementing Agencies, with the Project Financial monitoring system was established, implementation consultant's assistance, shall develop Matters, para. and TPMO and PIAs monitored and integrated project performance monitoring system 30 reported project performance procedures to generate data systematically on the inputs accordingly. and outputs of the components, as well as the indicators to be used to measure the project's impact and outcome taking into account the components' scope. Disaggregated baseline data for output and outcome indicators gathered during project processing shall be updated and reported semiannually through TMG's semiannual progress reports and after each ADB review mission. The PMO shall collect the data, calculate the indicators, analyze the results, and prepare a brief report describing the extent to which the project is generating the intended outputs and outcomes, as well as the overall impact on Tianshui municipality.

(a) GPG and TMG shall carry out the Project with due PA, Art. II, Complied with. GPG and TMG diligence and efficiency, and in conformity with sound Section 2.01 carried out the Project with due administrative, financial, engineering, environmental and diligence and efficiency, and in urban development practices. (b) In the carrying out of the conformity with sound practices. Project and operation of the Project facilities, TMG shall TMG performed all obligations set perform all obligations set forth in the Loan Agreement to forth in the Schedule of the Project the extent that they are applicable to TMG and all Agreement. obligations set forth in the Schedule to this Project Agreement.

TMG shall make available, promptly as needed, the funds, PA, Art. II, Complied with. TMG made available, facilities, services, equipment, land and other resources Section 2.02 promptly as need, the funds, which are required, in addition to the proceeds of the Loan, facilities, services, equipment, land for the carrying out of the Project. and other resources which were required, in addition to the proceeds of the Loan, to carry out the Project in time.

(a) In the carrying out of the Project, TMG shall employ PA, Art. II, Complied with. In the carrying out of competent and qualified consultants and contractors Section 2.03 the Project, TMG has employed financed under the Loan proceeds, acceptable to ADB, to competent and qualified consultant an extent and upon terms and conditions satisfactory to and contractors financed under the ADB. (b) Except as ADB may otherwise agree, all Goods, loan proceeds, acceptable to ADB, Works and Consulting Services to be financed out of the to an extent and upon terms and proceeds of the Loan shall be procured in accordance with conditions satisfactory to ADB. All the provisions of Schedule 4 to the Loan Agreement. ADB Goods, Works and Consulting may refuse to finance a contract where Goods, Works or Services financed out of the loan Consulting Services have not been procured under proceeds were procured in procedures substantially in accordance with those agreed accordance with the provision of between the Borrower and ADB or where the terms and Schedule 4 to the Loan Agreement. conditions of the contract are not satisfactory to ADB.

TMG shall carry out the Project in accordance with plans, PA, Art. II, Complied with. TMG has carried out

Appendix 12 53 design standards, specifications, work schedules and Section 2.04 the Project in accordance with plans, construction methods acceptable to ADB. TMG shall design standards, specifications, furnish, or cause to be furnished, to ADB, promptly after work schedules and construction their preparation, such plans, design standards, methods acceptable to ADB. In each specifications and work schedules, and any material contract bid document, the modifications subsequently made therein, in such detail as specification clauses have been ADB shall reasonably request. main context.

(a) TMG shall take out and maintain with responsible PA, Art. II, Complied with. TMG required that insurers, or make other arrangements satisfactory to ADB Section 2.05 each contractor insured for each for, insurance of Project facilities to such extent and against Project facilities during the such risks and in such amounts as shall be consistent with construction duration in consistent sound practice. (b) Without limiting the generality of the with sound practice. foregoing, TMG undertakes to insure, or cause to be . insured, the Goods to be imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods.

GPG and TMG shall maintain, or cause the Implementing PA, Art. II, Complied with. GPG and TMG has Agencies to maintain, records and accounts adequate to Section 2.06 required the IAs to maintain these identify the Goods, Works and Consulting Services and records. IAs has established the other items of expenditure financed out of the proceeds of Financial Management regular to the Loan, to disclose the use thereof in the Project, to collect and maintain the Documents. record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

(a) ADB, GPG and TMG shall cooperate fully to ensure that PA, Art. II, Complied with. ADB, GPG and TMG the purposes of the loan will be accomplished. (b) GPG Section 2.07 cooperated well to have ensured that and TMG shall promptly inform ADB of any condition which the purpose of the loan has been interferes with, or threatens to interfere with, the progress accomplished. of the Project. The performance of its obligations under this Project Agreement or the Subsidiary Loan Agreement, or the accomplishment of the purposes of the Loan. (c) ADB and TMG shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, TMG and the Loan.

(a) TMG shall furnish to ADB all such reports and PA, Art. II, Complied with. TMG provided information as ADB shall reasonably request concerning (i) Section 2.08 information and reports timely as the Loan and the expenditure of the proceeds thereof; (ii) needed. the Goods, Works and Consulting Services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of TMG relating to the Project; and (v) any other matters relating to the purposes of the Loan. (b) Without limiting the generality of the foregoing, TMG shall furnish to ADB semiannual reports on the execution of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during 6 months under review, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following 6 months.

54 Appendix 12

(c) Promptly after physical completion of the Project, but in any event not later than 3 months thereafter or such later date as ADB may agree for this purpose, TMG shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by TMG of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

(a) GPG and TMG shall (i) maintain separate accounts for PA, Art. II, Complied with. TMG has submitted the Project; (ii) have such accounts and related financial Section 2.09 the annual audit report on time. statements (balance sheet, statement of income and Since 2012, the independent expenses, and related statements) audited annually, in auditors have audited annually the accordance with appropriate auditing standards financial statements for TUCIC and consistently applied, by independent auditors whose THC and the annual audit report has qualifications, experience and terms of reference are been furnished ADB for review. acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement as well as a separate opinion on the use of the procedures for imprest account/statement of expenditures), all in the English language. GPG and TMG shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. (b) GPG and TMG shall enable ADB, upon ADB's request, to discuss their financial statements and TMG's financial affairs from time to time with the auditors appointed by TMG pursuant to Section 2.09(a) hereabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of GPG and TMG unless GPG and TMG shall otherwise agree.

TMG shall enable ADB’s representatives to inspect the PA, Art. II, Complied with. TMG has enable Project, the Goods and Works financed out of the proceeds Section 2.10 ADB’s representatives to inspect the of the loan, and any relevant records and documents. Project, the Goods and Works financed out of the proceeds of loan, and any relevant records and documents.

(a) TMG shall at all times conduct its business in PA, Art. II, Complied with. TMG has conducted accordance with sound administrative, financial, Section 2.11 its business in accordance with environmental and urban development practices, and sound administrative, financial, under the supervision of component and experienced environmental and urban management and personnel. development practices, and under (b) TMG shall at all times operate and maintain its plants, the supervision of components and equipment, and other property relating to the Project, and experienced management and from time to time, promptly as needed, make all necessary personal. repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, urban development, and maintenance and operational practices.

Except as ADB may otherwise agree, TMG shall not sell, PA, Art. II, Complied with. Except as ADB may lease or otherwise dispose of any of its assets which shall Section 2.12 otherwise agree, TMG did not sell, be required for the efficient carrying on of its operations or lease or otherwise dispose of any of

Appendix 12 55 the disposal of which may prejudice its ability to perform its assets which is required for the satisfactorily any of its obligations under this Project efficient carrying on of its operation Agreement. or the disposal of which may prejudice its ability to perform satisfactorily any of its obligations under the Project Agreement.

Except as ADB may otherwise agree, TMG shall apply the PA, Art. II, Complied with. Except as ADB may proceeds of the loan to the financing of expenditures on the Section 2.13 otherwise agree, TMG has applied Project in accordance with the provisions of the Loan the proceeds of the loan to the Agreement and this Project Agreement, and shall ensure financing of expenditures on the that all Goods, Works and Consulting Services financed out Project in accordance with the of such proceeds are used exclusively in the carrying out of provisions of the Loan Agreement the Project. and the Project Agreement, and ensured that all Goods, Works and Consulting Services financed out of such proceeds were used exclusively in the carrying out of the Project.

ADB=Asian Development Bank, Art = Article, CHP = combined heat and power plant, EMP = environmental management plan, EMR = environmental monitoring report, GPG = Gansu Provincial Government, km = kilometer, LA = loan agreement, NMT = non-motorized transport, NOx = nitrogen oxides, PA = project agreement, PAM=project administration manual, para = paragraph, PIA=project implementation agency, PM10 = particulate matter 10 micrometers or less in diameter, PMO = project management office, PRC = People’s Republic of China, RP=resettlement plan, Sch = Schedule, SO2 = sulphur dioxide, THC = Tianshui Heating Company, TMG = Tianshui Municipal Government, TUCIC = Tianshui Urban Construction and Investment Group Co. Ltd, TWRB = Tianshui Water Resources Bureau.

56 Appendix 13

ECONOMIC REEVALUATION 1. The economic reevaluation of the Gansu Tianshui Urban Infrastructure Development Project covers the project’s three infrastructure components: (i) Qinzhou district heating network, (ii) Chengji road and flood control facilities, and (iii) Tianshui urban transport improvements. The economic analysis evaluated the components based on cost-benefit analysis and conducted following the Asian Development Bank (ADB) Guidelines for the Economic Analysis of Projects.1

A. Methodology and Basic Assumptions

2. Incremental costs and benefits are estimated by comparing with-project and without- project scenarios for each component and the project as a whole. Basic assumptions used in the economic analysis include:

(i) The project life is assumed 25 years, including an implementation period of 3-7 years and an operating period of 20 years. The residual value at the end of the project life is assumed to be zero. The project capital costs are expressed in the prices of the year that they were actually incurred. Costs and revenues after project completion are expressed in constant 2019 prices; (ii) Transfer payments such as taxes, duties, and subsidies are excluded from the economic evaluation of the individual components and the project as a whole; (iii) The updated economic prices per metric ton of emissions are CNY266 per metric ton for 2 carbon dioxide (CO2), and CNY1,200 per metric ton for sulfur dioxide (SO2), nitrogen oxides (NOx), and suspended particulates respectively. These values are based on the latest trading values in PRC; (iv) The opportunity cost of capital employed in the analysis is assumed at 12% per annum.

B. Economic Costs

3. Economic costs include (i) capital costs, including land acquisition and resettlement, and environmental mitigation and monitoring costs; (ii) cost for project management and institutional strengthening; (iii) physical contingencies utilized; and (iv) operation and maintenance costs. Financial costs were converted after deducting duties and taxes and by applying a shadow exchange rate factor of 1.013 on tradable components. A shadow wage conversion factor of 0.8 was applied for unskilled labors.

C. Economic Benefits 4. Economic benefits identified for the Qinzhou district heating component include: (i) Non-incremental economic benefits due to savings from greater energy efficiency through reduced coal consumption—the switch from small, inefficient boilers and single-family heating stoves to district central heating system reduced annual coal consumption by around 237,120 tons in 2021;

1 ADB. 2017. Guidelines for the Economic Analysis of Projects. Manila 2 The value is consistent with the economic values of CO2 used in the recent PRC project in Beijing-Tianjin-Hebei region (PRC 52007 Air Quality Improvement in the Greater Beijing-Tianjin-Hebei Region- Henan Cleaner Fuel Switch Investment Program).

Appendix 13 57

(ii) incremental economic benefits computed on the basis of the incremental residential areas as compared with the situation before the project and the willingness-to-pay; (iii) environmental benefits resulting from lower environmental costs due to reduced pollutant emissions of CO2, SO2, and NOx emissions as results of decommissioning 194 coal-fired boilers; the quantified benefits were based on annual CO2 emissions reduction of 402,600 tons, SO2 emissions reduction of 3,300 tons and NOx emissions reduction of 5,130 tons by 2021; 5. Economic benefits determined for the flood control component relate to reduced flood risk from 10% to 1%, which is expected to result in fewer flood damages and higher land values. Land values were based on their opportunity cost. These benefits were updated at around CNY6.5 million–CNY9.8 million per year. 6. Economic benefits identified for the Chengji road and urban transport improvement components include: (i) vehicle operation cost savings as results of the HDM4 model—better road conditions and shorter traveling distances to lower vehicle costs per trip; (ii) passenger time and cost savings—shorter traveling distances to yield passenger time and cost savings; and (iii) accident cost reductions—better roads and bridges, including safety features, to reduce existing accident rates. 7. Traffic counts were conducted on the road component in 2016 and 2017 which were the basis for traffic forecast for 2016-2020. Traffic was composed mainly of normal and diverted traffic. Generated traffic was not considered due to its small size. The growth rates for period 2021-2035 were based on the anticipated gross domestic product growth. Traffic growth rates used to forecast traffic are showed in Table A13.1.

Table A13.1: Projected Traffic Growth Rates 2016-2020 2021-2025 2026-2030 2031-2035 Chengji Road 11% 8% 4% 2% Maiji Road 8% 7% 4% 2% Shetang Bridge 8% 8% 4% 2% Shuangqiao Bridge 8% 8% 4% 2% Chiyu Road 8% 8% 4% 2% Source: Executing agency’s project completion report.

D. Economic Internal Rates of Return and Sensitivity Analysis 8. Economic internal rates of returns (EIRRs) were computed to re-examine the economic viability of the three components and the project as a whole. The overall project economic analysis was based on an aggregation of the economic benefits and economic costs of components. 9. The reevaluated EIRR for the Qinzhou district heating network component is 32.7% as compared which is higher than the appraisal estimate of 15.2%. The reevaluated EIRR for the Chengji road and flood control component is 13.0% as compared with the appraisal estimate of 16.2%. The reevaluated EIRR for the Tianshui urban transport improvements component is 9.7% which is lower than the appraisal estimate of 18.2%. The EIRR for the project as a whole is 15.5% which is also lower than the appraisal estimate of 16.8%. The Qinzhou district heating network component, the Chengji road and flood control component, and the project as a whole are economically viable as their EIRRs are higher than 12%. Details are provided in Tables A13.2-A13.5.

58 Appendix 13

Table A13.2: The Whole Project Economic Analysis (CNY million)

Economic Evaluation - Whole Project Costs Beneifts Year Net Benefit Capital Operation Maintenance Total Road & Flood Control Heating Total 2011 69.87 0.00 0.00 69.87 0.00 0.00 0.00 (69.87) 2012 167.60 0.00 0.00 167.60 0.00 0.00 0.00 (167.60) 2013 320.69 0.00 0.00 320.69 0.00 0.00 0.00 (320.69) 2014 222.38 0.00 0.00 222.38 0.00 0.00 0.00 (222.38) 2015 158.80 2.64 0.57 162.01 0.71 0.00 0.71 (161.30) 2016 53.59 2.72 0.59 56.90 6.51 0.00 6.51 (50.39) 2017 245.54 85.30 4.73 335.57 112.49 103.27 215.75 (119.82) 2018 145.47 144.50 7.70 297.67 123.20 183.90 307.10 9.43 2019 0.00 199.61 16.90 216.50 135.01 246.78 381.79 165.28 2020 0.00 209.53 2.83 212.36 148.03 320.45 468.48 256.12 2021 0.00 219.94 3.04 222.98 159.50 357.43 516.93 293.95 2022 0.00 230.88 3.26 234.14 171.89 373.04 544.93 310.79 2023 0.00 242.35 3.50 245.85 185.27 389.89 575.16 329.31 2024 15.64 254.41 11.21 281.25 199.74 525.11 724.85 443.60 2025 0.00 267.06 3.78 270.84 215.36 618.84 834.20 563.37 2026 0.00 267.16 3.80 270.97 224.27 474.05 698.32 427.35 2027 0.00 267.27 3.83 271.10 233.56 474.05 707.61 436.51 2028 0.00 267.39 3.85 271.24 243.26 474.05 717.31 446.07 2029 0.00 267.50 12.51 280.01 253.37 474.05 727.42 447.41 2030 77.33 267.62 3.90 348.85 263.93 474.05 737.98 389.13 2031 0.00 267.75 3.93 271.67 269.84 474.05 743.89 472.22 2032 0.00 267.87 3.96 271.83 275.92 474.05 749.97 478.14 2033 0.00 268.00 3.98 271.99 282.18 474.07 756.25 484.26 2034 21.02 268.14 14.02 303.18 288.62 474.07 762.69 459.51 2035 (515.18) 268.28 4.04 (242.85) 295.24 474.07 769.31 1012.17 Economic Internal Rate of Return (EIRR): 15.5% 0.00 0.00 Net Present Value at 12%: 334.84 Sources: Executing agency’s project completion report and Asian Development Bank estimates.

Appendix 13 59

Table A13.3: Economic Analysis for the Qinzhou district heating network component (CNY million)

Economic Evaluation - Heating Component Costs Beneifts Net Year Capital Operation Maintain Total Environmental Non-incremental Incremental Total Benefit 2011 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2012 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2013 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2014 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2015 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2016 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2017 244.78 82.50 4.12 331.40 52.18 38.95 12.14 103.27 (228.13) 2018 145.47 141.61 7.08 294.16 68.03 50.78 65.09 183.90 (110.26) 2019 0.00 196.63 9.83 206.47 90.32 67.42 89.03 246.78 40.31 2020 0.00 206.47 2.17 208.64 116.13 86.69 117.63 320.45 111.81 2021 0.00 216.79 2.36 219.15 129.03 96.32 132.08 357.43 138.29 2022 0.00 227.63 2.56 230.19 129.03 96.32 147.69 373.04 142.85 2023 0.00 239.01 2.78 241.79 129.03 96.32 164.54 389.89 148.10 2024 0.00 250.96 3.01 253.97 129.03 96.32 299.76 525.11 271.14 2025 0.00 263.51 3.01 266.52 129.03 96.32 393.49 618.84 352.32 2026 0.00 263.51 3.01 266.52 129.03 96.32 248.70 474.05 207.53 2027 0.00 263.51 3.01 266.52 129.03 96.32 248.70 474.05 207.53 2028 0.00 263.51 3.01 266.52 129.03 96.32 248.70 474.05 207.53 2029 0.00 263.51 3.01 266.52 129.03 96.32 248.70 474.05 207.53 2030 77.33 263.51 3.01 343.85 129.03 96.32 248.70 474.05 130.20 2031 0.00 263.51 3.01 266.52 129.03 96.32 248.70 474.05 207.53 2032 0.00 263.51 3.01 266.52 129.03 96.32 248.70 474.05 207.53 2033 0.00 263.51 3.01 266.52 129.03 96.32 248.72 474.07 207.55 2034 0.00 263.51 3.01 266.52 129.03 96.32 248.72 474.07 207.55 2035 0.00 263.51 3.01 266.52 129.03 96.32 248.72 474.07 207.55 Economic Internal Rate of Return (EIRR): 32.7% ` Net Present Value at 12%: 339.23 Sources: Executing agency’s project completion report and Asian Development Bank estimates.

60 Appendix 13

Table A13.4: Economic Analysis for Chengji Road and Flood Control Component

Chengji road and flood control component Costs Benefits Passenger Vehicle Time and Accident Reduced Main- Operating Cost Cost Flood Net Year Capital Operation tenance Total Costs Savings Reductions Risks Total Benefits 2011 69.87 0.00 0.00 69.87 0.00 0.00 0.00 0.00 0.00 (69.87) 2012 117.88 0.00 0.00 117.88 0.00 0.00 0.00 0.00 0.00 (117.88) 2013 165.18 0.00 0.00 165.18 0.00 0.00 0.00 0.00 0.00 (165.18) 2014 129.51 0.00 0.00 129.51 0.00 0.00 0.00 0.00 0.00 (129.51) 2015 96.10 1.42 0.32 97.84 0.00 0.00 0.00 0.00 0.00 (97.84) 2016 47.39 1.47 0.33 49.18 0.00 0.00 0.00 0.00 0.00 (49.18) 2017 0.77 1.51 0.34 2.62 52.18 17.89 0.46 8.15 78.69 76.07 2018 0.00 1.56 0.35 1.91 57.96 19.92 0.51 8.40 86.80 84.89 2019 0.00 1.60 3.97 5.57 64.39 22.19 0.57 8.65 95.79 90.22 2020 0.00 1.65 0.37 2.02 71.52 24.70 0.63 8.91 105.76 103.74 2021 0.00 1.70 0.38 2.08 77.34 26.80 0.68 9.18 114.00 111.91 2022 0.00 1.75 0.39 2.15 83.64 29.07 0.73 9.45 122.89 120.75 2023 0.00 1.81 0.41 2.21 90.45 31.53 0.79 9.74 132.51 130.30 2024 8.78 1.86 4.60 15.24 97.82 34.20 0.86 10.03 142.91 127.67 2025 0.00 1.92 0.43 2.35 105.79 37.10 0.93 10.33 154.15 151.80 2026 0.00 1.97 0.44 2.42 110.16 38.71 0.97 10.64 160.48 158.06 2027 0.00 2.03 0.46 2.49 114.71 40.40 1.01 10.96 167.07 164.58 2028 0.00 2.09 0.47 2.56 119.44 42.16 1.05 11.29 173.94 171.38 2029 0.00 2.16 5.33 7.49 124.38 44.00 1.09 11.63 181.09 173.60 2030 0.00 2.22 0.50 2.72 129.52 45.92 1.13 11.97 188.54 185.82 2031 0.00 2.29 0.51 2.80 132.86 46.69 1.16 12.33 193.04 190.24 2032 0.00 2.36 0.53 2.88 136.30 47.48 1.19 12.70 197.67 194.79 2033 0.00 2.43 0.55 2.97 139.84 48.28 1.23 13.09 202.44 199.47 2034 11.80 2.50 6.18 20.48 143.50 49.11 1.26 13.48 207.35 186.87 2035 (323.63) 2.57 0.58 (320.48) 147.27 49.96 1.29 13.88 212.40 532.88 Economic Internal Rate of Return: 13.0% Net Present Value at 12%: 48.39 Sources: Executing agency’s project completion report and Asian Development Bank estimates.

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Table A13.5: Economic Analysis for Tianshui Urban Road Improvement Component

Tianshui urban road improvement component Costs Benefits Passenger Vehicle Accident Reduced Net Year Main- Time and Capital Operation Total Operating Cost Flood Total Benefits tenance Cost Costs Reductions Risks Savings 2011 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2012 49.72 0.00 0.00 49.72 0.00 0.00 0.00 0.00 0.00 (49.72) 2013 155.51 0.00 0.00 155.51 0.00 0.00 0.00 0.00 0.00 (155.51) 2014 92.87 0.00 0.00 92.87 0.00 0.00 0.00 0.00 0.00 (92.87) 2015 62.70 1.21 0.25 64.17 0.32 0.36 0.03 0.00 0.71 (63.46) 2016 6.21 1.25 0.26 7.72 4.12 2.32 0.07 0.00 6.51 (1.21) 2017 0.00 1.29 0.27 1.55 23.09 10.42 0.29 0.00 33.80 32.24 2018 0.00 1.33 0.27 1.60 24.80 11.29 0.31 0.00 36.40 34.80 2019 0.00 1.37 3.10 4.47 26.65 12.25 0.33 0.00 39.22 34.76 2020 0.00 1.41 0.29 1.70 28.64 13.28 0.35 0.00 42.27 40.57 2021 0.00 1.45 0.30 1.75 30.77 14.36 0.38 0.00 45.51 43.76 2022 0.00 1.49 0.31 1.80 33.06 15.53 0.41 0.00 49.00 47.19 2023 0.00 1.54 0.32 1.86 35.53 16.80 0.44 0.00 52.76 50.91 2024 6.86 1.58 3.59 12.04 38.19 18.17 0.47 0.00 56.83 44.79 2025 0.00 1.63 0.34 1.97 41.05 19.66 0.50 0.00 61.21 59.25 2026 0.00 1.68 0.35 2.03 42.67 20.59 0.52 0.00 63.79 61.76 2027 0.00 1.73 0.36 2.09 44.37 21.58 0.54 0.00 66.49 64.40 2028 0.00 1.78 0.37 2.15 46.14 22.61 0.56 0.00 69.32 67.17 2029 0.00 1.84 4.17 6.00 48.00 23.70 0.59 0.00 72.28 66.28 2030 0.00 1.89 0.39 2.28 49.94 24.84 0.61 0.00 75.39 73.11 2031 0.00 1.95 0.40 2.35 50.99 25.19 0.62 0.00 76.80 74.45 2032 0.00 2.01 0.41 2.42 52.07 25.54 0.64 0.00 78.25 75.83 2033 0.00 2.07 0.43 2.49 53.18 25.91 0.65 0.00 79.74 77.25 2034 9.22 2.13 4.83 16.18 54.32 26.28 0.67 0.00 81.27 65.09 2035 (191.54) 2.19 0.45 (188.90) 55.50 26.65 0.68 0.00 82.84 271.73 Economic Internal Rate of Return: 9.7% Net Present Value at 12%: (52.78) Sources: Executing agency’s project completion report and Asian Development Bank estimates. 10. The sensitivity analysis tested the robustness of the economic viability of the project, using three scenarios: (i) a 10% benefit decline, (ii) a 10% operation and maintenance cost increase, and (iii) a combination of both. The analysis shows that the project will remain viable in all the tested scenarios. The results are provided in Table A13.6.

Table A13.6: Sensitivity Analysis on EIRR Scenario EIRR ENPV at 12% (CNY million) Base Case 15.5% 334.8 Case (i): benefits decline by 10% 13.5% 136.0 Case (ii): O&M cost increase by 10% 14.7% 253.0 Combination of case (i) and (ii) 12.6% 54.2 EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operations and maintenance. Sources: Executing agency’s project completion report and Asian Development Bank estimates.

62 Appendix 14

FINANCIAL REEVALUATION

1. Financial reevaluation was conducted on the revenue-generating component under the project, which is the Qinzhou district heating network. This component at completion included a new Qinzhou heat source plant (580=5x116 megawatts), a primary heat transmission network of 2*41.38 kilometers (km), and 76 heat exchange stations rehabilitated or newly constructed to match with the heat source plant capacity.

A. Methodology and Major Assumptions

2. The financial reevaluation was carried out by applying the same methodologies and major assumptions at appraisal. The analysis was in accordance with the Guidelines on Financial Management and Analysis of Projects of the Asian Development Bank (ADB). The specific assumptions applied in the analysis are as follows:

(i) Financial viability was assessed by calculating the financial internal rate of return (FIRR) of the component. The weighted average cost of capital (WACC) updated based on the actual capital costs and funding sources was used as the benchmark to determine the financial viability and as the discount rate to estimate the financial net present value (FNPV); (ii) FIRR was based on incremental revenues derived from heating tariff charges and incremental costs incurred in investment and operation and maintenance of the Qinzhou district heating network; (iii) A projection period of 25 years including the construction period was assumed with no residual value; (iv) The capital investments were derived from the project actual expenditures incurred during the project implementation period. The project costs were expressed in the prices of the year that they were actual incurred. Costs and revenues after project completion were expressed in constant 2019 prices. (v) The capital cost, incremental revenue income, and operations and maintenance (O&M) costs were provided by Tianshui Heating Company (THC), the project implementing agency; (vi) According to THC, an increase of 20% in heating tariff has been proposed to the government in 2020, this was therefore assumed in the reevaluation; (vii) In addition to heating tariff revenues, THC also had received connection fees from 2017 to 2019 for providing central heating service which were decided on negotiation with the property developers. It is expected to receive such fees during 2020-2025 along with the expansion of heating area; (viii) Full capacity of the component is expected to be achieved by 2025; (ix) FIRR is calculated after taxes. The income tax rate is assumed at 25%; (x) Sensitivity analysis has been undertaken to assess the impact of potential adverse changes in operating costs and revenues.

B. Weighted Average Costs of Capital

3. The WACC of Qinzhou district heating network component was recalculated with the actual funding sources which were composed of ADB loan and equity from Tianzhui Municipality Government. The cost of the ADB loan was based on the London interbank offered rate on 10-year fixed-rate swap at the time of project completion plus a loan spread of 0.30% per annum. The cost of equity was assumed to be 8.0% per annum. The resulting WACC is

Appendix 14 63

3.38% as compared with 1.85% estimated at appraisal. The changes in WACC were due to higher ADB loan interest rate, different capital composition, and higher proportion of equity inputs.

C. Results of the Financial Reevaluation

4. The reevaluated FIRR of the Qinzhou district heating network was 11.6% which was higher than the updated WACC indicating that the component is financially viable. Compared with the appraisal estimate of 9.1%, the higher FIRR result was due to inclusion of the connection fees during 2017-2025, and the proposed heating tariff increase despite the smaller heating area and higher O&M costs as a result of the change of heat source from CHP to the newly constructed Qinzhou heat source plant. Table A14.1 provides the cash flows of FIRR calculation.

Table A14.1: Financial Internal Rate of Return for Quinzhou District Heating Network (CNY million) Capital O&M Total VAT Cashflow Income Net Year Costs Costs Costs Revenues Taxes Before Tax Cashflow Income Tax 2017 180.5 94.5 275.0 151.4 5.9 -129.5 -129.5 2018 137.0 162.1 299.1 204.4 4.4 -99.1 -99.1 2019 225.2 225.2 228.3 0.3 2.8 2.8 2020 227.5 227.5 216.7 -1.1 -9.7 -9.7 2021 239.0 239.0 295.7 5.9 50.8 50.8 2022 251.0 251.0 319.3 7.1 61.2 61.2 2023 263.7 263.7 344.9 8.4 72.8 18.2 54.6 2024 277.0 277.0 372.5 9.9 85.6 21.4 64.2 2025 290.6 290.6 426.9 14.2 122.1 30.5 91.6 2026 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2027 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2028 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2029 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2030 83.4 290.6 374.0 323.3 3.4 -54.1 0.0 -54.1 2031 290.6 290.6 323.3 3.4 29.3 0.0 29.3 2032 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2033 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2034 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2035 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2036 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2037 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2038 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2039 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2040 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2041 290.6 290.6 323.3 3.4 29.3 7.3 22.0 2042 290.6 290.6 323.3 3.4 29.3 7.3 22.0 FIRR= 11.0% FNPV at WACC= 194.4 ( ) = negative, CNY = yuan, FIRR = financial internal rate of return, FNPV = financial net present value, O&M =operation and maintenance WACC = weighted average cost of capital, Sources: Executing Agency’s Project Completion Report and Asian Development Bank estimates.

64 Appendix 14

5. Sensitivity analysis tested three scenarios: (i) revenues decrease by 5%; (iii) O&M costs increase by 5%; and (iii) combination of (i) and (ii). The resulting FIRRs indicated that the component will remain financially viable in the case of (i) and (ii) with small margin to WACC, and will not be viable in case (iii), indicating that the component is very sensitive to negative changes in costs or revenues.

Table A14.2: Sensitivity Analysis on FIRR Scenarios FIRR FNPV at WACC (CNY million) Base Case 11.0% 194.4 Case (i): Revenue decrease by 5% 4.9% 29.8 Case (ii): O&M cost increase by 5% 5.2% 34.7 Combination of case (i) and (ii) - - FIRR= financial internal rate of return, FNPV= financial net present value, WACC= weighted average cost of capital, - = negative values. Sources: Executing agency’s Project Completion Report and Asian Development Bank estimates.

D. Financial Performance of Project Implementing Agencies

6. According to the Project Agreement, THC should achieve and maintain from the second year of full operation of the new district heating system (i) a debt-equity ratio of not more than 70:30; and (ii) a debt service coverage ratio of not less than 1.2. Both ratios were not complied with as of 2019. With the proposed heating tariff increase in 2020, the situation is expected to improve. Table A14.3 shows these ratios based on the entity financial statements of fiscal years of 2015-2019.

Table A14.3: Summary Financial Statements and Key Ratios of THC

Item 2015 2016 2017 2018 2019 Base tariff level (CNY per m2 per heating 21.2 21.2 21.2 21.2 21.2 season) Operating cost (CNY million) 52.4 141.5 78.4 150.6 210.0 Total operating revenue (CNY million) 59.4 143.4 84.7 156.9 206.9 Net income after corporation tax (CNY million) 5.2 0.9 -8.4 -14.5 -5.1 Working ratio 88% 99% 93% 96% 102% Debt-service coverage 0.15 1.09 -0.38 -0.67 0.44 Debt-Equity Ratio 83% 84% 93% 97% 98% Sources: Tianshui Heating Company annual financial statements.

Appendix 15 65

SOCIAL DEVELOPMENT ACTION PLAN ACHIEVEMENTS MATRIX1

Proposed Actions Target Group Achievements (As of 31 December 2018) 1. Local employment for construction 1,465 full time A total of 2,364 jobs were created for local people by project construction, including 487 skilled work and other services positions during jobs (21%) and 1,877 unskilled jobs (79%); Priority to local labor in general. project construction Targets: 745 jobs were provided for women including 50 skilled jobs accounting10% of total skilled jobs  30% women for unskilled labor and 695 unskilled jobs accounting 37% of total unskilled jobs; in landscaping and civil work  15% poor households for 288 (15%) unskilled jobs were provided for local poor people; unskilled labor in landscaping and civil work Monthly salary for skilled men reached CNY4,600 against CNY4,000 for skilled women. While -Use of local construction materials, monthly wage for unskilled men averaged CNY3,200 against CNY3,000 for unskilled women. e.g., rock, gravel, clay, cement The salary gap between men and women was due to the different positions with different skills -Training to be provided by contractors requirements;

Local construction materials supply valued over 50% of the total supply;

All contractors provided relevant training to all workers (100%) including new position orientation, construction safety, environmental protection; On-the-job training during constructions were also provided to workers under urban road network, Chengji road and bridges, and heating network. 2. Control of HIV/AIDS and sexually All project A total of 1,214 posters, flyers and educational brochures related to construction safety, public transmitted infections (STIs) construction health/sanitation, and prevention of communicable disease were distributed to workers in -Centre for Disease Control (CDC) workers construction sites during project construction; provides training to worksite health Service providers promoters 60 training sessions were held on construction sites and 15,000 (person/time) workers were All communities in - Health promoters provide training to all trained in HIV/AIDS and STIs by local CDC including 4,500 (person/time) female trainees; the DPA workers and managers and subcontractors No records of HIV/AIDS and sexually transmitted infections among workers during 2013-2018. -HIV/AIDS and STI counseling program and voluntary testing by health agencies for workers -Provide manuals, posters and drawings 3. Protect local communities from Residents close Measures were taken during the project construction to protect communities from disturbances, construction disturbances and ensure to project sites noise and interruptions; safe construction practices Night time construction was strictly prohibited and supervised by the community project - Prohibit nighttime construction and coordinators; no case of night-time work was recorded; adhere to proposed noise standards -Reconstruct public facility systems No case of complaints regarding construction disturbances was received; such as road recovery due to pipe No case of accidents regarding workplace safety was recorded during the project construction; installation, poles and transformers

1 This matrix was prepared based on the executing agency’s project completion report.

66 Appendix 15

Proposed Actions Target Group Achievements (As of 31 December 2018) -Construction safety enhancement, 6,300 meters pedestrian passage were permanently built for local residents; 2,500 meters including temporary road traffic (e.g., irrigation channels permanently restored for villagers in project areas; 500 meters roads were safe road conditions and proper warning reconstructed and recovered for local residents; signage) Temporary road traffic including warning signs were set up during e project construction.

4 Livelihood training to assist income 1,289 affected A total of 889 households with 4,390 persons were affected by land acquisition. While 101 recovery for people affected by land households, at least households with 408 persons were affected by house demolition; acquisition and resettlement 50% of trainees will A total of 83 livelihood training was conducted by relevant government agencies for affected - Training on non-farming employment be female households including local All China Women’s Federation, Poverty Relief Office and Civil skills Affairs Office etc.; 52,626 (person/time) affected people were trained including 26,418 - Training of women in employment Support for all 26 (person/time) female participants (50%); These trainings contributed to women’s economic skills empowerment; - Special support to poor and vulnerable women (technical training, priority in households Livelihood training included agricultural technology and non-farming skills development such as employment, and special funds for green vegetable cultivation, prevention of crop diseases and pest control, full-film mulching vulnerable groups) technique, prevention and security guard, greening, electrician, welder, excavator driving, housekeeping, nursery, etc. Of the total trainees, around 7,894 (person/time) or 15% were the poor; The project job opportunities were prioritized to the affected poor and women. 288 unskilled jobs were occupied by the poor during the project construction; and 140 jobs were provided to the poor during the project operation; Among the 668 permanent new jobs during operation, 268 (40%) were taken by women with 146 (39%) skilled jobs and 122 (41%) unskilled jobs. 5. Re-employment of affected formal 323 affected The re-employment plan was formulated and approved by ADB in 2011 at project appraisal. boiler workers boiler workers During the project actual implementation, the project identified 251 formal workers including 35 - Consultation and participation of females were affected by the closure of small boiler houses; affected workers These 251 formal workers were consulted continuously their willingness to be remained and - Training on technical and safety for their concerns about the skills training for new job during 2013-2016; new working position - Signing labor contract with offered Based on the consultation results, no formal workers to be re-employed based on monitoring of workers the re-employment plan in 2017 because all of them including female workers were remained in their current institutions and enterprises without change in salary level and position. 6. Maintain the heating subsidies to All households The heating tariff in Tianshui remained as CNY21.2 per square meter per heating season since poor households with MLG with MLG in 2012; Qinzhou District The Tianshui government does not have a plan to increase heat tariff recently considering the - Consultation and discussion on heating supply as an important factor in ensuring people’s livelihood and well-being. No agenda heating subsidy. Target: 30% poor All households in in public heating tariff hearing; households Qinzhou - Consultation and hearing on heating The survey on willingness to pay and affordability conducted in 2017 showed no complaints tariff. Target: 30% women about the heating charge. The survey was conducted through interviews with local community representatives, including 39 females (49%) and 25 (31%) poor; In 2018, 200 households were interviewed through questionnaires on willingness to pay and

Appendix 15 67

Proposed Actions Target Group Achievements (As of 31 December 2018) affordability, with additional 48 people who were interviewed through focus group discussions; The percentage of male and female respondents was 48% and 52% respectively. In addition, 21men and 27 women were interviewed by focus group discussions; 30 (15%) poor people were interviewed and 18 (38%) poor people were consulted in focus group discussions; The 2018 survey results showed that all the interviewed residents were satisfied with the current heating charge and women had stronger willingness to pay the heating supply which had disproportionate impact on women’s time burden, health and domestic workload; Several measures were taken to ensure poor people have access to the improved heating network: (i) the governmental heating subsidy is available for all poor households in Qinzhou District with an annual of CNY450 per person per heating season which could cover around half of the total heating cost for each poor household; and (ii) Tianshui Heating Company also took special measure to meet special demand of poor household through monthly charge instead of one-time payment, and delay in payment in special cases. 7. Strength traffic awareness to Primary and improve road safety middle schools, and A total of 120,000 school students received road safety training during 2013-2018, of which communities in DPA 60,000 (50%) were girls; - Road safety workshop in schools (picture exhibition, etc.) Target: 40% Road safety awareness programs were conducted in communities which benefited 18,000 poor households community representatives during 2013-2018, of which 8,820 (49%) were women and 7,200 (40%) were from poor households;

-Traffic signal and marks on street No particular studies on pedestrian and non-motor travel access were conducted, except the - Road construction safety overall studies on road design and relevant facilities. - Pedestrian and non-motor travel access studies 8. Tourism promotion with local natural Tianshui City Investment and Development of Cultural Tourism Company of Tianshui was established in order and ancient resources to promote local cultural tourism development; - Cultural and ecotourism development Three tourism express trains have been operated to strengthen the connectivity between four (local characteristics) cultural tourism cities of Tianshui, Lanzhou, Xi’an and Dunhuang. They are: Tianshui-Lanzhou Tourism Express Train, Tianshui-Dunhuang Tourism Express Train and Tianshui-Xi’an Tourism - Advertising of tourism sites on Express Train; expressway sign boards near project Maiji Mountain Grottoes was declared as a Would Cultural Heritage site; sites Seven tourist attractions in Tianshui City were classified as the top level of National AAAA tourist - Related job training for women and attractions; poor The number of domestic and foreign tourists in Tianshui increased from 13 million in 2013 up to 37 million in 2017 with improved urban environment and convenient travel access; the total tourism revenue increased from CNY8 billion in 2013 to CNY21 billion in 2017; The local government organized skills training programs in tourism development but no detailed

68 Appendix 15

Proposed Actions Target Group Achievements (As of 31 December 2018) sex-disaggregated data on the trainees.

9. Promote non-farming employment All people in DPA About 0.2 million rural labors successfully migrated to the urban for employment annually during and improve livelihood – targeting women 2013-2017; and young adults - Promote information and training on Net income of rural migrants increased from 8.3 billion in 2013 to 12.9 billion in 2017 in Tianshui and the poor non-farming jobs for local jobs and City; migrant jobs All rural migrants received employment related training such as non-farming skills development - Provide education to migrant laborers training, labor law and entrepreneurship training, etc.; on labor law, contract, and right issues Per capita annual net income of rural farmers increased from CNY4,482 in 2013 to CNY7,700 in 2018 with an increasing of 72%.