Accelerated Energy Efficiency and Environment Improvement Financing Project (RRP PRC 48452)

TECHNICAL DESCRIPTION OF SUBPROJECTS A. APPRAISED SUBPROJECTS Shaanxi Power Energy Technology Company 1. Based in Xi’An, Shaanxi Bo’er Energy Technology Company Ltd. (Shaanxi Bo’er Energy) is an energy saving company (ESCO) who invest in and implements energy efficiency projects in and for industrial facilities and get a share of energy saving as return for investment under energy performance contracts (EMC). Established in 2010 the strengths of this ESCO include: (i) Recovery of waste heat from low temperature industrial process medium using ORC (Organic Rankine Cycle) agents with low boiling points, for power generation. (ii) Recovery of energy from the top gas of industrial furnace (such as blast furnace) using a Top-Gas Recovery Turbine (TRT), for power generation.

2. Shaanxi Bo’er Energy is currently involved in 3 ORC hear recovery projects for a combined power generation capacity of 26 megawatt (MW) at a cost range of, and 3 TRT residual pressure energy recovery projects for a combined power generation capacity of 18.9 MW at an average cost of approximately CNY5,400 per kilowatt (kW). The cost range for the ORC power generation is CNY4,600/kW – CNY10,000/kW and the average unit cost for the TRT projects is approximately CNY3,900/kW. Together, the 6 projects would require a total investment of CNY241 million. Sample projects are described below, using the ORC technology. Elion Lime Kiln Thermal Oil Waste Heat to Power Project 3. DaLaTe Division Company of Elion Resources Group operates a carbide plant in Ordos, Inner Mongolia. The project propose to recover of waste heat from the thermal oil loops of lime kilns for power generation using low boiling point ORC fluid. The thermal oil of 190oC is currently cooled down by air cooler to 150oC. A total of 4x0.75MW ORC turbines are proposed for four locations in the carbide plant, which are expected to generate up to gross 24,000 megawatt hour per year (MWh/yr) and net 21,600 MWh/yr electricity. The generated electricity is to be used by the carbide plant at an internal rate of CNY 0.5/kWh. In full operation, the project is expected to result in an annual energy saving of 8,500 tce/yr and greenhouse gas (GHG) emission reduction of approximately 21,500 t CO2/yr.

4. A critical outstanding issue with the proposed project is that the ORC fluid, R123, is a Class II ozone depleting substances, which may need an alternative. As well, it is not clear how much of the total return is to be shared by the ESCO under the EMC contract.

Shenmu County Dongfeng Magnesium Metal Co.

5. Established in 2004 in Shenmu County, Yulin, Shaanxi, Shenmu Dongfeng Magnesium Metal Co.Ltd. (Shenmu Dongfeng Magnesium), is a privately owned company with its core business in the production of magnesium alloy. Its current business turnover is CNY620 million/year and the profit is CNY54 million. With 600 employees, its current production capacities include 20 tons (t) per year magniseum (to form 22.5 t/yr magnesium alloy). The facility also produces 600,000 t/yr semicoke, 60 t/yr tar and 90 million pcs/yr non-kiln bricks. All 2 the coking gas generated from the semicoke production was previously used for the production of magnesium, which generated 60% of the profit of the whole company.

6. The recent energy efficiency improvement to the existing magnesium and semicoke making processes has resulted in substantial surplus of coking gas with a heat value of approximately 7,000 gigajoules per normal cubic meters per hour (Nm3). The proposed project include a gas-fired boiler of 130 t/hr, which will consume 53,000 Nm3/hr surplus coking gas and produce high-pressure steam of 9.8Mpa/540oC to drive a condensing turbine generator of 30MW capacity.

7. At 6,000 operational hours per year, the power generator is expected produce 180GWh power. The generated power is in part consumed on the facility, which currently consumes 25.2 GWh electricity per year. With the 30MW generator, the facility is expected to supply 154.8GWh net electricity to the local power grid at a feed-in tariff of CNY0.342/kWh. The grid connection is located within 2km. In full operation, the project is expected to result in an annual energy saving of 120,000 tce/yr and a GHG emission reduction of approximately 170,000 t CO2/yr.

Ankang Yangchen Modern Agriculture Group Co.

8. Based in , Shaanxi, Yangchen Group is an agricultural group, including livestock. Established in 1988, it has a registered capital of CNY40 million. The promoter of the proposed project is Fufeng Yangchen Livestock Co. Ltd, located in Fufeng, which is a subsidiary of Yangchen Group established in 2015 in , Shaanxi (Fufeng Yangchen).

9. Fufeng Yangchen operates a hog farm with a total capacity of 60,000 pigs in various stages/types, which produces 100 t/d manures and 140t/d liquid waste. The collected hog farm wastes of 240 t/d are to be digested in 2 complete mixing (CSTR) anaerobic digesters of 3000m3 each. The digesters are expected to generate 6000m3/d biogas (containing 50%-70% methane), 206 t/d stabilized effluent, and 20 t/d solid waste.

10. The biogas (total 6,000m3/d) will be utilized to fuel a 500 kW gas turbine generator with heat recovery from the flue gas. The generated power will be fed to the local grid while the recovered heat is primary used to heat the mid-temperature anaerobic digesters, which is to be maintained at 350C to 38oC. The liquid and solid wastes will be sold at market price to the surrounding farms as organic fertilizers.

11. The 500 kW biogas generator is expected to generate net 10 MWh/d or 3,600 MWh/yr electricity to feed to the local grid at a preferred feed-in tariff of RMB 0.75/kWh with an annual sales of CNY2.63 million. The solid waste (7,200t/yr) and liquid fertilizers (74,160 t/yr) are expected to generate a revenue of CNY3.15 million/yr. In full operation, the project is expected to result in an annual energy saving of 1,170 tce/yr. As the project eliminates methane emission otherwise from the manure to the atmosphere, its GHG emission reduction is significant, at approximately 24,000 t CO2/yr.

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Shaanxi Haiyan New Energy Group

12. Established in 1993 in , Shaanxi, Shaanxi Haiyan Coking Group (Haiyan Coking), is a privately owned company with 2000 employees and annual turnover of CNY2,500 million (in 2012). Its core operation includes two coking furnace of 1 million t/yr capacity each.

13. The project proposes to install a coke dry quenching (CDQ) unit of 125 t/h to replace existing wet quenching process. A waste heat boiler 72.5 t/h capacity is employed to recover waste heat from hot inert gas (N2) of 900oC to 980oC from the CDQ process. The waste heat boiler will generate mid-pressure steam of 3.82 MPa/450oC and supplies 584,568 t/yr steam to the LNG process in the same plant which utilizes coking gas to produce LNG.

14. In full operation, the project is expected to result in an annual energy saving of approximately 48,700 tce/yr and GHG emission reduction of approximately 134,800 t CO2/yr.

15. The total investment of the proposed project is estimated to be approximately CNY128.3 million. The total revenue of the project is estimated to be CNY52.6 million/yr while the operational cost is estimated to be 20.0 million/yr. Critical outstanding issue with the proposed project is that the Promoter should commit to demolish the existing wet quenching units (rather than being kept as stand-by) because the CDQ technology is now considered mature in .

Sinopec Green Resource Geothermal Development Co.

16. Established in 2006, a Sinopec JV with Norway ORKA Energy Co. , the core business of the ESCO company is to provide geothermal heating and hot water supply to residential buildings. By the end of 2012, the Company's cumulative operation assets included 85 geothermal wells (62 extraction wells and 23 injection wells), heat supply network of 96 kilometers (km) and 34 exchange stations. In 2012, its total service area amounted to 9.06 million square meter (m2) floor area, which resulted in a total revenue of CNY133 million and gross profit of 21.67 million (net CNY11.69 million).

17. The proposed project is located in XiXian New District between Xi'An and XianYan, Sha'anxi. The proposed ESCO project comprise primarily 12 deep wells of 3000 meters (m)- 3500m in depth (water temperature 80-85oC), 12 shallow wells of 1750m to 2300m in depth (water temperature 60-65oC), 12 injection wells of some 2700m in depth, and 12 heat exchange stations. These installations are to be implemented in phases in 8 years to eventually service a total heating floor area of 318 million m2 through a piping network of some 62 kms.

18. Each extraction well will produce some 90-120 cubic meter (m3)/hr hot water. The 24 extraction wells are expected to supply hot water of a total of approximately 2560m3/hr to heat some 3.18 million m2 (with a total designed heat load of 160 MW) floor area in the winter (120 days). The extracted water (over 50%) is to be return to the aquifer through the 12 injection wells. The Project includes Li Bromide absorption chillers to provide cooling to select buildings.

19. In full operation, the project is expected to result in an annual energy saving of approximately 88,000 tce/yr and GHG emission reduction of approximately 249,500 t CO2/yr.

20. Critical outstanding issue with the proposed project is that the Promoter needs to ensure that the environmental impact assessment and hydrogeological assessment are properly done and obtain timely approval. As well, the risk of running into “dry” well needs to be built into the cost-benefit analysis. 4

B. SUBPROJECTS TO BE APPRAISED High Efficiency Gasification Project by Tenglong Ceramic 21. Tenglong Ceramic produces 20,000 m2 of ceramic tiles per day. It is one of one of the largest ceramic tiles producers in China.

22. Tenglong Ceramic operates two manufacturing factories in Hancheng, Shaanxi; in the same industrial park, there are other ceramic factories. The ceramic kilns in these factories are presently fueled by fixed bed coal gasifiers with open air with low energy efficiency.

23. The proposed project is to build two high efficiency enclosed coal gasifiers with purified oxygen and fluidized bed configuration. One new gasifier will supply sync gas to the existing ceramic factories to replace the existing small, low efficiency gasifiers.

24. The total investment is expected to be in the order of magnitude of CNY600 million. The efficiency will improve from 85% to 90% - 95%.

Suun Energy ESCO

25. Suun Energy ESCO is a subsidiary of Sun Holding Group with core businesses in the areas of (i) Solar thermal power (only EPC contracts) (ii) Distributed energy centers in urban areas (EPC and EMC contracts) (iii) Residual energy recovery (EPC and EMC contracts)

26. The proposed project is to invest, under ESCO mode, in urban distributed energy centers fueled by natural gas, which may be supplemented by solar thermal and geothermal. Their clients are (i) buildings, (ii) industrial parks, (iii) mixed zones of residents and business. The provide heat, cooling, hot water and electricity. All EMC projects have a payback period of 4 to 5 years.