Social Due Diligence Report

41957-014 30 June 2012

Social Due Diligence Report of Dalkia Harbin Heating Network Project for the PRC: Municipal District Energy Infrastructure Development Project

Prepared by Dalkia Sunshine (Harbin) Heat Power Co., Ltd. for the Asian Development Bank (ADB)

This social due diligence report is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature.

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.

Social Due Diligence Report

of

Dalkia Harbin Heating Network Project

Dalkia Sunshine (Harbin) Heat Power June 30, 2012

CONTENT

1 Project Introduction ...... 4 2 Resettlement ...... 4 2.1 Main Plant ...... 4 2.2 Primary Heating Pipelines ...... 5 2.3 Substations ...... 8 2.4 Secondary Heating Pipelines ...... 10 3 Employment of Workers from HOBs Connected ...... 10 4 Conclusions ...... 15 5 Corrective Plan ...... 15 6 Appendix 1. Certificate of Land Using on State-owned Land ...... 16 7 Appendix 2. Approval of transferring of land using right from the State-owned Assets Supervision and Administration Commission of Harbin People’s Government...... 17

II TABLE AND FIGURE

Table 1 Summary of the Primary Heating Pipelines (2008-2011) ...... 7 Table 2 Summary of Substations ...... 8 Table 3 Employment of Workers of HOBs Connected (2009-2011) ...... 12

Figure 1 Location of the Project ...... 4 Figure 3 Main Plant...... 5 Figure 4 Relocated Community for HHs affected by Road Construction ...... 6

ABBREVIATIONS

ADB - Asian Development Bank AAOV Annual Average Output Value AHs Affected Households APs Affected Persons HD House Demolition LA&R Land Acquisition and resettlement PRC - People’s Republic of China PMC Property Management Company

Units

Currency unit = Yuan (CNY) 1.00 yuan = $0.15 1 hectare = 15 mu 1 mu = 667 m2

III

1 Project Introduction

1. Dalkia Harbin acquired a majority interest in Sunshine (Harbin) Heat Power Co.Ltd., a company which undertakes the development and operation of the South West heating network that supplies the southern part of Nangang District in the southwest of Harbin city, capital of Heilongjiang Province. 2. Southwest Heating Network Project was approved by National Development and Reform Committee on May 20, 2005. Generally, the project includes heating plant construction and heating network expansion. Its service scope is south to Xihuan Road, north to Harbin-Mudanjiang railway, west to Harbin-Changchun railway, east to Haping Road. The total service area is 51.6 square kilometer. The location of the project is shown in Figure 1.

Figure 1 Location of the Project

2 Resettlement

2.1 Main Plant

3. The area of land occupied by main plant of Sunshine (Harbin) Heat Power is 440 mu (293,302 square meters), which was acquired in 2005 by the local government. The land using right of state-owned land was transferred to Sunshine (Harbin) Heat Power in 2007 when the joint venture was established. Certificate of Land Using Right on State-Owned Land is presented in Appendix 1. Approval of transferring of land using right from the State-owned Assets Supervision and Administration Commission of Harbin People’s Government is presented in Appendix 2.

4

Figure 2 Main Plant 4. Land acquisition was implemented by the Nangang District Land Resource Bureau and other government agencies in 2005. Qianjin village of Chaoyang Town was affected. The compensation rates were calculated based on the Land Administration Law of the People’s Republic of China (effective from January 1, 1999) ,Land Administration Regulation of Heilongjiang Province (effective from January 1, 2000), and Notice of Annual Average Output Value of farmland issue by Harbin People’s government (Hazhengfa200021 ). Land compensation and resettlement subsidy was 16 times of AAOV, which was 40,533 yuan/mu for vegetable land and 29,760 yuan/mu for dry land respectively. The affected village is located near the urban area and is included in the new zone for urbanization. Agricultural income only accounts for 20% of the total income per capita in this village. The AP lost 0.4 mu farmland per capita which is 20% of the 2 mu of per capita land holding before land acquisition. Accordingly, land acquisition induced 8% income loss per capita averagely in 2005, and the impact was minor. Consultation with the APs verified this minor impact. APs preferred to get the cash compensation so that they can invest on small business and high-value agriculture. All compensation was paid to the APs before August 2005 before commencing land acquisition activities. 5. This village established an industrial park in 1993, so the APs think land acquisition was an opportunity for them to release from the land. Also, Xiangfang District Labor Bureau provided free trainings to the APs in 2005. The trainings include driving, cooking, hairdressing, motorcycle maintenance, machine tools maintenance and electric welding and the training helped them quickly find a job in the village industrial park. In 2005, this village industrial park was awarded as provincial level industrial park due to the repid development and contribution to the local farmer’s income. Interviews with the women also verified that these trainings are very useful to them. Women’s contribution to the family income is higher than before which also improve their status in the household. 6. Phase II of Southwest Heating Network Project plans to install 2 turbo-generator sets with the capacity of 50MW and 4 steam boilers with the capacity of 220T/H and associated facilities. The construction needs 6,300 square meters land and all are reserved land in the boundary (red line) of the plant.

2.2 Primary Heating Pipelines

7. Expansion of district heating systems was carried out under existing public roads in Nangang District, mainly in Haxi New Development Zone. 8. Construction Administration Committee of Haxi New Development Zone had

5

acquired the land and demolished houses for road construction as early as in 2004 according to Land Administration Regulation of Heilongjiang Province (effective from January 1, 2000) and Measures for Urban House Demolition Management of Harbin City issued by Harbin People’s Government in 2004. Totally, 422 households in 3 villages were affected. Two options were provided to the AHs, including cash compensation and relocation houses. All AHs have been relocated in the new Sunshine Community constructed by the government. Compared with before, the living condition is better with central heating system, tap water, public bus, kindergarten. The LA&R was successfully completed and all the acquired land became state-owned construction land in this area. So, there’s no LA&R involved in the primary heating pipeline networks construction.

Figure 3 Relocated Community for HHs affected by Road Construction 9. From 2008 to 2011, the total length of primary heating pipelines completed is 33,189.8 meters. For some roads, Dalkia Harbin laid the pipes firstly, then the government built the roads, so Dalkia Harbin didn’t need to pay any cost to the government. As for those networks constructed under the existed roads, Dalkia Harbin should just pay road dig fees to the Construction Bureau and restore the road after alying the pipes. By the end of last year, the project owner totally paid CNY 6.09 million for road dig fees. Detailed conditions are shown in Table 1.

6

Table 1 Summary of the Primary Heating Pipelines (2008-2011)

Length of Width of the Construction Road dig the Name of Road Pipelines period fees Pipelines (unit: m) (year/month) (10,000yuan) (unit: m) Haxi Road 4329.5 2.55~4.16 2008/6-2011/10 0 Baojian Road 736 2.42~3.05 2006/9-2010/10 0 the first stage of main 0 networks of Yangguang 807 2.55~2.42 2007/6-2007/10 Company Zixing Street 857.7 2.55~3.05 2006/9-2006/10 0 Xichang Road 1296 2.16~2.69 2010/6-2011/10 0 Wuwei Road 402.1 2.84~3.62 2010/6-2010/10 0 Xihu Road 789.5 3.05 2010/6-2010/10 0 Wuwei Road and Dingxiang 0 855 2.16~2.84 2010/6-2010/10 Street Huashuang Road 1160 2.55~3.38 2010/6-2010/10 0 Chilun Road 1309.5 2.55~3.05 2010/6-2010/10 0 Ning’an Road 676 2.16~2.69 2010/6-2010/10 0 Xihu Road 927 2.16~2.96 2010/6-2010/10 0 Xuefusidao Street 1826 2.16~3.05 2010/8-2010/10 0 Xuefu Road 588.5 2.42~2.69 2010/6-2010/10 0 Xigou Street 646.5 1.99~2.69 2010/9-2010/10 0 Ning’an Road 295 2.16~3.05 2010/8-2010/10 0 Keyan Street 222 4.16 2011/6-2011/10 0 Nangang Nanbeiwu Road 882.5 1.93~2.42 2011/6-2011/10 0 Extension of Hashuang Road 214 1.8~2.55 2011/6-2011/10 0 Gongdian Road 1025 2.42~3.62 2011/6-2011/10 0 Zhongxingzuo Road 230 3.05 2011/6-2011/10 0 Suihua Road 595 3.38 2011/6-2011/10 0 Subtotal (Haxi area) 20669.8 0 Changshou Road 3510.6 2.42~4.99 2009/6-2011/10 0 Linxing Road (Hexingsandao 1049.9 4.16 2009/6-2009/10 350 Street-Xuexing Road) Hexing Road 862.1 1.99~3.62 2009/6-2010/10 57．4 Zhongxing Road 962.4 1.93~2.69 2009/6-2009/10 1.1 Hengkuachilun Road 68 2.16 2009/6-2010/10 0 Zhengyi Road 3335 2.16~3.38 2010/6-2010/10 63.2 Zhenxing Street 614 2.16~ 2010/6-2010/10 4.4 Keyan Street 63 4.42 2010/6-2010/10 0 Yuexing Road 677 2.55~2.69 2010/6-2010/10 28.5 Hexingtoudao Street 207 1.99~2.16 2010/6-2010/10 1.5 Nenjiang Road 630 1.86~2.84 2011/6-2011/10 0 Extension of heating network 541 3.38 2011/6-2011/10 103.2 in Yanxing Road Subtotal (other areas in 12,520 609.3 Nangang District) Total 33189.8 609.3

7

2.3 Substations

10. The geographical scope of operation for both Dalkia Harbin is determined. Each year, Dalkia Harbin have the obligation, within the determined geographical scope, to connect new areas/customers as required by the local governments and to replace small-pollutant HOBs which were the former source of heating by a new connection to the district heating network, in order to stop these HOBs highly pollutant production. With the expansion of centralized heating networks, the connected HOBs are either dismantled or can be replaced by substations. 11. At the end of 2011, there were totally 62 substations, and the total land occupation area is 9,2251 m2. Among them, there are 37 substations which are newly built and used the existed basements, and 16 substations use the existed HOBs connected and 9 substations are newly built which use the land freely supplied with by related property management companies. As for the newly-built substations, Dalkia Harbin didn’t need to pay for the occupied state-owned land according to relevant policies of Harbin for promoting centralized heating supply due to its characteristic of public service. Detailed information substations are shown in Table 2. Table 2 Summary of Substations

Newly-built and using the land Area of Land Using Using freely supplies by No. Location Site Occupation existed existed 2 property (unit: m ) basement HOBs? management company. 1 Huawei Company 50 V 2 Wenxinqinglvshijia Community 15 V 3 Xiongshi Community 70 V 4 New Children Welfare Association 70 V 5 Dianlan Plant 60 V 6 Richuyinxiang Community 80 V 7 Xihuayuan Community 40 V Heilongjiang Agriculture Science 8 80 V Institute 9 Longxiangranqi 90 V V 10 Xueyuanxincheng Community 70 V 11 Tielu Community 80 V 12 Jinhuakeji Company 100 V 13 Physical Institute 60 V 14 Heilongjiang Taxation College 60 V 15 Shengqinggong 90 V 16 Chewuke 100 V 17 No. 1 of Xuefu Community 200 V 18 No. 2 of Xuefu Community 200 V 19 Piaozheng 200 V Attached Primary School of Harbin 20 100 V V Normal University

1 For NO 47 and NO 55 substation, the areas have not been finalized.

8

Newly-built and using the land Area of Land Using Using freely supplies by No. Location Site Occupation existed existed 2 property (unit: m ) basement HOBs? management company. 21 No. 165 Middle School 100 V 22 Harbin Normal University 400 V 23 Yanxing Primary School 150 V 24 No. 47 Middle School 100 V 25 Jinyulancheng Community 400 V 26 Xichenglijing Community 200 V 27 Gondazhuzhai 100 V 28 Xuefuyiyuan Community 100 V 29 Heilongjiang Art Career School 100 V V 30 Baoliyiqi Community 500 V 31 Xinjiapo Kaide Company 400 V 32 Nangang Culture Community 150 V Training Center of China 33 300 V Construction Bank 34 Jiangguan College 300 V 35 Youdian College 200 V 36 Yuanding Primary School 150 V Wujing Disable Persons’ 37 150 V Association 38 No2. Of Xidian Community 240 V 39 No4. Of Xidian Community 80 V 40 Haxi Dasha 50 V No. 1 Nursing Center for Retired 41 60 V Cadres 42 Hanchengguoji Community 180 V 43 No.1 Chenneng 40 V 44 No.2 Chenneng 150 V 45 No.1 Penggai 110 V 46 No.2 Penggai 230 V 47 West Railway Station of Harbin V 48 Jianqiaoxipan Community 300 V 49 Yipinxinjing Community 360 V 50 No.2 Yangguang Community 200 V 51 No.3 Yangguang Community 260 V Yongfeng Village of Wanggang 52 80 V Township 53 Wanggang Township Government 120 V East Square of West Railway 54 200 V Station West Square of West Railway 55 V Station 56 Passenger Station 180 V 57 Xinwen Dasha 120 V 58 Yaojiao Institute 100 V 59 Wancheng Station 100 V 60 Farmer’s Community 150 V Provincial light industrial 61 150 V department

9

Newly-built and using the land Area of Land Using Using freely supplies by No. Location Site Occupation existed existed 2 property (unit: m ) basement HOBs? management company. 62 Longxiang Gas Company 150 V

2.4 Secondary Heating Pipelines

12. From 2009-2011, a total length of 16 km of secondary heating pipelines have been laid. As all the secondary pipelines were installed under the residential community areas, where the necessary space for the installation has been left during the design. Therefore, laying the secondary pipelines has not involved land acquisition and resettlement impacts.

3 Employment of Workers from HOBs Connected

13. Survey Methodology. With the assistance of Dakia, ADB’s staff consultant got the list of HOBs connected from 2009 to 2011. In order to get the re-employment information of the affected workers, the following survey was conducted. ò For each HOB, the consultant and assistant called all the unit and checked the employment status of the affected workers and measures; ò The consultant visited the Harbin Haxi District Reconstruction Management Office and discussed the general policies and procedures for closing the small HOB. ò The consultant visited some representative agencies which had significant impacts on the workers and held discussion. 14. From 2009-2011, Dalkia Harbin had connected with 60 HOBs belonged to 32 units. All affected 104 workers are male, including 65 of regular employees and 39 of seasonal employees. Before the connection, their average wage per month was CNY 1,406 and after the connection it’s CNY 1,413. It could be concluded that the income level of the workers affected either the regular ones or the seasonal ones after the connection is no less than before. Generally speaking, 4 measures were implemented for these affected workers to minimize job displacement and facilitate workers re-employment and ensure all can achieve equal, or better, income and living standards. 15. Measure A. For the 65 regular workers, they have their own main positions such as gate guarder or car washer. They were assigned as stokers to operate the boilers in winter only. After the connection, these 65 workers didn’t have to serve the boilers for heating in winter. But they are maintained on their main positions, without changing salary rate. According to the survey and consultation some workers, they are satisfied to their employment arrangement without any complaints. 16. Measure B. As for the seasonal employees, according to the Employment Contracts Law (2008) and Labor Law of PRC (1994), fixed term (usually five to six months) labor contract was signed between the employees and the employers. These seasonal employees needed to work from October to April of next year (heating season). After the heating season, the contract was finished. At the end of the heating season (April), the

10

government informed the units which will be connected to central heating system in the next heating season. The unit shared the information in advance with these workers. During implementation, local labor & Social Security Bureau played a leading role in releasing employment information for these labors to provide better labor and re-employment labor safeguard. The units implementing the HOBs actively collaborated with the Social Security Bureau in assisting, facilitating, and prioritizing employment for the affected HOB seasonal workers. Priorities were provided to these workers when there were job vacancies. These seasonal workers were all migrant workers from near rural areas. According to the interviews, all of they have found jobs as there are a lot of such kind of seasonal job opportunities in Harbin. The Harbin Haxi District Reconstruction Management Office confirmed that there were not any complaints received from these workers. 17. Measure C. Also for some agencies/institutes, the operation service of the small boiler was contracted to a qualified property management company (PMC). Each year, the PMC set several staff to the site to work. These workers were regular workers of the PMC with non-fixed term labor contract. After connection, they were provided other jobs in the PMC, without changing basic salary rate and social issuance according to the Employment Contracts Law (2008) and Labor Law of PRC (1994). During implementation, the PMC provided several job positions for them to choose based on consultation. According to the survey, they are satisfied to their new employment arrangement without any complaints. 18. Measure D. Advanced Retirement: for 4 full-time affected workers who were closing to the retirement age, Labor and Social Insurance Bureau and the affected worker’s home organization coordinated to arrange advanced retirement based on the voluntary application of the affected workers. 19. As for the workers affected by HOBs connection, Dalkia Harbin made special employment measures for them, including: firstly, notifying them employment plans at the first time while connecting; secondly, giving them employment priorities under the same conditions; thirdly, lowering the employment requirements for them and enabling them to get job qualification certificate when they had accepted skill training that freely offered by the company. Additionally, Dalkia Harbin made an effort to investigate the affected workers’ basic information, working capacities and employment willingness and supplied them suitable employment opportunities as early as possible when negotiating with the property rights owners of the connected HOBs. By now, Dalkia Harbin has employed 3 affected workers.

11

Table 3 Employment of Workers of HOBs Connected (2009-2011)

Average Average Monthly Arrangement for Monthly Workers Affected Status of the Workers Wage Employment after Amount Wage after before Connection No. Unit Related of Connection Connection HOBs Amount of average Seasonal Amount male Regular Unit: yuan Unit: yuan age Employees Employees Harbin Training Center of 1 3 1450 Measure C 1500 China Construction Bank Heilongjiang Agriculture 2 5 1450 Measure C 1450 Science Institute 3 Harbin Normal University 5 1500 Measure C 1500 Heilongjiang Regional 4 Areal Geology Survey 2 6 6 51 6 1400 Measure B 1450 Institute 5 Harbin Firefight Division 1 1 1 53 1 1350 Measure B 1400 Heilongjiang Liyuan 6 2 48 1700 Measure C 1700 Certificate Print Company 7 Xuefu Community No. 12 Building and No.1 1 1500 Measure C 1500 8 Building of Xuefu Community Xihuayuan Funeral and 9 2 4 4 4 1450 Measure B 1500 Interment Service Center Attached Primary School 10 of Harbin Normal 2 1450 Measure C 1450 University Harbin Kindergarten 11 2 1450 Measure C 1450 Training School

12

Average Average Monthly Arrangement for Monthly Workers Affected Status of the Workers Wage Employment after Amount Wage after before Connection No. Unit Related of Connection Connection HOBs Amount of average Seasonal Amount male Regular Unit: yuan Unit: yuan age Employees Employees 12 Harbin 165 Middle School 1 1450 Measure C 1450 13 Harbin 32 Middle School 1 1450 Measure C 1450 14 Hexing Primary School 1 2 2 48 2 1500 Measure A 1500 Harbin Traffic Police 15 1 3 3 50 3 1600 Measure B 1600 Division Police Dog Base of 16 Heilongjiang Police 1 2 2 49 2 1600 Measure B 1600 Department 17 Heilongjiang Zaiti Center 1 1450 Measure C 1450 Judiciary Police Career 18 College of Heilongjiang 1 3 3 50 3 1600 Measure B 1600 Province Hospital of Heilongjiang 19 Police 1 4 4 47 4 1600 Measure A 1600 Harbin Disabled Training 20 Direction Center Xiongshi Community 21 2 5 (Army) No.1 Nursing Home for 22 the Retired Cadre of 2 6 6 49 6 1600 Measure B 1600 Harbin Heilongjiang Taxation 23 2 3 3 49 3 1550 Measure A 1550 School Engineering Mechanics Regular employees: 24 Institute of China 3 21 21 45 2 19 1600 Measure A 1600 Seismological bureau Seasonal employees:

2 Information can not be provided due to it’s army.

13

Average Average Monthly Arrangement for Monthly Workers Affected Status of the Workers Wage Employment after Amount Wage after before Connection No. Unit Related of Connection Connection HOBs Amount of average Seasonal Amount male Regular Unit: yuan Unit: yuan age Employees Employees Measure B Regular employees: Technical Physics Measure A 25 Institute of Heilongjiang 1 3 3 49 1 2 1550 1550 Seasonal employees: Academy of Sciences Measure B Telecom Technology 26 Service Center of 2 1450 Measure C 1450 Heilongjiang Province Regular employees: Heilongjiang Art Training Measure A 27 2 3 3 49 1 2 1500 1500 Cllege Seasonal employees: Measure B Educational College of 28 2 20 20 46 20 1500 Measure A 1500 Heilongjiang Guoyu Heating Property 29 3 2 2 54 2 1450 Measure A 1450 Management Company Harbin Institute of 30 Technology (Xizhi 2 7 7 50 7 1550 Measure A 1550 Community) Harbin Shenghua Real 31 Estate Development 1 8 8 51 8 1450 Measure A 1450 Co.Ltd. 2 workers: Measure A Baoli Heating Property 4 workers: Regular 32 2 6 6 57 6 1450 1450 Management Company employees: Measure D

14

4 Conclusions

20. It is concluded that land acquisition or resettlement have not been involved in this project as: (i) Harbin municipal government completed the land acquisition for the main plant in 2005. The land has transferred to state-owned from collective land since then. Construction of Phase II is on the reserved land in the plant, with no demand of new collective land acquisition (ii) The primary heating pipelines were installed under the state-owned roads, with no demand of new land use. Through the due diligence survey of the land acquisition of existing roads under which the primary heating pipelines were be installed, it is confirmed that all affected persons have received the relevant compensation, and all affected households have moved to resettlement apartment. Compensation rates for LA and HD complied strictly with the national and provincial policies of that time. Living conditions and livelihoods of affected households have been improved and recovered. It was confirmed that there were no outstanding issues or grievances with respect to the compensation and resettlement. (iii) Among the 62 substations, there are 37 substations which are newly built and use the existed basements, and 16 substations use the existed HOBs connected and 9 substations are newly built which used the land freely supplied by related property management companies. There are no remaining problems. (iv) The secondary heating pipelines were installed underground within the areas of the community and no new land was required.

21. At the end of year 2011, there were 60 HOBs connected. Through the due diligence, all affected 104 workers have been well arranged. Local government bureaus and affected agencies have worked together to address the re-employment issues to comply the China Labor law (1994).

5 Corrective Plan

22. Trainings on ADB’s policy on resettlement and Social Protection Strategy for capacity building are necessary for the staff, especially at the project company level. 23. For the coming heating season of 2012-2013, 118 HOBs will be connected, so a re-employment plan for the affected workers should be prepared and submitted to ADB. During implementation, the process of consultations (summary of meetings discussions, minutes, pictures, video, etc) should be well documented. 24. Regarding the implementation of this re-employment plan, grievance redress mechanism and monitoring should be in place.

15

6 Appendix 1. Certificate of Land Using on State-owned Land

Certificate of Land Using on State-owned Land No: HA 2005-39692 Land Area: 293302 M2 Issued by: Harbin People’s Government Date: August 2005

16

7 Appendix 2. Approval of transferring of land using right from the State-owned Assets Supervision and Administration Commission of Harbin People’s Government

17

18