Document of THE WORLD BANK FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 60014-CN PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN Public Disclosure Authorized IN THE AMOUNT US$100 MILLION TO THE PEOPLE‟S REPUBLIC OF CHINA FOR AN URUMQI DISTRICT HEATING PROJECT April 21, 2011 Public Disclosure Authorized China and Mongolia Sustainable Development Unit Sustainable Development Department East Asia and Pacific Region Public Disclosure Authorized This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective July 1, 2010) Currency Unit = RMB (Chinese Yuan Renminbi) RMB6.70 = US$1.00 US$0.149 = RMB1.00 FISCAL YEAR January 1 – December 31 ABBREVIATIONS AND ACRONYMS CDM Clean Development Mechanism NA Not Applicable CHP Combined Heat and Power Plant ORAF Operational Risk Assessment Framework DA Designated Account PAD Project Appraisal Document DH District Heating PDO Project Development Objective EA Environmental Assessment PIU Project Implementation Unit EHS WB/IFC Environmental Health and PLG Project Leading Group Safety EHS Environmental Health and Safety PM Procurement Manual EIA Environmental Impact Assessment PMO Project Management Office EIRR Economic Internal Rate of Return RMB Renminbi (Chinese Yuan) EMP Environmental Management Plan RPF Resettlement Policy Framework ESP Electrostatic Precipitators SBD Standard Bidding Documents FM Financial Management SCADA Supervisory Control and Data Acquisition FMM Financial Management Manual SHN Shayibake Heating Network FRR Financial Rates of Return SLA Subsidiary Loan Agreement FYP Five-Year Plan SOE State-Owned Enterprise GEF Global Environment Facility SW Staff-Week HOB Heat Only Boilers TA Technical Assistance HRBEE GEF-financed China Heat Reform TOR Terms of Reference and Building Energy Efficiency Project IBRD International Bank for TSP Total Suspended Particulates Reconstruction and Development ICB International Competitive Bidding TTL Task Team Leader IDA International Development Agency UDHC Urumqi District Heating Company IFC International Finance Corporation UHN Shuimogou Heating Network (WB Group) IFRs Interim Financial Reports UITCPO Urumqi International Technical Cooperation Project Office L Low UMG Urumqi Municipal Government LIBOR London Interbank Offered Rate UUCC Urumqi Urban Construction Commission M&E Monitoring and Evaluation WACC Weighted Average Cost of Capital MBD Model Bidding Documents WB World Bank MI Medium-Impact WBPG World Bank Project Group MFB Municipal Finance Bureau XRAO Xinjiang Uyghur Autonomous Region Audit Office MOF Ministry of Finance XRFB Xinjiang Uyghur Autonomous (RFB) Region Finance Bureau Regional Vice President: James W. Adams, EAPVP Country Director: Klaus Rohland, EACCF Sector Director: John Roome, EASSD Sector Managers: Ede Jorge Ijjasz-Vasquez, EASCS Vijay Jagannathan, EASIN Task Team Leader: Gailius J. Draugelis, EASCS CHINA Urumqi District Heating Project CONTENTS I. STRATEGIC CONTEXT ..................................................................................................1 A. Country Context .........................................................................................................1 B. Sectoral and Institutional Context ................................................................................2 C. Higher Level Objectives to which the Project Contributes ............................................4 II. PROJECT DEVELOPMENT OBJECTIVES .....................................................................4 A. PDO ...........................................................................................................................4 B. Project Beneficiaries ...................................................................................................5 C. PDO Level Results Indicators .....................................................................................5 III. PROJECT DESCRIPTION ................................................................................................5 A. Project components .....................................................................................................5 B. Project Financing ........................................................................................................7 1. Lending Instrument ..................................................................................................7 2. Project Cost and Financing .....................................................................................7 C. Lessons Learned and Reflected in the Project Design...................................................7 IV. IMPLEMENTATION........................................................................................................8 A. Institutional and Implementation Arrangements ...........................................................8 B. Results Monitoring and Evaluation ..............................................................................8 C. Sustainability ..............................................................................................................9 V. KEY RISKS AND MITIGATION MEASURES ................................................................9 VI. APPRAISAL SUMMARY .............................................................................................. 10 A. Economic and Financial Analysis .............................................................................. 10 B. Technical .................................................................................................................. 12 C. Financial Management .............................................................................................. 13 D. Procurement ............................................................................................................. 13 E. Social (including safeguards) .................................................................................... 13 F. Environment (including safeguards) .......................................................................... 14 G. Other Safeguards Policies triggered (if required)........................................................ 15 Annex 1: Results Framework and Monitoring .......................................................................... 16 Annex 2: Detailed Project Description .................................................................................... 19 Annex 3: Implementation Arrangements ................................................................................. 27 Annex 4 Operational Risk Assessment Framework (ORAF) ..................................................... 39 Annex 5: Implementation Support Plan ................................................................................... 42 Annex 6: Team Composition ................................................................................................... 45 Annex 7: Economic and Financial Analysis ............................................................................. 46 Annex 8: Map ......................................................................................................................... 57 CHINA URUMQI DISTRICT HEATING PROJECT PROJECT APPRAISAL DOCUMENT EAST ASIA AND PACIFIC EASCS Date: April 21, 2011 Sector(s): District heating and energy Country Director: Klaus Rohland efficiency services (100%) Sector Director: John Roome Theme(s): Pollution management and Sector Managers: Ede Jorge Ijjasz-Vasquez; environmental health (34%); Other urban Vijay Jagannathan development (33%); Climate change (33%) Team Leader: Gailius J. Draugelis EA Category: A Project ID: P120664 Lending Instrument: Specific Investment Loan Project Financing Data: Proposed terms: Variable spread loan has a final maturity of thirty years including a grace period of five years. [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: Source Total Amount (US$ M) Total Project Cost: 343.20 Cofinancing: 0 Borrower: 243.20 Total Bank Financing: 100.00 IBRD 100.00 IDA New Recommitted Borrower: Ministry of Finance (MOF) / PR China and Urumqi Municipality Responsible Agency: Urumqi International Technical Cooperation Project Office Urumqi Construction Commission No. 29, Xinxing Road, Urumqi, PR China Contact Person: Mr. Qiao Yu, Director Telephone / Fax No.: +86-991-4617-327 Email: [email protected] Estimated Disbursements (Bank FY/US$ m) FY 2012 2013 2014 2015 2016 Annual 30 30 20 15 5 Cumulative 30 60 80 95 100 Project Implementation Period: February 1, 2011 – June 30, 2015 Expected effectiveness date: October 19, 2011 Expected closing date: December 31, 2015 ○ Yes ● No Does the project depart from the CAS in content or other significant respects? If yes, please explain: Does the project require any exceptions from Bank policies? ● Yes ○ No Have these been approved/endorsed (as appropriate by Bank ● Yes ○ No (Not applicable) management? Is approval for any policy exception sought from the Board? ○ Yes ● No If yes, please explain: An increase in retroactive financing from 20% to 30% of the Loan amount has been approved by management. ● Yes ○ No Does the project meet the Regional criteria for readiness for implementation? If no, please explain: Project Development Objective: The proposed project development objective (PDO) is to connect consumers in selected districts of Urumqi to district heating services with improved energy efficiency and environmental performance.