Documentof The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Repon No. 12329-CHA STAFF APPRAISALREPORT CHG Public Disclosure Authorized XIAOIANGDIMULTIPURPOSE PROJECT MARCH25, 1994 Public Disclosure Authorized Agriculture Operations Division China and Mongolia Department Public Disclosure Authorized East Asia and Pacific Regional Office Thi document ha a resticted distibuton and ay be used by r.dpien.& only in the perfonnance of their officGiadudes. Its contents may not otherwise be disclosed without Wodd Bank authorzation. CURRENCY EQUIVALENIS 1/ (as of January 1, 1994) Currency Unit - Yuan (Y) $1.00 = Y 8.7 Y 1.00 = $0.11S FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 cubic meter (m3 or cm) = 35.31 cubic feet 1 kilometer (Cm) = 0.62 miles 1 hectare (ha) = 15 mu 1 ton (t) = 1,000 kg 1 kilogram (kg) = 2.2 pounds ABBREVIATh)NSAND ACRONYMS BM - Basin Model Bcm - billion cubic meters cms - cubic meters per sec CCPN - Cental China Power Network CPLG - Central Project LeadingGroup CYJV - CIPM Yellow River Joint Venture CNTIC/lTC - ChinaNational Technical Import Corporation/International Tendering Co. DCA - Development Credit Agreement DOD - Dam Operation Department DSIERP - Dam Safety and Environmental/ResettlementPanel EIA - Environmental Impact Assessment EIRR - Economic Internal Rate of Return El. - Elevation level EM - Environmental Management EMO - Environmental Management Office FAO - Food and Agriculture Organization FD - Finance Divisiorn FIRR - Financial Intemal Rate of Return FPH - Flood Prevention Headquarters 1/ This project was apprised in April/May1993 when the exchangerate was $1 = Y 5.7. All costs and financinghave been recalculatedat the rate of $1 = Y 8.7, effectiveJanuary 1, 1994. Economicand financialanalysis is basedon ogmnal appraisalparametes. Thedevaluation would improveeconomic and fina_i results to some extent. FOROFFICLAL USE ONLY GOC - Governmentof China G TAO - Gross Value of AgriculturalOutput GVIO - Gross Value of Industdal Output GWh - Gigawatthours ICB - InternationalCompetitive Bidding kV - kilovolt kW - kilowatt LCB - Local CompetifiveBidding LG - LeadingGroup LRM - Lower Reach Model LRMC - long-run average margnal cost M&I - Municipaland Industrial MCM - millioncubic meters MGM - Ministry of Geologyand Mining MOA - Ministry of Agriculture MOC - Ministry of Communications MOE - Ministry of Energy MOF - Ministry of Finance MOP - Ministry of Power MURC - Ministry of Urban and Rural Construction MW - Megawatt (1,000 kW) MWR - Ministry of Water Resources NCGWR - National CoordinationGroup on Water Resources NCPN - North China Power Network NEPA - National EnvironmentalProtection Agency NWPN - NorthwestPower Network O&M - Operation and Maintenance PA - Project Agreement PAB - ProvincialAudit Bureau PCC - Project CoordinatingCommittee PMO - Project ManagementOffice PPLG - ProvincialProject LeadingGroup ppm - parts per million RBC - River Basin ConservancyCommission RPDI - Reconnaissance,Planning and Design Institute SAA - State Audit Administration SEPC - State EnvironmentPlanning Commission SOE - Statementof Expenditure SPC - State Planning Comaission WRB - Water ResourceBureau XECC - XiaolangdiEngineering Consultant Company YRCC - YellowRiver Conservancy Commission YRCCRO - YRCC ResettlementOffice YRWHDC - YellowRiver Water and HydropowerDevelopment Corporation Thisdocument has a resticteddisribution and maybe used by recipients only in the performanceof their officialduties Its contentsmay not othewse be disclosedwithout Wodd Bano athoato CHINA XIAOLANGDIMULTIPURPOSE PROJECT Loan and Project Summary Borrower: People'sRepublic of China Beneficiary: YellowRiver Water and HydropowerCorporation (YkWHDC) Amount: $460 million Terms: 20 years,including 7 yearsof grace,at the Bank'sstandard variable interestrate, with levelprincipal payments. OnlendingTerms: The proceeds of the loan (other than the InstitutionalSupport Componentfor the Ministryof Water Resources,MWR) will be onlent from the Borrowerto YRWHDCunder a subsidiaryloan agreemt, with a 20-yearterm, includi,ng7 years of grace, at the Bank's variable interest rate, with level principal repayments. YRWHDCwill bear the foreignexchange risk and commitment charges. Objecives: The mainobjectives of theproject are to: (a) introduceflood control in the lower reachesof the YellowRiver Basin to protect major infrstructure and 103 millionpeople; (b) control siltationin the 800km downstreamchannel of the nver and prevent further aggradationso that leveeheights need not be raisedfurther during a periodof 20 years; (c) providewater for asred irrigationfor 2 millionhectares and more stablewater suppliesfor downstream citiesand industries; and (d) generatehydropower for supplementing the baseload of thermalstations in HenanProvince and the Central ChinaPower Network. Description: The project would include the following components: (a) constructionof Xiaolangdirockfill dam (witha slopingcore), 154 meters high, with associatedintake and outlet structures; (b) constructionof a power stationand associatedsix tunnelswith turbineand gevrators withan installedcapacity of 1,800MW (6 x 300 MW) and associatedswitchyards, and transformers;(c) an environmentalmanagement component to monitor, manage and offsetany negativeimpacts of the project;(d) trainng and technical assistance for YRWHDC in contract management,project Ifi scheduling,cost control,claims management,financial management, managementinformation systems, organizationalsupport, corporate planningand personnelmanagement; and (e) an institutionalsupport component for the Ministry of Water Resources and the Yellow River Conservancy Commission. The resettlement of 171,000 people displaced by the project and the development of their livelihoods is being undertaken through a separate project being processedsimultaneously. Benefits: The project will generate enormous benefits: (a) flood control measureswi}l substantialyreduce the risk of normal annual floods, ice-dam breaches, and of major floods. The flood control benefits have been calculatedin tenns of damage reductionfor agriculture, urban and industrialareas. Benefitsfrom avoidanceof massiveloss of human life and suffering have not been quantified. About 103 million people will benefit from protection from infrequent catastrophicfloods and about 3 millionof someof the poorestpeople in Chinaliving between the levees and in flood detentionareas will benefit from preventionof annual and frequent floods (1-in-2 years or more); (b) sedimentcontrol benefitshave been calculatedin terms of reducing the expenditures on levee raising and maintenance; (c) power benefitswould be firm pea'. power generationand would replace building expensivealternative thermal generation using gas tines or other sources; and (d) irrigation and water supply benefits will raise yields of crops (mainly grain) to about double their present yieldsand croppingintensities on about 2.0 million ha and make more water available to cities such as Qingdao so as not to reduce industrial output. The internal economic rate of return calculated on the basis of the above benefits is about 18 percent. Project investmentswould increase labor productivityand incomes of about 4.5 millionfarm familieswith incomesrising by 33 percent in Henan, and by 12 percent in Shandong. Risks: The major risks are: (a) constructionrisks; (b) cost overruns; and (c) delays in the resettlement, thereby delaying the project implementation. Constructionrisks are within reasonablelimits and would be manageablewith continuoussupervision by foreign and Chineseconsultants and internationalpanels who have been retained for the constructionphase. Cost overruns have been minimizedby incorporatingactual prices for the three major civil works lots that form over 65 percent of the cost estimates. To minimizepotential risks associated with the execution of this project and the resettlementproject, assuranceswere obtained from the Government under the XiaolangdiResetdement Project that it would ensure an adequate and timely flow of funds, and establish and maintain - i - effective project implementation management and detailed independentmonitoring. EstimatedCost: Loa Foreign Total -($ ~~million) -------- Site prepaation/local civil works 280.2 - 280.2 Dam & appurtenances 385.7 572.8 958.5 Turbirnes& gates 63.1 99.9 163.0 Generators& electrical works 95.1 38.1 133.2 Inst. dev. training 0.4 0.9 1.3 Engineeing & admin. 63.6 3.9 70.5 Implementationconsultants 2.9 16.6 19.5 Environmentalmanagement 9.1 9.7 18.8 MWR/YRCCinstitutional support 0.5 2.2 2.7 BawsCost 2Q36 744.1 1.647.7 Physicalcontingencies 90.1 77.5 167.5 Price contingencies 102.1 109.4 211.6 TarQi Cost la120252 6.8 Interest during constructionlb - 267.9 267.9 Total FinancingReauired 1 1.198.9 294.7 Fnacing Plan: GOC 1,095.8 738.9 1,834.7 IBRD Loan - 460.0 460.0 Total FinancingRequired 1,5j 2.294.7 EstimatedDisbursements: IBRD/IDAFY Lc 1994 i199 1996 1997 1998 ~~~---($million)------- Annual 40 150 150 115 5 Cumulative 40 190 340 455 460 Poverty Category: Not applicable EconomicRate of Return: 18 percent l Includestaxes and duties of $98.9 million. / Interest during constructionis basedon the Banks variable interestrate. /c Includes$24.0 million retroactivefinancing for expendiures after June 15, 1993. - v - CONTENTS 1 Background . ................................. 1 A. Intrxduction . ................................ 1 B. Project Origin and Objectives ....................... 1 C. Bank Group Lending for Developmentof the Yellow