Songhua River Basin Water Pollution Control and Management Project, Private Sector Facility - Phase 1

Home , Heihe, Heilongjiang, Jiamusi, Jiguan District, Jixi, Mudanjiang

Annual Environmental and Social Monitoring Report

Project Number: LN2627 January to December 2012

PRC: Songhua River Basin Water Pollution Control and Management Project, Private Sector Facility - Phase 1

Prepared by LJEP Group Co., Ltd.

This report has been submitted to ADB by the Borrower and is made publicly available in accordance with ADB’s public communications policy (2005). It does not necessarily reflect the views of ADB.

Annual Environmental & Social Performance Report

Longjiang Environmental Protection Group Co., Ltd.

Harbin·China

April 30, 2013

Reporting Period: January 2012 to December 2012

Report Completion Date: April 30, 2013

Prepared by LJEP Group Co., Ltd.

Disclaimer

The following information is only for reference instead of serving as formal legal documents or any other professional opinions. This report will not guarantee for statements or implications in any form.

This report is drafted by Longjiang Environmental Protection Group Co., Ltd. Unless specially noted, discoveries, instructions and conclusions herein only represent opinions from Longjiang Environmental Protection Group instead of ADB board or its working staff.

Table of Contents I INTRODUCTION ...... 2 A Background ...... 2 B Objective ...... 3 II ENVIRONMENTAL AND SOCIAL MANAGEMENT ...... 4 A ESPR Prepareration ...... 4 B Environmental and Social Responsibility ...... 4 C1 Overall Staff and Institutional Arrangement ...... 7 C.2 Environmental and Social work plan ...... 9 III Environmental and social requirements compliance ...... 14 A National requirements compliance...... 14 A.1 Quality and Environmental Management System ...... 14 A.2 Compliance with Legislative and Regulatory Requirements ...... 15 A.3 Regular environment monitor inspection ...... 19 A.4 Emerging Environmental and Social Issues ...... 26 B Compliance with ADB Safeguards Requirements ...... 27 IV PROGRESS OF ONGOING SUBPROJECTS/ACTIVITIES...... 28 V Summary of safety performance and corrective action ...... 33 VI Sustainable Development Activities and Exchange ...... 35 A Sludge Treatment Plan ...... 35 B Corporation Social Responsibility Report ...... 37 Annex 1 ...... 38 Annex 2 ...... 41 Annex 3 ...... 43 Annex 4 ...... 48

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

GLOSSORY OF TERMS & ACRONYMS

A2/O Anaerobic-Anoxic-Oxic Biochemical Reactor Process CASS Cyclic Activated Sludge System CSRR Corporation Social Responsibility Report EA Executing Agency EIA Environmental Impact Assessment EMP Environmental Management Plan EPB Environmental Protection Bureau ESMS Environment al and Social Management System ESPR Environmental and Social Performance Report ESA Environmental and Social Affairs ESU Environmental and Social Unit IPP Indigenous People Plan IRP Involuntary Resettlement Plan LJEP Longjiang Environmental Protection Group Co., Ltd. QEMS Quality and Environmental Management System SBR Sequencing Batch Reactor SEPA State Environmental Protection Agency SHMP Safety and Health Management Panel SIA Social Impact Assessment SMI Safety Management Institution SRB Songhua River Basin TTWE Tsinghua Tongfang (Harbin) Water Engineering Co., Ltd. WWTP Wastewater Treatment Plant

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

ENVIRONMENTAL & SOCIAL PERFORMANCE REPORT ESPR (2012)

Reporting Period: January 2012 to December 2012 Report Completion Date: April 30, 2013

I INTRODUCTION

A Background

1. Longjiang Environmental Protection Group Co., Ltd. (hereinafter referred to as “Longjiang Environmental Protection”), with its predecessor Qinghua Tongfang (Harbin) Water Affairs Co., Ltd. established in May, 2004 (hereinafter referred to as “Tongfang Water Affairs”), is a shareholding company mainly engaged in water affairs environment protection project investment, construction and operation and owns living sewage level A operation qualification issued by P.R.C Ministry of Environmental Protection. In order to introduce strategic cooperation partner, get listed in the stock market and issue shares to ADB, Qinghua Holding Co., Ltd and other investors, the company adheres to the people-oriented operation ideas to serve the society and actively perform social responsibilities by relying on environment management system. Through close cooperation with Heilongjiang Provincial Committee and government and various regional Committees and governments, the company is committed to resolving long-term water pollution and worsening water quality issues in Heilongjiang, SRB based on public services privatization in multiple forms, e.g. BOT, TOT, cooperation construction and other franchised operation mode.

2. During the 11th five-year plan,, Longjiang Environmental Protection undertook more than 70% water environmental emission reduction assignment in Heilongjiang Province, among which, accumulated sewage disposal within 0.42 billion ton, cut COD 110,000 ton in the capital city Harbin. By the end of 2011 , invested and operated nearly 30 sewage disposal plants, faucet water company, etc, with total disposal capacity 2,600,000 m3/day; the total investment for the last 7 years approached 5 billion Yuan.

3. Based on the water affairs sector and expanding water affairs market, the company is hanging on to the favorable opportunity of environmental protection industry upgrade fully implemented by the national government, accelerating the pace of deeply extending to the environmental protection sector and committed to operating frontline environmental protection project, including low-carbon economy, renewable resources development and recycling advocated by the government. In line with the continued cooperation and development strategy, in order to further enhance operation performance of urban water supply, drainage, sludge disposal facilities, increase the recycling capacity of abandoned appliance, electronic product, dismantled auto parts and improve the urban living environment, in 2010, Longjiang Environmental Protection Group and Heilongjiang Provincial Government signed Investment Strategy Cooperation Agreement on Water Affairs Project and Sewage Disposal Plant in the Key Tourist Towns of Heilongjiang Province; in 2012, the company signed Strategic Cooperation Agreement on Water Affairs and Recycling Project in Heilongjiang Province with Heilongjiang Provincial Environmental

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

Protection Bureau and Heilongjiang Construction Bureau.

4. In 2012, there were 3,836 urban wastewater treatment facilities in operation in China, with a total designed treatment capacity of 149 million cubic meters/day and average daily treated wastewater amount of 116 million cubic meters. In 2012, there were 65 urban wastewater treatment facilities in operation in Heilongjiang, with a total designed treatment capacity of 3.1052 million cubic meters/day and average daily treated wastewater amount of 1.8175 million cubic meters, of which the total designed treatment capacity of the water factories under Long Jiang Environment Protection Group Share Company was 2.015 million cubic meters/day and average daily treated wastewater amount was 1.0814 million cubic meters.

5. Harbin Taiping Wastewater Treatment Plant is the first wastewater treatment project of Long Jiang Environment Protection Group Share Company and was officially put into operation in December 2005. By the end of 2012, 14 wastewater treatment plants had been obtained, located in Harbin, Mudanjiang, Jamusi, Jixi, Heihe, Zhaodong, Fujin, Anda and Ning’an respectively and three water supply companies had been acquired, i.e. For example, Mudanjiang Longjiang Environment Protection Water Supply Company, Jiamusi Running Water Company and Jixi Running Water Company. Of the projects above, by the end of December 2012, 14 wastewater treatment plants (Harbin Taiping, Harbin Wenchang, Harbin Pingfang, Harbin Xinyi, Acheng Phases I, Mudanjiang Phases I, Jiamusi East Region, Jixi, Anda, Zhaodong Phases I and Ⅱ, Heihe Phases I, Ning’an, Fujin and Jiamusi West Region) and all water supply companies (Mudanjiang, Jiamusi and Jixi)had been put into operation. The upgrade transformation of an existing wastewater treatment plant had been at the environmental acceptance stage. (Harbin Taiping and Harbin Wenchang1). The project preliminary design, feasibility study report and environmental impact assessment report of Mudanjiang Wastewater Treatment Project, PhaseⅡ had been completed, ready for construction commencement. Heihe Wastewater Treatment Project, PhaseⅡ had been at the water passing and debugging stage. Acheng PhaseⅡ and Harbin Sludge Disposal had been at the engineering construction stage.

6. For the introduction of ADB equity investment, in 2010, LJEP has obtained direct loan 9,410,000 USD. In the same year, ADB provides RMB loan 0.25 billion RMB.In the near future, ADB about to provide category B joint financing scheme, with total amount 0.1 billion USD (converted into RMB 0.65 billion Yuan). Meanwhile, the disposal plants affiliated with LJEP include two sewage disposal plants with sovereignty loan provided by ADB East Asia Bureau, which are separately Harbin Xinyi Sewage Disposal Plant and Fujin Sewage Disposal Plant. Both of them use ADB public sector loan approved in 20082, constructed by state-owned company and handed over to Longjiang Environmental Protection for operation, maintenance and management.

7. Attachment I provides basic information of sewage disposal plant and water supply company affiliated with LJEP , including the current operation status or different stages governing expansion.

B Objective

8. Environment and social performance report (ESPR) is to disclose the company's implementation of environment and social management system during the report period and compliance with ADB environment and social requirements, its sub-project (or activity)’s adaptation to national and actual local condition and regulations, including environment monitor plan, environment management implementation, stakeholder participation,

1 Harbin Taiping WWTP and Harbin Wenchang WWTP are neighboring with each other. The undergoing project actually is an upgrade to both WWTPs by adding a combination of biofilter and sedimentation treatment. 2 Loan-2487 PRC：Songhua River drainage area water pollution control and management project

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

community relation, gender equality, health and occupation safety. In 2011, the ESPR is mainly centered on the implementation of all stages of sub-project (or activity) of LJEP, including:

i. Various sub-project (or activity)'s compliance with environment and social management requirements; ii. Various sub-project (or activity)'s implementation in terms of environment and social management; iii. Occupational health and safety performance and major highlights; iv. Sustainable development programme, and community relations.

II ENVIRONMENTAL AND SOCIAL MANAGEMENT

A ESPR Prepareration

Report prepared by: EASEN International Co., Ltd. Telephone: +86-451-86036638 / 86036639 (Fax) Email: [email protected] Enterprise web site: www.ljep.com.cn Signature: Piao Yongjian Date: April 30, 2013 B Environmental and Social Responsibility

9. In order to conform to environment and social management system requirements, LJEP establishes Environment and Social Management Union (ESU) based on the existing organizational structure, a special authority in charge of environment and social affairs management, under the supreme management board, guide and coordinate various departments and sub-projects in terms of environmental and social aspect implementation; connect the governmental function mechanism in charge of environmental and social affairs; disclose related information; interaction and exchange with the community. The following figure shows LJEP’s environment and social management framework structure.

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

10. The individuals below (Table 1) hold responsibility for environmental and social performance in the organizational structure of LJEP and at the subprojects/activities sites. All the listed staffs in Table 1-1 are also LJEP’s ESU leading group members who together ensure the corporation performs well in environmental and social front. In Table 1-2 is the list of environmental and social management working groups of each subproject and in Table 1-3 is the list of members of the Environmental and Social Management Office.

Table1-1 Environmental and social Management Leading Group

Headman: Piao Yongjian(CEO) Deputy Head: Yu Xibo(Standing Deputy CEO) Liu Song(Deputy CEO, In charge of investment and social affairs) Zhang Fugui(Deputy CEO, In charge of environmental management) Members: Name Department Title Contact Information Liu Qiang Financial Department General Manager 13845106042 Xu Runzhi Investment Department General Manager 13603656133 Human Resource Chen Lingjun person in charge 13359705598 Department Dong Peng Chairman office deputy director 18246644777 Engineering construction Liu Wensheng General Manager management department

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

Zhang deputy general Production plan department 13704816580 Haiyanga manager Li Xiaowei Dispatch centre director 13633625641 Environmental protection Wang Naa and social management person in charge 13946050289 union Mudanjiang LJEP water General Manager， An Jiuhai 13836367905 supply company Assistant resident Jiamusi water supply Wang Jingyu General Manager 13555422666 company Jixi Running Water Li Xiaoqiang General Manager 13604687977 Company General Manager Wang Jie Mudanjiang WWTP 13904839088 Factory Director Jiamusi LJEP Company General Manager Zhou Qingzhu Jiamusi Eastern/Western 13945460148 Factory Director WWTP Zhu Dejun Jixi Jiguan District WWTP Factory Director 13846009199 Yang Weidong Heihe WWTP Factory Director 13904560953 Guan Fucai Fujin WWTP Factory Director 13945406588 Li Yan Ning’an WWTP Factory Director 13604631588 Ma Kuna Anda WWTP Factory Director 18245988620 He Xiangguo Zhaodong WWTP Factory Director 15246695718 Guan Zhenguo Harbin Xinyi WWTP Factory Director 15804631684 Zhao Feng Harbin Pingfang WWTP Factory Director 13804500256 aaa Female employees Table1-2 Sub-project environmental and social management workgroup list

Name Department Title Contact Information Mudanjiang LJEP water Minister of Production Shen Xuge 13359389838 supply company Department Jiamusi water supply Minister of Production Guo Hongtu 15046479896 company Department Jixi Running Water Minister of Production Yan Hua 13946823933 Company Department Xu Zhiqiang Taiping WWTP Process owner 18745068950 Sun Yulong Mudanjiang WWTP Process owner 13766601960 Jiamusi Eastern/Western Xue Kaijing Office Director 13704545082 WWTP Liu Chen Jixi WWTP Process owne 13836559745 Cao Han Heihe WWTP Process owne 13845679425

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

Zhao Lihong Zhaodong WWTP Process owne 13694621752 Comprehensive Xiao Tie Fuji WWTP 15845151755 administra Comprehensive Wang Hongbin Anda WWTP 13634890133 administra Huo Xueyu Ning’an WWTP Process owner 13624631221 Assistant factory Hou Fangzhou Harbin Xinyi WWTP 15246695775 director Sun Jian Harbin Pingfang WWTP Process owne 15331888029 Harbin Jincheng Shi Shengyu Longjianghuanbao Company aaa Female employees Table1-3 Environmental and social management office members list

Name Department Title Contact Information Environmental protection and Wang Naa person in charge 13946050289 social management union Environmental protection and Xu Linghuia Assessment Officer 15004541817 social management union Ma Yuntao Quality & Managerial Center deputy director 18845763110 Kang Shuanga Investment Department Project Manager 13703624610 Chen Chao Investment Department Project Manager 13766812433 aaa Female employees

C1 Overall Staff and Institutional Arrangement

11. In the aforementioned organizational diagram and table 1, LJEP will entrust a batch of high qualified staff from various departments to serve as ESU members. All environmental protection and social management leadership personnel and work staff has good professional and academic background (the leadership group boasts of 6 senior engineers, 12 engineers and 5 assistant engineers), in 2012,LJEP conducted at least two internal training concerning environmental and social management plan implementation, In November, the Group employed Dr. Zhou Jian, a consultant from ADB to provide the Environmental and Social Management Department and the Investment Department with training related to ADB’s Safeguard Policy Statement, social management systems and corporate social responsibility. In addition, the Environmental and Social Management Department provided the water factories under the Group with special poisonous chemicals-related training to enhance their ability to purchase, use and manage poisonous chemicals. All members are from LJEP management layer , all function departments and the affiliated branches or water plant; Further more, each of them have the ability to assume the task of management study, policy and management rule formulation and organization authority, implement quality and environmental management system and environmental monitor and information disclosure during implementing social management scheme of all sub-projects (or activity). In order to perform its duties, the ESU recruits 12 staff owning bachelor or master degree in environmental science, environmental engineering, water supply and drainage, chemical analysis, ecology, etc. With rapid expansion of LJEP, in order to strengthen capacity, the ESU needs training. Column 1 shows major assignments and

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

duties of ESU.

Column 1. The main tasks and responsibilities of ESU ò The research and formulation of environmental and social policies, laws, regulations and management aspects.

ò Responsible for the preparation of environmental impact assessment (EIA), social impact assessment (SIA), environmental management plan (EMP), involuntary resettlement planning (IRP), and indigenous people plan (IPP), and environmental and social performance report (ESPR) .

ò Organizing the completion environmental protection acceptance and operation qualification and wastewater discharge permit handling of each project undertaken by the Group Company.

ò Supervise and inspect the implementation of the ISO9001-14001 system and ESMS, to put forward the improvement plan for the deficiency identified.

ò Coordinating the environmental projection management and environmental protection monitoring work of the Group Company.

ò Supervision and evaluation of subproject (or activities) on the environmental and social effect aspects.

ò Managing energy-saving and emission-reduction work, organizing the preparation of annual energy-saving and emission-reduction project plans and monitoring the implementation of such plans.

ò Communication with government function institutions, general public ,ADB, stakeholders and other personnal; Coordinate social relations; Information disclosure and resolve complaints, In response to environmental and social questions.

12. In order to ensure sound management on safety and occupational health, LJEP establishes safety and health management panel (SHMP) from group legal person to all sub-projects. In terms of the company's high-level management, the SHMP is led by chief executive vice president, who is in charge of operation management and directly report to the president. The SHMP consists of representatives from security department, project management department, HR development management department, ESU, finance department and investment department. With regard to sub-project of LJEP, the SHMP is usually composed of sub-project company general manager, deputy general manger, HR principal, safety engineer, technical personnel and safety technicians. All special safety and health personnel have received training on related regulations, rule, articles of association, standard and other governing compulsory regulations and are capable of implementing daily

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

management.

C.2 Environmental and Social work plan

13. In the reporting period, LJEP mainly focused its environmental and social efforts on implementation and upgrade of its certified Quality and Environmental Management System (QEMS based on ISO 9001-14001); enforcement of ESMS according to ADB’s requirements and integrating it into existing system; environmental monitoring and reporting; public relationships related to environmental and social affairs; relevant trainings for environmental and social staff; safety and occupational health care; development and adoption of innovative technologies in wastewater and sludge treatment.

14. In 2011, LJEP Function Departments, major environmental and social work is classified as:

i. The ESU authorizes to advance the company's overall environmental management system and social management implementation to maintain their effectiveness, consistence and continuous update. Another task of the company is to monitor operation activities, gather, analyze, report and disclose data related to environment, provide feedback advice to related department and board and coordinate relief measures taken by various departments. This department shall also ensure communication among environmental management departments at various levels and resolve the public complaint on environmental issues. It is worth mentioning that during the report period, the three projects, Acheng Phase II, Mudanjiang Phase II and Harbin Sludge undergone the audit of ADB and submitted relevant documents, including social audit reports and environmental management plans, as required. The Group has formulated its project environment and social management process to facilitate the smooth progress of environmental and social management work. ii. The Security Department is responsible for examining and approving the structure of the safe production management system of each unit under the Group; establishing and perfecting the standardized management system for safe production; organizing the preparation of safe production and safe construction targets, and implementing safety evaluation; responsible for evaluating the safety of protective equipment and facilities, setting, monitoring and managing key points of safety management, organizing safety inspection and hidden danger rectification and implementation; organizing each unit’s preparation of emergency rescue plans for work safety accidents; organizing the drills of such emergency rescue plans for work safety accidents and the construction of emergency rescue teams; organizing each unit’s safety publicity, education and training work and helping relevant departments to publicize safety science and technology and advance the construction of enterprise safety culture;

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

supervising and inspecting the safety management of construction projects; organizing the investigation and treatment of work safety accidents; responsible for safety management of fire fighting, fire prevention, security, safety facilities and special equipment; responsible for vehicle management of each unit (please provide detailed decomposition); responsible for occupational health and industrial hygiene management, coordinating protective equipment, facilities and supplies management and monitoring on-site safety management of production units; responsible for the archiving management of all inner safety data and inspecting and guiding each unit’s inner safety management. iii. The Financing Center is responsible for working out financing resource planning, preparing and organizing the implementation financing resource optimization schemes; formulating annual financing plans, working out and implementing special financing implementation plans; participating in capital operation and asset reorganization management. iv. The production planning department integrates environmental and social requirements into LJEP’s operational specifications, codes, and production planning. It is also demanded to take environmental and social requirements into account when designing investment and operational modalities, which is a key task of the department. This department has a command center under it ,taking care of daily operational activities of all the components of LJEP including the environmental and social performance. The command center supervises implementation of QEMS and ESMS in subprojects/activities, and carries out actions to correct any arising incompliance. It also plays as a statistician to provide timely and accurate statistics reflecting the environmental and social achievements. v. The human resource department sets up appropriate staffing standard to ensure adequate and qualified management and/or technical personnel will be allocated to the positions with environmental and social responsibility. It also undertakes due diligence on the staff performance. Meanwhile, this department makes and implements environmental, safety, and occupational training plans; arranges physicals for the whole staff; and promotes health care and other welfare for the employees. This department, the Party-Masses Work Department and the Planning Department works in a united office, mainly responsible for affairs management, trade union management and enterprise culture construction and publicity work. vi. The investment department is entitled to manage preparation, finalization and acceptance to operation of the construction projects. Hence it takes charge of ESAs

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

emerged in the two kinds of phases of the project cycle. This department also communicates with ADB and other shareholders about ESAs on behalf of LJEP’s management board. Theoretically, the investment department may be confronted with resettlement complaint and indigenous people grievance, therefore a resettlement plan (RP) and a indigenous people plan would be readily prepared and implemented. However, as explained in paragraph 26 and 27 below, there were never such challenges appearing in the reporting period. vii. The project management center is commissioned to engage all the ESAs during the project construction phase. Potential ESAs include conventional air pollution, wastewater, noise & vibration, impairment on ecosystem, and any other social impacts that are liable to causing serious complaint and impedance to the project. Nevertheless, the project staff actually had little troubles in the reporting period. viii. The technical management and R&D department mainly keeps close track of advanced and innovative technologies applicable to LJEP’s subprojects/activities. It also takes independent or joint studies to provide solutions for immediate and impending technical challenges. Whenever or whatever it is possible, new techniques will be introduced into LJEP in time. As a good example, the technical center collaborated with Harbin Industrial University to search an optimized sludge treatment technology for reduction and recycling of the huge sludge dump. They made it. This department has a water quality monitoring center under it, whose mainly responsibilities include: participating in quality objective formulation, organizing the preparation of water quality management plans for water supply and wastewater treatment; establishing and perfecting water quality management systems, formulating water quality inspection, monitoring and management rules, regulations and technical specifications and preparing internal control standards; organizing water quality testing, monitoring, inspection and appraisal work involved in water supply projects and wastewater treatment projects and responsible for water quality sampling work; organizing preventive treatment of unqualified water quality issues such as outlet water quality abnormalities; guiding water quality inspection and monitoring business, organizing technical training of laboratory personnel and monitoring personnel; organizing annual business assessment of inspection personnel, monitoring personnel and laboratory personnel; cooperating with relevant government departments in the investigation of pollution accidents and submitting unified water quality monitoring data to be released to the outside; water quality equipment and facility management. ix. The financial department commits fully to providing financial support for ESAs as cost

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

of environmental training, expenditure in monitoring, payment for new techniques of sludge treatment, etc. x. President Office: Under the guidance of President and Vice President, the President’s Office is mainly responsible for administrative management, general affairs management, non-investment legal affairs coordination and management, letter and call management of the Group Company and the organization and implementation of large-scale theme activities. There is an archives office under it, working in a united office with the Enterprise Management Office, mainly responsible for participating in organization setting and adjustment and defining responsibilities and duties of each department; coordinating the construction of rules and regulation systems; organizing and optimizing the business process of the Group Company; coordinating the operation performance appraisal of each department and the units directly under the Group Company; Working out development plans, establishing management systems and promoting enterprise cultural construction.

15. For the sewage disposal plants and faucet water plants under operation, major environmental and social tasks within the report period include:

i. Carrying out QEMS and ESMS in their operational and maintenance activities to ensure satisfactory environmental and social performance. ii. Keeping wastewater treatment/water supply facilities in good conditions and working well; tail water/running water meeting regulatory criteria respectively; sludge being properly disposed; and other significant adverse impacts (e.g. odor, garbage, sludge, and sewage per se) within allowable limits. iii. Ensuring the on-line monitoring system doing well and reading out real time data ceaselessly, as mandatory requirements of the environmental authority. iv. Formulating environmental monitoring plans and preparing monitoring reports. v. Preparing corrective action plans in view of the adverse impact of projects on the environment and society. vi. Keeping vigilant and good scores of risk management by ensuring all the positions and processes subject to potential risks (e.g. equipment failure, power outage, overflow, pipeline damage, fire incident, and flood/water logging) closely watch dogged and in control. vii. Strengthening safety management and staff health care to avoid or minimize incidental casualties and health hazard. viii. Enhancing working skills and environmental awareness of the employees by

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

periodic training and routine education. ix. Maintaining a good relationship with neighboring communities, governmental administrators, and other stakeholders by proactive communication, information disclosure, and transparency.

16. Major environmental and social tasks concerning the ongoing sub-project:

i. Strengthen environmental and social management and capacity building to cope with thorny potential or newly emerged issues. ii. Formulating and implementing mitigation measures against the possible adverse impact on the environment during the project construction period and preparing compliance monitoring reports. iii. Superintending construction activities and ensuring that the contractors strictly adhere to requirements of the project EIA and the detailed design, and all the prescribed environmental protection measures (mainly for soil erosion, noise & vibration, dust pollution, small volume of camp sewage and garbage, etc.) are put in place according to the time-bound schedule. iv. Undertaking due diligence on safety and occupational health of construction labor force and promoting welfare for workers as much as possible; maximizing social benefits. v. Maintaining a good relationship with neighboring communities, governmental administrators, and other stakeholders by proactive communication, information disclosure, and transparency. vi. Involuntary immigration and original inhabitant issue: when LJEP obtained sub-projects, the local government and EA have completed land acquisition and honored all compensations. According to the agreement signed between LJEP and local government, when the permanent or temporary land use has been handed over to LJEP, the power, water supply and road are already available. The legal responsibilities arising out of immigration, compensation and claim belong to the local government. On the other side, among the 2010 projects, Mudanjiang Sewage Disposal Plant Phase II needs land acquisition; the current project is not started yet. For this project, all land acquisition and other social issues belong to the governmental scope, the government is responsible for land acquisition and resettlement and shoulders related expenses. The same shall not be borne to LJEP.

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

III Environmental and social requirements compliance

A National requirements compliance

17. From the very beginning when LJEP was founded, environmental and social commitment has been always the core value of the corporation. Following and being compliance with environmental and social laws, ordinances, regulations, codes, and standards of national and local levels should be the first things first of LJEP's environmental and social management. In fiscal year of 2012, the environmental and social performances of LJEP and its all subjects/activities scored high points.

A.1 Quality and Environmental Management System

18. Prior to the establishment of environment and social management system required by ADB, LJEP already established complete quality and environment management system in 2009, in compliance with ISO9001 and ISO14001. Both systems were certified on July 17, 2009 by HBQA and passed re-rating in 2012 (see attachment 2), including all sewage service and related activities. ISO9001-14001 system plays a very important role in LJEP’s sub-project. Related issues arising out of environmental and social aspect are seen in column 2.

Column 2. Certified Quality and Environmental Management System ò Continuing commitment environment friendly, social responsive and sustainable development. ò Policy framework defining LJEP’s strategy, principles, and objectives in environmental and social fields and ensuring the national and local statutory safeguard requirements are fully met. ò Environmental, safety and occupational health responsibilities and obligations assigned to every operation and activity. ò Operational instructions to guide and regulate response to environmental, safety and occupational health stresses for minimizing and mitigating risks and adverse impacts of subprojects/activities. ò Performance inspection and evaluation procedures to ensure due diligence on and ever lasting improvement of environmental, safety and occupational health performances. ò Prompt, proper and effective correcting action plans for any emerging or potential faults and defects in environmental, safety and occupational health fields, including a scrutinized contingency scheme. ò Records and reporting system to track the interactions with environmental, safety and occupational health matters from top to bottom. ò Institution for various types of training to promote environmental capacity building and provide qualified staff with sufficient knowledge and skills in environmental and safety domains.

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

19. LJEP's QEMS environmental factor identification needs yearly update3. In 2011, the environment verification involved 161 items in environment and resources, covering three major sub-protects, including LJEP Taiping Sewage Disposal Plant, Mudanjiang Sewage Disposal Plant and Jiamusi East Area Sewage Disposal Plant; thereinto, 9 highlighted environmental factors are classified into 3 categories (e.g. water and soil pollution, air pollution and energy conservation) which gets adequate attention. For each environment and resource constraint, the QEMS confirms anticipated impact, possible operation status and time framework, responsible department (or personnel) and prevention complaint and relieving measures. Through this set of standard method, LJEP guarantees quality of three sub-protects and continued improvement of environmental management system so that different regulations and rules are met. At the same time, 2012 quality and environmental management system supervision and examination work is to be conducted in late May 2013 and completed by July 2013.

A.2 Compliance with Legislative and Regulatory Requirements

20. Harbin Pingfang Sewage Disposal Plant, Harbin Xinyi Sewage Disposal Plant and Jiamusi West Area Sewage Disposal Plant constructed before 2011 were put in operation in 2011, whose construction and installation were done in the factory site of the front phase project. During the report period, LJEP's expansion project includes Zhaodong Sewage Disposal Phase II and Heihe Sewage Disposal Phase II. Harbin Sludge Disposal Project is still ongoing, obtaining approval from all related authority, including EIA approval, thereinto, Zhaodong Phase II has been put in operation in the end of 2011; Heihe Phase II is still under construction. Land acquisition concerning Ning'an Anda, Pingfang, Zhaodong Phase II has been resolved, with land certificate obtained, see attachment 3 in details. The front phase design concerning Phase II engineering of Mudanjiang Sewage Disposal Plant is ongoing, with governmental administrative approval before land acquisition being handled. Previously, Longjiang Environmental Protection has no resettlement issue and/or case of impacting former local inhabitants.

21. Table 2 sets out major environmental and social law (or regulations) and their observance by LJEP

3 In August 2, 2012, pass HBQA and first re-rating review of quality and environment management system certification.

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd

Table 2. Main Legislative/Regulatory Requirements and Compliance Statuses

Legislative Requirements

Title Correlated Stipulations Compliance Status Note The Environmental component should be Some mitigation measures even prior to Environmental Protection Law designed, built, and operated simultaneously Fully met main constructions. as the principal component. EIA report should be delivered and a permit Most EIAs for LJEP’s subprojects were Fully met. All the subprojects had been EIA Law obtained before the feasibility study or managed by governmental EAs before approved. project application gets approval. transferring to LJEP. EIA requirements for projects. Provisions on Entirely satisfactory. LJEP managed its Environmental Protection environmental management of the whole LJEP mainly engaged itself in subprojects/activities strictly following Management Ordinance for project circle including design, construction, successive construction, acceptance stipulated procedures and Construction Project acceptance to operation, operation and inspection, and operational mgt. requirements. close down. Provisions on control requirements of water, Large quantity of sludge cumulated in air, noise, and solid wastes pollutions. Satisfactory. LJEP per se commits fully Water Pollution Control Law; Air past years was still causing serious Focuses are put on locating pollution to water pollution control and Pollution Control Law; Noise impacts on surroundings. It is the most sources and relevant management, preservation of water resources, with Pollution Control Law; Solid intrusive environmental stress and pollutants treatment and disposal, protection considerate inputs on pollution control Wastes Pollution Control Law LJEP’s first priority of environmental of water resource and other environmental of sludge, odor, and noise. concerns. sensitive objectives. Fully met. All LJEP’s subsidiaries in Procedural, functional, and performance According to latest news, the newly-built Management Regulation on service have fulfilled the specific requirements for the specific environmental Harbin Pingfang WWTP, Harbin Xinyi, Environmental Acceptance environmental acceptance inspection acceptance inspection. Violation of this and Jiamusi Western have commenced Inspection for Completion of and got the final permit for operation. SEPA Decree by any project could result in the environmental acceptance Construction Project Some subprojects were going to take banning to operation. inspection when this report is prepared. the inspection by the end of 2010. Law of Promoting Clean Promotion of adoption of advanced Entirely satisfactory. LJEP has been To address the long term sludge pollution Production; Energy Saving Law; technologies and equipment, clean materials pushing clean production and energy and transform the feces into a useful Directive Inventory for and energy; encouragement of recycling saving cross its all resource, LJEP has started a ambitious

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd Adjustment of Industrial industries and comprehensive utilization of subprojects/activities. Technologies project aimed to devour the huge sludge Structure (2005) resources; improvement of adopted by LJEP are listed as dump accumulated within Harbin production/service processes and encouraged category in the inventory, Wenchang WWTP compound at a rate of enhancement of production efficiency; also uptodate or appropriate and 1,000 t/d by a new composting technology strengthening management of energy commonly used. The corporation was which mixes the sludge with straw and consumption and product’s life-time cycle; entitled with energy saving example of then ferments the mixture in high reduction of pollution; investment & Harbin Municipal by the government in temperature tank and finally get a technological categories to be encouraged, the past consecutive two years. manure. This compost could be used as limited and banned. an ameliorant for saline soil or for afforestation. LJEP has never been involved in land Land Management Law; Urban Fully met. All land acquisition and Procedures of land acquisition, house acquisition and resettlement activities up and Rural Planning Law; resettlement had been finished with demolition and resettlement, and application till now. All its occupied lands either Management Ordinance for relevant compensation in place. All the for permits of project locality, building permanently or temporarily are House Demolition in Urban project designs and constructions density, plot ratio, and construction activities. appropriated or sold by local Area4. strictly abided by relevant permits. governments. Totally satisfactory. As a social LJEP has a staff of 1,480 employees responsive corporation, LJEP fully among which 455 employees are female Provisions on employment; establishment, respects legislative requirements of (30.74% of the whole staff). LJEP alteration, and abolishment of labor contract; social dimension and commits itself and ensures every employee receives fair labor dispute arbitration; laborer’s rights and its subsidiaries to better fulfillment of and equitable treatment. Most of female obligations, work hour and break relevant duties. All the employees have employees take on administrative, Labor Law; Labor Contract Law; time/vacation, salary, safety and signed the labor contract and enjoyed technical, financial, and fare collection Women Rights and Interests occupational health; occupational training; stipulated rights and interests. Safety, positions working on day shifts only and Protection Law social insurance and welfare; protection of occupational health, training, social with middle or upper level of payment. women and minors; gender equity on insurance and welfare, and gender Female employees can get more health working, payment, welfare, social insurance, equity are highly secured. No minor was care. All the employees have a physical and political interests. employed. All the staffs have inspection before engaged in position. endowment, medical, work injury, Middle and high level management staff maternity and unemployment can enjoy physical on yearly basis.

4 This ordinance will be replaced by Ordinance for House Acquisition and Compensation on State-Owned Land, promulgated by Decree of the State Council No. 590, taking effect from Jan. 21, 2011. 17

Environmental & Social Performance Report (FY2012) LJEP Group Co. Ltd insurance, as well as other welfare. Within the corporation, LJEP also follows Fully met. LJEP observes statutory an indiscriminate policy in terms of Constitution of PRC; Law on Provisions on nationality equity, favorable requirements of indigenous people employment, payment, promotion, Regional National Autonomy; policies for development of minorities, protection. LJEP and its subsidiaries training, health care, and other welfare. Ordinance on Religious Affairs; freedom of religious belief, etc. In addition, provide indiscriminate service to the Mr. Piao Yongjian, a Korean, as the CEO Relevant Policies of People’s governmental policies generally give certain people in service area no matter what of LJEP, provides a live example. Many Government privileges to minority and religious people. nationality they belong to or what employees are Manchu, Korean, Hui, religion they believe. and Mongolian. Requirements of Technical Policies/Guidelines/Codes

Title Correlated Stipulations Compliance Status Note Detailed conditions for localities of WWTPs, Generally satisfactory. LJEP and its LJEP has so far been rarely engaged in Technical Policy for Urban recommendations and guidelines for subsidiaries all belong in national the location selection and other earlier Wastewater Treatment and wastewater and sludge treatment encouraged categories. The localities of project preparation of WWTPs. While it Pollution Control; Technical technologies; prevention and mitigation LJEP’s WWTPs are sufficiently could happen in the future, this issue has Guidelines for Urban measures for secondary pollutions on separated form water sources, natural always been dealt with by local Wastewater Treatment and ambient air, water, soil, acoustic reserves, residential blocks, and other governments or governmental EAs till Pollution Control environment, and groundwater. sensitive areas. now. Sludge dumping to landfill is facing more Generally satisfactory. Sludge is Technical Policy (Tentative) for Technical guidance for sludge treatment and and more restrictive conditions. A sludge normally dehydrated to certain extent Sludge Treatment and Pollution disposal by adoption of uptodate composting plant adopting advanced and sent to landfill or just dumped within Control in Urban and Township technologies; recommendations for pollution technology was prioritized and the WWTP compound (e.g. Harbin Wastewater Treatment Plant control and proper disposal. undergoing construction within Harbin Wenchang WWTP). Wenchang WWTP compound.

Environment Social Performance Report (2012) LJEP Group Co. Ltd

A.3 Regular environment monitor inspection

22. According to the above contents, LJEP has established a set of online monitor system, including all its sewage disposal plant and water plant. The monitor system works 24 hours a day so that LJEP's QEMS can respond to over target value to prevent direct or indirect damage on environment. This set of complete monitor system meanwhile provides complete monitor data to provide a sound platform environment performance inspection for LJEP within the report period. Besides, each sewage disposal plant is equipped with professional assay equipment. The following table lists major environment indicator of all sewage disposal plants and water plants. The monitor data shows that all sewage disposal plants and water plants of LJEP meets related standard requirements. Within the report period, there is no over target status.

Table 3. Average Daily Air Pollution Monitor Data in 2012 Smelly gas1 H S1 Ammonia gas1 Methane2 Indicator concentration (no 2 mg/m3 mg/m3 % dimension) Standard value 20 0.06 1.5 1 Name of sewage

disposal plant Harbin Wenchang 7~15 0.009~0.026 0.068~0.186 0.09~0.72 Harbin Taiping 8~12 0.011~0.025 0.054~0.221 0.12~0.53 Harbin Pingfang 9~14 0.006~0.010 0.081~0.303 0.11~0.70 Harbin Xinyi 12~15 0.004~0.006 0.062~0.125 0.23~0.29 Harbin Acheng 10~13 0.002~0.004 0.061~0.127 0.20~0.26 Mudanjiang 6~13 0.011~0.025 0.103~0.342 0.07~0.36 Jiamusi East Area 8~12 0.012~0.016 0.007~0.121 0.21~0.53 Jiamusi West Area 11~17 0.010~0.021 0.013~0.023 0.42~0.83 Heihe 8~12 0.006~0.009 0.066~0.208 0.20~0.61 Jixi 8~14 0.003~0.008 0.087~0.316 0.12~0.78 Zhaodong 10~17 0.004~0.006 0.064~0.129 0.22~0.26 Ning’an 11~17 0.015~0.029 0.011~0.023 0.43~0.86 Anda 10~15 0.005~0.012 0.102~0.139 0.12~0.33 Fujin 10~14 0.004~0.008 0.142~0.198 0.19~0.36 Note: 1 Urban sewage disposal plant discharge standard (GB18918-2002), category II 2 Smelly gas emission standard (GB14554-93), category II

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Table 4. Noise Monitor Data in 2012 Continuous equivalent sound level Continuous equivalent sound level Indicator in daytime (dBA) at night (dBA) Standard value 60 50 Name of sewage disposal

plant Harbin Wengchang 44.1~55.8 36.1~45.3 Harbin Taiping 43.3~56.8 35.3~46.0 Harbin Pingfang 43.0~52.6 41.8~47.6 Harbin Xinyi 36.2~43.9 33.3~39.8 Harbin Acheng 43.6~52.5 41.1~47.5 Mudanjiang 37.6~53.9 33.7~42.4 Jiamusi East 41.4~48.4 32.6~39.2 Jiamusi West 42.3~47.7 31.4~40.8 Heihe 41.1~52.2 34.2~42.9 Jixi 44.3~55.6 34.3~44.7 Zhaodong 43.4~52.6 41.3~46.8 Ning’an 35.5~44.4 34.0~39.9 Anda 41.5~50.8 35.8~42.5 Fujin 45.2~50.9 41.3~45.6 Note: Industrial Company discharge standard, category II (GB12348-2008)

Table 5. Sludge Monitoring Data in 2012 Indicator Sludge quantity in 2012 (ton) Sludge water content (%) Name of sewage disposal

plant Harbin Wengchang 79361 77.94 Harbin Taiping 88512 77.84 Harbin Pingfang 8940 77.92 Harbin Xinyi 24537 77.51 Harbin Acheng 11622 79.00 Mudanjiang 37752 79.19 Jiamusi East 11128 78.80 Jiamusi West 5277.5 77.70 Heihe 4744 79.16 Jixi 13828 77.73 Zhaodong 17141 78.44 Ning’an 4714 78.55

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Anda 9353 79.18 Fujin 4381 79.30 Total 321290.5 Note: Anda Sludge Disposal Plant was under official operation in November, 2010, with operation of sludge dehydration equipment delayed to April, 2011.

Table 6. Water Supply Plant's Water Quality Monitor in 2012 (Annual average total analysis on a monthly basis)

National Annual average treated water Test Items Institute of Unit Standards Mudanjiang Jiamusi Jixi smell and taste nought / nought nought nought

Visible objects nought / nought nought nought

pH 6.5 -8.5 / 7.1 6.87 6.8

turbidity 3.00 NTU 1.3 2.74 2.54

color 15 Degree 7.9 2.5 13.0

free chlorine ≥0.3 mg/L 0.4 0.45 0.4

Nitrates 10 mg/L 1.3 0.11 4.10

Total Hardness 450 mg/L 46.2 55.8 129.3

The amount of 3 mg/L 3.0 0.9 2.76 oxygen consumed Chlorides 250 mg/L 10.1 5.66 21.2

Iron 0.3 mg/L 0.1 0.19 0.3

Total number of 100 CFU/mL) 2.7 Not detected 10.0 colonies Total coliforms Not detected CFU/100mL Not detected Not detected Not detected

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Table 7. Average Value of Monitor Data for Sewage Disposal Plant in 2012 Design disposal Total disposal COD BOD5 SS NH3-N TN TP Name capacity volume (mg/L) (mg/L) (mg/L) (mg/L) (mg/L) (mg/L) 103m3/d 103m3 Inlet Outlet Inlet Outlet Inlet Outlet Inlet Outlet Inlet Outlet Inlet Outlet Standard value (category II)1 350 100 220 30 220 30 30 15 / / 6 3 Harbin 325 93488.0 304 49.4 142 8.35 236 16.5 41.34 4.26 46.26 16.29 5.29 0.62 Wenchang Standard value (agreement)2 420 100 220 20 250 20 50 15 / / / / Harbin Taiping 325 103277.7 269 49.8 140 8.22 215 16.5 37.51 4.09 42.61 16.10 4.67 0.64 Standard value (agreement)2 350 60 200 20 250 20 35 815 45 20 5 1 Harbin Pingfang 150 11463.3 288 41.1 132 10.5 293 15.0 38.31 4.53 45.94 17.56 4.35 0.69 Standard value (agreement)2 500 60 220 20 250 20 40 815 50 20 5 1 Harbin Xinyi 100 22170.7 618 40.1 266 7.52 377 11.2 54.74 2.69 62.12 14.79 7.35 0.58 Standard value (agreement)2 400 60 200 20 240 20 25 815 35 20 6 1 Harbin Acheng 500 18790.4 405 34.4 135 4.70 244 7.30 19.47 1.05 32.30 13.62 4.91 0.91 Standard value (agreement)2 400 100 180 20 200 20 / / / 20 4 1 Mudanjiang 100 36611.9 204 42.4 73.2 11.2 176 15.9 19.36 1.01 25.81 17.53 3.83 0.85 Standard value (level II) 350 100 160 30 200 30 35 25 / / / / Jiamusi East 60 23133.9 217 23.3 91.1 5.87 130 11.5 20.52 0.94 23.85 7.99 2.37 0.36 Standard value (agreement)2 350 50 160 10 200 10 35 58 40 15 5 0.5 Jiamusi West 50 19255 268 36.7 159 78.4 191 5.00 28.70 2.90 34.50 6.54 3.10 0.23 Standard value (level I B) 450 60 250 20 300 20 65 815 70 20 7.5 1 Heihe 50 7858.0 329 24.9 137 9.36 199 10.5 39.67 2.39 43.41 12.67 4.83 0.38

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Standard value (level I B) 400 60 200 20 200 20 45 815 55 20 6 1 Jixi 50 18332.2 341 36.3 114 12.2 190 15.0 32.53 4.42 42.16 12.16 3.60 0.49 Standard value (level I B) 400 60 180 20 240 20 30 815 40 20 6 1.5 Zhaodong3 50 17421.4 461 45.2 155 13.7 193 14.7 42.20 1.70 50.25 13.49 5.35 0.35 Standard value (level I B) 450 60 200 20 250 20 25 815 / 20 5 1 Ning’an4 20 6774.0 303 35.3 111 12.4 219 12.0 22.86 5.66 33.66 18.99 3.32 0.84 Standard value (level I B) 350 60 180 20 250 20 35 815 50 20 5 1 Anda4 20 8886.0 204 45.4 97.6 11.2 176 16.0 26.43 3.01 37.34 13.24 4.67 0.75 Standard value (level I A) 300 50 200 10 250 10 30 58 30 15 4.5 0.5 Fujin4 20 4883.4 297 26.0 114 6.00 264 7.00 33.25 2.54 40.71 12.30 4.49 0.32 Note: 1) For Wenchang Sewage Disposal Plant and Taiping Sewage Disposal Plant, the ammonia and nitrogen in discharged water reduces to 15mg/L, as per the agreement between LJEP and local government. 2) The agreement with Taiping Sewage Disposal Plant takes into consideration of suction water quality and disposal capacity. 3) According to suction water quality and disposal capacity, the total phosphorous standard is 1.0--1.5mg/l. 4) Ningan, Anda and Fujin were under official operation separately in April, 2010, November, 2010 and December, 2010.

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Table 8. Construction Period of Heihe Sewage Disposal Plant Phase II-Environmental Monitor Downstream air Environmental factor Downstream ground water quality quality Oil Indicator PH COD (mg/L) BOD (mg/L) NH3-N (mg/L) TN (mg/L) TP (mg/L) TSP (mg/L) 5 category(mg/L) Standard Value* 6 - 9 20 4.0 1.0 1.0 0.2 0.05 0.3

Monitor value 7.29 12.0 2.5 0.4 0.45 0.08 No inspection 0.17 – 0.30 Table 9. Construction Period of Acheng Sewage Disposal Plant Phase II-Environmental Monitor Downstream air Environmental factor Downstream ground water quality quality Oil Indicator PH COD (mg/L) BOD (mg/L) NH3-N (mg/L) TN (mg/L) TP (mg/L) TSP (mg/L) 5 category(mg/L) Standard Value* 6 - 9 20 4.0 1.0 1.0 0.2 0.05 0.3

Monitor value 7.26 12.3 2.6 0.5 0.55 0.07 No inspection 0.15 – 0.29 Note: Level III water quality standard in GB3838-2002 and level II standard as per GB3096-1996

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23. Within the report period, LJEP's construction activity environment monitor is conducted by local government monitor station, with low monitor frequency, thanks to well-round environment management. Table 8 and 9 list Sewage Disposal Plant's data in terms of environmental performance in the construction period. Due to similar characteristics and environmental background, the selected monitor data is typical and representative. The monitor spot is equipped in the downstream of the construction site. The gathered environment quality data indirectly reflects impact of construction activity. Apparently, the water quality is very good, indicating that the water discharge in the construction site has no obvious impact on water quality. 24. According to the 2012 China National Land and Resources Information, 198 prefecture-level administrative areas have conducted underground water quality monitoring work, with a total of 4,929 monitoring points, including 800 state-level monitoring points. According to the Underground Water Quality Standard (GB/T14848-93), the comprehensive evaluation result is as follows: there are 580 monitoring points with excellent-level water quality, occupying 11.8% of all monitoring points, there are 1348 monitoring points with good-level water quality, occupying 27.3%; there are 176 monitoring points with fair-level water quality, occupying 3.6%; there are 1999 monitoring pointes with poor-level water quality, occupying 40.6%; there are 826 monitoring pointes with extremely poor-level water quality, occupying 16.8 %. Compared with the previous year, there are a total of 4,677 water quality monitoring points with continuous monitoring data, distributed in 187 cities, including 2,974 monitoring points whose comprehensive water quality change show a steady trend, occupying 63.6% of the total number of monitoring points, 793 monitoring points whose water quality has changed for the better, occupying 17.0% and 910 monitoring points whose water quality has changed for the worse, occupying 19. 5%. On the whole, in 2012, of the nationwide water quality monitoring points with continuous monitoring data, the overall change of underground water quality mainly showed a steady trend, with similar proportions of the monitoring points whose water quality changed for the better or for the worse.. 25. Mudanjiangr Longjiang Environmental Protection Water Supply Co., Ltd. is acquired by LJEP via TOT; Jixi Water supply plant is operated by LJEP entrusted by Jixi government. In 2011 end, in the year end excellency rating for governmental authority and municipal welfare companies by Mudanjiang and Jixi inhabitants, Mudanjiang Water Supply Company and Jixi Water Supply Company run into top-10 from the low-ranking originally, which indicates the water supply service quality gets recognition by users. 26. Generally speaking, LJEP boasts of excellent environmental and social performance in terms of water supply and sewage disposal, there is not major environment issue and social complaint record. LJEP's Sewage Disposal Plant helps to improve the water pollution prevention and control in SRB. According to data published by Heilongjiang Environment Protection Authority, the sewage disposal rate for cities within SRB has exceeded 82%. According to related statistics by China Environment Bullitin5, the water quality in Songhua River has improved a lot, thereinto, I- III water body6 belonging to national monitor section in SRB rise to 45.2% from 33.8% in 2008. Meanwhile, the VI-V water body reduces to 40.5% from 45.2%, V water body has no obvious variation, still accounting for 14.3%. In a certain extent, such scores are attributed to LJEP and its afficiated sewage disposal plant. The following figure shows water quality improvement in 2008-2011 and water quality in Songhua River in

5 China Environmental Protection Ministry, 2008, 2009, 2010 and 2011 China Environment Status Statement 6 As per ground water environmental quality standard (GB3838-2002)

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2011.

60.0% 50.0% 2008 40.0% 2010 30.0% 2011 20.0% 10.0% 0.0% Category I - III Category IV-V Category inferior V Water Quality Improvement of SRB: 2008-2011

A.4 Emerging Environmental and Social Issues 27. LJEP has rapidly enlarged its market share in terms of water supply, sewage disposal, sludge disposal and use. With rapid expansion, some new environmental and social issues are emerging, which include: (i) The sewage disposal plant will produce large quantity of sludge every day. After dehydration, the water content will reduce below 80%, which will be transported outside the factory or transited to the municipal waste burying field. During the report period, Harbin sewage disposal project has been under construction, take LJEPs project in Harbin as an example, the daily newly added sludge in Taiping, Wenchang, Pingfang and Xinyi Sewage Disposal Plant is 650 ton. The sludge stacking field has major environmental safety potential. With the accumulation of sludge, there is no more stacking space; on the other hand, there may be possible secondary pollution on ground water and underground water environment, air and soil environment. The effective and rapid project construction imposes grave challenge on LJEP's wish to build a better environment and gain more social benefits. (ii) Under most circumstances, the construction of sewage gathering pipeline lags behind sewage disposal plant. Due to lack of gathering pipeline, LJEP's Pingfang Sewage Disposal Plant's actual sewage disposal capacity is inhibited due to inadequate water supply. Although the main pipeline construction is shouldered by the government, in order to prevent or strive to reduce such issues, LJEP needs more communications with the government and design institute with regard to water volume in the front construction stage and strive to obtain confirmation by the National Development and Reform Commission. (iii) It should be noticed that due to the expansion of Harbin City, the perfection of its piping network and the increase in the amount of domestic sewage in recent years, highly frequent overload situations have occurred in Taiping and Wenchang Wastewater Treatment Plants this year. Due to the combined rainwater and wastewater sewer system in the city, the “sewage overflow” phenomenon occurs in the case of heavy rain. In view of this, Long Jiang Environment Protection Group Share Company has submitted a report to the Environmental Protection Bureau to state the situation. (iv) Besides, LJEP's follow up pipeline construction may involve land acquisition (usually temporary land acquisition) and related immigration issue. As stated in

26 Environment Social Performance Report (2012) LJEP Group Co. Ltd

table 2, on January 21, 2011, the State Council issued State-owned Land House Acquisition and Compensation Rule to standardize house relocation and related compensation, which has replaced the original urban house relocation management rule. The new rule emphasizes the governmental management obligations on land acquisition and immigrant and enhances immigration requirements. Actually, from the perspective of the company, LJEP basically doesn't involve housing relocation and compensation issue. However, the well-furnished and proper mechanism needs to be set to cope with immigration issue in pipeline construction with regard to LJEP sub-project. (v) In consideration of different modes of LJEP's sub-project acquisition, construction or operation, it's necessary to confirm LJEP and its sub-project's responsibilities, obligations, task and target in terms of social issues after handover. Besides, LJEP needs to form a set of active and efficient communication method so that it can interface with the government in terms of social aspect and honor commitments regarding social gains. B Compliance with ADB Safeguards Requirements 28. To satisfy ADB’s Safeguard Policy Statement (SPS) of 2009, LJEP put into effect a tailored ESMS for its relevant subprojects/activities through the help of ADB’s experts. One of the main purposes of the ESMS is to fill the gaps possibly existing between the country requirements and ADB’s policies. In general, these gaps mostly lie in social policies and associated institutional requirements. For example, in the established ESMS detailed frameworks for involuntary resettlement and indigenous people are proposed to address land acquisition and associated house demolition and relocation, compensation for land loss, protection of affected ethnic minority groups, grievance redressing, and so on. While in the country system, relevant responsibilities are required by respective laws and other mandatory rules and not integrated. The most prominent gap could be the difference in requirements for transparent information disclosure and stakeholder engagement. In this regard, ADB is more demanding. 29. In the reporting period, LJEP did not handle any involuntary resettlement issues and was never confronted with indigenous people grievance. As pointed out in ADB’s environmental and social safeguards compliance audit report, LJEP primarily relies on the local government to undertake land acquisition and resettlement as this is done even before a particular concession is brought up for bidding. LJEP plays a very limited role in land acquisition and resettlement. The local governments also promised LJEP would enjoy the same entitlement and arrangement as prior practices in land acquisition and resettlement for its future subprojects. With respect to the indigenous people protection, since all LJEP’s subprojects are located in remote suburbs where local inhabitants are sparsely distributed and ethnic minority people, if any, mix with Han, the majority nationality, LJEP’s activities can hardly affect the ethnic people. 30. During the report period, Acheng Phase II, Mudanjiang Phase II and the Sludge Project have undergone social audit, with the results indicating that the land acquisition, compensation and fund allocation of the three projects have been conducted in accordance with the Land Administration Law of the People’s Republic of China and relevant rules of Heilongjiang Province and that all affected families were very satisfied. Providing various compensation and benefits for all affected families and people comply with the clause about non-voluntary immigration in ADB’s Safeguard Policy Statement. The implementation of all mitigation measures is consistent with the requirements for non-voluntary immigration in ADB’s Safeguard Policy Statement, with no violation of any clauses. During the project preparation and implementation stage, a number of activities with public involvement have been held

27 Environment Social Performance Report (2012) LJEP Group Co. Ltd

to understand the issues that the affected people were concerned about, such as quantity goods investigation, compensation standards and distribution of compensation fees. The complaining channels intended for migrants are clear and effective and all migrants are aware of such channels. All the three subprojects have no effect on ethnic minorities and have no connection with the provisions about aboriginal people stipulated in the Safeguard Policy Statement. 31. According to the agreements between local governments and LJEP, for all subprojects under LJEP, either acquired through particular concession, or constructed from the beginning, land acquisition and resettlement should be undertaken by governmental agency or government commissioned corporation and all the lands permanently or temporarily needed should be appropriated or sold to LJEP by local governments. For the subproject already acquired, the governmental agency should continue to take charge of successive formalities related to resettlement. As the instance of Harbin Xinyi WWTP financed by ADB’s public loan, Harbin Urban Inland Water Construction & Development Co., Ltd. (HUIWCDC) has been handling the resettlement, earlier preparation, and construction management, whenever prior to or after transferring to LJEP. Even with respect to implementation and monitoring of EMP and RP, HUIWCDC is still engaged in everything related and responsible to report to ADB. 32. As for future expansion and development, the LJEP will remain the same approach with the previous land acquisition. On the other hand, pursuant with the newly enacted Regulation on the Expropriation of Buildings on State-owned Land and Compensation, the people’ government at municipal (or county) level and their authorized EA shall be responsible for the land acquisition, immigration and related compensation caused by public services (including environmental protection and resources maintenance). This mandatory command further explains the reasonable arrangements for LJEP not to directly take charge of land acquisition. However, it is expected the LJEP may also directly involve the land acquisition and resettlement when the extended pipeline network (especially part of pipe network that is not under the public road) is carried out in the future. During the report period, the proposed Mudanjiang phase II is in the process of land acquisition. Local Land Resources Bureau has announced the Notice about Examination and Approval of Implementation Plan for the Phase VIII Mudanjiang Urban Construction Farmland Transference and Land Collection in 2009 released by the provincial government as shown in Annex 4 in December 2011. Thus, in the opinion of LJEP, the ESMS that is consistent with ADB's security policy has always been effective. 33. Taking an overview of LJEP’s environmental and social performance, it can be confirmed that there is no phenomenon noncompliant with ADB’s safeguard requirements. If to be more stringent, people may complain LJEP’s information disclosure and stakeholder engagement are not so sufficient. That means there is room for LJEP to improve its transparency and communication with communities in accordance with ADB’s Public Communication Policy.

IV PROGRESS OF ONGOING SUBPROJECTS/ACTIVITIES

34. As shown in Annex 1, during the report period, there is one new project, Heihe Sludge, and only two existing wastewater treatment plant expansion projects, Acheng Wastewater Treatment Phase II and Heihe Wastewater Treatment Phase II. According to the project schedule, at the end of 2012, the environmental assessment and other procedures of all the projects under construction were completed and these projects will be completed in 2013.

28 Environment Social Performance Report (2012) LJEP Group Co. Ltd

35. During the report period, the Wenchang upgrading and reconstruction project is in the midst of transformation from the construction to the operation. For Harbin Taiping Sewage Treatment Plant and Wenchang Wastewater Treatment Plant which are restricted by the construction process standards and influent water quality during the construction period, the COD that is the main indicator of water quality only meets the standard of GB 18918-2002 level II, but should meet the standard of GB 18918-2002 level I in order to improve pollution control projects in key watersheds as required by the country. Thus, LJEP is conducting upgrade projects so as to further reduce the emission of pollutants. The project has entered the trial operation phase in 2011 and is in the process of environmental acceptance at present. The upgrade project is now carried out in Harbin Wenchang Sewage Treatment Plant. Therefore, the construction activities do not involve land acquisition and environmental impact is very limited and controlled.

General Layout Plan of Upgrade and Reconstruction & Sludge Disposal Project in Harbin Wenchang Wastewater Treatment Plant

Legend Taiping Sewage Treatment Plant Phase ⅠProject of Wenchang Sewage Treatment Plant Phase II Project of Wenchang Wastewater Treatment Plant Phase III Project of Wenchang Wastewater Treatment Plant Upgrade and Reconstruction Project of Wenchang Wastewater Treatment Plant Sludge Disposal Project of Wenchang Wastewater Treatment Plant Serial Serial Name Remarks Name Remarks No. No. 1 New A2/O tank Upgrade 38 Phase garage Phase II 2 New blower room Upgrade 39 Phase lifting pump Phase

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station Biofilters for Phase chemical feed 3 Upgrade 40 Phase denitrification room 三 Phase lifting pump 4 Methanol storage pool Upgrade 41 Phase station and distribution room ,chemical feed room High efficient 5 Methanol dosing room Upgrade 42 Phase sedimentation tank Depth processing and 6 Upgrade 43 Biological Aerated Filter Phase lifting pump station Distribution room for 7 Mixed flocculation tank Upgrade 44 Phase biofilter Filter cloth and filter 8 Upgrade 45 Sludge storage tank Phase chamber 9 UV disinfection room Upgrade 46 Blower room Phase 10 New administration room Upgrade 47 Fine screen room Taiping Sludge thickening and 11 Upgrade 48 Vortex-type grit chamber Taiping dewatering room Primary sedimentation 12 Sludge storage pool Upgrade 49 Taiping tank Phase I sludge thickening 13 Phase I 50 A / O tank Taiping tank Phase I sludge dewatering Secondary sedimentation 14 Phase I 51 Taiping room tank Phase I sewage tank and Sewage secondary lifting 15 Phase I 52 Taiping sewage pump chamber pump station Phase sludge tank 16 Phase I 53 Blower room Taiping and sludge pump chamber Sludge recycle pumping 17 Phase I office building Phase I 54 Taiping station 18 Phase I clean-water tank Phase I 55 Drainage pumping station Taiping Phase water supply Drainage pumping station 19 Phase I 56 Taiping station gate shaft Spoil disposal pumping Phase I slagging well 20 Phase I 57 station for primary Taiping chamber sedimentation tank Slagging well chamber for 21 Phase I boiler room Phase I 58 primary sedimentation Taiping tank Distribution well for 22 Phase I guard room Phase I 59 primary sedimentation Taiping tank Distribution well for 23 Phase II A / O tank Phase II 60 secondary sedimentation Taiping tank Phase II distribution Sludge thickening and 24 well for secondary Phase II 61 Taiping dewatering room sedimentation tank Phase II secondary 25 Phase II 62 Comprehensive building Taiping sedimentation tank 26 Phase II blower room Phase II 63 Garage Taiping 27 Phase Ⅰ disinfecting tank Phase II 64 Mail room Taiping Phase II Sewage 28 Phase II 65 Phase I grit room Phase I secondary upgrading

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pumping station Phase Ⅰreturn sludge Phase I primary 29 Phase II 66 Phase I pumping station sedimentation tank Phase Ⅰsludge thickening 30 Phase II 67 Sludge and straw bunker Sludge and dewatering room Sludge fermentation 31 Phase Ⅰmud hut Phase II 68 Sludge workshop Phase Ⅰdrainage pump Sludge finishing 32 Phase II 69 Sludge room workshop Phase Ⅰwastewater 33 Phase II 70 Straw storage shed Sludge recycle treatment room Phase Ⅰsubstation in the Biological deodorization 34 Phase II 71 Sludge factory area filter Phase Ⅰ central control 35 Phase II 72 Fire pool and pump room Sludge building Phase Ⅰ machine repair Substation and 36 Phase II 73 Sludge warehouse distribution room Weighing apparatus and 37 Phase II canteen Phase II 74 Sludge metering plant 36. The preliminary design of Phase II of Mudanjiang Wastewater Treatment Plant is under way. The environmental impact assessment of the project has been approved and the resettlement plan has been completed. Currently, the preliminary design has been completed and the land acquisition notice has been issued. The project is ready for construction commencement. 37. Harbin Sludge Treatment Plant is the first large-scale sludge treatment plant in the Songhua River Basin, intended to digest and recycle the sludge from the wastewater treatment plants in Harbin. The plant adopts high-temperature fermentation technology to produce fertilizers, located in the existing sludge storage yard in Harbin Wenchang Wastewater Treatment Plant, covering an area of 9.17 hectares7. Expert argumentation shows that if the bioleaching technology is applied to the front end of the process, the treatment capacity can reach 1000 tons, without changing the original area of the plant. According to the project schedule, the environmental impact assessment, feasibility study and preliminary design were prepared and approved in 2010. The diagram below is the schematic diagram of the main process and facilities.

7 The sludge dump is estimated having aggregated up to 500,000 tons of sludge to date.

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38. In the preparation of the report, the sludge disposal plant has carried out the preliminary sludge solidification processing work, namely solidification of sludge piled on the construction site, in order to achieve the lower moisture content as well as prevent secondary pollution caused by rainfall or rise of groundwater. During the investigation on the site, it was discovered that construction machinery such as excavators, loaders and heavy-duty trucks has been on the site. The factory site is far away from the nearest buildings as well as from the Songhua River. Thus, it can be concluded that the impact caused by construction noise, dust, odors and other pollutants on the surrounding sensitive target is negligible. In general, the building activities are organized orderly and compliance with conventional environmental requirements.

Construction Site of Harbin Sludge Treatment Plant

V Summary of safety performance and corrective action

39. As set forth under the list of main environmental and social laws (or regulations) in Table 2, the LJEP and its subsidiary plants are in full compliance with provisions of the Labor Law, Labor Contract Law, Law on the Protection of Women’s Rights and Interests and other laws and regulations as well as related security and occupational health requirements. During the report period, all subprojects are fully compliance with above-mentioned provisions, and no significant safety and health event occurs. 40. Long Jiang Environment Protection Group Share Company gives priority to employing local labors and encourages construction project contractors to hire workers from local communities. The Wenchang Sludge Treatment Subproject will offer 33 jobs and Phase II of Mudanjiang Wastewater Treatment Plant will offer 25 jobs. 41. The Trade Union holds the staff conference every year to discuss salaries, welfare, management rules and regulations and other matters related to employees and provide suggestions for the management of Long Jiang Environment Protection Group Share Company. 42. During the report period, Long Jiang Environment Protection Group Share Company recruited 579 employees (including the employees in the newly acquired Jiamusi Running Water Factory), including 171 females, all of which are formal employees. The data above show that in spite of the industry restrictions, Long Jiang Environment Protection Group Share Company still offers employment opportunity and the equal treatment to female employees as far as possible, thereby contributing to the increase in the employment rate of the project location.

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43. During the report period, there are 2084 employees in Long Jiang Environment Protection Group Share Company and the plants under it, including professional management personnel, engineers, technicians, manpower analysts, mechanics, operators, electric appliance engineers, drivers, breeders, cleaners, entrance guards and other posts that provide rear service support. Long Jiang Environment Protection Group Share Company encourages contractors to offer equal employment opportunities to female employees and is willing to cooperate with contractors without sex discrimination. Wenchang Wastewater Treatment Plant and Phase II of Mudanjiang Wastewater Treatment Plant will create a total of 58 jobs, 10% of which may be offered to females. All employees have signed a labor contract and enjoy relevant rights and benefits. Long Jiang Environment Protection Group Share Company provide it employees with all legal rights and interests, including salaries, post allowance, old-age insurance, medical insurance, unemployment insurance, housing allowance, maternity insurance, work injury insurance, full attendance bonus and other welfare (such as work clothes, individual protective articles and free lunch). As for the employees exposed to a harmful environment for a long time, subsidies may occupy 15% of their salaries. 44. Anchored to General Principles for Requirements of Safety and Health in Production Process (GB/T12801-2008), Hygiene Design Codes for Industrial Enterprises (TJ36-79), Technical Specification for Operation, Maintenance and Safety of Municipal Wastewater Treatment Plant (CJJ 60-94), and other applicable standards related to safety and health management, LJEP set up a Safety Management Institution (SMI) which covers every position to regulate the procedures, processes, and activities for ensuring compliance with all the legislative and other mandatory safety requirements. SMI explicitly defines the organizational and responsibility aspects of the safety management; and regulates implementation of safety education and training program, safety inspection, accident prevention and aftermath treatment mechanism, contingency plan, rewards and punishment. Through overall screening and identification of key factors potentially impairing safety performance, SMI specially focuses on overflow, accidental release of pollutants, fire, flood, equipment breakdown, pipeline crack, power outage, driving accident, among others. Based on SMI, technical and management measures for securing safety and health dimensions are readily in place. In a word, good institution, conscientiousness, due diligence, and vigorous implementation, all together guaranteed excellent safety performance of LJEP in the reporting period. 45. To strengthen the leadership, supervision and enforcement, LJEP established Safety and Health Management Panels (SHMP) at various administrative levels. As it always being, LJEP came up with an annual environmental, safety and health training program in 2012. By implementing the training program, 579 new recruit received an entering education; four environmental training courses were held accommodating 1910 person-times; four safety training courses for 2027 attendances were finished, and ten occupational education sessions for 3368 person-times were well done. All the input in these trainings got very positive reward and significantly promoted the safety and health capacity building. 46. Long Jiang Environment Protection Group Share Company has its procedure guide and requirement standards, all of which have been clearly archived. Administrative personnel provide occupational training and situation description immediately after a new employee is recruited. Through group discussion and the learning activity, employees can receive further training. On Nov. 30th, 2012, the employees in the Environmental and Social Management Department received relevant ability construction training, with the training topics covering the following several aspects:

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(i) ADB’s social security policy and procedure; (ii) Steps for land acquisition and resettlement audit; (iii) Domestic laws and regulations about social security guarantee; (iv) Guide for the latest national social impact assessment; (v) Implementation and monitoring of the environmental and social management system (vi) International success experience in resettlement 47. As the project owner/proponent, LJEP fulfilled construction safety and health management mainly through specific agreement with the construction contractor. The project management center took charge of daily superintendence of construction safety and health. Construction contractors were required to act following national and local safety/health mandatory rules, and make every effort to avoid work injury and casualties during construction. Moreover, the contractor had to guarantee that the laborers (including farmer-turned-workers) would have timely payment commensurate to their workloads and enjoy necessary social insurance, medical care, personal safety gadgets, appropriate sanitation, and suitable accommodation. LJEP’s project center, together with governmental authorities, supervised and undertook due diligence on the performance of the contractor in terms of construction safety and health. 48. LJEP and its subsidiaries have also maintained a good record of safety and occupational health, but there are still areas that need to be improved. For example, the annual medical examination should not only cover senior management staff and new employees, but should extend to in-service staff, especially those in the harsh conditions. LJEP will expand its health plans and increase the budget so as to benefit all employees. Another proposal is to arrange for a safety and health training. For employees who are exposed to hazardous substances and environmental risk, it is very important that LJEP must ensure that each employee's health, and fully understand the safety and health threats that may be encountered, as well as special programs to deal with such emergencies. Therefore, LJEP should strengthen its training programs to improve the safety and health awareness of employees, so that employees may be aware of the methods and requirements to respond to emergencies or potential threat. All employees, whether new or veteran, are recommended to receive at least once specific safety and health education or training. 49. During the report period, a total of 43 newly hired employees for 10 sewage treatments operation projects of LJEP, including 7 women, belong to certified staff, accounting for 84% of the staff whose hometown are on the project site. The above data indicated that LJEP provides the female employees with employment opportunities and equal treatment as possible even under restrictions by this industry, and makes contributions to the enhancement of the employment rate on the project site.

VI Sustainable Development Activities and Exchange

A Sludge Treatment Plan 50. From the perspective of China's sewage treatment industry, the sludge problem is certainly emerging and will last for long time. The sewage treatment plants across the country perhaps have to face the problem of treatment and disposal of sludge for a long time. A great quantity of discarded sludge contains water, various pathogenic microorganisms and parasites, so as to provide food and breeding conditions for flies

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and rats. A small-scale decentralized sludge pile will result in the deterioration and pollution of air. The leachate after sludge disposal will lead to the serious pollution of surface water and groundwater. In the Environmental and Social Audit Report, the ADB inspection team also pointed out that the sludge needs to be solved as the most pressing problem. In order to respond to this problem, LJEP has paid great efforts to the research and development of innovative and applicable solutions. LJEP has participated in the project team led by experts from China Northeast Municipal and Environmental Design and Research Institute to prepare the Sludge Treatment and Disposal Plan of Sewage Treatment Plants in Heilongjiang Province (draft) (hereinafter referred to as" sludge Plan ") which has been submitted to Heilongjiang Provincial Development and Reform Commission, Provincial Environmental Protection Bureau and the Provincial Department of Construction. 51. In accordance with the "12th Five-Year" Plan of Urban Sewage Treatment and Recycling Facilities Construction Plan in Heilongjiang Province, the daily sludge production shall rise from 2,848 t / day in 2010 to 3,375 t / day in 2015 with the rapid increase in sewage treatment capacity. The sludge treatment rate will reach 60% in 2015. 52. In view of the rapid increase in sewage treatment, the sludge issue has become an environmental, social and economic barrier to Heilongjiang Province. For the sludge planning, a comprehensive comparison and selection has been carried out among all mainstream sludge treatment processes, and the final choice is composting approach. The nutritive soil produced by the sludge can be widely applied as soil improver to wide extent of saline-alkali soil in Heilongjiang province. In addition, the nutritive soil can be used for woodland fertilizing, garden and flower nursery, lawn cultivation, road slope protection, highway greening, golf courses, soil improvement, quarry, fixation of open pit, and vegetation recovery, etc. As a pilot, the restoration for one hectare of saline-alkali soil needs about 90 tons of nutritive soil produced by sludge compost each year, and the effect will be achieved after 3-5 year continuous restoration. Based on the existing size of sludge composting process (calculated as per nutritive soil production of 428 tons per day), the saline land of 2080 hectares may be restored every three years, which can be used for the cultivation of commodity crops and trees as well as the construction of greening park, so as to generate enormous ecological and economic benefits. In the future, it is predictable that sludge harmless treatment project will be increased by 50 new ones in the “12th Five-Year” Plan of Heilongjiang Province, with a total investment of 2.137 billion Yuan. 53. As the early participant of the sludge program and the forerunner of such sludge composting plants, LJEP has fully committed itself to the implementation of the proposed sludge planning in the next “Five –Year” plan. During the report period, LJEP has signed strategic agreements with Zhaodong, Anda and other local governments, so that LJEP will take advantage of the supplied saline land of five square kilometer as the restoration land for nutritive soil created by sludge compost of Harbin Sludge Treatment Plant. The pilot program is applied to agricultural development after transformation. Through the cultivation of commodity crops such as marigold and lavender, etc., high density straw crop - silage corn and fast-growing trees such as poplars, the agricultural tourism demonstration zone featured by environmental protection shall be established in Heilongjiang Province so as to promote the integration of ecological, economic and social benefits for salinization soil in Heilongjiang Province. Judging from the long-term expansion of the sludge treatment, LJEP will copy the mode of Harbin Sludge Treatment Plant, that is BOT assignment agreement, or develop other financing, construction and operation modes.

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B Corporation Social Responsibility Report 54. As an earlier participant of the sludge plan and sponsor of the first sludge compost plant of its kind, LJEP will fully commit to fulfillment of the proposed sludge plan in the next five years. In the reporting year of 2010, LJEP signed an outline agreement with Zhaodong People’s Government for an arrangement by which LJEP will reclaim a provided saline plot of 5 square km, using all the sludge compost produced by Harbin Sludge Treatment Plant. The reclaimed plot is planned for development of forestry by planting fast-growing poplar trees. In view of further expansion in sludge treatment, LJEP will copy the modality of Harbin Sludge Treatment Plant, namely BOT concession arrangement, or explore other financing, construction and operation modes. 55. For the purpose of better performance in public relations and transparency, LJEP will re-revise corporate website after its listing application, and make an Annual CSRR available on the website. The Annual CSRR will cover a summary of the performance and results of operation and construction, environmental performance and subproject completion status, public relations, and the contribution to social benefits, in order to reflect environmental and social impact as possible. The LJEP even presents the draft about the further improvement in environmental and social aspects of the Company in its Corporate Social Responsibility Report. 56. Taking into account the similarities between the CSRR and Annual Environmental & Social Report submitted to the ADB, the preparation of the annual corporate social responsibility report may be combined with the report for ADB. The managers of LJEP have agreed that once the preparation and distribution mechanisms of the Annual Corporate Social Responsibility Report are established and implemented, LJEP will improve its environmental and social performance and greatly increase its transparence.Annex 1

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Annex 1

Summary of Longjiang Environmental Protection Subprojects Total COD Time and Design Mode and Name of 2011 load treatment pollutant Treatment Date of Date of scheduled capacity current Remarks subprojects (km3/d) capacity deduction process conferment commencement completion (km3/d) status (km3) (t) date Wastewater Treatment Plant in Operation Existing, Wenchang plant has BOT experienced with first full year Harbin Wenchang 325 196.1 68247.3 18167 A/O Dec. 2004 May. 2004 Dec. 2005 Operation of operation for 2011 since 2010 after the merger BOT Harbin Taiping 325 298.8 68247.3 25923 A/O Sept. 2010 May.2004 Oct.2005 Existing Operation Harbin Pingfang BOT Environmental acceptance in Wastewater 150 28.0 10330 1975 CASS Oct. 2008 Dec. 2008 Sept. 2010 Operation progress Treatment Plant Harbin Xingyi Except the greening project, BOT Wastewater 100 59.0 21335 11280 A2/O Oct. 2008 Dec. 2008 Sept. 2010 the main construction has Operation Treatment Plant already been completed. Harbin Acheng TOT 50 102.95 11840.3 6638.1 CASS Sept.2012 / 2012 Existing Phase I Operation Mudanjiang Phase BOT 100 101.4 36599.9 8478.5 A/O May 2008 NA NA Existing I Operation BOT Jiamusi East 60 63.1 22767.8 2945.2 SBR July 2005 June 2005 Dec. 2006 Existing Operation BOT Heihe Phase I 50 41.6 15024.8 5788 CASS Nov. 2009 July 2008 Sept. 2009 Existing Operation BOT Jixi 25 26.1 9412.7 2430.9 CASS Oct. 2009 April 2009 Oct. 2009 Existing Operation

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BOT 30 24.6 8895.5 3201.2 CASS June 2009 March 2009 Sept. 2009 Existing Zhaodong Phase I 0peration BOT Existing, environmental Zhaodong Phase II 20 / / / CASS / Aug. 2010 July 2011 Expansion acceptance in progress Improvement BOT Existing, started to run Ning’an 20 13.7 3776.8 1133 Oct. 2009 Aug. 2009 May 2010 of A/O Operation formally in April 2010. BOT Existing, started to run An’da 45 19.6 1078 161 A2/O Dec. 2010 NA NA Operation formally in November 2010. BOT Existing, started to run Fujin 20 6.4 153.9 28.9 CASS Dec. 2009 July 2009 Nov. 2010 Operation formally in December 2010. Harbin Xingyi BOT Existing, phase is under Wastewater 50 / / / CASS Under Nov. 2008 June 2009 June 2010 construction by municipal Treatment Plant construction government A/0+ biofilters for Upgrade of Harbin denitrification Existing, at trial operation BOT Wenchang and 600 / / / + mechanical Sept.2011 June 2010 June 2011 currently, environmental Operation Taiping filtration + acceptance in progress UV disinfection Wastewater treatment plants under construction or proposed wastewater treatment plants Mudanjiang Phase BOT 100 / / / NA NA NA NA Proposed II Initialization BOT Heihe Phase II 25 / / / CASS Under / Oct. 2010 Sept. 2011 Expansion construction BOT Acheng Phase II 50 / / / / Sept.2012 Aug.2014 Expansion construction Wastewater Treatment Plants in operation Mudanjiang TOT Longjiang 360 / April 2010 NA NA Existing Operation Environmental

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Water Supply Company Operation Jixi Water Plant 100 / under June 2009 NA NA Existing assignment Jiamusi Water 2000 / Franchise NA NA NA Existing Plant Sludge treatment plant under construction

Thermorphilic Harbin Sludge BOT 1 / / / aerobic Sept.2012 Aug. 2010 Dec. 2011 Under construction Treatment Plant Under composting construction

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Annex 2

Environment Quality Management System Certificate of Conformity and Environment Management System Certificate of Conformity for Longjiang: ISO9001:2008 and ISO14001:2004

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Annex 3

Owner of Name of Land type Type of Area of Issuance Status of land transaction Land No. land use Location Remarks subprojects (application) use right use right date right Wastewater Treatment Plant in Operation Since both Wenchang, and Taiping jointly handled the land Tuanjie Allocation Heilongjiang certificate initially, the Harbin Township, Land for of Harbin Has acquired land certificate, State-owned Land 585169.0 July area of tenure for Drainage Taiping municipal state-owne Wenchang renaming Use (1997) m2 25,2007 Wenchang Wastewater Co., Ltd. District facilities d land use Document No.075 Plant include Harbin right the usable area of Taiping Wastewater Plant. Harbin Tuanjie Tongfang State-owned Land Township, Municipal Acquired, belonging to the (Harbin) 152141.8 December Harbin Taiping Use (2009) Taiping public Allocation Group Water Co., m2 18,2009 Document No. District facilities Ltd. 040011557 Harbin Harbin Acquired, belonging to joint Pingfang project, the partner holds the / / / / / / / Wastewater certificate of land allocation Treatment Plant Harbin Xingyi Acquired, belonging to joint Wastewater project, the partner holds the / / / / / / / Treatment Plant certificate of land allocation Harbin Acheng Acquired, belonging to joint A Harbin Public 74924.0 / Allocation June 9,2012 WWTP project State-owned Land Acheng facilities m2

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Use (2011) Tengfei Document No. Wastewater 00548 Treatment Co., Ltd. Mudian- Mudianjiang jiang 450-515-3/ Property Right Longjiang 1-27-DZ Mudanjiang Certificate Environ- Yangming 101026.0 January Acquired Industrial Allocation Phase Yangming District mental District m2 2,2010 Document No. Protection 450-515-3/ 4084828 and Water 1-27-DZ Co., Ltd. Jiamusi North of Longjiang Eastern Jiamusi State-owned Environmen part of Public Land Use(09) 70807.00 Jiamusi East Acquired tal Chang’an infrastruc- Allocation June 9,2009 Document No. m2 Protection Road ture 0900800 and Water Dongfeng Co., Ltd. District Heihe Heihe Longjiang Two State-owned Land Environ- kilometers Public 54000.00 September Heihe Phase I Acquired Use (2011) mental south from Allocation 2 facilities m 30,2011 Preliminary Protection Changfa Document No. 262 and Water village Co., Ltd. Jixi Acquired, renaming Zhaodong West side Zhaodong Longjiang of Nanhan State-owned Land Environ- River, the Zhaodong 44100.00 October Acquired Use (issued in mental Ninth Industrial Allocation Phase m2 17,2010 2010 ) Document Protection Middle No. 12 and Water School of Co., Ltd. Tiedong

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District West side Zhaodong of Nanhan Zhaodong Longjiang River, the State-owned Land Environ- Zhaodong Ninth 44100.00 October Acquired Use (issued in mental Industrial Allocation Phase II Middle m2 17,2010 2010 ) Document Protection School of No. 12 and Water Tiedong Co., Ltd. District Ning’an Not acquired / / / / / / / Acquired, but in government An’da / / / / / / / name Fujin Longjiang Land for Heilongjiang Fujin North side Environ- environmen State-owned Land of April Fujin Acquired mental tal Allocation 18800m2 Use (2011 ) industrial 25,2011 Protection sanitation Document No. 0102 park and Water facilities Co., Ltd. Jiamusi Longjiang Jiamusi State-owned No. 100 Jiamusi West Environ- Land Use(2011) Committee, Municipal November Wastewater Acquired mental Allocation 99866m2 Document No. Yonghong facilities 25,2011 Treatment Plant Protection 201101738 District and Water Co., Ltd. Since both Wenchang, Tuanjie Allocation Upgrade of Heilongjiang and Taiping jointly Harbin Township, Land for of Harbin Included in the landholding of State-owned Land 585169.0 July handled the land Drainage Taiping municipal state-owne Wenchang and Wenchang Use (1997) m2 25,2007 Co., Ltd. District facilities d land use certificate initially, the Taiping Document No.075 Harbin right area of tenure for Wenchang Wastewater

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Plant include the usable area of Taiping Wastewater Plant. Wastewater treatment plants under construction or proposed wastewater treatment plants Mudanjiang In the process of land / / / / / / / Phase II acquisition Heilongjian Heilongjiang g State-owned Longjiang Two Land Use Environ- kilometers 54000.00 September Heihe Phase II Acquired, (2011) mental south from Public facilities Allocation 2 m 30,2011 Preliminary Protection Changfa Document and Water village No.262 Control Co., Ltd. A Harbin State-owned Acheng Acheng Phase Acquired, belonging to joint Land Use Tengfei / Public facilities Allocation 74924.0m2 June 9,2012 II project (2011) Wastewater Document Treatment No. 00548 Co., Ltd. Water supply company in operation Ningan Mudanjiang State-owned Mudian- Longjiang Land Outside jiang Water Environmental Acquired, Resource(Bra Dongdaem 4900.00m2 Supply Water Supply nch) un Company Company Document No.0072 Jiamusi Water Acquired, HeiJiamusi Jiamusi Xiangyang Public facilities Allocation 1248.23m2 October

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Supply State-owned Water district 15,2002 Company Land Supply No.57 Resource Company Public Document No.00773 Operation under assignment, Jixi Water Plant / / / / / / / not belonging to the Group Sludge treatment plant under construction Heilongjiang Tuanjie Allocation State-owned Harbin Township, of Area of tenure for Harbin Sludge Included in the landholding Land Use Land for municipal 585169.0 July Drainage Taiping state-owne Wenchang Wastewater Treatment Plant of Wenchang (1997) facilities m2 25,2007 Co., Ltd. District d land use Plant includes Document Harbin right No.075

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Annex 4

Mudanjiang Bureau of Land and Resources Announcement about Compensation and Allocation Scheme for Collecting Collective Land of Yangming Village and Yumin Village in Xinxing Street Office

According to the Notice about Examination and Approval of Implementation Plan for the Phase VIII Mudanjiang Urban Construction Farmland Transference and Land Collection in 2009 which was approved by the People’s Government of Heilongjiang in Heilongjiang Government Land [2011] Document No.169 in October 18, 2011 and re-checking of land collection compensation registration of villages whose land is collected, Mudanjiang Bureau of Land and Resources protocolled Compensation and Allocation Scheme for Collecting Land. In accordance with the Article 48 of Land Management Law of the People’s Republic of China and the Article 25 of Implementing Regulations for Land Management Law of the People’s Republic of China, the contents and relevant matters of Compensation and Allocation Scheme for Collecting Land are as follows: I. Villages with lands to be collected and the areas: in this phase, 11,4165 hectares of collective land are transferred to urban construction farmland and collected to be owned by the state (including 4.5310 hectares of collective farmland of Yangming Village and 6.8855 hectares of collective farmland of Yumin Village; 6.0461 hectares of collective construction land is collected to be owned by the state (including 5.6027 hectares of residential land and 0.4434 hectares of

48 Environment Social Performance Report (2012) LJEP Group Co. Ltd industrial and mineral warehouse land of Yangming Village); at the same time, 2.3586 hectares of state-owned farmland in the Jiangxi Farm is transferred to construction land. The above 19.8212 hectare land altogether is the urban construction land in this phase. II. Standards of compensation and allocation for collecting land: the land areas in this phase are within the comprehensive land price blocks of collected land blocks in Mudanjiang and numbered M-22 and M-24, whose comprehensive land prices are RMB 125/m2 and RMB 175/m2 respectively. III. Attachments and structures compensation: For underground and over-ground attachments and structures compensation, compensation and allocation will be given according to demolition method determined by municipal government. IV. Farm workers allocation method Allocation and compensation method will be formulated according to collective economic organizations whose land is collected and practical situations of the villages in this project. V. If owners of land ownership and land use right within the four boundaries of the collective land have different opinions about this scheme, please send opinions in written form to Mudanjiang Bureau of Land and Resources through Village Committees before January 26, 2012. VI. After consultation, this scheme will be submitted to the People’s Government of Mudanjiang for enforcement. According to the regulations in 25th Article of Implementing Regulations for Land Management Law of the People’s Republic of China, dispute on the approved Compensation and Allocation Scheme for Collection Land will not influence enforcement. Notice is hereby given. Mudanjiang Bureau of Land and Resources Mudanjiang Bureau of Land and Resources (sealed) December 26, 2011

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Mudanjiang Municipal People’s Government Announcement about Collecting Collective Land of Yangming Village and Yumin Village in Xinxing Street Office

The Notice about Notice about Examination and Approval of Implementation Plan for the Phase VIII Mudanjiang Urban Construction Farmland Transference and Land Collection in 2009 (Heilongjiang Government Land [2011] No. 169), provided by Heilongjiang Provincial People’s Government, approves the collection of collective land of Yangming Village and Yumin Village in Xinxing Street Office in our city. In accordance with the Article 46 in “Land Management Law of the People’s Republic of China” and Article 25 in “Implementing Regulations for Land Management Law of the People’s Republic of China”, the issues which are relevant to the land collection are announced as follows: I. Title of the construction land project: Implementation Scheme of the Phase VIII Urban Construction Farmland Transference and Land Collection in 2009 in Mudanjiang. II. Location of the land to be collected: Yangming Village and Yumin Village in Xinxing Street Office in Mudanjiang. The specific location refers to the block function chart approved by Heilongjiang Government Land [2011] No. 169 Document. III. Villages with lands to be collected and the areas: in this phase, 11,4165 hectares of collective land are transferred to urban construction farmland and collected to be owned by the state (including 4.5310 hectares of collective farmland of Yangming Village and 6.8855 hectares of collective farmland of Yumin Village; 6.0461 hectares of collective construction land is collected to be owned by the state (including 5.6027 hectares of residential land and 0.4434 hectares of industrial and mineral warehouse land of Yangming Village); at the same time, 2.3586 hectares of state-owned farmland in the Jiangxi Farm is transferred to construction land. The above 19.8212 hectare land altogether is the urban construction land in this phase. IV. Standards of compensation and allocation for collecting land: carrying out the task in accordance with the rules described in “Reply of Heilongjiang Provincial People’s Government on Adjusting the Comprehensive Land Price of Collected Land Blocks” (Heilongjiang Government Letter [2010] No. 140) and “Mudanjiang Municipal People’s Government Announcement about Adjusting the Comprehensive Land Price of Collected Land Blocks in the Whole City”. The land areas in this phase are within the comprehensive land price blocks of collected land blocks in Mudanjiang and numbered M-22 and M-24, whose comprehensive land prices are RMB 125/m2 and RMB 175/m2 respectively. V. From December 16, 2011 to March 16, 2012, owners of land ownership and land use right in the areas of collected land shall hold the certificate of land ownership or other relevant certificate materials and go to the village committee office of Yangming Village and Yumin Village in Xinxing Street Office in Mudanjiang to deal with the land compensation register. Notice is hereby given.