Project Agreement

_ocu_ms

LOAN NUMBER 8170-CN

Project Agreement

(Gansu Qingyang Urban Infrastructure Improvement Project)

between

INTERNATIOINAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

and

GANSU PROVINCE

Dated 2-" '771 2012 PROJECT AGREEMENT

AGREEMENT dated 2 , 2012 entered into between INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ("Bank") and GANSU PROVINCE ("Gansu" or "Project Implementing Entity") ("Project Agreement") in connection with the Loan Agreement ("Loan Agreement") of the same date between PEOPLE' S REPUBLIC OF CHINA ("Borrower") and the Bank. The Bank and Gansu hereby agree as follows:

ARTICLE I - GENERAL CONDITIONS; DEFINITIONS

1.01. The General Conditions (as defined in the Appendix to the Loan Agreement) constitute an integral part of this Agreement.

1.02. Unless the context requires otherwise, the capitalized terms used in the Project Agreement have the meanings ascribed to them in the Loan Agreement or the General Conditions.

ARTICLE H - PROJECT

2.01. Gansu declares its commitment to the objective of the Project. To this end, Gansu shall:

(a) carry out the Project, and cause QWSSC in respect of Part 1.4 of the Project to assist in the carrying out of such Part of the Project, all in accordance with the provisions of Article V of the General Conditions; and

(b) provide, or cause to be provided, promptly as needed, the funds, facilities, services and other resources required for the Project.

2.02. Without limitation upon the provisions of Section 2.01 of this Agreement, and except as the Bank and Gansu shall otherwise agree, Gansu shall carry out, and shall cause to be carried cut, the Project in accordance with the provisions of the Schedule to this Agreement.

ARTICLE III - REPRESENTATIVE; ADDRESSES

3.01. Gansu's Representative is its Governor or a Vice-Governor or such other person or persons as said Governor or a Vice-Governor shall designate in writing, and Gansu shall furnish to the Bank sufficient evidence of the authority and the authenticated specimen signature of each such person. -2-

3.02. The Bank's Address is:

International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America

Cable: Telex: Facsimile:

INTBAFRAD 248423(MCI) or 1-202-477-6391 Washington, D.C. 64145(MCI)

3.03. Gansu's Address is:

Office of Gansu Provincial Foreign Loans Administration Committee No,. 696 West Donggang Road Chengguan District, Lanzhou City Gansu Province People's Republic of China

Facsimile: 86-931-8891043.

AGREED at Beijing, People's Republic of China, as of the day and year first above written.

INTERNATIONAL BANK FOR RECONSTRUCTION ANqDEVELOPMENT

By / /1/ Authorized Representative

Name: V&/e.u"

GANSU PROVINCE

By Authorized Representative

Name: -3-

SCHEDULE

Execution of the Project

Section I. Implementation Arrangements

A. Project Management

Gansu shall maintain, or cause to be maintained, for purposes of carrying out the Project, the following org,nizations, with terms of reference, staffing and other resources acceptable to the Bank, throughout the period of implementation of the Project:

(a) the Project Leading Group (PLG), which shall: (i) be chaired by the Executive Vice Mayor of Qingyang Municipality and composed of senior officials from relevant agencies of Qingyang Municipality and Xinfeng District; and (ii) be responsible for providing policy guidance and inter-department coordination for implementation of activities under the Project.

(b) the Project Management Office (PMO) which shall: (i) be established under the Project Leading Group and stationed in Xifeng District; and (ii) be responsible for daily management, supervision and coordination of Project implementation.

(c) a Project Implemeritation Unit each in QWSSC and Xifeng Housing and Construction Bureau and Xifeng District's Transportation Bureau which shall be responsible for implementing their respective components, including leading the engineering design, procurement, signing and managing the ccontracts and authorizing disbursement for each subcomponents accordingly.

2. Gansu shall, not more than three months after the Effective Date or prior to the commencing of the bidding process for any works to be procured under the Project, whichever occurs first, employ or cause to be employed under terms of reference satisfactory to th- Bank, qualified consultants acceptable to the Bank to assist Qingyang Municipality, Xifeng District and the Project participants in Project management and supervision.

B. Anti-Corruption

Gansu shall ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines, including those applicable to the recipients of Loan proceed& other than the Borrower. -4-

C. Environmental and Social Safeguards

1. Gansu shall, through Qingyang Municipality and Xifeng District, as the case may be, and shall cause QWSSC to:

(a) implement the EMP and the RAP in accordance with their respective terms;

(b) without limitation to the provisiong of paragraph (a) of this Section I.C, ensure that all land acquisition under the RAP required for the purposes of carrying out works under the Project are financed exclusively out of Qingyang Municipality's and Xifeng District's resources, as the case may be, and shall provide, promptly as needed, the resources needed for this purpose; and

2. Gansu shall maintain and cause to be maintained policies and procedures adequate to enable it to monitor and evaluate, in accordance with guidelines acceptable to the Bank, the implementation of the EMP and RAP and the achievement of the objectives of said plans and by March 15 and September 15 of each year, commencing on March 15, 2013, furnish to the Bank semi-annual reports of such monitoring and evaluation activities with respect to the EMP and RAP, together with any revisions proposed to be introduced into said plans in order to achieve their respective objectives. The information on the status of compliance with the EMP and RAP shall provide details of:

(a) measures taken in furtherance;

(b) conditions, if any, which interfere or threaten to interfere with the smooth implementation; and

3. Gansu shall not amend, abrogate or waive any provision of the EMP or RAP without the prior written agreement of the Bank.

4. Gansu shall ensure that each contract for civil works includes the obligation of the respective contractor to implement the EMP, including the Environmental Codes of Practice. -5-

5. In the event of any inconsistencies between the provisions of the EMP or the RAP and those of this Agreement, the provisions of this Agreement shall prevail.

D. Financial Arrangements

Gansu shall make the .)rincipal amount of the Loan available to Qingyang Municipality under arrangements satisfactory to the Bank, which shall include, without limitation:

(a) the following principal terms:

(i) Gansu shall make available the principal amount to Qingyang Municipality in Dollars (on the date, or respective dates, of withdrawal from the Loan Account) of the value of the currency or currer cies so withdrawn on account of the Project;

(ii) Gansu shall recover: (i) the Front-end Fee referred to in Section 2.03 of the Loan Agreement, interest during construction and any caps and collars; and (ii) the principal amount referred to in paragraph (a) of this Section I.D over a period of thirty (30) years, inclusive of a grace period of five (5) years; and

(iii) Gansu shall charge interest on such principal amount, withdrawn and outstanding from time to time at a rate equal to the rate of interest applicable from time to time to the Loan pursuant to Section 2.04 of the Loan Agreement; and

(b) Qingyang Municipality's obligation to make available the principal amount of the Loan so made available. by Gansu, to Xifeng District, under arrangements satisfactory to the Bank, and under the same terms and conditions.

E. QWSSC Agreement

1. Gansu shall cause Xifeng District to enter into an agreement with QWSSC for the implementation of Part 1.4 of the Project under terms and conditions satisfactory to the Bank which shall include those set forth in Annex A to this Schedule.

2. Gansu shall cause Xifeng District to exercise its rights under the QWSSC Agreement in such manner as to protect the interests of the Borrower, the Bank, Gansu, and Xifeng District, and to accomplish the purposes of Part 1.4 of the Loan, and except as the Bank shall otherwise agree, not assign, amend, abrogate or waive the QWSSC Agreement or any provision thereof. -6-

F. Transport Action Plans

Gansu shall cause Xifeng District to:

(a) not later than later than twelve (12) months after the Effective Date, prepare and furnish to the Bank for its comments:

(i) an action plan for the improvement of parking within Xifeng District including the required strategies, measures and locations where the measures will be implemented;

(ii) an action plan for the improvement of Xifeng District's public transport services including the measures to be taken such as improvement of bus facilities, bus lane markings, construction and/or reconstruction of selected bus bays and bus stop improvements; and

(iii) an action plan for the improvement of safety of the three (3) integrated road corridors supported by the Project, including the specific user education measures to be taken; and

(b) promptly thereafter carry out such plans taking into account the comments if any made by the Bank in accordance with schedule included in such plans.

Section H. Project Monitoring, Reporting and Evaluation

A. Project Reports

Gansu shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 5.08(b) of the General Conditions and on the basis of the indicators set forth in Annex B to this Schedule. Each such Project Report shall cover the period of one (1) calendar semester, and shall be furnished to the Bank by March 15 and September 15 each year, starting September 15, 2012.

B. Financial Management, Financial Reports and Audits

1. Gansu shall maintain a financial management system and prepare financial statements in accordance with consistently applied accounting standards acceptable to the Bank, both in a manner adequate to reflect the operations, resources and expenditures related to the Project.

2. Gansu shall have its financial statements referred to above audited by independent auditors acceptable to the Bank, in accordance with consistently applied auditing standards acceptable to the Bank. Each audit of these financial -7-

statements shall cover the period of one (1) fiscal year. The audited financial statements for each period shall be furnished to the Borrower and the Bank not later than six (6) months after the end of the period.

Section M. Procurement

All goods, works and services required for the Project to be financed out of the proceeds of the Loan shll be procured in accordance with the provisions of Schedule 2 to the Loan Agreement. -8-

ANNEX A to SCHEDULE

Principal Terms and Conditions of the QWSSC Agreement

For the purposes of Section I. E of the Schedule to this Agreement, the QWSSC Agreement shall be entered into between Xifeng District and QWSSC on the terms and conditions set forth below.

1. QWSSC shall undertake to:

(a) carry out Part 1.4 of the Project with due diligence and efficiency and in accordance with appropriate management, financial, engineering and public utility practices and social and environmental standards acceptable to the Bank, and

(b) without limitation on the foregoing, take all measures necessary to ensure that the Project shall be implemented in accordance with the Resettlement Action Plan and the Environmental Management Plan.

2. QWSSC shall undertake to procure the works and services to be financed out of the proceeds of the Loan allocated from time to time to Part 1.4 of the Project in accordance with the provisions of Section III of Schedule 2 to the Loan Agreement, and utilize such works and services exclusively in the carrying out of such Part of the Project.

3. QWSSC shall undertake to enable the Bank, Gansu, Qingyang Municipality and Xifeng District to inspect such sites and works included in the Project, the operation thereof, and any relevant records and documents.

4. QWSSC shall during the Project implementation period undertake to:

(a) maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations and financial condition;

(b) have its financial statements (balance sheets, statements of income and expenses and related statements) for each fiscal year audited, in accordance with appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank;

(c) furnish to the Bank, Gansu, Qingyang Municipality and Xifeng District as soon as available, but in any case not later than six (6) months after the end of each such year, certified copies of said financial statements -9-

and accounts for such year as so audited; an opinion on such statements by said auditors In such scope and detail as the Bank, Gansu, Qingyang and Xifeng District shall have reasonably requested; and all such other information concerning said records, accounts and financial statements, as well as the audit thereof, as the Bank, Gansu, Qingyang Municipality and Xifeng District shall reasonably request;

(d) prepare and furr ish to the Bank, Gansu, Qingyang Municipality and Xifeng District all such other information concerning said records, accounts and financial statements, as well as the audit thereof, as the Bank, Gansu an a Qingyang Municipality shall reasonably request;

(e) not later than December 31, 2013, submit a financial performance improvement plan of QWSSC satisfactory to Gansu, Qingyang Municipality, Xif.ng District and the Bank.

(f) except as the Bark shall otherwise agree, ensure that, commencing with the calendar year starting January 1, 2015, the sum of QWSSC's operating revenues and non-operating revenues will be no less than equal to the sum of its operating costs, including depreciation and taxes; debt service requiremcnts; and funds required for other necessary operating investments, calculated in a manner satisfactory to Gansu, Qingyang Muncipality, Xifeng District and the Bank.

(g) maintain policies and procedures adequate to enable it to monitor and evaluate on an orgoing basis, in accordance with indicators satisfactory to the Bank, the carrying out of Part 1.4 of the Project and the achievement of the objective thereof.

6. Gansu, Qingyang Municipality and Xifeng District shall have the right to suspend or terminate the right of QWSSC to the use of the proceeds of the Loan allocated from time to time to Part 1.4 of the Project made available under the QWSSC Agreement upor failure by QWSSC to perform any of its obligations under the QWSSC Agreement. - 10 -

ANNEX B to SCHEDULE

Indicators

Project Development Objective (PDO): is to assist Xifeng District to improve selected urban infrastructure services including urban roads and urban environmental services. Cumulative Target Values** Data Daapolilectior a PDO Level Results Indicators* 6 Unit of Measurement Baseline Frequency Ioieo 41S YR1 Method Data Collection YR2 YR3 IYR4 YR5 ology XF District Indicator 1: Journey time saved minutes 26.2 24.3 21.7 18.2 18.2 Reported Surveys Housing and for through traffic (freight) (% change) 28.4 (-8%) (-14%) (-24%) (-36%) (-36%) Annually Construction Bureau

15 20 22 XF District Indicator 2: Share of through 9.1 9.1 (120%) (142%) Reported Surveys Housing and (freight) on two corridors number of trucks 24 East:9.1 (0%) (0%) (65%) traffic 66.2 68 70 72 Annually Construction hrs, (%) West: 66.2 66.2 Bureau increased (0%) (0%) (3%) (6%) (9%)

Indicator 3: Service speed of 10.1 9.7 9.5 15.5 15.5 Reported PMO and Bus buses during rush hour on Nan Bei U km/h (% change) 10.3 (-2%) (-6%) (-8%) (50%) (50%) Annually Surveys Company Street corridor) (-20/6) (0 (0) 0 5% n lC p Indicator 4:% of built-up area %(e Reported Municipal Water serviced by storm water/wastewater % ( of serviced 50.6 50.6 55.6 61 73.5 92 Surveys Supply and Sewage Company networks increased area) 365 1168 R Municipal Water Wastewater pollution BOD:0 0 0 0 Indicator 5: 2569 Reported Surveys Supply and Sewage 5: COD, SS i U ton/year COD: 0 0 0 0 802 reduction SS: 0 0 0 0 693 2219 Annuay Company

INTERMEDIATE RESULTS - 11 -

Intermediate Results Component One, Sub-component 1: Urban Bypass Road Construction

% of Road Construction 0 % 0 0 0 100 100 100 Reported Field Xifeng District Completed, by km every quarter Visits Trans. Bureau Average annual number of fatalities and severely injured in number of fatalities Reported Police project corridors over a three-year O and severely injured 14 14 14 14 9 9 Annually Reports Traffic Police period (relative to base year- (persons) period) 11 1 1 1 1 1 1 1 1 1 1 Intermediate Results Component One, Sub-component 2: Integrated Road Corridor Improvement Passenger ridership of buses during number of 5,845 6,100 6,400 6,700 11,000 12,000 Reported PMO and Bus rush hour on Nan Bei Street 0 passengers for tAN tAO0A to0 A tIM041 (M41 I Ann-aytv Surveys rnmnnnv corridor increased 12hrs, (% change) ' ' XF District stops reconstructed/upgraded E Number of bus stops 0 0 11 11 33 33 Reported Field Housing and Bus every quarter Visits Construction Bureau XF District Number of unsignalized zebras Reported Field Housing and converted to signalized mid-block O Number of crossings 15 15 60 60 103 103 every quarter Visits Construction crossings on the three corridors Bureau XF District Number of intersections with El Number of 12 12 21 21 27 27 Reported Field Housing and traffic channelized intersections every quarter Visits Construction Bureau User satisfaction surveys (feedback of public transport users, including % expressing Reported PMO and Bus disabled and vulnerable groups, El positive opinion on 27 27 27 27 60 65 Annually Surveys Company through bus user surveys on Nan the services Bei Street corridor) I I _

Intermediate Results Component One, Sub-component 3: Drainage and Sewage Pipes XFDistrict % of New Drainage/Sewage Pipe 0 Cumulative % 0 5 20 35 65 100 Reported Field Housing and Construction Completed, by km every quarter Visits Construction I_ I I Bureau - 12 -

%of Drainage/Sewage Pipe 0 XF District Cumulative% 0 10 30 50 75 100 Reported Field Reconstruction Completed, Housing and by km every quarter Visits Construction I_ I Bureau Intermediate Results Component One, Sub-component 4: Wastewater Treatment Plant

% of Wastewater Treatment Plant 0 Cumulative Municipal Water % 0 15 40 60 80 100 Reported Field Visits Supply Investment Completed, by US$ and every quarter Sewage Company % of associated pipes construction 0 Cumulative Municipal Water % 0 5 20 35 65 100 Reported Field Visits Supply completed, by km and every quarter Sewage Company Intermediate Results Component Two: Institutional Strengthening and Capacity Building

Study Completed O Cumulative Number 0 0 1 2 3 5 Reported Surveys PMO of studies every quarter Staff Trained O Cumulative Number 0 15 35 75 95 110 Reported Surveys PMO of staff every quarter