People’s Republic of : Air Quality Improvement in the Greater Beijing–Tianjin– Hebei Region— Cleaner Fuel Switch Investment Program

Semiannual Program Implementation Progress Report 2020.6-2020.12

Henan Yu-Tian New Energy Co., Ltd.

JANUARY 2021 Chapter 1 RESULTS AND DISBURSEMENT

A.The Program results

1.The results-based lending (RBL) mode is adopted for the Program. The disbursements will be based on the completion of eight (8) disbursement-linked indicators agreed by ADB and the program unit.

Indicator 1:Indicator 1: Number of customers: By the end of 2018, the Program had covered 307,708 households. ADB should expand its assistance to cover 1.20 million households by 2023. The target value set for 2020 was to cover at least 400,000 new households and the actual increase was 633,000.

Indicator 2: Gas consumption: By the end of 2018, the amount of cleaner gas consumed reached 13,900 Nm3. By the implementation of the ADB program, by 2023, the amount of cleaner gas consumed should reach 317 million Nm3. The target value set for 2020 was at least 32.35 million Nm3, and the total actual gas consumed was 157,600 Nm3. Indicator 3: Mobilization of private and public sector investment: From 2022, the CNY915 million of commercial financing for the cleaner fuel switch investment should be mobilized for continuous overall program implementation. This indicator was not involved in 2019 and 2020. Indicator 4: Expansion of cleaner gas network system: By the end of 2018, the pipelines of 6,877 km were laid. By the implementation of the ADB program, by 2021, the planned total length of natural gas distribution network pipeline installed should be 26,880 km. The target value set for 2020 was 17,920 km of natural gas distribution network pipeline, and the total actual length was 18,500 km.

Indicator 5: Stations: By the end of 2018, one (1) natural gas station was constructed. By the implementation of the ADB program, by 2021, the total number of constructed natural gas stations will reach 12. The target value set for 2020 was to construct at least 8 natural gas stations, and the total natural gas stations constructed was 3.

Indicator 6: Development of alternative cleaner fuel: By 2023, the total annual biomass gas production should reach 17 million Nm3. The Biomass gas site selection, project development, and bidding and procurement have been completed in 2020.

Indicator 7: Raising awareness of using cleaner fuel: The publicity activities of using cleaner fuel should be conducted, especially for the women using the energy in the households, to reduce the barriers for the use of cleaner fuel in the target population. Throughout the implementation of the Program, at least 500 awareness-raising publicity activities should be conducted. The target set for 2020 was to conduct at least 100 awareness-raising publicity activities for clean fuel use, with at least 50% of participants

1 being women. YTNE actually conducted 226 awareness-raising publicity activities for clean fuel use, of which more than 50% of the participants were women.

Indicator 8: Institutional development and capability improvement: Throughout the entire implementation of the ADB program, the institutional and organizational capability of ZYIG and YTNE in corporate governance, financial and risk management, social and environmental safeguard, and gender balance, specifically including (i) developing an integrated enterprise resource planning and management system; (ii) strengthening the corporate governance and management system for financial and risk control and environmental and social safeguard; (iii) expanding the financing capacity and financing channels for commercial loans; and (iv) increasing the human resources to ensure the effective implantation of the Program. The goals set for 2020 were (i) to improve the integrated enterprise resource planning system; (ii) to engage 250 employees at Yu-Tian New Energy Company by the end of the year (20% of which are women). YTNE has actually (i) improved the enterprise resource system; (ii) engaged 430 employees by the end of the year, including 316 male employees and 114 female employees (accounting for 27%).

2 Table 1: Status of the Results Framework (As of 31 December 2020)

Linked Indicator DLI Annual Outcomes in S/N Objectives in 2020 Item 2020

400,000 customers connected to the gas. (Medium-pressure ventilation is Number of connected to the pressure regulating 633,000customers 1 customers DLI 1. box in the village, and the low- connected to the gas connected to pressure pipeline in the village can be (cumulative) the gas replaced for ventilation at any time before it is ventilated to the meter or has been accepted)

32.35 million Nm3 of total gas 2 Total gas DLI 2. 15.76million Nm3 of gas consumption by customers connected consumption consumption to the gas at the end of the year

17,920km of gas distribution network 18500km of gas Gas distribution 3 DLI 4. pipeline installed (cumulative) distribution network network (medium-pressure and low-pressure pipeline installed pipeline pipeline construction) (cumulative)

4 DLI 5. 3 gas stations built Gas station 8 gas stations built (cumulative) (cumulative)

Basic work of site selection, project Site selection, project 5 DLI 6. approval, bidding and procurement, Biogas approval, bidding and and civil construction of biogas procurement completed completed at the end of the year

Totally 206 gas use awareness campaigns 100 gender sensitive cleaner in line with ADB Publicity of 6 DLI 7. awareness programs convened in standards convened in gender total, and at least 50% of participants 2020, with 226 in total. awareness are women At least 50% of participants are women.

7 DLI 8. Institutional and 1. Integrated enterprise resources 1. Integrated enterprise

3 organizational planning systems improved; resources planning capacity 2. Totally 250 staff of YTNE at the systems improved; enhanced in end of the year (at least 20% women) 2. 430 staff of YTNE as management of October 2020 in information total, including 316 system, men and 114 women, financial and with women accounting risk for 27%. management, social and environment safeguard with full staffing.

Chapter 2 EXPENDITURE FRAMEWORK AND FINANCING

A Expenditure Framework

2. The content of program expenditure mainly involved the expansion of cleaner gas network system, the enhancement of cleaner fuel awareness, the institution building and capacity building, the management, and the interest incurred during construction and commitment charges. a. Construction costs for natural gas support facilities: 633,000 households b. Cost of purchased natural gas c. Costs for natural gas station construction and equipment purchase: 3 new natural gas stations were built d. Expansion of cleaner gas network system: The program completed the access to system of 633,000 households, involving the construction of 18,500 km, including the works outside villages of 3,500 km and the works inside villages of 14,800 km. e. Safety training: At least 50% of program participants were women. f. Institution building and capacity building: This mainly included the upgrading of information and management systems, the monitoring and verification by third-party institutions, the engineering consultative services, and the reinforcement of financial and risk management. g. Interest incurred during construction and commitment charges: The interest incurred during construction involved the loans from ADB and the loans from banks in China. For the loans from ADB, the repayment period would be 25 years, including the grace period of 5 years (in which only the interest would be paid without the repayment of principal), and the annual consolidated interest rate of the loans would be 2.31% (the 6-month LIBOR would be 1.71% + 0.5% interest margin + 0.1% maturity premium). For the loans from banks in China, the repayment period would be 15 years, including the grace period of 3 years (in which only the interest would be paid without the repayment of principal), and the annual consolidated interest rate of the loans would be 4.9%. The commitment charges would be collected 60 days after

4 the signing of the loan agreement, and the annual commitment charges would be 0.15% of the loan amount not withdrawn.

B Expenditure Status

Table 2: Estimated Program Expenditure (As of 31 December 2020)

Expected expenditure Percentage of S/N Item (Jan 1, 2020 - December 31, 2020) expenditure in (CNY10,000) EUR million total amount (%) Construction costs for natural 1 189,000.00 24,097.50 89.88% gas support facilities

2 Cost of purchased natural gas 3,700.00 471.75 1.76%

Costs for natural gas station 3 construction and equipment7,500.00 956.25 3.57% purchase Expansion of cleaner gas 4 8,000.00 1,020.00 3.80% network system Institution building and capacity 5 350.00 44.63 0.17% building

6 Financial and risk management 1095 139.6 0.52%

Interest incurred during 7 641 81.72 0.30% construction Total 210,286.00 26,811.45 100.00%

3.The total expenditures of the program were CNY2,102,860,000, in which EUR45.02 million would be the loans from ADB (according to the exchange rate of EUR1 = CNY7.84, it could be converted into CNY353,132,400), and the remaining amount would be the loans from China Development Bank and the self-raised funds of the program unit. （ (The above investment amount is the estimated budget amount. As the actual accounting treatment will lag behind, the actual investment amount shall be subject to the next verification report.)

5 Chapter 3 PROGRAM SYSTEMS AND IMPLEMENTATION ARRANGEMENTS

A Monitoring and Evaluation System

4.The Management Information System of Henan Yu-Tian New Energy Co., Ltd. (YTNE) mainly includes the Customer Information System, Financial Management System, Engineering and Construction Management System, Equipment and Maintenance System, Security Monitoring System, Material Management System, and Human Resource Management System, which form the information management system of YTNE. These systems can greatly improve the management level and operation efficiency of enterprises, facilitate the performance of the program work, and be used for dynamic monitoring throughout the whole life cycle of the program approval, bidding and tendering, purchase, construction, financial affairs, completion acceptance, and operation.

6 Table 3 System Functions and Construction

system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e 1. Meet the requirements of Financial such accounting businesses as (general voucher ledger, fixed management, assets, transaction View all the financial and inventory write-off Issuan capital information of accounting), management, Monthly ce of YTNE and all its forms customer financial financi subsidiaries in real time, managemen defined transfer, statement al and improve the financial System t of the period-end s issued, statem management level of administrat company, handling, and query of Gen ents on YTNE. Financi ors, and treasury query of Financial financial erati a Reduce fund risk, al financial managemen common statements books, on monthl improve fund use Manag personnel t (account financial books, (balance sheet, 1 query and by y basis, efficiency, manage bank ement of YTNE managemen and provide cash flow analysis the and accounts uniformly and System Headquart t, cash business statement, etc.), of cash syst real- disbursement authority of (FMS) ers and managemen functions such etc. flow, and em time subsidiaries, and set subsidiarie t, bank- as cash flow query of query income accounts. Monitor s, etc. corporate analysis and fixed of the flow of funds, direct query. assets financi including the connection, 2. Track and cards. al disbursement process, fund manage the books. and review the settlement value of fixed compliance. and assets in the procurement whole life from , internal addition to loans, and retirement. fund plan) 3. Check the warehouse-in cost, 7 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e warehouse-out cost and cost balance of the company's inventories, and complete the handling of purchase estimation business (handling in purchase, and automatic inventory bookkeeping), the adjustment of inventory cost, etc. 4. Provide related businesses such as drafting, distribution, acquisition, review, and submission of forms. 5. Perform account management, particularly, in the whole process of opening and 8 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e closing bank accounts, and support opening (closing) accounts. 6. Handle various forms of funds of the unit in a centralized manner to strengthen the fund management of individual units, thus to help these units control and manage the receipts and disbursements caused by daily businesses and the allocation of internal current account. 7. Support business of settlement by entrustment, internal transfer business, internal special transfer business, cash business, 9 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e business query, and business receipt. 8. Support the management of fund flow process including transfer application and fund transfer, and transfer the business of fund procurement to accounting. 9. Support the functions of statistical forms and analysis & query related to internal credit, loan application, loan contract, loan lending, loan repayment, interest accrual and calculation, interest withholding, and internal loans. 10. The fund plan is a reasonable plan for funds in compliance with 10 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e the management objectives by balancing the future fund income and expenditure of the unit and the group in combination with the amount of funds deposited.

1. The purchase management Man function ual module, with System entry purchase orders administrat Bidding of as the core, View the information on ors, and Purchase and sour tracks and bidding & purchase and human managemen contract ce manages all materials of YTNE and all Materia resources t, sales Inventory book, informatio docu links and its subsidiaries in real l Real- managem managemen warehouse-in and n, and ment statuses of time, standardize the 2 Manag time ent t, inventory -out journal, and purchase s, logistics bidding & purchase ement query personnel managemen inventory age and and movement in process for the program, System of the t, and analysis inventory gene the purchase and improve the material departmen internal informatio ratio process. management level of t and of transactions n n by 2. The sales YTNE. subsidiarie the management s syst function module em supports the management of the whole 11 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e process of commodity exchanges, logistics and fund flow, involving order, delivery plan, commodity return and exchange, invoicing, and settlement, the real-time control of the sales price and sales credit, and the automatic management of financial inventory accounting, and provides the sales management statement of the company. 3. The inventory management function module mainly deals with the daily warehouse-in and -out businesses and inventory 12 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e adjustment business of the company based on the receipt and delivery of physical materials, supports the functions of reservation and in-transit loss, and provides numerous inventory information query forms. 4. The internal transaction function module manages the supply chain business among organizations within the group, and manages the internal settlement of the supply chain business of organizations within the group, with the internal transaction 13 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e settlement platform as the core, to realize the efficient collaboration between the internal business and finance of the supply chain. 1. Establish various organizational units in the company, Man determine the ual System responsibilities entry Organization administrat and authorities Informatio of managemen Personnel ors, and of and n on sour t, employee structure Check the personnel human relationships Human personnel, ce managemen analysis, gender information and resources among these Resour contracts, docu t, contract ratio, age composition of YTNE in Real- managem units, and ce social ment managemen structure real time, improve the 3 time ent organization Manag security, s, t, leave & analysis, level of human resources query personnel structure thus ement salary, and attendance educational management, and inquire of the formed, and System and gene managemen background about the proportion of departmen create, modify, attendanc ratio t, and salary analysis, and female employees. t and of move, set in e n by managemen personnel roster subsidiarie order and the t s inquire about syst the em organizational units of the company. 2. Manage the employee 14 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e information, employee changes, and employee induction, transfer and resignation. 3. The system can manage contract templates according to various types, such as labor contracts, confidentiality contracts, and training contracts. The original electronic contract documents can be saved in the template as attachments for inspection. 4. According to the company's holiday policy, define the types of holidays stipulated by the company, and manage 15 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e attendance and holidays. 5. Allow establishing, according to particular situations, multiple payrolls, in which the pay items and pay calculation formula can be self-defined. After the payroll is paid, generate the corresponding accounting documents according to the summarized data on such disbursement. Number of Entr Custo Informatio Industrial The customer Statistical form for access y mer n recorder, and information number of customers into quantit toll commercial system customers Provide customer Custom , customer CMS y, collector, households, manages a (according to the information, gas er types, , or custom meter residential large amount of nature of gas consumption information informa 4 customer acqu er type, reader, households, personal consumption), summary, gas purchase tion locations, isitio custom and households customer form of accounts information summary, system number of n er security paying by information, received of this and other bases for (CMS) household and locatio inspector groups, including month, form of program indicators. s sync n, and of the gas location, customer accounts (residentia hron real- company meter location, gas receivable of this 16 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e l ous time services, meter number, month, statistics customers uplo acquisit meter gas of IC unpaid for ) and ad ion of reading, consumption months, summary employee by fuel charging, record, and type of aging analysis s hand informa invoice, of installed gas of gas bills (industrial -held tion security equipment receivable, and and termi before inspection, (such as stove, schedule of aging commerci nal. conver work order, water heater analysis of gas al sion bank, and hot water). bills receivable. enterprise are inspection, Also, this customers acquire query, and system ), d in forms manages the IC household real numbers, and heads time. payment and (classified The recharge by gas records of gender), consu personal benchmar mption customers, k fuels of since the before custom program aims to conversio ers is introduce a n acquire prepaid (firewood, d on a intelligent card coal and quarterl (IC) plan for liquefied y basis. payment for gas petroleum consumption to gas), and improve billing customer and payment satisfactio efficiency. n survey results.

Gas consumpti on of 17 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e customers , customer types (industrial and commerci al enterprise customers and residential customers ), and customer satisfactio n survey results. Engineerin Engineering g and Length of project technical the management, departmen Engine installed Entr project t Provide statistical form of ering pipeline, y progress, personnel, pipeline construction and number of into Program quantities of Detailed project design length for indicators, and Constru customers or approval- project of the ledger, and In real personnel, relate the project 5 ction , program uplo design- program, statistical form of time acceptanc information to the Manag progress, adin planning- program ledger, quantities of e customer ledger in the ement program g to completion and summary of project personnel, CMS through field System ledger, syst quantities of and description. (ECS) and other em project (pipeline contract informatio length, and managem n. number of ent customers). personnel Equipm Station Busi In real- Station Equipment Station Inspection 6 ent and equipment ness time, or persons on managemen equipment statistics, and 18 system data Functions and uses Acq Acquisi System uisiti Service System S/N system tion Statistical forms Monitoring role name on objects function Specific uses data frequen mod modules cy e Mainte ledger, oper on a duty t, inspection ledger, maintenance nance maintenan ation daily or managemen equipment statistics System ce monthl t, manufacturers, (EMS) managem y basis maintenance equipment ent tasks, inspection plan, journal, equipment equipment and inspection, maintenance manufactu and plan, and rer ledger statistics maintenance managemen record. t The Security Monitoring System is used Auto to detect gas mati Gas leakage and According to the c Ledger Securit volume accidents, and information acquired by acqu Operators maintenance Details about y measured is connected flowmeter, analyze the isitio In real of the , information acquisition of gas 7 Monitor by station with the gas consumption, and n time subsidiarie acquisition, consumption ing outlet and distribution determine whether there and s and data information System township network working is gas leakage or uplo analysis flowmeter system accident. adin equipped with g system control and data acquisition.

19 5. The management personnel and employees of each department of YTNE and its subsidiaries can work through the information system according to the company's relevant management regulations and their own system authorities. The performance report generated by the system is the basis for supervising and evaluating performance, solving the problems in the program implementation, and adjusting the work plan and budget plan, to contribute to the guidance and decision making by the company's management and program coordination teams. 6. Table 4.Disbursement-Linked Indicators, Monitoring and Evaluation System, and Collecting Information

MIS Data acquired under the status Monitoring DLIs subsystem quo frequency I. Outcomes In real-time/on a Number of customers quarterly basis connected, type of customer, Customer quantity, location of customer, size of customer type, households (residential customer location, DLI1: Number of customers) and employees and fuel before customers connected to (industrial and commercial CMS conversion are gas increased to 1.2 million customers), head of household acquired in real customers by 2022. (sex- disaggregated), baseline time. The gas fuel before the switch consumption of (firewood, coal, and Liquefied customers is petroleum gas), customer acquired on a satisfactory survey results. quarterly basis. In real-time/on a quarterly basis Customers’ gas consumption, Customer types are disaggregated consumption DLI2: Volume of gas acquired in real per type of customer consumption increased to CMS time, and the gas (industrial, commercial, and 316.63 Nm3 by 2023. consumption of residential), and customer customers are satisfactory survey results. acquired on a quarterly basis. In real-time/on a DLI3: CNY915 million of monthly basis commercial finance Issuance of Financial statements, financial mobilized for cleaner fuel financial FMS books, cash flow, and fixed switch to continuously statements on a assets implement the overall monthly basis, and program from 2022. real-time query of financial books. II. Outputs DLI4: Total length of Length of the installed pipeline, installed natural gas number of customers, program distribution network ECS In real time progress, program ledger, and pipeline reached to 26,880 other information. km by 2021. DLI5: Total installed units Length of the installed pipeline, of natural gas regulatory number of customers, program ECS In real time and storage facilities progress, program ledger, and reached to 12 units by other information.

20 MIS Data acquired under the status Monitoring DLIs subsystem quo frequency I. Outcomes 2021.

DLI6: Total annual biogas ECS and In real time/on a fuel production reached to —— EMS daily/monthly basis 17 million m3 by 2023

DLI7: At least 50% of participants in 500 gender sensitive cleaner fuel use CMS —— awareness outreaching programs/year are women. DLI8: Institutional building and capacity enhancement: Financial and credit risk management guideline In real-time/on a adopted by 2019; social monthly basis and environment Issuance of safeguard guideline Financial statements, financial financial adopted by 2019; FMS books, cash flow, and fixed statements on a Integrated ERP system assets monthly basis, and installed by 2020; Fund real-time query of raising plan for overall financial books. program implementation adopted by 2021 and increase number of YTNE staff to 300 of which 30% is women by 2022.

B Issues and Changes

6.At present, the data of YTNE information management system is being continuously entered, and as the program progresses, the data will be supplemented successively.

C Fiduciary Systems

7.Financial and risk management. In 2020, YTNE engaged a third-party institution through public bidding to carry out the development of the company's internal control and comprehensive risk management systems, which could greatly improve the company's risk control in daily operation management and financial, investment and financing.

8.Budgeting and planning, and information system. In 2020, YTNE continued to upgrade the information management system to improve manual efficiency, manage capital risks effectively, and use deposit funds efficiently by establishing interfaces between the original systems, optimizing the financial system, starting the business of bank-corporate direct linkage (the connection between the company's system and the banking system).

21 D Procurement System a Procurement System Related Program Actions Status 8 YTNE is responsible for the procurement of the Program, and the PMO of ZYIG is responsible for supervision to ensure that the procurement conforms to the national policy and the Program Action Plan related to the procurement.

Table 5 2020 Henan YTNE ADB Project Bidding Ledger

Procurement Doc Publication S/N Project Name Category Bidding No. Bid Opening Time Method Time Revenue & customer service and engineering management software procurement of HNYT/XJ001- 1 ADB Inquiry January 14, 2020 January 20, 2020 Henan Yu-Tian 2020 New Energy Co., Ltd. with loan from Asian Development Bank Deployment of the cloud server and operation and maintenance services procurement of HNYT/XJ003- 2 ADB Inquiry April 3, 2020 April 13, 2020 Henan Yu-Tian 2020 New Energy Co., Ltd. with loan from Asian Development Bank Skid-mounted high- and medium-pressure regulator station project in Taiqian HNYT/XJ006- 3 ADB Inquiry April 29, 2020 May 11, 2020 County, Henan 2020 Province with loan from Asian Development Bank Xiaojia Village and Zijincheng Village program of coal-to-gas HNYT/XJ012- 4 natural gas ADB Inquiry June 8, 2020 June 28, 2020 2020 utilization project in Lushan County, Henan Province with

22 loan from Asian Development Bank

Program of medium pressure pipe network outside villages of HNYT/XJ014- Henan rural coal- 2020 Public 5 ADB June 18, 2020 July 16, 2020 to-gas project HNZB[2020]N03 bidding with loan from 30 Asian Development Bank Intelligent storage management system procurement program of HNYT/XJ024- September 11, 6 Henan Yu-Tian ADB Inquiry August 31, 2020 2020 2020 New Energy Co., Ltd. with loan from Asian Development Bank Construction of Deting, Jiuxian, Muzhaling LNG gasification stations of Yu- HNYT/XJ026- September 11, September 21, 7 ADB Inquiry Tian New Energy 2020 2020 2020 Co., Ltd. with loan from Asian Development Bank Turnkey project of biogas (biological natural gas) production line of Public September 1, 8 ADB PYZB-2020149 July 31, 2020 bidding 2020 Minquan Biogas Plant of Henan Yu-Tian New Energy Co., Ltd. Henan rural coal- to-gas project (phase ii) with HNZB[2020]N05 Public September 10, 9 ADB 2020/8/30 loan from Asian 13 bidding 2020 Development Bank Official website development HNYT/XJ033- September 22, September 30, 10 program of ADB Inquiry 2020 2020 2020 Henan Yu-Tian New Energy Co., 23 Ltd. with loan from Asian Development Bank Equipment management system program of Henan Yu-Tian HNYT/XJ034- September 22, September 30, 11 New Energy Co., ADB Inquiry 2020 2020 2020 Ltd. with loan from Asian Development Bank CA safety certification system program of Henan Yu-Tian HNYT/XJ035- September 22, September 29, 12 New Energy Co., ADB Inquiry 2020 2020 2020 Ltd. with loan from Asian Development Bank Project of installation within the villages of rural coal-to-gas project in HNZB[2020]N08 Public 13 ADB October 30, 2020 December 1, 2020 47 bidding (Phase 1) with loan from Asian Development Bank In 2020, procurement activities in YTNE procurement programs were carried out in accordance with ADB requirements under the premise of complying with the domestic procurement laws.

24 E Anticorruption System

Anticorruption System Related Program Actions Status

9 In 2010, the State Council issued a white paper entitled "Anticorruption and Construction of a Clean and Honest Administration in China". According to the Agreement Establishing the Asian Development Bank, ADB has a fiduciary responsibility to ensure that its loans and other forms of capital contributions are used only for the purposes for which they are granted. In order to fulfill this obligation, ADB has formulated guidelines to prevent or mitigate fraud, corruption, and other prohibited activities in the operation of the Program funded by ADB in whole or in part. ADB's anticorruption guidelines are adopted in the Program to avoid conflicts of interest and transactions with related parties in procurement, all of which have been included in the Program Action Plan.

10 Since ZYIG is a state-owned enterprise wholly owned by the provincial government and YTNE is directly controlled by ZYIG, both ZYIG and YTNE are subject to the anticorruption system of the national and provincial governments. ZYIG and YTNE are subject to the annual audit by a third-party accounting firm and the audit by the Audit Bureau of Henan Province, and also inspected by the Supervisory Committee of the Provincial Commission for Discipline Inspection on staffing, party member management and expenditure every 2-3 years.

11 In order to ensure the normal operation order of ZYIG and YTNE, safeguard the reputation of enterprises, ensure that the commercial operation is in a fair and just environment, and prevent corruption and bribery, anticorruption, as a part of awareness strengthening, runs through all kinds of training during the implementation of the Program. However, YTNE should pay more attention to the anticorruption policies and measures to reduce the risks during the procurement.

25 F Safeguard Systems

a Safeguard System Related Program Actions Status

12 The safeguard system mainly includes environment, environmental assessment, involuntary resettlement, indigenous people, social safeguard assessment, institutional arrangements, etc. Table 6 Gap Proposed Action Indicators or Targets Responsibility Timeframe/Reporting S/N Environment Environmental The implementing agency shallProject REA checklistsIA, supported by TADuring project environmental categorization submit program REAaccepted and categorizationconsultants. assessment, REA checklists checklists and proposedconfirmed by ADB. will be included in the semi- categorization to ADB for allNo Category A projects annual environmental 1 subprojects under theapproved for implementation. monitoring reports to be program. submitted to ADB. Environment Category A projects to be excluded. Area of influence In addition to relevant PRCArea of influence in projectEIT Institutes,During project environmental technical guidelines, theEITs defined based onsupported by TAassessment definition of project area ofpotential impacts as well asconsultants. influence in EITs to be basedrelevant PRC technical 2 on based on potential impacts.guidelines (whichever is larger In case of inconsistency, theshall be adopted). definition which defines the larger area shall be adopted. Existing facilities Compliance audit of existingCompliance audits of existingEIT Institutes,During project environmental 3 facilities to be undertaken, iffacilities included in projectsupported by TAassessment relevant. EITs, if relevant. consultants.

Associated facilities Assessment of associatedAssessment of associatedEIT Institutes,During project environmental 4 facilities, if relevant. facilities included in projectsupported by TAassessment EITs, if relevant. consultants. Climate change Assessment of climate changeClimate Risk AssessmentEIT Institutes,During project environmental 5 risks. (CRA) incorporated into projectsupported by TAassessment EITs. consultants.

26 Physical and CulturalAssessment of PCRs. PCR assessment and ChanceEIT Institutes,During project environmental 6 Resources (PCRs) Find Procedure incorporatedsupported by TAassessment into project EITs. consultants.

Analysis of alternatives to the EIT Institutes, Analysis ofproject’s location, design,Analysis of alternatives During project environmental 7 supported by TA alternatives technology, and components,incorporated into project EITs. assessment consultants. including no project option.

Environmental EMP including adverseEMP included within projectEIT Institutes,During project environmental Management Planenvironmental impacts andEITs.EMP provisionssupported by TAassessment and program (EMP) risks; mitigation measure;incorporated into constructionconsultants. implementation environmental monitoringcontracts. 8 program; reporting; implementation arrangements; schedule; budget; and EMP performance indicators . Public Consultation Meaningful public consultation. Meaningful public consultationEIT Institutes,During project environmental incorporated into project EITssupported by TAassessment and program 9 and during projectconsultants. implementation implementation. Disclosure Disclosure of theEnvironmental assessmentImplementing Provide environmental assessment environmental assessmentreports in English of the firstagency (IA) reports in English of the first three reports in English. Disclosurethree subprojects disclosed on subprojects to ADB for disclosure of semi-annual environmentalADB website.Environmental within 15 days of obtaining 10 monitoring reports monitoring reports disclosed domestic approval.During project on ADB website, IA environmental assessment and websites.Information from the implementation EITs provided to affected people and other stakeholders. Inadequate Safeguards Unit in charge ofSafeguards Unit established. IA By December 2019 institutional environmental safeguardSafeguards Unit has adequate arrangements andcoordination and management. qualified environmental staff. 11 staffing for environmental management

27 Inadequate Conduct workshop(s) for staffWorkshop(s) and trainings heldPMO and qualifiedWorkshop(s) and training(s) held environmental of the PMO and IA withand summary report acceptedconsultant to designby March 2020, and will continue management andenvironmental managementby ADB and leadthroughout program coordination capacity responsibilities, contractors workshop(s) implementation. and CSCs, covering (i) environment screen and categorization, (ii) EMP scope, (iii) incorporation of EMP 12 provisions into bidding documents and construction contracts, (iv) EMP implementation and monitoring during construction and operation phases, (v) public engagement and information disclosure, (vi) GRM Inadequate monitoringThe construction supervisionMonitoring and reportingIA supported byMonitoring requirements of and reporting oncompany (CSC) to monitorrequirements, includingCSC and TAincorporated into the PID before EMP implementation daily and report monthly to IAchecklist, incorporated into theconsultants. program approval.Monitoring and based on established reportingPID.Semiannual environmental reporting ongoing throughout 13 template. IA to conductmonitoring reports submitted to construction phase and operation monthly construction site andADB. phase. operation site inspections based on established checklist. Grievance redressIA formalizes a locallyGRM arrangements posted onIA Established by December 2019 procedure limited toaccessible program GRM,relevant websites, and at 14 hotline systemsupplemental to theproject construction sites and managed by EEB. environmental hotline system. operation sites. Involuntary resettlement 1 Prepare involuntaryAll IR categorization checklistsPMO with support fromThe screening andPrepare involuntary resettlement resettlement impactare prepared. resettlement institute andcategorization formsimpact categorization checklist for categorization project implementationand Safeguardall subprojects.. checklist for all consultants. Reports for subprojects. Category C will be included in the semi- annual monitoring Category A projects toNo Category A projects Category A projects to be reports to be be excluded. approved for implementation. excluded.

28 For Category CAll Safeguard Reports for submitted to ADB. For Category C projects, projects, PreparationCategory C are prepared. Preparation of Subproject of Subproject Safeguard Report as per Social Safeguard Report as Safeguard Technical Guideline per Social Safeguard which has the following Technical Guideline attachments: (i) Screening and which has the categorization form which includes following attachments: confirmation that there are no (i) Screening and outstanding or legacy issues, (ii) categorization form Copy of Land Certification. which includes confirmation that there are no outstanding or legacy issues, (ii) Copy of Land Certification. 2 Preparation of RP forRPs prepared for allPMO with support fromRPs in EnglishPreparation of RP for subprojects subprojects insubprojects.PMO Issuance ofresettlement institute andlanguage submittedin accordance with PRC accordance with PRCConfirmation Letter that the RPproject implementationto ADB within 15regulations, ADB SPS, and the regulations, ADB SPS,is satisfactory prior to award ofconsultants. days uponProgram’s Social Safeguard and the Program’scivil works contract. confirmation that theTechnical Guideline. Social SafeguardPMO Issuance of Confirmation RPs are satisfactory Technical Guideline. Letter that LA and HD were to PMO satisfactorily completed before PMO Confirmation physical and economic Letters will be displacement of affected included as persons and submit to ADB. attachment in the semi-annual monitoring .reports to be submitted to ADB. Semi-annual external monitoring reports to verify PMO reporting 3 No requirement toConduct due diligence forDDRs prepared. PMO with supportDDRs in English language conduct due diligencesubprojects. Preparation of from resettlementsubmitted to ADB within 15 days for past landdue diligence report institute and projectupon confirmation that the DDRs acquisition implementation are satisfactory to PMO. consultants.

29 PMO Issuance of ConfirmationPMO with supportPMO Confirmation Letters will be Letter that the DDR isfrom resettlementincluded as attachment in the satisfactory and there is noinstitute and projectsemi-annual monitoring reports to legacy or outstanding issueimplementation be submitted to ADB. prior to award of civil worksconsultants. contract. If there are outstanding/ legacy Semi-annual external monitoring issues, PMO to submit the reports to verify PMO report including corrective reporting.DDR with corrective actions to ADB for review prior actions to be submitted to ADB for to award of civil works review once available. 4 No requirement toSocial Compliance Audit (SCA)SCA prepared. PMO with supportSCAs in English language conduct complianceof existing facilities to bePMO to confirm in writing thatfrom resettlementsubmitted to ADB within 15 days audit for existingundertaken, if relevant. the audit is satisfactory beforeinstitute and projectupon confirmation that the SCAs facilities awarding of CW contract andimplementation are satisfactory to PMO. no legacy issues for pastconsultants PMO Confirmation Letters will be resettlement activities. included as attachment in the semi-annual monitoring reports to be submitted to ADB. 5 Lack of identificationEarly screening of vulnerableResults of screening andPMO with supportSee Items 2-4 above. of the poor andgroups; conduct of properassessment in the IRfrom resettlement vulnerable groupssocial/risk analysis categorization checklist, RP,institute and project during the screening Due Diligence, SCA implementation process and consultants. resettlement planning. 6 Inadequate Documentation ofDocumentation is reflected inPMO with supportSee Items 2–4 above and Item 8 documentation of theconsultations, informationthe resettlement plan andfrom resettlementbelow.See Item 8 below in terms of consultation anddisclosure and grievancesmonitoring reports.A well-institute and projectmonitoring grievances and information disclosurereceived.GRM established atestablished and functionalimplementation assessment if GRM is effective. activities andthe PMO level. GRM is in place at the PMO;consultants.External grievances received and with clear roles andmonitor responsibilities when dealing with concerned government agencies handling resettlement. 7 No requirement toDisclosure of resettlementAll RPs, DDRs, SCAsPMO Disclosure activities will be disclose resettlementplans, DDR, SCA report disclosed on PMO website reported in the semi-annual planning documents monitoring reports.

30 during project Key information of RPs, DDRsPMO Disclosure activities will be preparation and and SMRs provided to affected reported in the semi-annual implementation. people and other stakeholders monitoring reports. in a form and language understandable to them. Inadequate monitoringPMO to establish a safeguardSafeguard monitoring trackingPMO Monitoring requirements and evaluation monitoring system to allowsystem established. incorporated into the PID before proper coordination and program approval. facilitation with concerned agencies. Preparation of semi-annualSemi-annual monitoringPMO Every July (for Jan–Jun monitoring monitoring reports reports prepared and period) and Every January (for submitted to ADB and July–Dec monitoring period). uploaded on PMO website. PMO to engage an externalAn external resettlementPMO Engagement of external monitor monitor to carry out its ownmonitor, acceptable to both and timing of mobilization to be monitoring and verification. ADB and PMO is engaged by reported in the semi-annual PMO before December 2019. monitoring report.Every July (for Jan–Jun monitoring period) and Every January (for July–Dec 8 monitoring period). Preparation of resettlementSemi-annual externalExternal monitor completion report monitoring reports prepared by the resettlement external monitor are submitted simultaneously to ADB and the PMO. Monitoring reports disclosed inPMO Disclosure of monitoring reports in the village in local language. the village will be reported in the semi-annual monitoring reports and in the external monitoring reports. Resettlement CompletionPMO Report submitted to ADB and disclosed on PMO website. 9 Inadequate Establish a Safeguards Unit inSafeguards Unit establishedPMO PMO letter to ADB institutional charge of social safeguardqualified full-time social arrangements andcoordination and management. safeguard specialist recruited staffing by December 2019.

31 10 Inadequate capacityEnhance capacity of staff andWorkshop(s) held by MarchPMO, IA andWorkshops undertaken will be for social safeguardconcerned agencies to plan,2020 and will continuequalified consultantreflected in the semi-annual management andimplement and monitorthroughout programto design and leadmonitoring reports and external coordination resettlement in accordanceimplementation. workshop(s) monitoring reports. with ADB SPS and agreed Social Safeguard Technical Guideline.

13 The environmental and social safeguard unit with sufficient staff has been established by YTNE by the end of 2020. The unit includes two general coordinators (Mr. Song Xiangchao and Ms. Peng Jiayin) and two coordinators (Mr. Qin Jisen and Ms. Xu Linlin). Besides, the unit also designated 17 staff responsible for environmental, social and gender issues in the 17 sub-companies of YTNE. The staff list is presented in Table 7.

Table 7 Staff list for environmental, social and gender issues

No. Subcompany name Name 1 City Sub-company of YTNE Li Yuanyuan 2 City Sub-company of YTNE Yang Mengru 3 Wugang City Sub-company of YTNE Wang Erwei 4 City Sub-company of YTNE Liu Zhenyu 5 City Sub-company of YTNE Fan Dong 6 Sub-company of YTNE Dai Fengwei 7 Sub-company of YTNE Chang Songnan 8 Sub-company of YTNE Li Zhigang 9 Sub-company of YTNE Ding Hao 10 Sub-company of YTNE Wang Junyi 11 Sub-company of YTNE Zhang Cong 12 Sub-company of YTNE Ma Chi 13 Sub-company of YTNE Sun Zhanlei 14 Jia County Sub-company of YTNE Zhu Jinke 15 Sub-company of YTNE Tian Panpan 16 Sub-company of YTNE Song Hua 17 Sub-company of YTNE Li Zhiyan

32 G Gender and Social Dimensions a Progress of PAP implementation

14 As to the end of 2019, the GAP and ACP monitoring and evaluation have been included in the program action plan (PAP) and is being implemented. The following gender and social activities according to the Program Action Plan (PAP) were carried out by YTNE up to now:

15 Action 1: Appoint one staff member as the social development and gender focal point to coordinate gender and awareness campaign-related issues during program implementation, such as relevant activities in GAP, ACP, and monitoring and reporting.

16 Completed by Dec 2019 and maintain during implementation. YTNE has appointed two full time staff in Engineering Operation Department of YTNE headquarter named Mrs Chenjing and Mr Masu as social development and gender focal points during the early stage of project implementation in 2019 to coordinate gender and awareness campaign-related issues, such as relevant activities in GAP, ACP, and monitoring and reporting. Each subsidiary has appointed at least two person as focal points to implement specific activities in the program area. In 2020, a gender working group with 36 staff in Engineering Operation Department (EOD) and Comprehensive Operation Department (COD) of YTNE headquarter and subsidiaries were officially confirmed, Mrs. Peng Jiayin, instead of Mrs. Chenjing, was named as the gender focal point, among them, female staff accounted 27.78%. One staff named Sun Hanjun in PMO was also appointed as the contact person for social and safeguard related issues.

17 Action 2: Integrate GAP and ACP monitoring into the program monitoring and evaluation system.

18 Completed by Dec 2019 and maintain during implementation. YTNE has appointed two full time staff as focal points for coordinate the implementation of relevant activities in GAP, ACP, and monitoring and reporting since 2019. The implementation status of GAP and ACP have been integrated into the program monitoring and evaluation system, and the results of GAP and ACP implementation and monitoring have been included in gender and social section of the first program implementation progress report (PIPR) on program implementation status as of 31 December 2019. However, YTNE was informed during the program loan inception mission in Nov 2020 that the separated semi-annual GAP progress report needs to be prepared with supporting documents and detailed description of the process of GAP implementation for further review. One gender and social consultant was engaged by YTNE in Dec 2020 as required by GAP for better implementation related activities and assisting for the preparation of separated semi- annual GAP progress report.

33 19 The results of ACP implementation from June 2019 to Dec 2019, associated with action 7 and action 8 in GAP have been reviewed and verified by Beijing Jiashu during the first time of verification from August 2020 to Oct 2020. The detailed results of ACP implementation in 2020 was reflected in chapter 5 and will be verified during next verification period by IVA expert. b DlL achievements and ACP implementation

20 Two gender targets in GAP have been included in DLI 7 and DLI 8. As to Nov 2020, the DLI 7 achievements from June 2019 to Dec 2019 have been verified by IVA. The related activities in ACP have been carried out by subsidiaries of YTNE to achieve DLI 7.

DLI 7 achievements and ACP implementation progress

21 The type of awareness activities are as follows:

 Public natural gas promotion awareness activities in township square and villages’ centers through broadcasting the promotion video, display board, distributing the booklet, gas safe use knowledge sharing (general knowledge of safe gas use, self- inspection methods, emergency treatment methods) and user's repair request and maintenance service.

 Audio broadcasting. As the promotion video was completed by the end of 2019, in order to use the material for the awareness activities as soon as possible, the audio of the video was completed in Nov 2019 and to broadcast in the village in fixed times with the cooperation of the village committees, which is an additional type of main awareness activities in the second half of 2019 and continue to be used in 2020 combined with the short video broadcasting;

 Promotion activities at school (such as broadcasting the promotion video, distributing the promotional leaflets and placing promotional display boards on campus and putting up posters on the bulletin board) which aims to build an even larger community of safety-conscious gas consumers through the awareness activities conducted in school.

 The other awareness campaign activities are to enhance the customer relation through sending safe gas use information via SMS/WeChat official account/Wechat group, and to increase the awareness of natural gas us of elderly people.

22 Due to the impact of COVID-19 epidemic, the on-site publicity activities were not available to carry out in the first quarter of 2020 in the villages and schools. Nevertheless, a series of publicity activities were actively carried out in ten cities/townships (except six subsidiaries established in 2019, four subsidiaries were

34 newly operated since 2020, such as Taiqian, Xichuan, Xinye and Wugang) since the second quarter of 2020. Each subsidiary has taken a series of measures to use the promotional short video for publicity, such as broadcasting in village committee center, township service stations and publicity vehicles. Except the same type of awareness activities in 2019, online aware campaign activities were also carried out in 2020 through wechat which could continuously and effectively during the COVID- 19 epidemic period in the first half year. The short video was also uploaded on the wechat official accounts of subsidiaries for publicity. However, the actual number of the gender information of participants of these activities were not available. Based on available statistics of 206 public awareness activities and 2550 times of audio/video broadcasting in 185 villages which have been carried out in 2020, according to the signed attendance sheets and proof of village committees about audio/video broadcasting and number of villagers covered, 131,445 persons in total have participated, and the percentage of female participants of 2020 reached 48.27%. The cumulative female participants from 2019 to the end of 2020 reached 50.05%.

23 From Jan 2020 to Dec 2020, about 206 times of public gender sensitive cleaner fuel use awareness and intensive natural gas promotion activities were carried out on the township square and the villagers’ center in ten counties/cities by ten subsidiaries During the activities, 4878 persons have signed attendance sheet according to the scanned copy submitted by subsidiaries with the photos in the spot, among them, 2915 were women, accounted 59.76%. 110,104 promotional leaflets were distributed to participants in the activities and new customers;

24 157,797 new information booklets on natural gas knowledge and safe use were distributed to the new customers;

25 Broadcasting the audio of the short special promotion video in 185 villages in 9 counties for 2550 times together were carried out which covered about 127,037 persons, among which 46.47% were women;

26 69,963 times of additional door-to-door visit to the elderly were reported by six subsidiaries to provide on-spot explanation and operation demonstration, ensuring that the customers could become familiar with and master the relevant knowledge;

27 All the ten subsidiaries have established wechat official account for providing information on gas fee payment, natural gas safety use knowledge publicity and recruitment, etc. 24 articles in total have been posted in the social media channel as to Dec 2020, among them, promotional short video and cartoon posters accounted 62.5% with 2494 pageviews.

28 It is reported by Songxian subsidiary that 9988 SMS were sent to customers in wintertime for the safety us of natural gas.

35 Table 8 The summary of awareness activities carried out by YTNE in 2020

Public awareness activities Other type of awareness activities Broadcasting audio/video School Display Distributing Distributing Number Broadcasting Total number of Covered Percentage Subsidiaries promotional boards leaflets Information of times participants population of female Times activities booklet villages Total Female times times copies Households village Times person % Lankao 22 841 460 2 6 31791 68947 55 1100 88000 45.00% Xuchang 44 1120 650 0 6 27100 17174 16 160 9800 55% Weishi 20 400 212 0 30000 34812 Yexian 26 792 491 1 22 4962 9981 5 100 3221 51.00% Songxian 34 449 280 0 100 5951 8227 77 500 11742 46.00% Hebi 20 649 416 0 50 5000 12056 4 70 1454 50% Taiqian 9 154 109 0 6 2000 4000 11 200 4258 46.00% Xichuan 11 191 121 0 1000 300 0 0 0 0 Xinye 10 182 125 1 10 1500 1300 5 60 4962 0.5 Wugang 10 100 51 0 5 800 1000 12 360 3600 51% Total 206 4878 2915 4 205 110104 157797 185 2550 127037 46.47%

36 DLI 8 Achievements Of Gender

29 As to the end of 2020, YTNE has newly recruited 160 staff in technical positions in the headquarter, such as accountants, managers, technicians and including the staff engaged in the working group for the implementation of the Program. Among them, 75 are female and accounted 46.88%. The percentage of female staff has exceeded the 2020 target of DLI 8. As during the preparation stage of ADB project, the awareness of gender sensitivity of the managers and human resources department has been improved and reflected in the recruitment practices which is to give priority to the female candidates under the same conditions with male candidates.

30 Similarly, when recruiting front line workers in the township service stations, it is also stipulated that each service station should be equipped with at least two women. In order to provide more convenient services for the customers in the villages, YTNE has established the 38 township service stations to provide customer services for the township and village level customers, 209 staff were newly recruited in the 38 service stations as front-line workers as to 2020, including 63 female employees, accounted 30.14% which also exceeded the indicator target in GAP (15%). All these employees, including female employees have received the technical trainings and pass through the entrance examinations, certified for work.

31 As to the end of 2020, the subsidiaries of YTNE have successively provided the training in Safety Production Training, Training in Basic Knowledge of Natural Gas, Training in Operation Standards for Gas Maintenance Services, Training in Household Safety Inspection for Gas, Training Course Materials for Transmission, Distribution and Metering, Training in Displacement and Gas Supply, and job responsibilities for the newly recruited staff. After the training, they also performed the corresponding exams and practical operations, thus integrating theory with practice, improving the professional knowledge, and improving the professional skills and problem-solving capability of the employees. They also established and improved the information management system and the job responsibilities of financial and risk management personnel, and improved the personnel allocation, after which the female employees accounted for 59% of the financial and risk management personnel. In 2019, the marketing service systems were launched for the member enterprises actually operating the gas supply. In 2020, the NCC system was launched to realize the informatization of various modules such as finance, supply chain, and human resources.

37 Chapter 4 INTEGRATED RISKS AND MITIGATING MEASURES

A Key Risks and Mitigating Measures

Table 9 Status of Integrated Risk Assessments and Mitigating Measures (As of 31 December 2020)

Risks Rating Without Key Mitigating Measures Mitigation Measures Actually Taken the Mitigating Measures Results-related risks Portions of the population in The program offers end-pipe connections to Each customer was provided with pipe end semi-urban and rural areas each customer at no cost and installment joints free of charge; when purchasing gas may refuse gas connections payments for the purchase of gas appliances, customers paid in installments Substantial (high) because of limited affordability. appliances to reduce the initial cost burden. and costs were reduced or exempted for poor households so as to reduce their initial cost burden. Slower transition to cleaner An awareness campaign regarding cleaner Cleaner fuel use and safety publicity fuel and/or persistent use of fuel use and safety will stimulate demand activities have been conducted to stimulate traditional fuels (e.g., coal, among customers. The customer service consumer demand. The customer service Substantial (high) wood, and agriculture waste) focal point deployed in each township and coordination center established in each continues even after gas village will facilitate the transition to cleaner township and village has effectively connections are made. fuel. promoted the transition to cleaner fuel use. Biogas plant fails to achieve The involvement of an internationally International experienced technology targeted production volume. experienced technology provider in building providers were actively communicated with, Substantial (high) the biogas plant substantially reduces the so that technically mature and experienced risk associated with deploying technology manufacturers were selected to participate new to the PRC. in the construction of biomass gas plants. Inaccurate primary data is The risks that inaccurate information is input The risk of inaccurate information input into entered into the MIS, and DLI- into the MIS are mitigated through the the management information system was related information is not enhanced internal audit function (to be in reduced through strengthening of the disclosed, reducing feedback place by 2019) and the information internal audit functions (in place in 2019) from customers. disclosure policy (to be adopted by 2019) and the information disclosure policy included in the PAP. The independent stipulated in Program Action Plan (adopted Moderate verification agent will also function to check in 2020). The independent verification inputted data through site inspection. agent (IVA) cross-checked the input data through on-site inspection. Automatic collection of flow in villages and towns was realized through the management information system. Expenditures and financing

38 Risks Rating Without Key Mitigating Measures Mitigation Measures Actually Taken the Mitigating Measures risk Implementing agencies fail to Under the PAP, an external board of director mobilize the financing needed (to the existing board) for financial for ongoing implementation of management will be selected by 2020 under the overall program following a competitive process, which will enhance Substantial (high) —— RBL program completion. capacity to build a financing strategy. Adoption of a fund mobilization plan in 2021 for ongoing implementation following the RBL program is one of the DLIs. The domestic bank loan and CDB intends to provide debt financing to the The registered capital has been paid up in equity contribution from the program and issued a letter of intent to the place. CDB has completed its initial credit implementing agencies fails to Low implementing agency. CNY100 million of extension, and other policy-related bank be mobilized to implement the equity has already been generated through loans such as loans from the Export-Import RBL program. the Yun-Tian Investment Fund. Bank of China are actively negotiated. Cost overruns in natural gas The unit cost for natural gas distribution The Company has formulated program distribution and the biogas reflects the actual costs (both in the 2018 management system, bidding procurement production plant in the RBL activities of the overall program and CTLG’s system and financial management system, program affect strengthened management and operation, Moderate built YTNE management information system, and strengthened supervision and management, so as to reduce investment costs. Investment in supplying gas in urban areas). CTLG as shareholder of YTNE provides technical support in controlling the cost. Unit Financial sustainability of cost of biogas reflects the current overall program. international overnight cost of a biogas —— plant. Engagement of international technology supplier for biogas component is mandated in the legal covenants to control the cost. Fiduciary risks (Financial management) Weak internal control and Engage external board of director to the credit risk management existing board, adopt stronger internal functions of the implementing controls and strengthen risk management Substantial agencies affect financial guidelines, and increase staffing for internal sustainability of overall control and credit risk management, as program. specified in PAP actions. Fiduciary risks (Procurement)

39 Risks Rating Without Key Mitigating Measures Mitigation Measures Actually Taken the Mitigating Measures Implementing agencies fail to retain experienced According to the requirements of provision procurement staff and/or to The PAP requires that any qualified of qualified procurement and contract provide the needed training to procurement and contract expert(s) be made specialists and continuous provision of use national standard bidding available and that adequate in-house adequate internal procurement and Moderate document templates and to training for procurement and anticorruption anticorruption training to procurement assure market openness and be provided for procurement staff on an personnel in the Program Action Plan, the quality of project ongoing basis. procurement specialists has been procurement and contract employed currently. management. Fiduciary risks (Anticorruption) Relevant anticorruption and integrity regulations published by the provincial Implementing agencies failed government are also applicable to the The provincial government’s regulations on to adopt ADB’s Anticorruption Program to prevent corruption and abuse anticorruption and integrity are also Policy (1998, as amended to of power. The Program Action Plan applicable to the program to prevent corrupt date) and Integrity Principles Moderate requires the adoption of ADB's activities and abuses. The PAP requires and Guidelines to prevent Anticorruption Policy and Integrity adoption of ADB’s Anticorruption Policy and corrupt activities and other Principles and Guidelines. There is an audit Integrity Principles and Guidelines. abuse. department with specially-assigned person to take charge of the audit of ADB programs. Safeguard related risks In accordance with the PAP: (i) the program’s Environmental and Social Environmental and social Safeguard Technical Guidelines were A third-party organization with rich safeguards screening, adopted in September 2019; (ii) a Safeguard experience in foreign-funded projects has planning, and monitoring are Unit will be established and qualified staff Moderate been hired to prepare environmental inadequate to comply with recruited by December 2019; and (iii) impact assessment and due diligence ADB’s safeguard policies and environmental and social safeguards reports. requirements. training will be provided to staff and contractors by March 2020, and will continue throughout program implementation. Operating environment risks

40 Risks Rating Without Key Mitigating Measures Mitigation Measures Actually Taken the Mitigating Measures Shortage of natural gas slows Moderate The natural gas supply in the PRC’s In the winter of 2017, due to the sudden the switch from coal to gas. domestic market became tight in the winter ban on the use of coal in major cities, of 2017 because of a sudden ban on coal natural gas in China's domestic market was use in major cities. Since 2018, the in short supply. Since 2018, the Chinese government has initiated natural gas sector government has deregulated the natural deregulation to stimulate private sector gas industry, and encouraged private involvement in upstream and downstream enterprises to participate in the upstream natural gas supply to meet growing domestic and downstream industries of natural gas demand. supply to meet the growing national demand. Comprehensive program risk Moderate

Chapter 5 PROGRAM ACTION PLAN

Status of Program Action Plan 32 During the whole program implementation process, the safeguard measures to be taken for the safeguard system related items are as follows:

Table10: Status of Program Action Plan

Responsible As of December 31, 2019 Action Timeframe Agency ZYIG YTNE Corporate governance ZYIG is a provincial-level state-owned enterprise, supervised by HPG and Henan Finance Department. The addition of external Engagement of an external director on the existing By the end of ZYIG directors is a major change of the group. It can be implemented board of directors. 2020 only after being reported to and approved by the HPG and Henan Finance Department. Existing risk management system of the Group: by the end of Establish corporate risk management guidelines and 2019, Strategy Committee, Remuneration and Appraisal a risk management function, with specialized Committee, Audit Committee and Investment Decision Committee By the end of committees under the board including (i) audit andZYIG were newly added, and corresponding management systems were 2020 risk management, (ii) compensation/nomination, (iii) formulated. strategic investment, and (iv) investment decisions.

41 Information disclosure

Adopt an information disclosure policy to disclose progress and achievement with respect to the disbursement linked indicators and activities, As of 2020, YTNE has disclosed the relevant procurement plans program action plan, customer satisfactory survey to Zhongyuan Yuzi and on YTNE's website as scheduled. results, audited corporate and program financialZYIG and By the end of The ADB loan agreement was signed on May 26, 2020, and statements, subproject safeguard documents,YTNE 2019 became effective in August. The semi-annual program progress environment and social monitoring reports, and will be disclosed in January 2021 on the ZYIG's and YTNE's procurement plan under the overall program, on a websites. semi-annual basis through the ZYIG and YTNE website that is publicly accessible.

Financial management

As of the end of 2020, YTNE has built a complete risk Introduce a foreign exchange fluctuations riskZYIG and By the end of management system, and the current foreign exchange risk reserve to mitigate foreign currency debt. YTNE 2020 reserve ratio is 0.1%-0.5%.

As of 2020, both ZYIG and YTNE have set up internal audit Strengthen staffing for internal control audit andZYIG and By the end of departments with relevant personnel to improve internal audit and adopt operational manuals. YTNE 2020 risk control.

The Group has formed a relatively complete project financial and Strengthen staffing for financial and risk management By the end of ZYIG risk management system and established a project investment and adopt related guidelines. 2020 management system.

Plan and implement training on financialZYIG and By the end of By the end of 2019, ZYIG and YTNE had jointly organized two management to their relevant staff. YTNE 2019 financial management trainings.

Procurement and anticorruption

42 YTNE By December Submit a procurement plan to the ZYIG PMO every YTNE submitted the "2020-2021 Procurement Plan" to the PMO 2019 and 12 months, update the procurement plan as needed, of ZYIG for approval, and the Procurement Plan was published on maintain during and disclose it on the YTNE website. the official website in JUNE 2020 after being approved. Website implementation http://www.zyyzgroup.com/news/show-126.html

YTNE By September Adopt national standard bidding document templates. Yes 2019 During Avoid procurement from ADB’s non-member preparation and Yes countries. implementation YTNE During Make any qualified procurement and contract preparation and expert(s) available and provide adequate in-house implementation By the end of 2020,YTNE had invited Yang Xiaoming, a training for procurement and anticorruption to procurement and contract expert approved by ADB, to conduct a procurement staff continuously, to assure market training session for relevant personnel. openness and fairness of project procurement and contract management.

YTNE During By the end of 2020, YTNE entrusted qualified bidding Conduct open competitive bidding without triggering preparation and procurement agency for the procurement of the Program’s works conflicts of interest and related party transactions. implementation. and goods through public tendering.

YTNE During Maintain and monitor the procurement and contract preparation and information, which is accessible to ADB. implementation Yes

YTNE During At the end of 2020, YTNE updated its bidding procurement Adopt and follow ADB’s Anticorruption Policy and preparation and system, which was prepared in accordance with relevant national Integrity Principles and Guidelines (both as amended implementation procurement policies and ADB procurement policies, and was from time to time). applicable to ADB programs. Safeguard measures YTNE By December Set up a safeguard unit with qualified staff to 2019 and coordinate environment and social safeguards- maintain during Song Xiangchao from the PMO is responsible for tracking and related issues implementation handling social and environmental affairs of the Program.

43 YTNE By December Social and environmental management safeguard personnel are 2019 and composed of Song Xiangchao, Peng Jiayin, Xu Linlin and Qin maintain during Jisen, among whom Song Xiangchao and Peng Jiayin are general implementation coordinators, and Xu Linlin and Qin Jisen are coordinators. Xu Linlin is responsible for compiling safeguard planning documents, Assign safeguard staff member(s) for social and monitoring reports and maintenance information records of social environmental management as coordinators for and environmental management, while Qin Jisen is responsible relevant activities, prepare safeguard planning for coordinating awareness action plans, gender action plans and documents, monitoring reports, and maintain the related activities in monitoring and reporting during the program information recording system. implementation. Xu Linlin and Qin Jisen have been assigned as coordinators of related activities in the social and environmental management safeguard, to play their roles in compiling safeguard planning documents, monitoring reports and maintenance information records.

ZYIG, Workshop(s) YTNE, and held by March PMO 2020 and will The Training Management System of Henan Yu-Tian New Energy continue Co., Ltd. has been formulated. Safety training, gas basic knowledge training, household safety inspection training, Plan and implement training on environment and throughout transmission & distribution and measurement training, gas social safeguard management for safeguard related program maintenance service operation standard training, etc. have been staff and contactors. implementation. carried out. Each subsidiary has conducted regular and irregular trainings on safeguard systems such as safety guarantee system and environmental protection system as required.

YTNE, By December 1. In 2020, the Program office hired an external expert, Nie ZYIG, and 2019 and Mingtao, as an expert for environmental and resettlement issues PMO maintain during to help the Executive Agency to solve the related problems. The Establish and maintain environmental and implementation semi-annual environmental monitoring reports have been resettlement monitoring and evaluation system for completed. the program: (i) prepare semi-annual environmental 2. YTNE has finished preparing the environmental and monitoring reports. Disclose the reports on YTNE resettlement monitoring report for the period of 2020.6-2020.12, and ZYIG websites, then submit them to ADB for which is planned to be published on the website of ZYIG and disclosure on ADB’s website; (ii) engage external YTNE in 2021. environment and social monitors acceptable to ADB and the PMO, to verify safeguard requirements; and, (iii) make semi-annual social safeguard monitoring reports in local language accessible to the affected people.

44 YTNE By September The guidelines have been prepared and published on the 2019 and designated website. The information is publicly available with maintain during monitoring and grievance redress mechanism and other related Adopt social and environment safeguard technical implementation contents included. guidelines that provide clear guidance on necessary screening and categorization, planning, and implementation of social and environmental management activities; early screening of vulnerable groups; conduct of proper social and environmental During risk analyses; documentation of consultations; and preparation and information disclosure, monitoring and grievance implementation redress mechanisms.

Based on an adopted social and environmentYTNE YTNE has prepared subprogram safeguard documents and safeguard guidelines, prepare and disclose the submitted them to ADB for disclosure on ADB's website after subprojects safeguard documents on the YTNE ADB's review is completed. website, and submit them to ADB for disclosure on ADB’s website. YTNE During preparation and After the completion of the program, multiple communications on Conduct meaningful public consultation that is implementation target groups will be performed in many ways in advance, and the documented in the safeguard reports and public consultation will be conducted through online and offline environmental monitoring reports. modes such as training and publicity.

YTNE By December 2019 and Establish grievance redress mechanisms for social maintain during Yes and environmental issues. implementation

Gender and development

45 YTNE By December 2019 and The PMO clearly appoints Wang Qinghui as the person in charge maintain during of gender action and informatization construction to take charge in Appoint one staff member as the social development implementation the preparation and implementation of Environmental and Social and gender focal point to coordinate gender and Safeguard Technical Guidelines. Wang, acting as the contact awareness campaign-related issues during program person for gender and social issues, should coordinate issues implementation, such as relevant activities in GAP, related to gender and awareness campaign during the program ACP, and monitoring and reporting. implementation, and complete publicity of the awareness of safe gas use. Related activities are continuously implemented during the program implementation.

YTNE By December Relevant work has been carried out as required and will continue 2019 and to be carried out during the program implementation. maintain during Integrate GAP and ACP monitoring into the program implementation monitoring and evaluation system.

46 Chapter 11 MONITORING OF KEY PROGRAM COVENANTS

Covenants State Implementation Arrangement In progress HPG, ZYIG and YTNE will ensure that the Program is implemented in accordance with the detailed arrangements set forth in the PID. Any subsequent change to the PID will become effective only after approval of such change by HPG and ADB. In the event of any discrepancy between the PID and the Program Agreement, the provisions of the Program Agreement will prevail. HPG, ZYIG and YTNE shall ensure that the amount of In progress Eligible Expenditures under the Program for any Fiscal Year is equal to or exceeds the Loan proceeds withdrawn by HPG in the same Fiscal Year. Such Eligible Expenditures are part of the expenditures incurred under its medium and long-term energy development plan, but they exclude any expenditures for (a) procurement of works, goods and services from countries which are not members of ADB; (b) procurement of works, goods and services from persons or entities debarred or suspended by ADB; (c) procurement involving High-Value Contracts; (d) any activities which are classified as category A for environmental impact under the SPS; and (e) any activities which are prohibited investment activities provided in Appendix 5 of the SPS. DLI Compliance and Program Dialogue Completed HPG shall ensure that all DLIs achieved under the Program continue to be complied with for the duration of HPG’s medium and long-term energy development plan. HPG shall keep ADB informed of discussions with other In progress multilateral or bilateral aid agencies that may have implications for the implementation of HPG’s medium- and long- term energy development plan and the Program and shall provide ADB with an opportunity to comment on any resulting proposals. HPG shall give due consideration to ADB’s views before finalizing and implementing any such proposal. Financial Management So far, ZYIG and YTNE: (a) HPG shall ensure that all Program Actions in the area of have introduced the policy of financial management are implemented in a timely and foreign exchange fluctuation risk efficient manner. In particular, ZYIG and YTNE shall, by reserve; (b) have strengthened the end of year 2020: (a) introduce foreign exchange the internal control and audit; (c) fluctuations risk reserve to mitigate foreign currency debt; have strengthened the financial (b) strengthen internal control audit staffing and adopt and risk management; operational manuals; (c) strengthen staffing for financial and risk management and adopt their guidelines; (d) strengthen subproject due diligence.

47 HPG will cause ZYIG to ensure that (a) its ratio of debt to As the 2020 annual audit has equity is maintained greater than 75 to 25, and (b) its net not yet been conducted, ZYIG revenues is at least 1.2 times its debt service and YTNE will update the requirements. HPG will cause YTNE to ensure that (c) its relevant data after the audit ratio of debt to equity is maintained greater than 70 to 30, reports are issued. and (d) its net revenues is at least 1.2 times its debt service requirements.

Procurement In progress HPG, ZYIG and YTNE shall ensure that each contract under the Program is awarded on the basis of the Program’s procurement system, having due regard for principles of competition, economy and efficiency, transparency, and fairness and equal opportunity. HPG shall ensure that all Program Actions in the area of In progress procurement are implemented in a timely and efficient manner. HPG will cause ZYIG and YTNE to engage (a) an In 2020, YTNE has selected internationally experienced technology provider, having at biomass gas suppliers whose least three projects experience using dry anaerobic qualification meets ADB fermentation technology with the similar size of production requirements. capacity which has successfully operated more than 3 years; and (b) an accredited procurement agency (bid document preparation, bid evaluation, and contract negotiation) to support implementing procurement under the Program. HPG will cause ZYIG and YTNE to ensure that they will In progress avoid any conflict of interest within the meaning of ADB’s Procurement Policy and Regulations. In particular, ZYIG and YTNE shall ensure that any affiliates and/or related parties to YTNE do not participate in bidding under the Program. Environmental and Social Safeguards In progress HPG shall ensure that all Program Actions in the area of environmental and social safeguards are implemented in a timely and efficient manner. (a) HPG will ensure or cause ZYIG and YTNE to In progress with part of the work ensure that no construction or rehabilitation works under completed the Program involve significant adverse environmental and social safeguard impacts that may be classified as category A under the SPS. Prior to commencing any construction or rehabilitation works under the Program, ZYIG and YTNE shall conduct a screening to ensure that any works that may be classified as category A for environment and involuntary resettlement impacts within the meaning of SPS are excluded from the Program. (b) HPG will ensure or cause ZYIG and YTNE to In progress with part of the work ensure that the preparation, design, construction, completed implementation, operation and decommissioning of all activities under the Program comply with (i) all applicable laws, regulations and guidelines of HPG relating to environment, health and safety; (ii) the Environmental Safeguards; and (iii) all measures and requirements, including monitoring requirements set forth in the Program Action Plan. HPG will ensure or cause ZYIG and YTNE to ensure that In progress with part of the work the preparation, design, construction, implementation, completed

48 operation and decommissioning of all activities under the Program comply with (a) all applicable laws and regulations of HPG relating to resettlement; (b) Involuntary Resettlement Safeguards; and (c) all measures and requirements, including monitoring requirements set forth in the Program Action Plan HPG will ensure or cause ZYIG and YTNE to ensure that Completed the Program does not involve any indigenous people risks or impacts within the meaning of the SPS. If due to unforeseen circumstances, the Program involves any such impacts, HPG shall ensure that the Program complies with (a) all applicable laws and regulations of HPG relating to indigenous peoples; (b) Indigenous Peoples Safeguards; and (c) all measures and requirements, including monitoring requirements set forth in the Program Action Plan. Gender and Social Equality YTNE has partially completed HPG will ensure that all Program Actions in the area of the gender action plan and will gender and social equality are implemented in a timely continue to update the progress and efficient manner. of this activity. Notwithstanding the generality of the foregoing, HPG will ensure and cause ZYIG and YTNE to ensure that (a) the GAP is implemented in accordance with its terms; (b) adequate resources are allocated for implementation of the GAP; and (c) progress on implementation of the GAP, including progress toward achieving key gender outcome and output targets, are regularly monitored and reported to ADB. Technical and/or Performance Audits Completed HPG will cause ZYIG and YTNE to recruit an independent verification agent in accordance with selection criteria and the terms of reference in the PID and subject to ADB’s prior approval. HPG will ensure that ZYIG and YTNE will submit, in a timely manner, (a) annual audit reports (Program account and corporate financial statements of ZYIG and YTNE), (b) semi-annual progress reports, and (c) annual performance reports from the independent verification agent. Change in Ownership In progress In the event of any change in ownership of the Program facilities, or any sale, transfer or assignment of shares or interest or other change of control in YTNE is anticipated, HPG, ZYIG and YTNE shall consult with ADB at least 6 months prior to the implementation of such change, and provide ADB with an opportunity to consider its equity contributions, if applicable. HPG, ZYIG and YTNE shall ensure that such change be carried out in a lawful and transparent matter. ZYIG and YTNE shall ensure that YTNE’s new controlling management complies with (a) all Program related agreements executed between ADB and the Borrower, HPG, ZYIG or YTNE; and (b) the policies of ADB relevant to the Program.

49 Corporate Governance HPG shall ensure that all Program Actions in the area of corporate governance are implemented in a timely and efficient manner. ZYIG and YTNE will ensure, in a manner satisfactory to ADB, that: (a) ZYIG retains the majority shareholding and majority representation on the Board of Directors of In progress YTNE, and the corporate documents of YTNE stipulates that a majority representation from ZYIG be required for a quorum for any meeting of the Board of Directors; and (b) no material changes are made to the shareholders agreement without prior consultation with ADB. Governance and Anticorruption In progress HPG will ensure and cause ZYIG and YTNE to ensure that the Program complies with the Anticorruption Guidelines and that all appropriate and timely measures are taken to prevent, detect and respond to allegations of fraud, corruption or any other prohibited activities relating to the Program in accordance with the Anticorruption Guidelines. HPG will or cause ZYIG and YTNE to promptly inform In progress ADB of any allegations of fraud, corruption or any other prohibited activities relating to the Program; and cooperate fully with any investigation by ADB on such allegations and extend all necessary assistance, including providing access to all relevant records, for satisfactory completion of such investigation. Throughout the Program implementation, HPG will, or will In progress cause ZYIG and YTNE to, update their public website to provide information on bidding procedures, bidders, contract awards and physical progress of the Program; post the audited annual financial statements for the Program, as such financial statements become available; and disseminate other relevant information on Program implementation.

50 Chapter 7 PROGRAM ORGANIZATIONAL STRUCTURE AND FOCAL STAFF

A Changes during Implementation

33 In 2020, some members of YTNE's ADB Project Office changed, including the person in charge of social and environmental changed from Yang Yongheng to Song Xiangcao, the person in charge of engineering changed from Xing Shaojun to Yang Huaming, and the person in charge of gender awareness changed from Chen Jing to Peng Jiayin. The above changes are mainly due to the adjustment of the business person in charge of the relevant business within the company, the main person in charge of the business will be responsible for the project and will work more efficiently, the relevant personnel changes have gone through the resolution process of the company's board of directors, and the relevant personnel information is included in the last results verification report. Table 10 shows the specific information of the changed personnel.

Table 12 Changes in Key Executing Agency Staff and ADB Mission Leader (As of 31 December 2020)

Reasons for the Change Number Changes Date {Summarize the reasons. Be brief.} 1 Person in charge of Song Xiangchao, the director-level social and environmental management of the company, can carry out the matters: Song Xiangcao coordination works effectively. 2 Person in charge of Yang Huaming is the head of YTNE engineering: Yang Huaming Engineering Department

3 Person in charge of gender Peng Jiayin is the head of YTNE General awareness: Peng Jiayin Management Department 5

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