20210128 PVR Loan 2760 PRC Gansu Tianshui Urban
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Validation Report January 2021 People’s Republic of China: Gansu Tianshui Urban Infrastructure Development Project Reference Number: PVR-758 Project Number: 43025-013 Loan Number: 2760 ABBREVIATIONS ADB – Asian Development Bank CHG – China Huaneng Group CHP – combined heat and power plant CO2 – carbon dioxide DMF – design and monitoring framework EIRR – economic internal rate of return FIRR – financial internal rate of return GTEZ – Guanzhong–Tianshui Economic Zone LAR – land acquisition and resettlement m2 – square meter O&M – operation and maintenance PCR – project completion report PRC – People’s Republic of China THC – Tianshui Heating Company TMG – Tianshui Municipal Government TPMO – Tianshui project management office NOTE In this report, “$” refers to United States dollars. Director General Marvin Taylor-Dormond, Independent Evaluation Department (IED) Deputy Director General Veronique Salze-Lozac’h, IED Director Nathan Subramaniam, Sector and Project Division (IESP) Team Leader Srinivasan Palle Venkata, Senior Evaluation Specialist, IESP The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. The final ratings are the ratings of IED and may or may not coincide with those originally proposed by the consultants engaged for this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, IED does not intend to make any judgments as to the legal or other status of any territory or area. PROJECT BASIC DATA Project number 43025-013 PCR Circulation Date 12 Oct 2020 Loan number 2760 PCR Validation Date Jan 2021 Project name Gansu Tianshui Urban Infrastructure Development Project Sector and Water and other urban Other urban services subsector infrastructure and Urban policy, institutional and capacity development services Strategic agenda Environmentally sustainable growth Inclusive economic growth Safeguard Environment A categories Involuntary resettlement A Indigenous peoples C Country People’s Republic of China Approved Actual ($ million) ($ million) ADB financing ADF: 0.00 Total project costs 229.60a 204.50 ($ million) OCR: 100.00 Loan 100.00 98.50 Borrower 61.40 106.00 Beneficiaries 0.00 0.00 Others 68.20 0.00 Cofinancier Total cofinancing 0.00 0.00 Approval Date 29 Jun 2011 Effectiveness date 23 Jan 2012 14 May 2012 Signing Date 25 Oct 2011 Loan closing date 31 Dec 2016 31 Dec 2018 Financial closing 12 Aug 2019 date Project Officers Location From To B. Reid ADB headquarters 1 Nov 2011 12 Jan 2013 H. Maruyama ADB headquarters 23 Jan 2013 30 Jun 2015 M. P. Ancora ADB headquarters 1 Jul 2015 24 Oct 2015 X. Liu PRCM 25 Oct 2015 12 Aug 2019 IED review Director N. Subramaniam, IESP b Team Leader S. Palle Venkata, Senior Evaluation Specialist, IESP ADB = Asian Development Bank, ADF = Asian Development Fund, IED = Independent Evaluation Department, IESP = Sector and Project Division, OCR = ordinary capital resources, PCR = project completion report, PRCM = People’s Republic of China Resident Mission. a The amount was based on the breakdown of financing sources and on the cost at appraisal per appendix 2 of project completion report. b Team members: R. Brockman (Quality Reviewer), F. De Guzman (Senior Evaluation Officer), W. Zhou and J. Eerikainen (Consultants). I. PROJECT DESCRIPTION A. Rationale 1. Gansu was one of the least developed provinces in the People's Republic of China (PRC). In 2009, its gross domestic product per capita was the second lowest among all provinces. Development constraints were its poor infrastructure and remote inland location. Tianshui municipality, a second-tier city within the province, had an urban population of 640,000 and an urban poverty rate of 13.5% in 2009.1 Poor municipal infrastructure—district heating, urban transport, and flood control—was a barrier to its economic and social development. District heating in the city had limited coverage and caused severe air pollution due to energy- inefficient coal-fired boilers and single-family heating stoves. Tianshui’s inadequate facilities for public and nonmotorized transport lagged behind population growth. Poor traffic management meant frequent road safety issues. Also, the city had a high risk of seasonal flooding due to the convergence of Xi and Wei rivers. 2. Tianshui was a subcore city under the Guanzhong–Tianshui Economic Zone (GTEZ) Development Plan that the National Development and Reform Commission prepared in 2009.2 GTEZ was envisioned to become the economic backbone of northwest PRC by 2020. Tianshui is a major industrial center in Gansu province. Under the GTEZ, it is seen as a location for equipment manufacturing and nonmetallic mineral resources mining and utilization, and a hub for road and rail transport linking other parts of Gansu province with GTEZ. Implementation of this development plan was expected to increase the demand for Tianshui city's infrastructure. This spurred the need to prioritize the renovation and upgrading of its district heating, urban transport, and flood control facilities. 3. The PRC government requested a $100 million loan from the Asian Development Bank’s (ADB) ordinary capital resources to fund the Gansu Tianshui Urban Infrastructure Development Project (the project) that would address Tianshui’s infrastructure challenges. The ADB Board approved the loan in June 2011.3 The project aimed to promote balanced and environmentally sustainable urbanization in Tianshui through the restructuring and expansion of district heating, construction of urban roads and flood control facilities, and strengthening of its urban management capacity. The PRC was the borrower, relending the proceeds to Gansu provincial government which on-lent to Tianshui Municipal Government (TMG) on the same terms and conditions as those of the ADB loan. B. Expected Impacts, Outcomes, and Outputs 4. The project’s design and monitoring framework (DMF) indicated that the expected impact was better living conditions in Tianshui municipality, as set out in the report and recommendation of the President and the project completion report (PCR).4 The intended outcome was improved heating, transport, and flood control services in Tianshui municipality. 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 Government of PRC, National Development and Reform Commission. 2009. Guanzhong–Tianshui Economic Zone Development Plan. Beijing. 3 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. 4 ADB. 2020. Completion Report. People’s Republic of China: Gansu Tianshui Urban Infrastructure Development Project. Manila. 2 There were four targeted outputs: (i) operating Qinzhou district’s upgraded heating network, (ii) operating Chengji road and flood control facilities, (iii) open urban roads and bridges to traffic and operating related services, and (iv) developed capacity and strengthened institutions. Some of the target indicators in the DMF were changed due to a minor change in scope. C. Provision of Inputs 5. ADB’s Board approved the project in June 2011 and the loan became effective in May 2012, almost four months later than expected. Loan closing was in December 2018, two years after the original date of December 2016. Project completion was extended from June 2016 to December 2018 because of the change of the heating plant under the Qinzhou district heating development. Due to China Huaneng Group’s (CHG) cancellation of the originally planned combined heat and power plant (CHP), the loan had to be extended to December 2018 for TMG to build a new heat source plant and complete the Qinzhou district heating network component. 6. At appraisal, the total project cost was $229.6 million, with $100 million financing from ADB (43.6%), $61.4 million (26.7%) from TMG, and $68.2 million domestic loan (29.7%) from the China Development Bank (CDB). At completion, the total project cost was $204.5 million, or 89.1% of the appraised amount, of which ADB loan financed $98.5 million (48.2%) and $106.0 million (51.8%) from TMG. The proposed domestic loan from CDB was not used and TMG provided the required financing. CHG, which was to use the CDB loan, canceled the construction of the originally planned CHP. TMG instead built its own new heat source plant to supply Qinzhou District using its own fund. 7. Five consulting services packages were proposed. However, during implementation, these were combined to one in accordance with a minor change in project scope approved in September 2015. A consulting firm was selected to support project implementation through quality- and cost-based selection, and a time-based contract was awarded in October 2012. The firm provided 22 person-months of international consulting services and 89.5 person-months of national consulting services. TMG funded external monitoring agencies, design institutes, construction supervision agencies, and a procurement agent to provide related consulting services. There was