China - Second Ertan Hydroelectric Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: 24342 IMPLEMENTATION COMPLETION REPORT (CPL-39330; SCL-3933A; SCL-3933B; TF-26652) ONA LOAN AND GUARANTEES IN THE AMOUNT OF US$550 MILLION TO THE PEOPLE'S REPUBLIC OF CHINA FOR THE ERTAN II HYDROELECTRIC PROJECT June 21, 2002 Energy and Mining Development Sector Unit East Asia and Pacific Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective January 2001) Currency Unit = Yuan (Y) Y1 = US$ 0.12048 US$ 1 = Y 8.28 Exchange Rates During Project Years Year Average 1995 --- Y 8.30 1996 --- Y 8.30 1997 --- Y 8.30 1998 --- Y 8.28 1999 --- Y 8.28 2000 --- Y 8.28 2001 --- Y 8.28 WEIGHTS AND MEASURES Metric system FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy MW Megawatt CHIDI Chengdu Hydroelectric Investigation and NGO Nongovernmental Organization Design Institute O&M Operation and Maintenance DRB Dispute Review Board OP Operational Policy EEC Ertan Engineering Corporation PHRD Policy and Human Resource Development EHDC Ertan Hydroelectric Development Company PPA Power Purchase Agreement EMP Environmental Management Plan QAE Quality at Entry ERP Environmental and Resettlement Panel QAG Quality Assurance Group ERR Economic Rate of Return RAP Resettlement Action Plan FRR Financial Rate of Return REDC Resettlement Engineering Development Center GDP Gross Domestic Product ROR Rate of Return GOC Government of China SAR Staff Appraisal Report GWh Gigawatt-hour SBC Special Board of Consultants ha Hectare SDB State Development Bank ICB International Competitive Bidding SDIC State Development Investment Company ICR Implementation Completion Report SDPC State Development and Planning Commission IDC Interest During Construction SEPA State Environment Protection Agency JV Joint Venture SEPC Sichuan Electric Power Company km Kilometer SIC Sichuan Investment Company kV Kilovolt SOE State-Owned Enterprise kW Kilowatt SPRO Sichuan Provincial Resettlement Office kWh Kilowatt-hour TA Technical Assistance m Meter TCC Technical Cooperation Credit m2 Square Meter TWh Terawatt-hour MIS Management Information System VAT Value-Added Tax Vice President: Jemal-ud-din Kassum Country Director: Yukon Huang Acting Sector Director Mohammad Farhandi Task Team Leader: Noureddine Berrah  FOR OFFICIAL USE ONLY CHINA ERTAN II HYDROELECTRIC PROJECT CONTENTS Page No. I. Project Data I 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 1 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome I 1 6. Sustainability 14 7. Bank and Borrower Performance 15 8. Lessons Learned 17 9. Partner Comments 19 10. Additional Informnation 19 Annex 1. Key Perfornance Indicators/Log Frame Matrix 26 Annex 2. Project Costs and Financing 29 Annex 3. Economic Costs and Benefits 32 Annex 4. Bank Inputs 40 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 42 Annex 6. Ratings of Bank and Borrower Performance 43 Annex 7. List of Supporting Documents 44 Annex 8. Beneficiary Survey Results 59 Annex 9. Stakeholder Workshop Results 60 Map IBRD No. 22093R2 IBRD No. 21308R1 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization.   Project ID: P003507 Project Name: Ertan II Hydroelectric Project Team Leader: Noureddine Berrah TL Unit: EASEG ICR Type: Intensive Learning Model (ILM) of ICR Report Date: June 21, 2002 1. Project Data Name: Ertan II Hydroelectric Project IJCITF Number: CPL-39330; SCL-3933A; SCL-3933B; TF-26652 Country/Department: CHINA Region: East Asia and Pacific Region Sector/subsector: PH - Hydro KEY DATES Original Revised/Actual PCD: 12/21/1993 Effective: 01/17/1996 01/17/1996 Appraisal: 02/17/1995 MTR: Approval: 08/22/1995 Closing: 12/31/2001 12/31/2001 Borrower/lImplementing Agency: GOC/EHDC Other Partners: STAFF Current At Appraisal Vice President: Jemal-ud-din Kassum Russell Cheetham Country Manager: Yukon Huang Nicholas Hope Sector Manager: Mohammad Farhandi Richard Newfarmer Team Leader at ICR: Noureddine Berrah Vukota Mastilovic ICR Primary Author: Yves Albouy; Jie Tang 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project objectives were to assist in five areas: (a) alleviation of acute power shortages in Sichuan in a least-cost manner through the completion of the Ertan hydroelectric scheme; (b) further institutional  development of the Ertan Hydroelectric Development Company (EHDC) as an autonomous, financially sound and commercially oriented entity; (c) promotion of competition through the development of market-oriented commercial arrangements for the sale of power generated under the project; (d) diversification of financing strategies for power development; and (e) transfer of modem technology for hydroelectric power plants in the Borrower's territory. Relevance to country priorities and the Country Assistance Strategy (CAS). The relevance of Ertan II is high. Power shortages persisted through project completion. It was and still is a priority to develop cheap and environmentally benign energy sources, such as Ertan, to substitute for generation by coal. The need followed for transfers of technical and managerial know-how and for institutional development in the sector. The CASs had adopted these priorities, noting in particular the opportunity to build on the momentum the Bank and the Government of China (GOC) had created in the dialogue on reform and decentralization of the power sector and pricing [1]. Complexity and realism. The degree of complexity and realism of the objectives is rated satisfactory. The technological requirements of the dam and powerhouse were very complex. The resettlement of populations also involved the interplay of several institutions. But on the whole, the bulk of the intervention was focused on and around the project site and on a limited number of project entities. The institutional goals, far from adding extraneous complexity, were germane to and contributed to efficiency in serving the other objectives. Objectives were generally within the Borrower's reach. In the 1980s with the Bank-supported Shuikou dam, China had demonstrated its capacity to undertake major hydro projects, absorb offshore technology and make needed institutional adjustments. China had also shown strong interest in gradually restructuring it sector and increasing its market orientation with the assistance of the Bank by promoting non-utility power generation (Yangzhou Project, 1994, and Zhejiang Power Development, 1995), easing access to financial markets with Bank guarantees (Yangzhou and Ertan II) and developing, on a trial basis, competitive wholesale power markets (Tongbai, 1999). Objectives (c) and (d) were the first steps in that direction. The former stopped short of setting up such a market, an outlandish target at the time not only in China but also in most developed countries, but, in its broad formulation, it was over arnbitious: selling wholesale electricity at market-oriented prices is proving more difficult in Sichuan than in fast-growing coastal provinces. 3.2 Revised Objective: The objectives of the project were not revised. 3.3 Original Components: Adequacy to objectives. Design efficacy is rated satisfactory. Components and covenants supported the objectives. An agreement signed with the Sichuan Electric Power Company (SEPC) under another Bank loan addressed the policy risks of excess generating capacity and distorted dispatch and pricing practices. Components design. Detailed design is rated satisfactory. It usually followed good practice and incorporated many lessons learned from similar projects [2]. Some changes were made on the basis of experience from Ertan I: (a) affected and host populations participated in the design of resettlement plans; (b) a new Environmental Assessment was prepared following stricter national guidelines, and (c) a financial covenant was changed to guide EHDC's rate of return (ROR) on revalued fixed assets instead of its contribution to investments. Still, the scope of resettlement was underestimated and the financial thresholds - 2 -  were too ambitious, given the high front end cost, the move towards competition and soft market conditions that have created a lot of problems for IPPs in Asia [3]. 3.4 Revised Components: The components of the project were not revised. 3.5 Quality at Entry: No ratings exist for the quality of Ertan projects at their entry into the Bank portfolio. Applying the Quality Assurance Group (QAG) criteria, this Implementation Completion Report (ICR) rates the quality at entry (QAE) of Ertan II as satisfactory. Objectives and design are evaluated above. The other dimensions are rated below [4]. The design meets all applicable safeguard policies: Operational Policy (OP) 4.01 Environment Assessment, OP 4.30 Involuntary Resettlement and OP 4.37 Safety of Dams. Throughout, all risks were adequately identified, rated and mitigated except some policy risks mentioned above. Studies were adequate to minimize construction risks and could not possibly foresee the geological problems that caused tunnel collapses. The standard allowances that the Bank usually makes for physical contingencies may have been too small given the size and complexity of the project (mainly due to the lack of flexibility in the project approval process in China in the early 1990s). Implementation preparedness is rated highly satisfactory for Ertan II: for the most part it continued activities ongoing under Ertan I in a seamless way. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The project outcome is rated satisfactory. All major relevant objectives have been or will be met, albeit two were not fully met at loan closing. Actions are being taken regarding EHDC's finances and the livelihoods of all resettlers to reach satisfactory levels in the next few years and the prospects in these areas look even brighter in the longer run, enhanced as it is by economic recovery in Sichuan and recent reforms of the power sector nationwide [5] as noted below under Objectives (b) and (c). Objective (a): alleviation of acute power shortages in Sichuan in a least-cost manner. Outcomes: The objective was fully met. In 2000, the project added a capacity of 3,300 MW with an annual energy output of 17 TWh to the Sichuan and Chongqing grids. It eliminated power shortages in Sichuan for the first time in the past 27 years, and also enhanced service quality and reliability [6]. Today, Ertan is still the least-cost option for discount rates of 14 percent or less. The power generated is clean, equivalent to the burning of 6.3 million tons of coal annually, which would produce 15 million tons of carbon dioxide, 230,000 tons of sulfur dioxide, 50,000 tons of ash, and 45 million tons of waste water. Objective (b): further institutional development of EHDC as an autonomous, financially sound and commercially oriented entity. Outcomes: The objective was partially met. EHDC is now a joint-stock company with a Board of Directors and a Board of Supervisors. It is organized as a fully autonomous and commercially oriented entity responsible for its business operations; its administrative relationship with SEPC was converted to contracts for power sales. Sales volume and price have fallen short of expectations. The approved tariff (34.1 fen/kWh) was not implemented. The volume reached in 2002 will allow EHDC to service its debt. Negotiations are underway on measures to ensure EHDC's financial soundness and its ability to attract new project finance as soon as possible and in any case before 2010. EHDC is already doing better than -3-  most IPPs started at the same time and its operating environment is improving rapidly: electricity demand growth is accelerating and reforms will improve EHDC's market power as an independent producer of clean energy. Objective (c): promotion of competition through the development of market-oriented commercial arrangements for the sale of power generated under the project. Outeames: The objective was partially met. Ertan sharpened supply competition, causing the closure of inefficient and polluting thermal plants. A very narrow spot market with price auction bidding was developed in Sichuan, but other sales by EHDC seem to be thwarted by monopsony power abuses by SEPC and political interference. That situation helped trigger a reform nationwide to move from the provincial single buyer model to regional competitive wholesale markets. Under the new policy, utilities are required to divest their generating plants and become independent dispatch and grid operators before April 1, 2003, thus reducing the conflict of interest of single buyers and providing incentives for regional and inter-regional power trade. A regulatory committee is set up to discipline anti-competitive behavior and enforce environmental standards. The level of 34.1 fen/kWh approved by the Government of China (GOC) is close to the market's avoided cost, but the pricing regime and tariff structure are far from market-accepted practice and two principles agreed at appraisals [7]. Objective (d): diversification of financing strategies for power development. Outcomes: The objective was fully met. Funding included substantial offshore commercial lending, a Bank partial credit guarantee to foreign creditors and financing by Chinese commercial banks and investment companies. EHDC started with three shareholders: the Sichuan Investment Corporation (SIC), the State Development Investment Company (SDIC) and SEPC, its main output offtaker; they agreed on equity investments but have not yet fully met their commitment. At a slight cost to the goal of diversification, GOC is helping to fill the gap: it agreed to convert into equity the 17 percent value-added tax (VAT) proceeds of 1998-2002, a buildup that, unfortunately, like revenues, has lagged expectations. Objective (e): transfer of modem technology for hydroelectric power plants in the Boi;ower's territory. Outcomes: The objective was fully met. Modem technology for dam and power station construction was successfully transferred. Chinese institutes and manufacturers played the major role, respectively, in the design of one of the most sophisticated arch dams in the world, and the delivery of top-of-the-range equipment including the 550 MW turbines and generators and the computer control system application software. Chinese contractors learned many techniques for civil works, and EHDC became adept in large project management. Following on other Bank-financed projects, Ertan transferred many modem technologies for building and managing large-size hydropower schemes that are now being put to use in the Three Gorges Project (18,200 MW), the world's largest hydropower scheme. Other outcomes: (a) Flood Control: The dam created a reservoir with 3.4 billion cubic meters of live storage which in emergency situations was used to control floods of the Yalong and Yangtze Rivers. In 1998, during major floods of the Yangtze, it retained six flood peaks and allowed the safe discharge of water, thereby protecting 15 million people and 15 million hectares (ha) of farmland in the plain along the middle reaches of the Yangtze, together with contributions of other water control projects in the river basin. - 4 -  (b) Navigation Conditions: With the reservoir impounded to the Normal Pool Level of 1,200 meters (m), the 145 kilometer (Iam) stretch of the main stem of the Yalong River upstream of the dam and the 45 km stretch of the Ganyu River, a tributary of the Yalong, became major passages for navigation: in 2001, 77 passenger boats of various sizes were plying those stretches. (c) Aquaculture and Fishing Development: The water area created by the reservoir provided resources for aquaculture and fishing industry development and initial development was apparent. Caged fish fanming occupied 8,000 square meters (m ), with an annual production of about 500 tons in 2001. (d) Tourism Development: The reservoir created unique resources for tourism. GOC approved the establishment of the reservoir area as the Panzhihua National Forestry Park. Tourists numbered more than 100,000 in 2001. (e) Local growth. The project contributed remarkably to local economic growth. According to the Statistical Bureau of Panzhihua Municipal Government, the construction of Ertan in 1991-99 doubled the yearly growth rate of local gross domestic product (GDP) to 7 percent, raising the incomes of about 80,000 people. Over 1991-2001, it generated tax revenues of Y880 million; more than Y300 million was invested to improve infrastructure, including roads, bridges, expansion of a cement factory and the old railway station, and creation of a new county seat. It is also claimed that minorities benefited indirectly from improved access and job opportunities. 4.2 Outputs by components: The outputs of the five components have been essentially produced as defined in the Staff Appraisal Report (SAR): (1) Dam and Powerhouse (1.1) Preparatory Works. Started in September 1987 and completed by the end of 1990, all works were ready for commencement of the dam and powerhouse. They included nine access roads of 74.1 km in total, three bridges, three power transmission lines of a total length of 124 lan, microwave communication links of 470 km, housing of 60,000 m in total, earth and rock excavation of 1.02 million cubic meters, and land acquisition for project construction. (1.2) Construction of a parabolic double-curvature arch dam, an underground power complex, a log conveyance system, and appurtenant works. All key target dates were met for the safe operation of: (a) the dam and other hydraulic structures since May 1998, and (b) the powerhouse since December 1998, 6 months ahead of schedule. All concrete, steel and earthworks meet the highest standards. Concrete placement surpassed in quality all past civil works in China. For the log conveyance system and appurtenant works, construction was completed but equipment erection suspended in 1998 after devastating flash floods, after which logging was banned by GOC as part of a large-scale plan to arrest soil erosion. Two-thirds of the budget was spent and all equipment stored close to the site. (1.3) Provision and installation of six 550 MW generating units and associated equipment, including a 500 kilovolt (kV) step-up substation. The first unit entered commercial operation in August 1998 and the last one in December 1999, 2 and 6 months ahead of schedule respectively. All electromechanical equipment has been operating successfully as designed since comnmnissioning. (2) Resettlement Action Plan (RAP) -5-  The number of affected people increased from 35,000 at the appraisal of Ertan II to 45,812 in the RAP, of which 28,482 were in rural areas. Based on the changes in scope, in 1996 GOC approved a budget of Y2.03 billion [8]. Planning and execution were carried out by the Sichuan Provincial Resettlement Office (SPRO). In 1994, EHDC contracted the Resettlement Engineering Development Center (REDC) of Sichuan Province to carry out independent monitoring and evaluation of resettlement. Output indicators are available for the RAP and many indicators of impact on the life of affected people were also collected. (a) Scope: By the completion of the project construction in 2000, 100 percent of the people were resettled in accordance with the plan, of which 62 percent now live in rural areas. Yanbian County, where the dam is located, hosts 66 percent of the affected people. A second-round resettlement is planned for about 3,000 people in areas with too little farmland and for nearly 600 people affected by project-induced slipping erosion exacerbated by the major flood of 1998. (b) Livelihood: The development-oriented plan was to provide for not just maintaining but enhancing the income of the affected people. Negative impacts in the host areas, e.g. crowding, were also to be avoided by reclamation of new fannland, construction of irrigation systems in rural areas and voluntary migration to urban areas. (b.1) Income recovery: According to a 2000 survey, most of the affected population in urban areas recovered and surpassed their pre-resettlement incomes, but part of the affected people in rural areas did not [9]. The lower the level of income, the slower the pace of recovery. Both, it seems, depend on increasing available farmland and irrigation development. It is expected that most rural resettlers will have recovered their income by 2005. Based on other experiences in China, recovery could accelerate by an increasing shift to poultry/pig raising and other sideline or non-farming activities. (b.2) Farmland: By the end of 2000, newly developed farmland was on average 0.72 mu per capita, about 72 percent of what was planned. To ensure at least 0.5 mu of farmland for each resettler, the county governments of Yanbian and Miyi, the host areas with the most severe crowding problem, plan a second-round resettlement for 3,000 people out to Hongge and Pinshan, two areas with more irrigated land. (c) Standard of Living: Investment was made to replace and improve infrastructure and housing in the receiving areas to promote the standard of living of people affected. (c. 1) Infrastructure: Before the project, Yanbian county had an average fiscal revenue of about Y30 million a year and all households except for those in the county seat and immediate vicinity had no access to electricity and telephone, and difficult access to all-weather roads, schools and clinics. With Ertan, the county had a budget of Y1.2 billion for resettlement; by the end of 2000, it had invested Y685.8 million in infrastructure, thus dramatically improving the access to, and the quality of, the above services [10]. (c.2) Housing: In the reservoir inundation area, 1.61 million m of housing were replaced by new housing of about 1.19 million m. The per capita area dropped 17 percent from 44 to 36 m but the quality improved significantly: in the survey sample, old housing was 91 percent of earth/wood construction, 8 percent of brick/wood and 1 percent in brick/concrete; in new housing the percentages are 42.6, 22.9 and 34.5 respectively. -6 -  (d) Support after Resettlement: Support to affected people is being provided for 10 years by SPRO with funding from EHDC, a 10 year Reservoir Area Support Fund and a Maintenance Fund to facilitate the recovery of the resettlers' livelihoods [11]. (3) Environmental Management Program (EMP) The EMP had three objectives: (a) monitoring the environment of the Yalong River and detecting project impacts; (b) mitigating adverse impacts; and (c) expanding the knowledge base to guide the appraisal of future projects. Major impact areas as identified in the Environmental Impact Assessment are water quality, aquatic biology, human health, cultural relics and facilities located downstream from the dam. (a) Mitigation: All 10 groups of mitigation activities were implemented with few exceptions as described below. (a. 1) Conservation Management Zone. A "Plan and Design for the Management of a Buffer Zone around the Ertan Reservoir" was developed after an inventory of the existing vegetation was made in 1997. The plan was not fully implemented-the State Environment Protection Agency (SEPA) deemed it too extensive--but EHDC completed a pilot that met requirements and after 1998 when GOC promulgated a policy for forestry protection, all local governments joined in [12]. A few areas were designated as Plant Conservancy Areas. The scope of the plan is to be expanded. (a.2) Fish Resources. According to the comments made by the Environmental and Resettlement Panel (ERP) in 1999, the studies on reservoir fish resources related to the development of commercial fisheries on the reservoir should not be implemented until the reservoir is operated normally to provide a stable environment for fish. A budget for the studies has been set aside. Stocking of fish fry and caged aquaculture were developed in the reservoir as part of the RAP. (a.3) Reconstruction of Yuzha Ferry. It was not implemented because the project has no impact on the operation of the ferry as of now. (a.4) Protection of Cultural Property. A survey on the historic relics was conducted by the Sichuan Cultural Relics Archaeology Institute, supported by local government agencies, in March 1997. Excavations of the cultural properties on the site revealed were completed in 1998 before reservoir impoundment. A building was constructed and all the properties unearthed were stored in the building. A study of the relics is under way. (a.5)Vermin ControL Measures against rats, flies and epidemical diseases were taken on a regular basis during the construction period to reduce impacts on public health. No case of infestation has been reported. (a.6) Schistosomiasis Prevention. In 1996-97, an area of 4.776 million m was surveyed for snail population. An eradication program was implemented with success [ 13]. Monitoring is continuing. (a.7) Downstream Alarm System. Sirens were installed downstream to warn when water is released. Due to vandalism, the system was later streamlined to one siren at the damn site, an alarm vehicle, alarm telephones and alarm signals. EHDC also releases an operation schedule each day to the local daily newspaper. Up to now, the system has worked effectively and there have been no injuries or damage to property. -7 -  (a. 8) Construction Worker Health Inspection. A health office, a first-aid station and a hospital were established on the construction site for medical examination and treatment. No significant epidemical and contagious diseases occurred on the site during construction. Four cases of syphilis among expatriate staff were diagnosed; all of the patients were sent back to their home country as specified by the contract. (a.9) Post-Construction Landscaping. Before the rainy season of 2000, two phases of landscaping were carried out for erosion control and aesthetic improvement after construction. A total of 62.7 ha was reforested in the areas disturbed by construction and protection erected such as land leveling, random and systemic rock bolting in quarry areas to support unstable rocks. Considerable soil exposure still remains and will be covered by planted grasses. Local residents were interviewed and the overall re-vegetation was deemed satisfactory. (a. 10) Reservoir Clearing. All woody vegetation, waste disposals, houses as well as other buildings and structures in the impounded area were removed in 1998-99. There were a few trees left due to incomplete delineation of the maximum pool level. No adverse effect due to biomass decomposition has been recorded thus far. (b) Monitoring. The monitoring plan addresses seven major areas: (i) hydrology, sedimentation and climate; (ii) seismic activity; (iii) bank slope deformation; (iv) water quality and biological monitoring; (v) construction management; (vi) public health; and (vii) short-term monitoring programs. Monitoring was too often not followed by an analysis of the results to detect trends and to investigate anomalies. Nevertheless, it produced several important findings, some of which necessitated and were followed by mitigation measures. (b. 1) Sedimentation, Hydrology and Climate. First measurements were made in 1998 and a report on suspended load was prepared in 2000 [14]. All hydrological stations have been operating effectively, providing valuable data for investment planning, construction and now reservoir operation. In 1995, the reservoir has apparently had no significant impacts on climate, possibly because of its narrow shape. (b.2) Seismic Activity. Seismic activity in the reservoir area has been monitored for 10 years, including the periods of construction and after the reservoir impoundment. No abnormal seismic activity was recorded. The two-year monitoring of seismic characteristics after the reservoir impoundment shows no changes after impoundment. But this time is too short to arrive at firm conclusions and the monitoring is continuing. (b.3) Bank Slope Deformation. Three major, potentially unstable landslide bodies, as well as other minor unstable locations, were monitored before and after the reservoir impoundment. For the three sites, results show that the impoundment had some impact but none significant to their stability. Some landslides did occur around the reservoir after the impoundment. In general they were of a minor scale on steep slopes. Subsequently, no new landslide areas around the reservoir have been observed. (b.4) Water Quality and Biota. Water was sampled three times a year in high, average and low flow periods in 1993 and in 1997-2000 in the reservoir. Other data were collected at nine stations in the immediate upstream of the reservoir, the reservoir area and downstream. Monitoring will continue. Temperature was monitored almost on a weekly basis from October 1999 to November 2001 at six locations, one downstream and five in the reservoir area before it was terminated. In 1995-96, local - 8 -  experts surveyed the terrestrial fauna and flora in the reservoir area; in 1996-98, they studied aquatic biota [15]. The diversity of terrestrial wildlife is fairly low; many species are or will be affected both positively and negatively, but the two endangered species, a plant (Nouelia insignis Franch.) and an animal (Panthera pardus), will not be adversely affected. Aquatic weeds may proliferate, especially in the Ganyu River, and populations decline for bottom-dwelling organisms, but there are good conditions for other fish species and organisms. Water hyacinth was removed and fish species were introduced extensively. (b.5) Protection and Rehabilitation of the Construction Areas. Waste water treatment satisfied national standards. Air and noise pollution were controlled to the satisfaction of the Environment Bureau of the local government but the monitoring of both by contractors was not as frequent as required and reported only in parts to EHDC and the ERP [16]. Soil erosion in the three spoil areas was controlled through temporary measures during the construction including drainage, land leveling and slope protection, as well as permanent measures after construction including rock embankment and reforestation in 1999. (b.6) Public Health. The public health program was implemented effectively in cooperation with the Public Health Bureaus of local governments. No waterborne and water-related infectious diseases were discovered. There have been no observed changes in the health of populations living around the reservoir. (b.7) Short-Term Monitoring. The programs included first a survey on birds in the immediate areas of the reservoir conducted in 1996 by international and domestic experts jointly; findings were incorporated into the "Investigation Report on Biology Diversity in Ertan Reservoir" which covered the survey on terrestrial fauna and flora conducted from 1995 to 1996. A second survey was conducted in 2001 to evaluate any changes. The inventory of natural and human resources met the needs for reservoir clearing operations. (c) Environmental Monitoring during Construction. Chinese government agencies at central, provincial, municipal and county levels supervised human health and the implementation of measures against pollution by waste water, exhaust, materials and noises during the entire construction period. No pollution incident was identified during the construction period and a completion acceptance of the environment protection was made by SEPA. (4) Engineering and Construction Management. The construction started in 1991 and met all key deadlines in spite of major unforeseen circumstances [17] after changes in EHDC's management practices and efforts by all parties involved [18]. Part of the credit also goes to services provided under Ertan II: the Bank financed 544 person-months for international consultants and three expert panels to assist in construction management and supervision. A workshop was held on dispute resolution. The results were remarkable in scheduling, cost control, contract and site administration, construction inspection and quality assurance, and design engineering services [19]. (5) Technical Assistance (TA) and Studies (a) TA for Policy Support. In 1997, an offshore consultant completed a study to help develop EHDC's managerial capabilities and proposed a reform plan covering 10 major aspects, including an organization structure and financial management infornation system (MIS). The report provided the basis for the transformation of EHDC to a non-utility power developer and producer. -9-  (b) TA for Institutional Development This component was essential and its good impact felt daily in EHDC's operation. A total of 39 senior staff were sent abroad for study tours and training for project construction, power plant management, reservoir environmental protection and IPP development. For power plant operations, 237 staff received formal and on-the-job training in other hydropower plants in China and 15 person-months were spent abroad for technical training in relation to equipment procurement. A total of 121 staff were sent to universities in China for masters degrees in business administration (MBAs), financial management, corporate strategy and marketing from 1991 to 2002. Not all the planned high-level management, planning and financial training took place. It will be completed as part of a training program covering the next five years [20]. (c) Studies of power output pricing and optimal operation of the power plant and the reservoir. The studies exposed the Chinese parties to new ideas but had less tangible impact than expected. First, a pricing study was completed by a Chinese institute. Following another one by an international consultant, EHDC and Sichuan University developed the basis for future negotiations with SEPC. The "avoided cost" and two-part tariff principles or any reference to market prices were deferred in favor of finding a level to meet financial targets and even the latter was not fully enforced. Two studies were carried out in parallel on the long-, medium- and short-term optimal operation of the power plant and the reservoir by both a domestic team and a foreign consultant [21]. Aimed at minimizing operating cost for the entire Sichuan power system, its output is not applied in the current dispatch system, which is based on distorted contract prices. The short-term optimization resulted in an 8 percent reduction in water consumption in December 2000 to April 2001 relative to the same period a year earlier. To minimize that consumption further in the dry months, a hydrological forecasting system was commissioned in May 2001 and EHDC is measuring the characteristics of the reservoir storage and turbine's water consumption and efficiencies. (d) Investigations and tests on safety of structures; energy dissipation facilities, and powerhouse ventilation. These observations and tests were carried out in 1999 [22]. Data collected indicate that the dam, powerhouse and slopes are safe; the powerhouse is well ventilated; the dam foundation and the two dam buttresses are stable. The data provide a basis for the optimization of operation and valuable experience for the design of future projects. (6) Covenants GOC and EHDC essentially complied with all nonfinancial covenants but EHDC's finances, though improving, still fell short of covenants in 2001: Debt Service Coverage Ratio: 0.8 vs. 1.5, rate of return on revalued assets 3.9 percent vs. 15 percent and debt-equity ratio 98/2 vs. 70/30. Losses accumulated through 2001 reached US$257 mnillion and revenue shortfalls US$1,854 million. This is because the price and volume of power sales were below expectations [23] following a pause in demand growth and a temporary glut in generation capacity [24]. Lastly, EHDC is under-capitalized in spite of the conversion of VAT proceeds into US$150 million of equity by GOC: shareholders injected less than 50 percent of what they committed. 4.3 Net Present Value/Economic rate of return: Economic benefits are quantified here as the sum of Ertan's environmental benefit and of the value of its power sales. Conservatively, it is assumed that no regulating dam is built upstream so the output with an average hydrology stabilizes at 17.6 TWh and that 3 TWh has takers only at a very low price. For valuing the 14.6 TWh of contractual sales, a first method is the current price of 22 fen /kWh including the VAT. A second one is the willingness to pay by the offtakers--also including the VAT--for alternative generation at - 10 -  peak and base load; that avoided cost reaches 32.6 fen/kWh after netting out, the differential cost of transmission of Ertan's power to the load centers where this alternative generation originates. The re-estimated economic rate of return (ERR) is 11 percent with the first method and 15.7 percent with the second one. Environmental benefits add about two percentage points. If quantified, flood control benefits would add some more. The updated ERRs exceed the opportunity cost of capital--plausibly now closer to 10 percent than 12 percent in China given the increasing abundance of domestic and offshore financing. The changes from latest estimates, e.g. 18 percent in the 1997 ICR for Ertan I, are not so much due to project cost overruns nor to delayed absorption of energy by the grids and associated environmental benefits. The major reason is that power prices have decreased in real terms both because thermal capacity is some 30 percent cheaper than in the 1990s and supply now exceeds demand so much that the willingness to pay for part of the output is very weak. 4.4 Financial rate of return: The financial benefits are the sales with an average hydrology, after netting out the VAT, sales and income taxes. With a price of 22 fen/kWh adjusted for a 2 percent per year inflation, the financial rate of return (ERR) is 7.6 percent. If the price is ramped up to the contractual level of 34.1 fen/kWh in 2006 and then adjusted for inflation, it is 9.2 percent If no adjustment is made for inflation the FRR falls to 6.2 percent in the first case and 8.3 percent in the second. 4.5 Institutional development impact: The institutional development impact is rated substantial. EHDC has acquired a sound organization, efficiency in plant operations, transparency and accountability in financial management and a PPA that represents conceptual progress for hydropower in China. But that PPA is not state-of-the-art and modern pricing principles have yet to be fully applied. The World Bank credit guarantee likely extended and deepened the local understanding of this instrument and the changes in banking/ insurance institutions introduced with the Yangzhou thermal power project in 1994. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: Foreign exchange. In the early stage of project implementation during 1992 to 1996, EHDC had foreign exchange losses of US$63.34 million due to devaluation of US dollar against major European currencies. Asia financial crisis. After power demand growth in Sichuan exceeded 9 percent a year over 1990-97, outstripping all forecasts, it stalled in 1998-2001. The causes are partly the 1998 financial crisis that reduced export performnance and GDP growth, partly a clampdown on money-losing SOEs. The downturn made it difficult for the power industry in general, and for Ertan with its long inflexible construction time, to come up with the right capacity at the right time; it made local authorities more reticent to raise power prices and enforce the PPA. 5.2 Factors generally subject to government control: Changes in taxes and duties. Changes in policies on custom duties and VAT for import of goods and materials resulted in the actual expenses on custom duties and VAT less than the estimation at appraisal by Y8.645 million.  Policy and regulatory failures. Reforms encouraged diversified sources of investment in power generation but the policies and regulation were not quite right for a decentralized power market. For example, the Chongqing Municipality had incentives--including fiscal ones--to build and use its own plants even though costlier and more polluting than Ertan, SEPC also had incentives, after the creation of EHDC, to build its own power plants to generate revenues and minimize transmission investment that are key to the project because transmission services are not priced according to sound economic principles. More importantly, the GOC-approved price was not implemented by local authorities. 5.3 Factors generally subject to implementing agency control: Ertan was the first large-scale hydroelectric project in China for which major works and equipment involved large participation by foreign contractors, and the first built by an IPP. For all its unique traits, it shares common ones with other Bank-financed large-scale hydro schemes, Shuikou (Fujian) a power project built in 1986-96 and Xiaolangdi (Henan) built in 1990-98. The following analysis of performance factors is grounded in the Ertan experience, the ICRs for these projects (Implementation Completion Report--China-Second Shuikou Hydroelectric Project. Report No. 18970, February 1999; Implementation Completion Report--China-Xiaolangdi Multipurpose Project, Report No. 22493, June 2001) and the Operations Evaluation Department (OED) review of resettlement (Involuntary Resettlement-The Large Dam Experience, OED Precis No. 194, Winter 2000) that also included Yantan (Guizhou) built in 1985-94. Clear accountability. Tasks were parceled out sensibly and clearly assigned. EHDC entrusted construction supervision and management to Ertan Engineering Corporation (EEC), a subsidiary set up for the project. CHIDI was the project designer. Resettlement was the responsibility of SPRO, a government body responsible for resettlement in large-scale hydropower projects in Sichuan. Its monitoring was REDC's job. It may have helped that EHDC had only Ertan as a sole activity as opposed to SEPC who needs to manage many projects and operating assets. Solid local competence. CHIDI is one of the most experienced design institutes in China and has been responsible for the design of several large hydroelectric projects. The local partners of the construction joint ventures (JVs) came also with solid experience. For example, the Gezhouba Construction Bureau, a partner in the JV undertaking excavations, was one of the strongest firms in the hydropower construction business in China after having acted as sole contractor for the Gezhouba Project on the Yangtze River, the largest hydropower project in China until Ertan. Procurement through ICB. Most procurement packaging, including 38 major contracts of which 9 were through ICB, was largely determined during Ertan I. The excellent quality of the ICB process from prequalification decisions to documentation was key. Contractors with too little international experience to meet the technical and financial challenges of the task were barred from the bidding no matter their local reputation and clout. The innovative packaging for generating units lowered the cost of procurement 25 percent below the estimate and facilitated the successful introduction of advanced design and manufacturing technologies into China. While the language barrier and culture differences created communication difficulties and problems, such as the labor dispute between the Chinese and the foreign partner in a JV civil works, ICB practice was largely a factor of good performance and, in retrospect, it is doubtful that matters could have been handled differently. World-class advice. International consulting firms had their services for project management and supervision extended from the first to the second loan. They were also drawn into project design all along. Timely and valuable suggestions were made in the project design, construction, scheduling, quality control, - 12 -  technology and coordination. The Advisory Group comprised two to nine prominent international experts on a permanent basis and about 30 on an ad-hoc basis specializing in different technical and managerial areas. The advice was the key to achieving high effectiveness on schedule, cost and quality controls in the face of serious contingencies. Expert groups method. Many channels were set up to produce and disseminate prompt advice by world-class experts. EEC and CHIDI were assisted by an Advisory Group and three expert panels: the Special Board of Consultants (SBC), the Environmental and Resettlement Panel (ERP), and a Dispute Review Board (DRB) [25]. The SBC and ERP convened regularly to advise on important technical and management matters. A mechanical and electrical branch of SBC also reviewed bid documents for the main equipment The DRB successfully settled all submitted 14 civil works claims. Openness to change. The parties to the project had a constructive dialogue; the Chinese were very open to imported technologies and methods and to maling drastic changes in order to meet physical objectives and the implementation schedule. That schedule, established in the Ertan I SAR, remained unchanged; it was a challenge in the absence of adverse contingencies, even more so when major ones materialized; overcoming them tested the mettle and creativity of all. As with Shuikou, there was a need to rethink the construction method in various key areas and that need was fully met by schedulers, cost estimators and contractors. The need for adapting the RAP and significantly increasing the resettlement budget during the preparation of Ertan II were, as in Shuikou, well understood and adequately addressed at the provincial and central government levels. Good institutions for resettlement. China has institutions that facilitate resettlement: (a) enlightened policies by central and provincial governments that establish the principles and incentives for resettlement as a development opportunity; (b) planning and execution based on sound guidelines, managed by dedicated local authorities and open to a fair and participatory process; (c) funding of post-resettlement activities by a levy from the project-generated income. Ertan inaugurated a process of periodic surveys that was precious in guiding action. Two remnants of its command economy also help: (i) authorities with experience in creating and allocating jobs, and (ii) the public possession of land. Resettlement strategy. The principles followed in China are good practice; they blend good standards for reconstruction, identifying opportunities for land-based employment and tied cash options to steer volunteers away from the land and avoid competition for a limited land pool that will send prices spiraling. Here, however, land availability was overestimated for many reasons that are not unique to Ertan, except for the ban on logging, which could not have been foreseen during project preparation. Usual responses to farmland scarcity are three: (a) flexibility in moving rural populations to distant locations, or/and (b) intensification of or shift to high value-added agriculture, or/and (c) conversions to nonfarming jobs. The Bank's guidelines favor the last two solutions. They worked well in Shuikou in large part because of the strong growth of other sectors in Fujian. Because of the comparatively modest economic growth in Guizhou, all three solutions had to be used for Yantan. For the same reason, moving a small part of the affected population to distant locations is also needed in Sichuan. Planning shortcomings. At appraisal, planning was too vague and inaccurate on key points: (a) which people should be taken care of, (b) how to relocate and restore incomes, and (c) at what cost In Shuikou, the unit costs were unrealistic because they were based on old "plan" prices; for Ertan both the count of affected people and the unit costs were far off the mark when, in fact, economic reforms and previous experience had made it easier to improve estimates. 5.4 Costs andfinancing: - 13 -  At the appraisal of Ertan II, the estimated cost (excluding interest during construction--IDC) was US$2,200.2 million equivalent, of which US$930 million (42.3 percent) were in foreign costs and US$1,270.2 in local costs. The actual costs at completion were US$2,601 million, of which US$984.2 million were in foreign costs and $1,616.8 million in local costs. In US Dollar terms, the overrun is 18 percent, of which 6 percent for the foreign part and 27 percent for the local part. In Yuan, it is an 11 percent overrun, with 21 percent for the local part and an underrun of 4 percent for the foreign part. Compared to the Ertan I appraisal estimate, overruns reached 38 percent in US Dollar terms and 81 percent in Yuan terms. Because of great changes in cost factors that occurred mostly under Ertan I, GOC approved in 1998 a revised budget of Y28.5 billion (including IDC) in 1998, 3.3 percent more than the actual costs of Y27.64 billion. Those factors are: (a) higher-than-expected inflation in China (24 percent in 1993, 19.5 percent in 1994 and 14.9 percent in 1995 vs. 5 percent constant projected for these years); (b) devaluation of the US Dollar against European currencies in 1992-96, resulting in exchange losses of US$63.34 million; and (c) devaluation of local currency from Y5.24/US$1 in 1991 to Y8.30/US$I in 1996 [26]. Major local cost overruns originated in the changes of resettlement scope and in the unreliable method used to estimate unit costs for land, material and labor that has been the bane of most hydro projects in China. The contingencies at appraisal were on the low side, particularly in light of the unsettled claims at that time [27]. Financing closely followed the appraisal plan for offshore lending i.e. for the Bank loan and the Bank guaranteed commercial loan. It was way off expectations for equity and for loans by the State Development Bank's (SDB). Paid-in capital accounted for about 8 percent of total funding vs. a target of 18.5 percent. The SDB's loans included $150 million in foreign exchange and exceeded by 144 percent the $594.1 million of the plan. Together with the World Bank, the SDB accounts for 61 percent of the financing. With 31 percent, the share of commercial financing, is notable and close to the expected level of 34.7 percent; a lot of it is by government-owned banks and classified as such in Annex 2. 6. Sustainability 6.1 Rationalefor sustainability rating: Sustainability is rated likely. Technical/institutional capacity is up to the task: (a) all facilities are operational; (b) the organization is being structured into an IPP following modem management practice, and has had a record of efficiency in the past seven years; and (c) EHDC's capacity will continue to develop through its Training Program. Negative environmental impacts were obviated or mitigated as they arose. For resettlement, sustainability is likely also. A commitment was made and a budget allocated by EHDC to relocate about 3,600 people affected by landslides and farmland shortages by 2005 [11]. The quality of construction is good and the modem amenities of resettlers are generally affordable. Income recovery in rural areas is a concern but experience with other Bank projects in China shows that productive employment promotion has paid off over time not only in favorable economic environments such as Shuikou but also for cases like Yantan in areas where the availability of farmland and off-farm activities was less than plentiful. With effective monitoring systems and funding from electricity sales already in place, additional measures for resetlement and the environment can be devised and implemented as necessary. Financial sustainability is likely. The loans made by SDB and SIC have been rescheduled so their maturities match the project life better. With sales reaching 14.6 TWh in 2002, a recent commitment by EHDC not to pay dividends until it is financially sound and a Debt Service Reserve Fund to smooth it out, the debt service coverage ratio is well above 1 but other indicators are not too robust until 2010. The quick - 14 -  achievement offinancial soundness is likely on the expectation that negotiations will shortly produce two enhancements: (a) conversion of VAT proceeds into equity is extended, and (b) the Sichuan Government agrees to a quick and substantial ramping up of the selling price from the current 22 fen/kWh. The GOC is committed to help as it did in the past by (i) converting into equity the VAT proceeds for 1998-2002; (ii) helping to reschedule local loans; (iii) taking sweeping reform measures for a better dispatch; and (iv) approving a price of 34.1 fen/kWh, enough to make EHDC financially attractive before 2010. 6.2 Transition arrangement to regular operations: Operational arrangements. Arrangements for safe and effective plant operation have been at work satisfactorily since the commissioning of the first unit in 1998. EHDC has an adequate organization in place including units for dam safety, hydrological and environmental monitoring (Box 1). It has adequate staffing except perhaps for a shortage of skills for electricity marketing and pricing and for cost control but there is a training program under way to address this shortcoming. Box 1: EHDC Organization Hydropower Station. The number of staff, now 186, will be kept below 200. The organization chart indicates a rational setup of offices and workshop units. Operation procedures now in their fourth revision have assured safe and reliable O&M. An MIS was imporled and customized to improve work content, procedures and management information. Financial Department. Responsible for optimizing the capital structure of EHDC, and for disbursing, monitoring the use of and servicing the debt. It is also to raise funds for future investment. Accounting principles follow the Intemational Accounting Standards (IAS) after adaptation to Chinese legal provisions on financial reporting. Business Management Department. Responsible for power market studies, marketing and selling power output. It negotiates power sales deals and establishes budgets for all departments. Project Management Department. Responsible for current and future project construction--several hydropower projects on the Yalong River. It is staffed with experienced personnel, with training and experience from Ertan and other projects. Unfinished business. Important business remains to boost the resettlers' livelihood [11], and the Bank agreed with EHDC and committed a budget to carry out post-resettlement supervision. The Bank also agreed with EHDC the following: completion of the current discussion to guarantee EHDC's financial soundness as detailed above [28], and restructuring of financial covenants. It is also strongly recommended to structure the purchase price into a fixed capacity charge and energy charges--the latter to reflect the avoided costs--as was agreed at loan approval. SDPC is reviewing the pricing policy nationwide. Performance indicators. The indicators to monitor are the sales tariff as practiced, revenues from power sales, covenanted fmancial indicators, incomes of affected people and environmental impact indicators defined in the plan. All monitoring systems to that effect are in place. 7. Bank and Borrower Performance Bank 7. 1 Lending: Quality at entry was satisfactory. Bank financing was arranged in a timely manner, including the second loan to allow a seamless continuation of construction, and Loan 3848-CHA to fund the transmission of the project output to consumption centers. At an early stage, the Bank had put project construction on a sound footing. This did not happen for resettlement where lessons of experience were not fully applied [29]. Under - 15 -  Ertan II, the Bank improved project design on many fronts, but it could have been more realistic on a few important details: physical contingencies, resettlement scope, financial covenants and progress on the market-orientation of the power sector in Sichuan. 7.2 Supervision: Performnance is rated highly satisfactory. The Bank proactively supervised Ertan II with an unflagging focus on development impacts and on its safeguard policies and fiduciary duties. One QAG evaluation of the supervision of safeguard policies in China projects and one of supervision in general rated the project as best practice. The staff had an adequate skill mix and continuity. Missions had a sufficient and timely presence in the field. While not substituting for the Borrower in making decisions and nurturing its strong ownership of the project, it helped the Borrower in many ways (a) facilitating or providing world-class advice to EHDC so as to catch up on a major construction delay and settle major claims of contractors; (b) actively supporting the reorganization and institutional buildup of EHDC; and (c) prodding high-level government officials on key issues until satisfactory results were achieved, as it continues to do now on financial issues--EHDC's capitalization, debt rescheduling, sales pricing--and dispatch and transmission line construction by SEPC. 7.3 Overall Bankperformance: The Bank's overall performance is satisfactory. Ertan II was about implementation rather than design and on that score it did well. As noted earlier in the second Shuikou ICR, the two-loan arrangement had two advantages: (a) reducing the repayment burden before plant commissioning and commitment charges; and (b) allowing updates of project objectives and design as appropriate. Those probably offset the cost of processing a second loan and the trouble in opening letters of credit for procurement lasting beyond the first loan closing. Borrower 7.4 Preparation: The performance of central and local govemments and EHDC was highly satisfactory. All of them were very responsive to comnments made by the SBC and the Bank missions. Most of the work was completed in a timely manner and ensured smooth continuation of Ertan I. EHDC was quick to help in the planning of the RAP and EMP. 7.5 Government implementation peiformance: The overall government performance is rated unsatisfactory. GOC's performance is rated satisfactory. GOC was very responsive throughout. On policies, GOC did its part in changing EHDC's legal status and taking or facilitating measures that are conducive to EHDC's financial soundness. The provincial government was very responsive to comments for implementing the RAP and EMP; adequate counterpart funds were made available and meetings convened to review the project at various stages and ensure the resolution of construction and resettlement issues. A large increase in resettlement budget was authorized after the revised RAP was submitted. SPRO and the municipal resettlement offices prepared development and relocation plans in a timely manner and did not affect the construction schedule, but they could have better assessed and managed the risk of insufficient land availability. However, Sichuan Provincial and Chongqing Municipal Governments were remiss in the regulation of generation - 16 -  expansion, energy dispatch and wholesale power pricing. They bear the principal responsibility in the waste of economic resources--building and running high-cost plants that substituted for Ertan--and in EHDC's failure to meet financial covenants that are key to its future. The provincial and municipal governments' performance is rated unsatisfactory. In its comments on this ICR, EHDC takes exception to this last rating and considers that contractors should also receive high ratings. 7.6 Implementing Agency: EHDC's performance is rated highly satisfactory. (i) It achieved completion of one of the largest and most sophisticated arch-dam projects in the world in time and reasonably within budget considering the back drop of economic transformation, many unexpected events and major delays in early stages. (ii) It established an organization, restructured it as necessary, and efficiently mobilized and managed various offshore and local resources in achieving its goals. (iii) The achievement in financing the project throughout the implementation period was remarkable given the Asia Financial Crisis and the cost overrun. (iv) It committed to meet both national and international standards for resettlement and environment and was timely in plugging funding gaps for resettlement and environmental protection pending approval of budgets and for the second-round resettlement. (v) After commissioning, it did not default on its debt payments despite its financial difficulties and was also very responsive--albeit with mixed success so far--to Bank's comments in seeking remedies to improve its finances (a not very common approach of State-Owned Enterprises in China). (vi) It achieved highly efficient plant operation. (vii) It made good use of TA, kept open to new technologies and advice. It shares merit in the successful integration of the Advisory Group and the successful record of the DRB. (viii) The progress and implementation reports were timely and well documented. 7.7 Overall Borrower performance: Overall borrower performance is rated satisfactory. Ownership of the project was high to meet the challenges of building one of the highest dams in the world six months ahead of schedule with excellent standards of quality as shown by EHDC's emphasis on it in the 300-page ICR it prepared. The performance will be highly satisfactory once uncertainties are removed about the resettlers' livelihood and EHDC's financial ability to continue as a developer of hydro resources. 8. Lessons Learned The generic lessons below have broad validity as they are grounded in the experiences from Ertan, Shuikou, Yantan, and Xiaolangdi and the OED review of resettlement. One put forward for Ertan is only a strong presumption at this point Generic lessons (a) World-class construction work calls for world-class contractors and advice. Procurement must follow rigorous ICB. JVs with insufficient technical and financial wherewithal should not be prequalified to bid. This principle served Ertan well. For Shuikou, the involvement of the offshore contractor was too low given the capacity of its local partner and that led to long delays in mobilizing equipment. International consultants usually made timely and valuable input, e.g. for design, construction methods, scheduling, cost and quality control. (b) Communication problems should be kept in mind in procurement package design and - 17 -  sourcing. In Ertan, the allocation of civil works between two main contractors left interfaces that led to contractual difficulties. In Ertan and Xiaolangdi, with people from many countries, problems surfaced between Chinese and foreign contractors and laborers not only in terms of language but also misunderstandings and conflicts based on prior training or culture. (c) Construction and contract management personnel should be trained at the outset. The method should include the secondment of trainees for substantial periods to ongoing projects where modem management techniques are in use. This training increases their competence and improves response time by allowing better delegation rather than involving senior management in matters of detail. China routinely does this with a lot of success. (d) Project management tools should be available early on. These tools include contractual documentation management systems, a project master schedule, procurement and delivery schedules for employer-supplied equipment, a design drawing control system and cost control system. These reduce claims resulting from errors and delays in the supply of information or equipment. Development of a modem accounting and financial management system should also commence before commissioning the power plant for commercial operation. (e) Expert panels can improve the quality and timeliness of decisions. Following a now proven model, three panels are recommended: the Special Board of Consultants (SBC), the Environmental and Resettlement Panel (ERP), and a Dispute Review Board (DRB). The SBC and ERP convene regularly to review and advise on important technical and management matters. The DRB can be very effective if properly set up: for Ertan, contractors and EHDC each selected a member and both parties selected the Chairman. (f) Nimbleness in the face of contingencies is multifaceted. Changes in construction method are likely along the way; after important delays they are often the only way to cope and minimize cost and time overruns. They often imply some redesign, a large rescheduling and recosting exercise and the mobilization of extra equipment There is also invariably a need to adapt and sometimes rethink the plan for resettlement and particularly income recovery. All of this requires nimble mechanisms for budget adjustment as well as incentives and systems for cost control. (g) Good institutions for resettlement are key. China has three institutional features that facilitate successful resettlement and can be replicated elsewhere: (i) enlightened policies by central and provincial governments that establish the principles and incentives for resettlement as a development opportunity; (ii) planning and execution based on sound guidelines, managed by dedicated local authorities and open to a fair and participatory process; and (iii) funding of post-resettlement activities by a levy from project-generated income. (h) Income restoration strategies must be tailored to the physical and economic environment. In very agrarian economies, farmland availability largely determines how many people can be resettled and where. Therefore, it is better that farmland availability be conservatively ascertained. In fast-developing areas like China's coastal provinces, the shift to high value-added agriculture and nonfarming jobs provides much more flexibility and resilience to the plan. (i) Resettlement planning needs to improve. At appraisal, planning is usually too vague and inaccurate on key points: (i) who should be taken care of, (ii) how to relocate and restore incomes, and (iii) at what cost Planning is generally the weakest for economic rehabilitation, and its cost and the - 18 -  compensation amounts to finance it are seldom aligned; long gestation activities like crop tree planting are never scheduled early enough. This does not imply micro planning, especially when lead times exceed five years, as many details laid out at appraisal prove outdated at execution. A picture of plausible income opportunities is enough to establish a basis for budgeting and interactive implementation. (j) Resettlement contingencies are grossly underestimated. Landslides, weather and other contingencies may increase the scope of works. Local prices and incomes driving resettlement costs are usually higher than national inflation. Resettlement inevitably pushes land prices up. A new methodology must be worked out based as much as possible on area and specific forecast of the cost drivers. An OED survey of 50 projects suggested that a satisfactory resettlement requires a budget of 3.5 to 5 times the local GDP per capita (The World Bank's Experience with Large Dams--A Preliminary Review of Impacts, Operations Evaluations Department, August 15, 1996, p.30). Ertan-Specific Presumptions (k) For technically demanding construction, it is the best if, at the outset, the owner is a well-established separate entity with commercial orientation, full decision-making authority and accountability for its performance. In Ertan, initial delays, resulting in sizable contractor claims, largely arose from EHDC's inability to make timely decisions. In 1995, its incorporation as a limited liability company allowed EHDC to make quick decision on its own instead of seeking instruction from government agencies. The case for a separate owner was less strong for Shuikou and most other dams financed by the Bank in China, but their construction was arguably not quite as demanding. 9. Partner Comments (a) Borrower/implementing agency: The Borrower's comments were incorporated into the final document GOC and EHDC were abundantly represented at the stakeholders' meeting. (b) Cofinanciers: All the cofinanciers attended the stakeholders' meeting. In addition, the SDB in a meeting held in Beijing on June 3, 2002 with the Bank, MOF and EHDC stressed that EHDC is one of its strongest and creditworthy clients. They strongly feel that the current difficulties are only temporary, that the recently initiated reform will open new opportunities for EHDC in the thriving markets of east China, that Sichuan's and Chongqing's economies are recovering quickly, and that power shortages are looming during the dry season in both systems, increasing Ertan's value to the systems. (c) Other partners (NGOs/private sector): No comments were sought from nongovernmental organizations (NGOs) or the private sector. EHDC's clients and a few NGOs attended the stakeholders' meeting. 10. Additional Information Notes to the main text [I] The 1994 CAS called for "easing long-standing constraints to growth by alleviating infrastructure bottlenecks, particularly in the energy, transport and communication sectors;" and "furthering the market orientation of China's SOEs and financial institutions that are still largely insulated from competitive -19-  pressures." The 1995 and 1997 CASs had the same thrust. [2] Good practice design came in large part from Ertan 1. Strict international competitive bidding (ICB) procurement was applied to all major packages. Design quality was assured by the reinforcement of a very experienced design institute (Chengdu Hydroelectric Investigation and Design Institute, CHIDI), foreign and domestic consultants and thorough reviews by independent panels composed of world-renowned Chinese and foreign experts. A pricing study was to guide power purchase agreement (PPA) negotiations, and a reservoir management study to optimiize operations. Pricing criteria referred to avoided costs and the need for a kilowatt (kW) charge for capacity as practiced in the best power markets, for instance in Latin America. [3] Changes from Ertan I to 11 were good answers to practical problems. A self-financing ratio, smoothed over three years or so, made sense with an almost continuous investment program, that is a world where EHDC is part of a utility and/or develops hydro quickly on the basis of power prices as high as the market would bear, i.e. the avoided cost. It became impractical in the presence of a long hiatus between investments. Once issues about the inclusion of work in progress and assets revaluation have been solved, covenanting a 15 percent ROR on revalued assets can accommodate such a hiatus and make EHDC attractive to investors. However, as a cost-plus instrument of regulation, an ROR covenant works against the objective of promoting competition; references to avoided costs or competitive market prices would be more appropriate, In any case a "fair "ROR on revalued assets is probably in the 8 to 12 range depending on the assessment of country risks by lenders. [4] The economic analysis was satisfactory; the project as built was justified and still is, even with large resettlement cost overruns. The institutional and financial analyses are rated satisfactory. The economic analysis under Ertan I had led to an increase of the capacity from an original proposal of 3,000 megawatts (MW) to the actual 3,300 MW; the financial analysis had laid the basis for tranching the project into two loans and for extending the loan repayment grace period until plant commissioning. The resettlement analysis under Ertan I had underestimated its scope and resource requirements. Implementation preparedness was satisfactory: all the tasks on the first segment of the critical path had been well defined; resettlement was hardly one of them but the major civil works packages, which clearly were, had been awarded to rigorously pre-qualified contractors and their cost had been firmed up. [5] The 2002 Sate Council Document No 5 is a major step forward in the gradual process of reformiing the power industry in China. The new policy sets out a number of major tasks to be achieved during the 10th five year plan (2001-2005). Theses are: (a) separation of network from generation and restructuring of both generation and network businesses; (b) establishment of competitive and open regional markets through dispatching of generators according to bidding procedures, development of electricity market code(s); (c) setting up of a new pricing mechanisms including environmental protection mechanisms that link the price paid to generators to their emissions to encourage the development of renewable energy and other clean generation sources; (d) initiation of market trials that allow generators to supply energy directly to large customers and begin the phasing out of the single buyer market structure; (e) establishment of a State Power Regulatory Agency and a modem regulatory framework; - 20 -  (f) continuation of the rural electricity reform. [6] Ertan is the most important peaking plant in the area, supplying 1,900 to 2,500 MW, i.e. 60 to 75 percent of the peak load in the Chongqing grid, 30 to 50 percent in the Sichuan grid, in the wet and dry seasons. Frequency and voltage are meeting standards 99.9 and 99.7 percent of the time, respectively, vs. 99.1 and 98 percent before the project. In addition, the seasonal flow regulation capacity of Ertan enhances the firm power of existing hydroelectric plants in the Sichuan grid by 16 percent and their energy output by 2 percent. [7] The Power Purchase Agreements (PPAs) specify purchases for 1998 to 2000, principles for determining those after 2000 and pricing principles but price setting was left to the Government. That would be unacceptable in a competitive market. The formula proposed by the State Development and Planning Commission (SDPC)--operation and maintenance (O&M) and debt service costs levelized over a notional 20-year period--is more acceptable economically and politically than letting the price surge and fall with the repayment of shorter-tenure loans. But the price of 34.1 fen/kWh is used for an artificially low share of the output; the remainder is paid at a spot price that is artificially low, resulting in an average price of 22 fenlkWh. Besides, the tariff would track market value better if it had a kW charge component to reflect capacity benefits provided at peak and in dry months and the value of the project's contribution to grid frequency and voltage regulation, instead of being uniform and all-inclusive of capacity and energy cost. [8] The first increase in the scope of resettlement was made in 1995: from 30,000 in the SAR for Ertan I based on a 1984 census to 35,000 people in the Ertan II SAR based on a 1992 census, a physical survey and demarcation of the reservoir boundary. Further revisions in 1996 jacked up the number to 45,812 people after including those who would lose land but do not require relocation, those who will be indirectly affected by sliding reservoir banks, and natural population growth until 1998. The budget was YO.61 billion in the Ertan I SAR and Y1.5 billion in the Ertan II SAR. On a per capita basis, the approved budget was 3.9 percent higher than that in the Ertan II SAR and more than twice that in Ertan I. [9] Among the 550 rural households of the sample surveyed in 2000, 10 percent had incomes 15 percent higher than before relocation, but on average, income per capita was Y929, 65.6 percent of the level before resettlement. The income increased 17.7 percent in 2000 but only 3.7 percent in 2001. Only 37.6 percent of rural resettlers had 0.5 to 1 mu per capita while 30 percent had less than 0.5 mu, the targeted baseline for rural resettlers in the plan. The major reasons for this shortfall are three (i) more people than expected chose to stay within their original villages, where the potential for new farmland development is very limited; (ii) farning has been recently banned on steep grades to avoid erosion; (iii) the encroachment of infrastructures is greater than anticipated. [10] Infrastructure for resettlers include: (i) seven completed water reservoirs, four under construction; (ii) construction of three power substations, rehabilitation of one and construction of transmission and distribution lines to all 46 host areas; (iii) construction of 313 km of highway, rehabilitation of 500 km, construction of 400 km of roads for farming machinery, and five major bridges, (iv) 100 percent radio and 99 percent TV coverage to all affected Xiangs and towns; (v) program-controlled telephone to all Xiangs and towns in the reservoir area; and (vi) schools, clinics or hospitals built to cover each Xiang. [11] (1) Despite its current financial difficulties, EHDC committed Y 45 million in June, 2000 to finance the secondary resettlement of 3000 resettlers who are suffering farmland shortage and about 600 persons who were affected by reservoir-induced slipping erosion exacerbated by the 1998 flood. EHDC supplied and will continue to supply free of charge 33 GWh electricity a year to pump stations in host - 21 -  areas. (2) PHRD grant funds have been secured for post-resettlement support activities under Ertan II, including (i) diagnostic review of resettlement under the project, including barriers to income restoration and options for income generation; (ii) preparation of feasibility studies and business plans for the most promising income-generation projects; (iii) assistance to SPRO in preparation of work plans for the second-round resettlement. The agreement for the grant of US$543,000 was signed in April 2002 by the Bank and GOC. (3) Post-resettlement support is also financed by a Reservoir Area Support Fund (currently about Y24 million per year) and an Ertan Reservoir Area Maintenance Fund through a levy over Ertan's sales (currently about Y14.6 million, out of which 80 percent for resettlement and 20% for environment activities) since 2001. (4) A 10-year post-resettlement support program was initiated by the Provincial Government. The governments and State-Owned Enterprises (SOE) in various cities/counties in Sichuan provide continuous supports to the host Xiangs. For example, Sichuan Provincial Government entrusted REDC to prepare a plan and explicitly instructed local governments to execute it with a focus on (i) infrastructure construction for existing farmland and fertilization of new fanmland to improve productivity; (ii) improving the system for the distribution of grain and cash crops; (iii) providing job opportunities for surplus laborers. As an example of SOE support, EHDC continues to provide support to five local communities, for example it recently donated 12 computers to the high school in Yanbian County seat. [12] Local governments reforested 700 ha, which added to EHDC's pilot of 240 ha. But, the Yi-derived and other problems above the EHDC buffer zone were not dealt with effectively: lacking a watershed management approach, EHDC deemed those as outside its scope of works and thus had no productive dialogue with counties on the topic. [13] Schistosomiasis eradication was the work of the Sichuan Health Office, with EHDC's funding. The area treated by 1998 covered 1.676 million m' and 47 locations of snail habitat. Snails were eliminated from the surveyed areas (16,682 persons and 2,153 oxen were examined) and measures taken to prevent the reintroduction of the disease, such as building biogas-generating units, monitoring of fish ponds and socialization through training and information dissemination, etc. No new incidence has been diagnosed since program completion. [14] For sediment load monitoring during construction, establishment of 14 monitoring sections in a river reach of 31 km was started in March 1994 and accepted in 1998. For suspended load monitoring during trial operation, 60 monitoring sections were established in 1999 and measurements were made in September and October 2000. In total, 9 hydrological stations and 17 rainfall stations are operating. The number of stations for meteorology monitoring was reduced to three after the Special Board of Consultants (SBC) found the impact was nil; monitoring then took place at nine locations in the three stations before being terminated. Sediment sections were not measured soon after the exceptional storns of 1998 in order to establish a secondary baseline of "normality," making it hard to assess the average annual sediment increment, i.e. barring such an exceptional event. [15] Summarized in "An Investigation Report on Diversity of Fishes and Aquatic Organisms in the Reservoir Area" and "Investigation Report on Biology Diversity in Ertan Reservoir," reviewed by the Science and Technology Committee of Sichuan Province. [16] Contract provisions made contractors responsible for waste water treatment, air pollution control and noise management. Waste water was treated before discharge into the Yalong River. Dust was controlled by measures such as sprinkling and water spray. Exhaust was controlled through selection and regular maintenance of construction machinery. Noise-reducing measures were taken to reduce noise - 22 -  generated by construction machinery. Noise containment facilities were installed in locations when necessary to reduce noise level. [17] Underground works were delayed at an early stage. Unforeseen geological conditions caused the collapse of outlets in the two flood diversion tunnels, and EHDC could not make quick decisions to solve the problem. The commencement of tunneling was delayed by about a full year. The excavation for the underground powerhouse was consequently delayed, also due to lack of resources of the contractor in charge of underground works. The situation was worsened with the withdrawal of more than 1,000 skilled laborers by the Chinese party of the joint venture due to labor disputes. For the powerhouse, the contractor also suffered delays in the delivery of equipment drawings or specifications by suppliers, construction drawings by the design institute, and material and equipment by EHDC. [18] At this critical juncture of delayed schedules, construction methods were revised, a very experienced project manager was appointed by the contractor, international consultants were incorporated into the team, training of unskilled laborers was conducted and supervision enhanced for quality improvement, and capital investment was made by the contractor for more construction machinery. With efforts by all parties, the contractor fulfilled all its contractual obligations on October 1, 1998, half a year ahead of schedule. It allowed the commissioning of the first unit to go ahead of schedule by about 2 months and of the last unit by 6 months. The underground powerhouse construction proved the most difficult of all project works. [19] Consulting services were financed through grants, the joint financing from foreign banks with the Bank's guarantee, the Bank Group-supported Technical Cooperation Credit (TCC) and Loan 3933. The budget covered the services of (a) the core advisory group providing general support and consultation on contractual matters, (b) the Dispute Review Board, (c) specialists in civil, underground, mechanical and electrical engineering, (d) establishment of a cost control system, and (e) start-up coordination during the commissioning stage. The level of inputs and the anticipated staff mix is considered appropriate. [20] For training abroad, the five-year program mainly involves two candidates for MBA degrees in the United States and five groups to be sent to power plants in Australia and Norway for study tours and short-term training. For domestic training, it covers comprehensive management, computer software and applications, financial management and technical training. It will be carried out jointly by Sichuan University and Southwest China University of Finance and Economy. [21] The domestic team completed the "Report on Studies of Optimal Operations of Ertan Power Plant and The Reservoir" in January 1998. At the same time, a foreign consultant delivered an ETGMS (Ertan Generation Management System), a computer program, which enables EHDC to assess the compensation regulation of cascaded projects on the Yalong River, a good basis for decision-making on future projects. [22] EHDC signed a contract with the China Water Conservancy and Hydropower Research Institute for a joint campaign of observations and tests on the safety of structures under various hydraulic conditions, including observation tests for impacts of flood-release atomization on the safety of the surrounding environment and facilities, hydraulic tests for the safety of surface outlets and No.2 flood release tunnel, and monitoring of energy dissipation facilities of the plunge pool. EHDC conducted independently a hydraulic test on the discharge capacity of gates for both surface and middle-level outlets under various discharging conditions: 947 observation instruments were embedded in the dam and 187 in the powerhouse; in addition some were embedded in the excavated slope and potential landslide slopes during the construction period. An extemal network was set up to collect real time data from these instruments. - 23 -  [23] In 1998, a sales agreement signed with SEPC in 1995 was reworked into two PPAs with SEPC and the Chongqing grid; their pricing principles accommodate EHDC's revenue covenants but not other principles agreed at the approval of Ertan I and II that refer to avoided cost and a two-part tariff, i.e. with both kW and kWh charges. [24] The Chongqing Municipal Government became independent from the Sichuan Provincial Government in 1997, and approved several thermal power plants, which were not planned at the time of Ertan's approval. It did so plausibly because demand growth rates averaged 9.1 percent from 1990 to 1997, which were faster than the government forecast of 8 percent, and to generate fiscal revenues. Other plants, many of which were hydro, were installed in Sichuan province. A result was a sizeable capacity surplus in 1998-2001. That impacted the actual output and tariff for Ertan. In those years, excluding the VAT, the average tariff was 15.81, 15.68, 17.91 and 18.04 fen/kWh in contrast with 29.06 fen/kWh approved by the GOC, the shortfall in sales was 2.15 TWh, 5.73 TWh, 6.27 TWh and 1.8 TWh, and that in operating revenue US$110 million, US$401 million, US$631 million and US$715 million, respectively. [25] The success of Ertan has become widely recognized intemationally, and is often used as a case study at international conferences on Alternative Dispute Resolution Procedures. The Bank in association with the Institute of Civil Engineering of UK hosted a one-day seminar at Bank Headquarters to discuss the Ertan DRB and draw lessons from its operation applicable to dispute resolution in the international context. [26] For Ertan II alone, the main deviations are listed below with respect to the appraisal estimates, i.e. base cost plus contingencies as allocated by EHDC. The 6 percent overrun in foreign costs in US Dollar terms results mainly from: (a) a US$3.4 million (1.8 percent) increase in mechanical and electric equipment; (b) a US$60.4 million (7.9 percent) increase in civil works, largely due to unforeseen geological conditions; and (c) a US$9.4 million decrease in the costs of contract administration, services and TA. [27] For Ertan II alone, the 21 percent local cost overrun in Yuan terms can be attributed to: (a) the 29 percent increase in resettlement scope and the 3.8 percent increase in the cost per capita from Y42,736 to Y44,382, causing an overrun of 55.6 percent for land acquisition and resettlement; (b) civil works overruns of 37 percent due to (i) a 44 percent overrun for excavation works (Lot I) with physical contingencies of 45 percent vs. 10 percent at appraisal, due to unforeseen geological conditions and claims for schedule delays, price contingencies of Y971 million vs. Y278 million in the SAR due to labor cost increases of about 400 percent; and (ii) a 27 percent overrun for dam construction (Lot II) with physical contingencies of 25 percent vs. 20 percent in the SAR due in part to a Y1 12 million investment following water damage, and price contingencies 155 percent above expectations; (c) contract administration and services ovenruns of 50 percent. Additional costs include: (i) Y216.9 million for preparation works overlooked in the contingency allowance; Y131.5 million for construction service, design optimization and scientific research; Y59.4 million for contract administration; Y56.8 million for TA; and Y311.6 million for log transportation and repairs of water destruction in the reservoir area; (d) the cost for mechanical and electrical equipment was underrun by about 14 percent; and (e) taxes were Y864.5 million less than estimated, largely due to exemption of custom duties and import VAT. [28] EHDC committed to withhold dividend until all financial covenants are satisfied. SIC committed on extending the tenure of its loan from 2001-2009 to a new one up to 2019, and negotiation is underway to achieve an agreement. [29] The Bank's suggestion to optimize plant capacity led to its increase from 3,000 MW to 3,300 - 24-  MW. Later, the quality and timeliness of construction owes much to the Bank's insistence that only Joint Ventures with a significant share of foreign expertise and funds be pre-qualified. But it could have questioned harder the low cost assumptions that the Borrower proposed to prepare the first resettlement budget: evidence from other projects like Shuikou was available by then. On the question of policy risks that impaired EHDC's financial performance, this is not the first time-see Shuikou again--that new efficient plants are substituted by less efficient ones because of distortions in dispatch or development plans. The loan agreement signed with SEPC was of little use after decentralization allowed municipalities to build power plants. It was nearly impossible to design and enforce remedies on the issues of SEPC's performance with respect to energy dispatch because of the difficulty in obtaining hard evidence, and that is, in effect, intruding into the operations of the wholesale market. - 25 -  Annex 1. Key Performance Indicators/Log Frame Matrix Outcome / Impact Indicators: Output Indicators: End of project The Log Frame Matrix was not yet introduced when the project was appraised. The key indicators specified in the SAR were followed for monitoring (see next table). - 26 -  Key Monitoring Indicators Indicator Target Date Actual Date A. Physical Construction Construction Progress Diversion Tunnel Closure June 1, 1998 May 1, 1998 Completion of Powerhouse Draft Tube Liners Unit 6 Oct. 1, 1996 July 31, 1996 Unit 1 June 1, 1998 June, 1997 Comunercial Operation Unit6 Oct. 1, 1998 Aug 18, 1998 Unit I June 1, 2000 Dec 12, 1999 Procurement Progress 1995-1996 1995-1996 500 kV Dry Cable Generator Circuit Breakers 500 kV GIS Main Transformers Gates, Hoists, Cranes B. Environment Management Program Mitigation Program 1991-1997 1991-1997 Environmental Monitoring System 1994-1996 1994-1996 Environmental Monitoring during Construction 1993-2000 1992-2000 Staff Training and Study Tour 1991-1998 1991-1998 Scientific Research 1995-1998 1995-1998 Environmental Evaluation Panel 1994-1998 1994-1998 C. Resettlement Action Plan Lianshang County (resettlement of 6943* inhabitants) 1995 1995-1998 Yanbian County (resettlement of 30361* inhabitants) 1995-1997 1995-1998 Miyi County (resettlement of 4885* inhabitants) 1995-1997 1995-1998 Relocation of 12 Small Plants 1995-1997 1995-1998 Road Construction 1995-1997 1995-1997 Telecommunication, Power Transmission Line 1995-1997 1995-1997 Fish Farm 1995-1997 'Updated numbers in the resettlement planning approved by GOC in Aug., 1996. continued... -27 -  continue Indicator Target Date Actual Date D. Institutional Development Corporatization Incorporate EHDC as a Limited Liability Company 1995 1995 Establish a Board of Directors 1995 1995 Commercialization Study on Organizational Restructuring and Financial Management System 1995-1996 1996-1997 Implementation of the New Organization Structure and Financial Management System 1997 1998 Power Sales Bulk Sales Study 1995 1995-1996 Memorandum of Understanding with SEPC 1995 May 8, 1995 Reservoir Optimization Study June 30,1995 June, 1995 Signing of the Power Sales Agreement with SEPC June 30,1997 July 16, 1998 Training Prograrn Senior Management 1995-1997 1996-1997 Technical and Business Staff 1995-1997 1996-1997 Financial Staff 1995-1997 1996-1997 Environment and Resettlement 1995-1997 1996-1997 Power Station 1995-1997 1995-1998 E. Financial Indicators (in %) 1998 1999 2000 2001 2002 2003 2004 Rate of Return on (target) 8.0 20.0 17.0 17.5 16.3 15.0 15.0 Revalue Assets (actual) (1.7) (1.1) 1.4 3.9 5.9** 6.0** 6.2** Long-term Debt/ (target) 79.0 77.0 71.0 63.0 56.0 52.0 47.0 (LTDebt+Equity) (actual) 92.4 94.6 97.8 98.0 95.6** 93.1** 90.5** Debt Service (target) 1.5 1.5 1.6 1.5 1.5 1.5 1.7 Coverage ratio (actuallproj.) 0.3 0.4 0.8 0.82 1.5** 1.3** 1.2** . ~~~~~~~1.5*** 1.3*** 1.4*** ** projected based on the following assumptions (refer to the Financial Analysis Report in the project file): 1) no tariff growth from 22 fen/kWh in 2001 (unlikely); 2) energy sales of 14.6 TWh in 2002 and the ensuing years (highly likely); 3) extension of the tenure of SIC's loan from 2001-2009 to 2006-2019 (committed); 4) VAT rebate till 2002 (approved). *** projected based on the same assumptions as above plus 5) set-up a Debt Service Reserved Funds for the next 6-month debt service (committed). - 28 -  Annex 2. Project Costs and Financing Project Cost b Component (in US$ million equivalent) Preparatory works 107.50 87.50 81.4 Land acquisition and resettlement 168.20 293.00 174.2 Civil works 1053.20 1671.40 158.7 Administration & other works (1) 148.60 Electromechanical equipment 256.00 295.90 115.6 Power transforners 28.20 19.60 69.5 Gates/hoists etc. 40.00 37.30 93.3 Engineering & construction management (1) 72.60 183.90 83.1 Environmental protection 7.30 5.90 80.9 Reform plan & financial MIS 2.50 1.20 46.4 Training 6.10 5.40 88.5 Taxes & duties (2) 132.70 Total Baseline Cost 2022.90 2601.10 Physical ConUngencIes 130.90 Price Contingencies 46.50 Total Project Costs 2200.30 2601.10 Interest during construction 739.90 928.90 125.50 Front-end fee I I Total Financing Required 2940.20 3530.00 Notes: (1) The actual expenditures on "Administrative & other works" are included in the expenditures for "Engineering & construction management." (2) The actual expenditures on taxes and contingencies are incorporated into the actual costs of individual project components. - 29 -  Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent) B~-::p -iN.BF ,_ 4 M.i ~ ~ B.F -TrotllCo'st 1. Works 1222.70 0.00 3.20 448.20 1674.10 (639.00) (0.00) (3.20) (0.00) (642.20) 2. Goods 381.20 0.00 5.00 42.70 428.90 (95.10) (0.00) (5.00) (0.00) (100.10) 3. Services 0.00 0.00 97.20 0.00 97.20 (0.00) (0.00) (37.70) (0.00) (37.70) 4. Miscellaneous 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) Total 1603.90 0.00 105.40 490.90 2200.20 (734.10) (0.00) (45.90) (0.00) (780.00) Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent) V~~~ ~ v.. PF6remeB OMthqrdTon.Qs Y.- . O1 . ..h-6r _ _ __ _ _ 1. Works 1303.97 0.00 0.00 748.10 2052.07 (578.44) (0.00) (0.00) (0.00) (578.44) 2. Goods 217.96 0.00 0.00 138.18 356.14 (185.15) (0.00) (0.00) (0.00) (185.15) 3. Services 0.00 0.00 26.09 166.00 192.09 (0.00) (0.00) (16.26) (0.00) (16.26) 4. Miscellaneous 0.00 0.00 0.70 0.00 0.70 (0.00) (0.00) (0.00) (0.00) (0.00) Total 1521.93 0.00 26.79 1052.28 2601.00 (763.59) (0.00) (16.26) (0.00) (779.85) "Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies. 2'Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) relending project funds to local government units. Note: The differences of Bank financing for ICB between appraisal and actual was due to replacement of direct financing by Bank guaranteed financing in favor of civil works over goods or vice versa. - 30 -  Project Financing by components (in USS million equivalent) 1. Works 642.20 1031.90 578.44 1335.06 138.57 90.1 129.4 2. Goods 100.10 328.80 185.15 170.09 0.90 185.0 51.7 3. Services 37.70 59.50 16.26 166.00 9.83 43.1 279.0 4. Others 0.70 5. Total 780.00 1420.20 779.85 1671.15 150.00 100.0 117.7 - 31 -  Annex 3. Economic Costs and Benefits Common Assumptions for Rate of Return Calculations 1. Unit cost of emissions Unit Local Global Y/ton Hunan Sichuan SO2 NOx TSP S02 NOx TSP Carbon 1995 1998 1275 5073 607 2417 166 2000 5103 1671 6651 2431 796 3168 166 2005 6126 2456 9772 2918 1170 4655 182 2010 8135 3286 13078 3875 1565 6230 182 2015 8304 3998 15911 3956 1905 7580 188 2020 9115 4865 19358 4342 2318 9222 188 Notes: Population 64400000 person 83290000 person Area 210000 km2 480000 km2 GDP 368.89 billion Y 401.68 billion Y Source: World Bank/Beijing Economic Research institute study team. 2. Contractual energy sales: actual for 1998 -2001; forecast for 2002 and later 14.6 TWh of which peak sales 5 percent of total in 1998, increasing by 8 percent a year until it reaches 2,300 GWh, i.e. about 1,000 hours at maximum feasible power. 3. Spot sales to SEPC and other sales to other off takers are not taken into account even though the prices they fetch may very well increase from the low levels observed or anticipated today. 4. Plant service represents 0.5 percent of total generation. 5. Operation cost in 2000 is 1 percent of the capital cost. 6. All present values (PV) are discounted to year 2001. A) ERR Case 1 - 22 fen/kWh tariff (IERR = 11.07 percent) 1. Output value: current sale price of 22 fen/kWh including a 17 percent value-added tax (VAT) 2. No input is shadow price because price distortions are negligible for most key inputs. 3. All prices are held constant and expressed in Yuans of 2001. B) ERR Case 2 - WTP tariff (IERR = 15.72 percent) 1. Same as in (A but output is valued at SEPC's willingness to pay as revealed by price paid to competitors for contracts i.e. at peak--65 fen/kWh and base load--39.8 fenlkWh. 2. The cost of transmission from Ertan to load centers is netted out of the above; it is calculated as the Average Incremental Cost (AIC) of transmission investments discounted at 12%. C) FRR Case 1 - 22 fen/kWh tariff, (FRR = 7.56 percent after tax) 1. Inflation rate 2% p.a. 2. VAT rate is 17%. - 32 -  3. Corporate profit taxation rate after depreciation is 33%. 4. Output value: current sale price of 22 fen/kWh for 2002 and ensuing years. 5. Tariff and operating costs adjusted for inflation. D) FRR Case 2 - 34 fen/kWh tariff (FRR = 9.19 percent after tax) 1. Same as in C) but tariff ramping up from 22 fen/kWh in 2001 to the GOC agreed contract price of 34.1 fen/kWh in 2006 and adjusted for inflation in following years. 2. Operating costs adjusted for inflation. E) FRR Case 3 -22 fen/kWh tariff (FRR = 6.21 percent after tax) 1. Same as in C) but tariff not adjusted for inflation. F) FRR Case 4 -34 fen/kWh tariff (ERR = 8.28 percent after tax) 1. Same as in D) but tariff not adjusted for inflation - 33 -  A) ERR Case 1 - 22 fen/kWh tariff, and 14.6 TWhi sales [RR=11.07 percent) Generation Tariff cost Beneffi Net Base Peak Investment O&M cost Totatl Generation Enviroment Total Total Base Peak Load Load Plant PV Fixed PV PV PV PV PV PV GWhI fan/kWh Y Million Y Million Y Millon 1990 1991 2655.5 7589.5 7589.5 -7589.5 1992 1889.5 4861.9 4861.9 -4861.9 1993 1840.2 4263.0 4263.0 -4263.0 1994 1723.7 3595.1 3595.1 -3595.1 1995 2145.3 4028.3 4028.3 -4028.3 1996 3751.6 6342.3 6342.3 -6342.3 1997 5527.9 8413.7 8413.7 -8413.7 1998 800 760 40 22.0 22.0 2337.8 3203.5 218.7 299.7 3503.2 175 240.0 30.1 41.2 281.2 -3222.0 1999 5100 4825 275 22.0 22.0 1482 1828.4 233.5 288.1 2116.4 1116 1377 3 285 351.6 1728.9 -387.5 2000 8300 7816 4.84 22.0 22.0 969.7 1077.1 243.23 270.2 1347.2 1817 2018.0 494.5 549.3 2567.3 1220.1 2001 12700 11900 800 22.0 22.0 0.0 0.0 243.23 243.2 243.2 2780 2780.0 791.8 791.8 3571.8 3328 6 2002 14673.4 13675 998 22.0 22.0 0.0 0.0 243123 219.0 219.0 3212 2891.8 959 863.4 3755.2 3536.2 2003 14673.4 13595 1078 22.0 22.0 0.0 0.0 243.23 197.2 197.2 3212 2603 5 1111.9 901.3 3504.8 3307.6 2004 14673 4 13509 1164 22.0 22.0 0.0 0.0 243.23 177.5 177.5 3212 2344.0 1132 826.1 3170.1 2992 6 2005 14673.4 13416 1257 22.0 22.0 0.0 0.0 243.23 159.8 159.8 3212 2110.3 12.21 5 802.5 2912.9 2753.1 2006 14673.4 13315 1358 22.0 22.0 0.0 0.0 243.23 143.9 143.9 3212 1900.0 1236 731.1 2631,1 2487.2 2007 14673.4 13207 1467 22.0 22.0 0.0 0.0 243.23 129.5 129.5 3212 1710.6 1261 671.5 2382.1 2252.6 2008 14673.4 13089 1584 22.0 22.0 0.0 0.0 243.23 116.6 116.6 3212 1540.0 1286 616.6 2156.6 2040.0 2009 14673.4 12963 1711 22.0 22.0 0.0 0.0 243.23 105.0 105.0 3212 1386.5 1315 567.6 1954.2 1849 2 2010 14673.4 12826 1848 22.0 22.0 0.0 0.0 243.23 94.5 94.5 3212 1248.3 1377.6 535.4 1783.7 1689.2 2011 14673.4 12373 2300 22.0 22.0 0.0 0.0 243.23 85.1 85.1 3212 1123.9 1397 488.8 1612.7 1527.6 2012 14673.4 12373 2300 22.0 22.0 0.0 0.0 243.23 76 6 76.6 3212 1011.8 1422 447.9 1459.8 1383.2 2013 14673.4 12373 2300 22.0 22.0 0.0 0.0 243.23 69.0 69.0 3212 911.0 1447 410.4 1321.3 1252.4 2014 14673.4 12373 2300 22.0 22.0 0.0 0.0 243.23 62.1 62.1 3212 820.1 1475 376.6 1196.8 1134.7 2015 14673.4 12373 2300 22.0 22.0 0 0 0.0 243.23 55.9 55.9 3212 738.4 1531 6 352.1 1090.5 1034.6 2016 14673.4 12373 2300 22.0 22.0 0.0 0.0 243.23 50.3 50.3 3212 664.8 1549.1 320.6 985.4 935.1 2017 14673.4 12373 2300 22.0 22.0 0.0 0.0 243.23 45.3 45.3 3212 598.5 1567.1 292.0 890.5 845.2 2018 14673.4 12373 2300 22.0 22.0 3.6 0.6 243.23 40.8 41.4 3212 538.8 1585.6 266.0 804.8 763.4 2019 14673.4 12373 2300 22.0 22.0 79.6 12.0 243.23 36.7 46.8 3212 465.1 1604.7 242 4 727.5 678.7 2020 14673.4 12373 2300 22.0 22.0 58.5 8.0 243.23 33.1 41.0 3212 436.8 1689 229.7 666 4 625.4 2021 14673.4 12373 2300 22.0 22.0 321.3 39.3 243.23 29.8 69.1 3212 393.2 1689 204.8 600.0 530 9 2022 14673.4 12373 2300 22.0 22.0 1331.2 146.7 243.23 26.8 173.5 3212 354.0 1689 186.2 540.2 366.7 2023 14673.4 12373 2300 22.0 22.0 455.7 45.2 243.23 24.1 69.4 3212 318.7 1689 167.6 486.3 417.0 2024 14673.4 12373 2300 22.0 22.0 503.8 45.0 243273 21.7 66.7 3212 287.0 1689 150.9 437.9 371.1 2025 14673.4 12373 2300 22.0 22.0 193.1 15.5 243.23 19.6 35.1 3212 258.4 1689 135.9 394.2 359.1 2026 14673.4 12373 2300 22.0 22.0 243.23 17.6 17.6 3212 232.6 1689 122.3 354.9 337.3 2027 14673.4 12373 2300 22.0 22.0 243.23 15.9 15.9 3212 209.4 1689 110.1 319.5 303.7 2028 14673.4 12373 2300 22.0 22.0 243.23 14.3 14.3 3212 188.5 1689 99.1 287 7 273.4 2029 14673.4 12373 2300 22.0 22.0 243.23 12.9 12.9 3212 169.7 1689 89.3 259.0 246.1 2030 14673.4 12373 2300 22.0 22.0 243123 11.6 11.6 3212 152.8 1689 80.4 233.2 221.6 2031 1473.4 12373 2300 22.0 22.0 243.23 10.4 10.4 3212 137.6 1689 72 3 209.9 199.5 2032 14673.4 12373 2300 22.0 22.0 243.23 9.4 9.4 3212 123.9 1689 65.1 189.0 179.6 2033 14673.4 12373 2300 22.0 22.0 243.23 8.4 8.4 3212 IIIlS 1689 58.6 170.2 161.7 2034 14673.4 12373 2300 22.0 22.0 2431'3 7.6 7.6 3212 100.4 1689 52.8 153.2 145 6 2035 14673.4 12373 2300 22.0 22.0 243123 6.8 6.8 3212 90.4 1689 47.5 137.9 131.1 2036 14673.4 12373 2300 22.0 22.0 243.23 6.2 6.2 3212 81.4 1689 42.8 124.2 118.0 2037 14673.4 12373 2300 22.0 22.0 243123 5.5 5.5 3212 73.3 1689 38.5 111.8 106.3 2038 14673.4 12373 2300 22.0 22.0 243123 5.0 5.0 3212 66.0 1689 34.7 100.7 95.7 2039 14673.4 12373 2300 22.0 22.0 243123 4.5 4.5 3212 59.4 1689 31.2 90.6 86.1 2040 14673.4 12373 2300 22.0 22.0 243.23 4.0 4.0 3212 53.5 1689 28.1 81.6 77 5 2041 14673.4 12373 2300 22.0 22.0 243123 3.6 3 6 3212 48.1 1689 25.3 73.5 69.8 2042 14673.4 12373 2300 22.0 22.0 243173 3.3 3.3 3212 43.3 1689 22.8 66.1 62 9 2043 14673.4 12373 2300 22.0 22.0 243123 3.0 3.0 3212 39.0 1689 20.5 59 5 56.6 2044 14673.4 12373 2300 22.0 22.0 243123 2.7 2.7 3212 35.1 1689 18.5 53.6 50.9 2045 14673.4 12373 2300 22.0 22.0 243.23 2.4 2.4 3212 31.6 1689 16.6 48.3 45.9 20461 14673.4 12373 23001 22.0 22.0 243123 2.2 2.2 3212 28.5 1689 IS.0 43.5 41 3 2047 14673.4 12373 2300 22.0 22.0 24313 1.9 1.91 0 0.0 1689 13.5 13.5 11.S Total 701875 602711 99164 1100.0 1100.0 7736.3 6421.3 12127.2 3280.3 9701.71150428.4 35167.0 73372.5 13628.5 48795.5 0.0 - 34 -  - ~~B)ER Case 2 - WTP tariff, and 14.6 TWh sales (IERR = 15.72 percent) Generation Tariff Plant Cost Benefit Net AIC Leva- Invesment O&M Cost Total Generation Envirnment Total Total Base Peak Base Peak Weig. Trns.lized Plantg PV Fixed PV PV PV PV PV PV Load Load vAwragi cost f-g q-1 GWh fewikWh Y Million Y Milhion Y Miullon Y Million a b c d a f It h h I i k I m n o p g. r 1991 2655.5 11432.9 11432.9 -11432.9 1992 1889.5 7030.0 7030.0 -7030.0 1993 18401 5916.6 5916.6 -5916.6 1994 1723.7 4789.3 4789.3 -4789.3 1995 2145.3 5151.0 5151.0 -5151.0 1996 3751.6 7784.3 7784.3 -7784.3 1997 5527.9 9912.1 9912.1 -9912.1 1998 800 760 40 39.8 65.0 41.1 10.5 30.6 2337.8 3622.5 218.7 338.9 3961.4 244 377.5 30.1 46.6 424.2 -3537.2 1999 5100 4824.6 275 39.8 65.0 41.2 10.5 30.7 1482 1984.5 233.5 312.7 2297.2 2089 2796.9 285 381.6 3178,5 881.4 2000 8300 7815.9 484 39.8 65.0 41.3 10.5 30.8 969.7 1122.1 243.23 281.5 1403.6 3408 3944.0 494.5 572.2 4516.2 3112.6 2001 12700 11900 800 39.8 65.0 41.4 10.5 30.9 0.0 0.0 243.23 243.2 243.2 5230 5229.9 791.8 791.8 6021.7 5778.5 2002 14673 13675 998 39.8 65.0 41.5 10.5 31.1 0.0 0.0 243.23 210.2 210.2 6061 5237.8 959 828.7 6066.5 5856.3 2003 14673 13595 I078 39.8 65.0 41.7 10.5 31.2 0.0 0.0 243.23 181.6 181.6 6081 4541.3 1111.9 830.4 5371.7 5190.0 2004 14673 13509 1164 39.8 65.0 41.8 10.5 31.3 0.0 0.0 243.23 157.0 157.0 6103 3938.4 1132 730.5 4668.9 4512.0 2005 14673 13416 1257 39.8 65.0 42.0 10.5 31.5 0.0 0.0 243.23 135.6 135.6 6126 3416.5 1221.5 681.2 4097.7 3962.1 2006 14673 13315 1358 39.8 65.0 42.1 10.5 31.7 0.0 0.0 243.23 117.2 117.2 6151 2964.6 1236 595.7 3560.3 3443.0 2007 14673 13207 1467 39.8 65.0 42.3 10.5 31.9 0.0 0.0 243.23 101.3 101.3 6179 2573.2 1261 525.2 3098 4 2997.1 2008 14673 13089 1584 39.8 65.0 42.5 10.5 32.1 0.0 0.0 243.23 87.5 87.5 6208 2234.3 1286 462.8 2697.1 2609.6 2009 14673 12963 1711 39.8 65.0 42.7 10.5 32.3 0.0 0.0 243.23 75.7 75.7 6240 1940.7 1315 409.0 2349 7 2274.0 2010 14673 12826 1848 39.8 65.0 43.0 10.5 32.5 0.0 0.0 243.23 65.4 65.4 6274 1686.3 1377.6 370.3 2056.6 1991.2 2011 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 0.0 0.0 243.23 56.5 56.5 6388 1483.6 1397 324.5 1808.1 1751.6 2012 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 0.0 0.0 243.23 48.8 48.8 6388 1282.1 1422 285.4 1567.5 1518.7 2013 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 0.0 0.0 243.23 42.2 42.2 6388 1107.9 1447 251.0 1358.9 1316.7 2014 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 0.0 0.0 243.23 36.5 36.5 6388 957.5 1475 221.1 1178.6 1142.1 2015 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 0.0 0.0 243.23 31.5 31.5 6388 827.4 1531.6 198.4 1025.8 994.3 2016 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 0.0 0.0 243.23 27.2 27.2 6388 715.0 1549.1 173.4 888.4 861.2 2017 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 0.0 0.0 243.23 23.5 23.5 6388 617.9 1567.1 151.6 769.5 746.0 2018 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 3.6 0.3 243.23 20.3 20.6 6388 534.0 1585.6 132.5 666.5 645.9 2019 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 79.6 5.8 243.23 17.6 23.3 6388 461.4 1604.7 115.9 577.4 554.0 2020 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 58.5 3.7 243.23 15.2 18.8 6388 398.8 1689 105.4 504.2 485.4 2021 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 321.3 17.3 243.23 13.1 30.5 6388 344.6 1689 91.1 435.7 405.3 2022 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 1331.2 62.1 243.23 11.3 73.4 6388 297,8 1689 78.7 376.5 303.1 2023 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 455.7 18.4 243.23 9.8 28.2 6388 257.3 1689 68.0 325.4 297.2 2024 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 503.8 17.5 243.23 8.5 26.0 6388 222.4 1689 58.8 281.2 255.2 2025 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 193.1 5.8 243.23 7.3 13.1 6388 192.2 1689 50.8 243.0 229.9 2026 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 6.3 6.3 6388 16C.1 1689 43.9 210.0 203.7 2027 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 5.5 5.5 6388 143.5 1689 37.9 181.5 176.0 2028 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 24323 4.7 4.7 6388 124.0 1689 32.8 156.8 152.1 2029 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 4.1 4.1 6388 107.2 1689 28.3 135.5 131.4 2030 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 3.5 3.5 6388 92.6 1689 24.5 117.1 113.6 2031 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 3.0 3.0 6388 80.0 1689 21.2 101.2 98.2 2032 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 2.6 2.6 6388 69.2 1689 18.3 87.5 84.8 2033 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 2.3 2.3 6388 59.8 1689 15.8 75.6 73.3 2034 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 2.0 2.0 6388 51.7 1689 13.7 65.3 63.3 2035 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 1.7 1.7 6388 44.6 1689 11.8 56.4 54.7 2036 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 1.5 1.5 6388 38.6 1689 102' 48.8 47.3 2037 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 1.3 1.3 6388 33.3 1689 8.8 42.1 40.9 2038 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 1.1 1.1 6388 28.8 1689 7.6 36.4 35.3 2039 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 0.9 0.9 6388 24.9 1689 6.6 31.5 30.5 2040 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 0.8 0.8 6388 21.5 1689 5.7 27.2 26.4 2041 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 0.7 0.7 6388 18.6 1689 4.9 23.5 22.8 2042 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 0.6 0.6 6388 16.1 1689 4.2 20.3 19.7 2043 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 0.5 0.5 6388 13.9 1689 3.7 17.6 17.0 2044 1473 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 0.5 0.5 6388 12.0 1689 3.2 15.2 14.7 2045 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 0.4 0.4 6388 10.4 1689 2.7 13.1i 12.7 2046 14673 12373 2300 39.8 65.0 43.8 10.5 33.3 243.23 0.3 0.3 6388 9.0 1689 2.4 11.3 11. 0 20471 14673 12373 23001 39.8 65.0 43.8 10.5 33.31 243.23 0.3 0.31 6388 7.7 1689 2.0 9.81 9.5 Total 701875 602711 991641 1_____________ 27270.0 58876.1 12127.2 2721.8 61597.91 302731 51754.7 73372.5 9843.2 61598.01 0.0 - 35 -  C)FRR Case 1 - 22 fenlWhtariff, and 14.6 TWh sales (FR= 7.56 percent after tx Oper. Oper. Cashiflow interest Sales income Cashflow Investment Sales TaTiff Revenue Cost before Tax paymnent tax Tax after Tax Plant PV PV P Y Millon Y Million TWIt feaikWh Y Million Y Million Y Million Y Milhon Y Million Y Million Y Milhion Y Million Y Million 1990 1991 2655.5 5502.9 1992 1889.5 3640.4 1993 1840.2 3296.3 1994 1723.7 2870 6 1995 2145.3 3321.7 1996 3751 6 5400.6 1997 5527.9 7398.4 1998 2337.8 2909.0 0.75 15.81 118.6 199 98.7 122 8 0.0 2.8 0.0 95.9 119.3 1999 1482 1714.5 5.00 15.51 775.0 79.9 695.1 804.1 0.0 18.4 0.0 676.7 782.8 2000 969.7 1043.0 8.23 17.87 1469.7 129.7 1340 0 1441.3 0.0 35.0 0 0 1305.0 143.7 2001 0.0 0.0 12.50 18.41 2300.7 250.0 2050.7 2050.7 0.0 54.8 0 0 1995.9 1995.9 2002 0.0 0.0 14.6 18.803 2745.3 243.2 2502 1 2326.3 0.0 65.3 0 0 2436.8 2265.5 2003 0.0 0.0 14.6 19.18 2800.2 248 06 2552.1 2206.0 0.0 66.6 0.0 2485 5 2148.4 2004 0.0 0.0 14.6 19.56 2856.2 253.03 2603.2 2092.0 0.0 68.0 0.0 2535 2 2037.4 2005 0.0 0 0 14.6 19.95 2913.3 258.09 2655.2 1983.9 0.0 69.3 0.0 2585.9 1932.1 2006 0 0 0.0 14.6 20.35 2971.6 263.25 2708.4 1881.4 0.0 70.7 0.0 2637.6 1832.3 2007 0.0 0.0 14.6 20.76 3031.0 268.51 2762.5 1784.2 0.0 72.1 38.7 2651 7 1712 6 2008 0.0 0.0 14.6 21 18 3091.7 273.88 2817.8 1692.0 0.0 73.6 269.7 2474.4 1485 8 2009 0.0 0.0 14.6 21.60 3153.5 279.36 2874.1 1604.5 0.0 75.1 320.0 2479.1 1384.0 2010 0.0 0.0 14.6 22.03 3216.6 284.95 2931.6 1521.6 0 0 76.6 380.2 2474.8 1284.5 2011 0.0 0.0 14 6 22.47 3280.9 290.65 2990.2 1443.0 0 0 78 1 447.9 2464.3 1189 2 2012 0.0 0.0 14.6 22.92 3346.5 296.46 3050.0 1368 4 0 0 79 6 494.8 2475 6 1110.7 2013 0.0 0.0 14.6 23 38 3413.4 302.39 3111.0 1297 7 0.0 81.2 .540.8 2489.0 1038.2 2014 0.0 0.0 14.6 23.85 3481.7 308.44 3173.3 1230 6 0.0 82.9 587.4 2503.0 970.7 2015 0 0 0 0 14 6 24.32 3551.3 314.61 3236.7 1167.0 0.0 84.5 634.8 2517.4 907.7 2016 0.0 0.0 14.6 24.81 3622.4 320.90 3301.5 1106.7 0.0 86.2 686 8 2528.5 847.6 2017 0.0 0.0 14.6 25.31 3694.8 327.32 3367.5 1049.5 0.0 87.9 730 7 2548.9 794 4 2018 3.6 1.0 14.6 25.81 3768.7 333.86 3434.8 995.3 0.0 89.7 772.2 2573.0 745.5 2019 79.6 21.4 14.6 26.33 3844.1 340 54 3503.5 943.8 0 0 91.5 810.3 2601.7 700.9 2020 58.5 14.7 14.6 26.86 3921.0 347.35 3573.6 895.1 0.0 93.3 845.8 2634.5 659.9 2021 321.3 74.8 14.6 27.39 3999 4 354.30 3645.1 848.8 0.0 95.2 879 2 2670.7 621.9 2022 1331.2 288.2 14.6 27.94 4079.4 361.38 3718.0 804.9 0.0 97 1 904.5 2716.4 588.1 2023 455.7 91.7 14.6 28.50 4161.0 368.61 3792.3 763.4 0.0 99.0 930.3 2763.1 556.2 2024 503.8 94.3 14.6 29.07 4244.2 375.98 3868.2 723.9 0.0 101.0 956.6 2810.6 526.0 2025 193.1 33.6 14 6 29.65 4329.1 383.50 3945.6 686.5 0.0 103.0 983.4 2859 1 497.5 2026 14.6 30.24 4415.6 391.17 4024.5 651.0 0 0 105 1 1010 8 2908.6 470.5 2027 14.6 30.85 4504.0 399.00 4105.0 617.4 0.0 107.2 1379.0 2618.8 393.9 2028 14.6 31.47 4594 0 406 98 4187.1 585 5 0.0 109.3 1407 4 2670.3 373.4 2029 14.6 32.10 4685.9 415.11 4270.8 555.2 0.0 111.5 1436.5 2722.8 354.0 2030 14.6 32.74 4779.6 423.42 4356.2 526 5 0.0 113.8 1466 1 2776 3 335.6 2031 14.6 33.39 4875.2 431 89 4443.3 499.3 0.0 116.0 1496.4 2831.0 318.1 2032 14.6 34.06 4972.7 440.52 4532 2 473 5 0.0 118.4 1527.2 2886.7 301.6 2033 14.6 34.74 5072.2 449.33 4622.9 449.0 0.0 120.7 1558.6 2943.5 285.9 2034 14.6 35.44 5173 6 458.32 4715.3 425.8 0.0 123.1 1590.7 3001.5 271.1 2035 14.6 36.14 5277.1 467.49 4809.6 403.8 0.0 125.6 1623.4 3060.6 257.0 2036 14.6 36.87 5382.6 476.84 4905 8 383.0 0.0 128 I 1656.8 3120.9 243 6 2037 14.6 37.60 5490 3 486.37 5003.9 363.2 0.0 130.7 1690.8 3182.4 231.0 2038 14.6 38.36 5600.1 496 10 5104.0 344.4 0 0 133.3 1725.6 3245.2 219 0 2039 14 6 39.12 5712.1 506.02 5206 1 326.6 0.0 135 9 1761 0 3309 2 207.6 2040 14.6 39 91 5826.3 516.14 5310 2 309.7 0.0 138.7 1797.1 3374.4 196.8 2041 14.6 40.70 5942.9 526.47 5416.4 293.7 0.0 141.4 1833.9 3441.0 186.6 2042 14.6 41.52 6061.7 537.00 5524.7 278.5 0.0 144.3 1871.5 3508.9 176.9 2043 14 6 42.35 6183.0 547.74 5635.2 264.1 0.0 147.2 1909.9 3578.2 167.7 2044 14.6 43.20 6306.6 558.69 5747.9 250.5 0.0 ISO 1 1949.0 3648.9 159 0 2045 14.6 44.06 6432 8 569.86 5862.9 237 5 0.0 153.1 1988 8 3720.9 150 8 2046 14.6 44.94 6561.4 581.26 5980.1 225.3 0.0 156.2 2029.5 3794.5 142.9 2047 14.6 45.84 6692.6 592.89 6099.8 213.6 00 159.3 2071.0 3869.4 135 5 Total 24464.9 37717.1 698.1 1465 3 208724 18556.7 190167 45512.8 0.0 4967 6 48994.9 136204 37717.1 - 36 -  D) FRR Case 2 - 34 fen/kWh tariff FRR = 9.19 pe cent after tax) Oper. Oper. Cashflow Intees Saes Income Cshflow Investment Sales Tanff Revenue Cost before Tax payment tax Tax after Tax Plant PV PV PV Y Milion Y Milion TWh fen/kWh Y MilIon Y Milion Y YMlsion Y Million Y Milhon Y Millon YMillion YMtlion YMiUion 1990 1991 2655.5 6396.8 1992 1889.5 4168.5 193 1840.2 3718.1 1994 1723.7 3189.6 195 2145.3 3635.6 1996 3751.6 5822.7 1997 5527.9 7857.5 1998 2337.8 3043.4 0.75 15.81 118.6 19.9 98.7 128.5 0.0 2.8 0.0 95.9 124.8 1999 1482 1766.9 5.00 15.51 775.0 79.9 695.1 828.7 0.0 18.4 0.0 676.7 806.7 2000 969.7 1058.8 8.23 17.87 1469.7 129.7 1340.0 1463.1 0.0 35.0 0.0 1305.0 1424.9 2001 0.0 0.0 12.50 18.41 2300.7 250.0 2050.7 2050.7 0.0 54.8 0.0 1995.9 1995.9 2002 0.0 0.0 14.6 20.52 2996.4 243.2 2753.2 2521.4 0.0 71.3 0.0 2681.8 2456.1 2003 0.0 0.0 14.6 22.40 3271.0 248.06 3022.9 2535.5 0.0 77.8 0 0 2945 0 2470.2 2004 0.0 0.0 14.6 24.46 3570.7 253.03 3317.7 2548.5 0.0 85.0 0.0 3232.7 2483 3 2005 0.0 0.0 14.6 26.70 3898.0 258.09 3639.9 2560.7 0.0 92.8 418.5 3128.6 2201.0 2006 0.0 0.0 14.6 29.15 4255.2 263.25 3992.0 2572.0 0.0 101.3 590.1 3300.6 2126.6 2007 0.0 0.0 14.6 29.73 4340.3 268.51 4071.8 2402.7 0.0 103.3 645.2 3323.3 1961.0 2008 0.0 0.0 14.6 30.32 4427.1 273.88 4153.2 2244.5 0.0 105.4 700.0 3347.9 1809.3 2009 0.0 0.0 14.6 30.93 4515.7 279.36 4236.3 2096.7 0.0 107.5 758.8 3370.0 1667.9 2010 0.0 0.0 14.6 31.55 4606.0 284.95 4321.0 1958.6 0.0 109.6 827.8 3383.6 1533.7 2011 0.0 0.0 14.6 32.18 4698.1 290.65 4407.5 1829.7 0.0 111.8 904.4 3391.2 1407.8 2012 0.0 0.0 14.6 32.82 4792.1 296.46 4495.6 1709.2 0.0 114.1 960.5 3421.1 1300.7 2013 0.0 0.0 14.6 33.48 4887.9 302.39 4585.5 1596.6 0.0 116.3 1015.8 3453.4 1202.5 2014 0.0 0.0 14.6 34.15 4985.7 308.44 46772 1491.5 0.0 118.7 1071.9 3486.7 11119 2015 0.0 0.0 14.6 34.83 5085.4 314.61 4770.8 1393.3 0.0 121.0 1129.0 3520.8 1028.2 2016 0.0 0.0 14.6 35.53 5187.1 320.90 4866.2 1301.6 0.0 123.5 1190.9 3551.9 950.0 2017 0.0 0.0 14.6 36.24 5290.8 327.32 4963.5 1215.9 0.0 125.9 1244.8 3592.7 880.1 2018 3.6 0.8 14.6 36.96 5396.6 333.86 5062.8 1135.8 0.0 128.4 12966 3637.7 816.1 2019 79.6 16.4 14.6 37.70 5504.6 340.54 5164.0 1061.0 0.0 131.0 1345.3 3687.8 757.7 2020 58.5 11.0 14.6 38.46 5614.7 347.35 5267.3 991.1 0.0 133.6 1391.4 3742.3 704.2 2021 321.3 55.4 14.6 39.23 5727.0 354.30 5372.7 925.9 0.0 136.3 1435.7 3800.7 655.0 2022 1331.2 210.1 14.6 40.01 5841.5 361.38 5480.1 864.9 0.0 139.0 1472.1 3869.0 610.6 2023 455.7 65.9 14.6 40.81 5958.3 368.61 5589.7 808.0 0.0 141.8 1509.3 3938.6 569 3 2024 503.8 66.7 14.6 41.63 6077.5 375.98 5701.5 754.8 0.0 144.6 1547.2 4009.7 530.8 2025 193.1 23.4 14.6 42.46 6199.0 383.50 5815.5 705.1 0.0 147.5 1585.8 4082.2 494.9 2026 14.6 43.31 6323.0 391.17 5931.9 658.6 0.0 150.5 1625.2 4156.1 461.5 2027 14.6 44.17 6449.5 39.00 6050.5 615.3 0.0 153.5 2005.7 3891.3 395.7 2028 14.6 45.06 6578.5 406.98 6171.5 574.8 0.0 156.6 2046.7 3968.2 369.6 2029 14.6 45.96 6710.0 415.11 6294.9 536.9 0.0 159.7 2088.6 40467 345.2 2030 14.6 46.88 6844.2 423.42 6420.8 501.6 0.0 162.9 2131.2 4126.7 322.4 2031 14.6 47.82 6981.1 431.89 65492 468.5 0.0 166.2 2174.8 4208.3 301 1 2032 14.6 48.77 7120.8 440.52 6680.2 437.7 0.0 169.5 2219.2 4291.6 281.2 2033 14.6 49.75 7263.2 449.33 6813.8 408.9 0.0 172.9 2264.4 4376.5 262.6 2034 14.6 50.74 7408.4 458.32 6950.1 381.9 0.0 176.3 2310.6 4463.1 245.3 2035 14.6 51.76 7556.6 467.49 7089.1 356.8 0.0 179.8 2357.8 4551.5 229.1 2036 14.6 52.79 7707.7 476.84 7230.9 333.3 0.0 183.4 2405.8 4641.6 213.9 2037 14.6 53.85 7861.9 486.37 7375.5 311.4 0.0 187.1 2454.8 4733.6 199.8 2038 14.6 54.93 8019.1 496.10 7523.0 290.9 0.0 190.9 2504.8 4827.3 186.6 2039 14.6 56.02 8179.5 506.02 7673.5 271.7 0.0 194.7 2555.8 4923.0 174.3 2040 14.6 57.14 8343.1 516.14 7827.0 253.8 0.0 198.6 2607.9 5020.5 162.8 2041 14.6 58.29 8510.0 526A7 7983.5 237.1 0.0 202.5 2660.9 5120.0 152.1 2042 14.6 59.45 8680.2 537.00 8143.2 221.5 0.0 206.6 2715.0 5221.5 142.0 2043 14.6 60.64 8853.8 547.74 8306.0 206.9 0.0 210.7 2770.2 5325.1 132.6 2044 14.6 61.86 9030.8 558.69 8472.1 193.3 0.0 214.9 2826.6 5430.7 123.9 2045 14.6 63.09 9211.5 569.86 8641.6 180.6 0.0 219.2 2884.0 5538.4 115.7 2046 14.6 64.35 9395.7 581.26 8814.4 168.7 0.0 223.6 2942.6 5648.2 108.1 2047 14.6 65.64 9583.6 592.89 8990.7 157.6 0.0 228.1 3002.3 5760.3 100.9 Tont 24464.9 41107.5 698.1 2052.1 294402.6 18556.7 275845.9 51463.5 0.0 7006.8 76596.1 192243.1 41107.6 - 37 -  E) FRR Case 3 - 22 fen/kWh tariff, and 14.6 TWh sales (F R = 6.21% after tax) Oper. Oper. Cashflow Interest Sales Income Cashflow Investment Sales Taiff Revenue Cost before Tax payment tax Tax after Tax Plant PV PV PV Y Milihon Y Million TWh fen/kWh Y Million Y Milhon Y Million Y Mdilion Y Million Y Million Y Million Y Million Y MLlion 1990 1991 2655.5 4848.5 1992 1889.5 3248.3 1993 1840 2 2978.7 1994 1723.7 2627.1 1995 2145.3 3078.7 1996 3751 6 5069.3 1997 5527.9 7033.0 1998 2337.8 2800.6 0.75 15.81 118.6 19.9 98.7 1182 00 2.8 00 95.9 114.9 1999 1482 1671.6 5.00 15.51 775.0 79.9 695.1 784.0 00 184 00 6767 763.2 2000 969.7 1029.9 823 17.87 1469.7 129.7 13400 1423 1 0.0 350 0.0 13050 13860 2001 0.0 0.0 12.50 18.41 2300.7 250.0 2050.7 2050 7 0.0 54 8 0.0 1995.9 1995 9 2002 0.0 0.0 14.6 18.803 2745.3 243.23 2502.1 2355.9 00 65.3 00 2436.7 2294 4 2003 0.0 0.0 14.6 18.80 2745.3 248.09 2497.2 2213.9 0.0 653 0.0 2431.9 2156.0 2004 0.0 0.0 14.6 18.80 2745.3 253.06 2492.2 2080.4 0.0 65.3 0.0 2426.9 2025.9 2005 0.0 0.0 14.6 18.80 2745.3 258.12 2487.2 1954.9 0.0 65.3 0.0 2421.8 1903.5 2006 0.0 0.0 14 6 18 80 2745.3 263 28 2482.0 1836.9 0.0 65.3 00 2416.7 1788.5 2007 0.0 0.0 14.6 18.80 2745.3 268.55 2476.8 1725.9 0.0 65.3 0.0 2411.4 1680.3 2008 0.0 0.0 14.6 18.80 2745.3 273.92 2471.4 1621.5 0.0 65.3 0.0 2406.0 1578 6 2009 0.0 0.0 14.6 18.80 2745.3 279.39 2465.9 1523.4 0.0 65.3 119.5 22810 1409.2 2010 0.0 0.0 14.6 18.80 2745.3 284.98 2460.3 1431.1 0.0 65.3 230.8 2164.2 1258.9 2011 0.0 00 14.6 18.80 27453 290.68 2454.6 1344.4 00 65.3 2780 2111.2 11563 2012 0.0 0.0 14.6 18.80 2745.3 296.50 2448.8 1262.8 0.0 65 3 304 2 2079 3 1072.3 2013 0.0 0.0 14.6 18.80 2745.3 302.43 2442.9 1186.2 0.0 65.3 329.0 20485 9947 2014 0.0 0.0 14.6 18.80 2745.3 308.47 2436.8 1114.1 0.0 65.3 354.1 2017.4 922.4 2015 0.0 0.0 14.6 18.80 2745.3 314.64 2430.7 1046.4 0.0 65.3 3794 19859 8549 2016 0.0 0.0 14.6 18.80 2745.3 320.94 2424.4 982.7 0.0 65 3 408.9 1950.1 790.4 2017 0.0 0.0 146 18.80 2745.3 327.36 24179 922.8 0.0 65.3 429.9 19227 733.8 2018 3.6 1.3 14.6 18.80 2745.3 333.90 2411.4 866.5 0.0 65.3 448.0 1898.0 682 1 2019 79.6 269 146 18.80 27453 340.58 24047 813.7 0.0 65.3 4623 1877.0 635.1 2020 58.5 186 14.6 18.80 2745.3 347.39 2397.9 763.9 0.0 65.3 473.5 1859.1 592.3 2021 321.3 96.4 14.6 18.80 2745.3 354.34 2391.0 717.2 0.0 65.3 482.0 1843.6 553.0 2022 1331.2 376.0 14.6 18.80 2745.3 361.43 2383.9 673.3 0.0 65.3 482.0 1836.5 518 7 2023 455.7 121.2 14.6 18.80 2745.3 368.66 2376.6 632.1 0.0 65.3 482.0 1829.3 4865 2024 503.8 126.2 14.6 18.80 2745.3 376.03 2369.3 593.3 0.0 65.3 482 0 1821.9 456.2 2025 193.1 45.5 14.6 18.80 2745.3 383.55 2361.7 556.8 0.0 65.3 482 0 1814.4 427.8 2026 14.6 18.80 2745.3 391.22 2354.1 522.6 0.0 65.3 482.0 1806.8 401 1 2027 14.6 18.80 2745.3 399.04 2346.3 490.4 0.0 65.3 822.2 1458.7 304 9 2028 14.6 18.80 2745.3 407.03 2338.3 460.2 0.0 65.3 822 2 1450 8 285 5 2029 14.6 18.80 2745.3 415.17 2330.1 431.8 0.0 65 3 822.2 1442.6 267 3 2030 14.6 18.80 2745.3 423.47 2321.8 405.1 0.0 65.3 822.1 1434.4 250 3 2031 14.6 18.80 2745.3 431.94 2313.4 380.1 0.0 65.3 822.1 1425.9 234 3 2032 146 18.80 2745.3 440.58 23047 356.5 0.0 65.3 822.1 1417.3 2192 2033 14.6 18.80 2745.3 449.39 2295.9 334.4 0.0 65.3 822.1 14085 2052 2034 146 18.80 2745.3 45838 2286.9 313.6 0.0 65.3 822 1 1399.5 191.9 2035 14.6 18.80 2745.3 467.54 2277.8 294.1 0.0 65.3 8220 13904 1795 2036 14.6 18.80 2745.3 476.90 2268.4 275.8 0.0 65.3 822.0 1381 0 167.9 2037 14.6 18.80 2745.3 486.43 2258.9 258.6 0.0 653 822.0 1371 5 1570 2038 14.6 18.80 2745 3 496.16 2249.1 242.4 0.0 65 3 822.0 1361 8 146.8 2039 14.6 18 80 2745 3 506.09 2239.2 227.3 0.0 65 3 822.0 1351 9 137.2 2040 14.6 18.80 2745.3 516.21 2229.1 213.0 0.0 65.3 821.9 1341.8 1282 2041 14.6 18.80 2745.3 526.53 2218.8 199.7 0.0 65.3 821.9 1331 5 119.8 2042 14.6 18.80 2745.3 537.06 2208.2 187 1 00 65.3 821.9 1321.0 111.9 2043 14.6 18.80 2745.3 547 80 2197.5 175.3 0.0 65.3 821.9 1310.3 104 5 2044 14.6 18.80 2745.3 558.76 2186.5 164.2 00 65.3 8219 1299.3 97.6 2045 14.6 18 80 2745.3 569.93 2175.4 153.9 0.0 65.3 821.8 1288.2 91.1 2046 14.6 18.80 2745.3 581.33 2164.0 144.1 0.0 65.3 821.8 1276 8 85.0 2047 14.6 18.80 2745.3 592.96 2152.3 135.0 0.0 65.3 821.8 1265.2 79.3 Total 24464.9 35197.8 6981 932.6 130947.8 18558.9 112388.8 40961.7 0.0 3116.6 24371.7 84900.5 35197.8 - 38 -  F) FRR Case 4 -34 fen/kWh tariff, and 14.6 TWb sales =R =8.28% after tax) Oper. Oper. Cashlifow Interest Sales income Casliflow Investmnent Sales Tairiff Revenue Coat before Tax payment tax Tax after Tax plant PV PV PV Y Milhon Y Million TWht fen/kWh Y Millon Y Millio Y Milli on Y Million Y Millon Y Million Y MillionYMlio YMlin 1990 1991 2655.5 5882.7 1992 1889.5 3865.7 1993 1840.2 3477.0 1994 1723.7 3007.9 1995 2145.3 3457.4 1996 3751.6 5583.8 1997 5527.9 7598.6 1998 2337.8 2967.8 0.75 15.81 118.6 19.9 98.7 125.3 0.0 2.8 0.0 95.9 121.7 1999 1482 1737.5 5.00 15.51 775.0 79.9 695.1 8I5.0 0.0 18.4 0.0 676.7 793.3 2000 969.7 1050.0 8.23 17.87 1469.7 129.7 1340.0 1450.9 0.0 35.0 0.0 1305.0 1413.1 2001 0.0 0.0 12.50 18.41 2300.7 250.0 2050.7 2050.7 0.0 54.8 0.0 1995 9 1995.9 2002 0.0 0.0 14.6 20.52 2996.4 243.23 2753.1 2542 6 0.0 71.3 0.0 2681.8 2476.8 2003 0.0 0.0 14.6 22.40 3271.0 248.09 3022.9 2578.3 0.0 77.8 0.0 2945.0 2511.9 2004 0.0 0.0 14.6 24.46 3570.7 253.06 3317.7 2613.4 0.0 85.0 0 0 3232.7 2546.5 2005 0.0 0.0 14.6 26.70 3898.0 258.12 3639.9 2648.0 0.0 92.8 419.4 3127.7 2275.4 2006 0.0 0.0 14.6 29.145 4255.2 263.28 3991.9 2682.1 0.0 101.3 591.0 3299.6 2216 9 2007 0.0 0.0 14.6 29.15 4255.2 268.55 3986.7 2473.7 0.0 101.3 619.1 3266.3 2026.7 2008 0.0 0.0 14.6 29.15 4255.2 273.92 3981.3 2281.5 0.0 101.3 646.2 3233.8 1853.2 2009 0.0 0.0 14.6 29.15 4255.2 279.39 3975.8 2104.2 0.0 101.3 676.9 3197.6 1692.3 2010 0.0 0.0 14.6 29.15 4255.2 284.98 3970.2 1940.6 0.0 101.3 717.2 3151.8 1540.5 2011 0.0 0.0 14.6 29.15 4255.2 290.68 3964.5 1789.6 0.0 101.3 764.5 3098.8 1398.8 2012 0.0 0.0 14.6 29.15 4255.2 296.50 3958.7 1650.4 0.0 101.3 790.6 3066.8 1278.6 2013 0.0 0.0 14.6 29.15 4255.2 302.43 3952.8 1521.9 0.0 101.3 815.4 3036.1 1169.0 2014 0.0 0.0 14.6 29.15 4255.2 308.47 3946.7 1403.4 0.0 101.3 840.5 3005.0 1068.5 2015 0 0 0.0 14.6 29.15 4255.2 314.64 3940.6 1294.1 0.0 101.3 865.8 2973.5 976.5 2016 0.0 0.0 14.6 29.15 4255.2 320.94 3934.3 1193.2 0.0 101.3 895.4 2937.7 891.0 2017 0.0 0.0 14.6 29.15 4255.2 327.36 3927.9 1100.2 0.0 101.3 916 3 2910.2 815.2 2018 3.6 0.9 14.6 29.15 4255.2 333 90 3921.3 1014.4 0.0 101.3 934.5 2885.6 746.5 2019 79.6 19.0 14.6 29.15 4255.2 340.58 3914 6 935.2 0.0 101.3 948.8 2864.6 684.4 2020 58.5 12.9 14.6 29.15 4255.2 347.39 3907.8 862.2 0.0 101.3 959.9 2846.7 628.1 2021 321.3 65.5 14.6 29.15 4255.2 354.34 3900.9 794.9 0.0 101 3 968.4 2831.2 576.9 2022 1331.2 250.5 14.6 29.15 4255.2 361.43 3893.8 732.8 0.0 101.3 968.4 2824.1 531.5 2023 455.7 79.2 14.6 29.15 4255.2 368.66 3886.6 675.5 0.0 101.3 968.4 2816.9 489.6 2024 503.8 80.9 14.6 29.15 4255.2 376.03 3879.2 622.7 0.0 101.3 968.4 2809.5 451.0 2025 193.1 28.6 14.6 29.15 4255.2 383.55 3871.7 573.9 0.0 101.3 968.4 2802.0 415.4 2026 14.6 29.15 4255.2 391.22 3864.0 529.0 0.0 101.3 968.4 2794.4 382.6 2027 14.6 29.15 4255.2 399.04 3856.2 487.6 0.0 101.3 1308.6 2446.3 309.3 2028 14.6 29.15 4255.2 407.03 3848.2 449.4 0.0 101.3 1308.6 2438.3 284.7 2029 14.6 29.15 4255.2 415.17 3840.0 414.1 0.0 101.3 1308.6 2430.2 262.1 2030 14.6 29.15 4255.2 423.47 3831.7 381.6 0.0 101.3 1308.6 2421.9 241.2 2031 14.6 29.15 4255.2 431.94 3823.3 351.7 0 0 101.3 1308.5 2413 5 222.0 2032 14.6 29.15 4255.2 440.58 3814.6 324.1 0.0 101.3 1308.5 2404 8 204.3 2033 14.6 29.15 4255.2 449.39 3805.8 298.6 0.0 101.3 1308.5 2396.1 188.0 2034 14.6 29.15 4255.2 458.38 3796.8 275.1 0.0 101.3 1308.5 2387.1 173.0 2035 14.6 29.15 4255.2 467.54 3787.7 253.5 0.0 101.3 1308.5 2377.9 159.1 2036 14.6 29.15 4255.2 476.90 3778.3 233.5 0.0 101.3 1308.4 2368 6 146.4 2037 14.6 29.15 4255.2 486.43 3768.8 215.1 0.0 101.3 1308.4 2359.1 134.7 2038 14.6 29.15 4255.2 496.16 3759.1 198.2 0.0 101.3 1308.4 2349.4 123.8 2039 14.6 29.15 4255.2 506.09 3749.1 182.5 0.0 101.3 1308.4 2339.5 113.9 2040 14.6 29.15 4255.2 516.21 3739.0 168.1 0.0 101.3 1308.4 2329.4 104.7 2041 14.6 29.15 4255.2 526.53 3728.7 154.8 0.0 101.3 1308.3 2319.1 96.3 2042 14.6 29.15 4255.2 537.06 3718.2 142.6 0.0 101.3 1308.3 2308.6 88.5 2043 14.6 29.15 4255.2 547.80 3707.4 131.3 0.0 101.3 1308.3 2297.8 81.4 2044 14.6 29.15 4255.2 558.76 3696.5 120.9 0.0 101.3 1308.3 2286.9 74.8 2045 14.6 29.15 4255.2 569.93 3685.3 111.3 0.0 101.3 1308.2 2275.8 68.7 2046 14.6 29.15 4255.2 581.33 3673.9 102.5 0.0 101.3 1308.2 2264.4 63.2 2047 14.6 29.15 4255.2 592.96 3662.3 94.4 0.0 101.3 1308.2 2252.8 58.0 Total 24464.9 39165.9 698.1 1385.8 1971 19.0 18558.9 178560.1 48090.7 0.0 4691.4 45688.5 128180.1 39165.8 -39 -  Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, I FMS, etc;) Implementation Development Month/Year Count Specialty Progress Objective Identiflcatfon/Preparation 10/1994 1 Energy specialist Environmental I Economist I Environment specialist I Financial specialist 2 Resettlement specialists 3 Engineers 4/1994 3 Financial specialist Preappraisal I Energy specialist I Resettlement specialist 2 Economists 3 Engineers Appraisal/Negotiation 3/1995 1 Economist I Environment specialist 2 Financial specialists I Resettlement specialist 3 Engineers Supervision 6/1996 1 Manager HS HS I Environment specialist I Engineer I Resettlement specialist I Economist I Energy specialist 11/1996 1 Financial specialist HS HS I Engineer I Economist I Resettlement specialist 6/1997 1 Engineer HS HS I Resettlement specialist I Environment Specialist 3/1998 2 Engineers HS S I Resettlement specialist I Environment Specialist 7/1998 1 Engineer HS S I Resettlement specialist I Environment Specialist 12/1998 1 Economist HS S I Energy specialist I Engineer I Resettlement specialist -40 -  5/1999 1 Environment specialist HS S I Energy specialist 11/1999 1 Economist HS S I Energy specialist I Environment specialist I Resettlement specialist 5/2000 1 Economist S S I Engineer I Energy specialist I Resettlement specialist I Financial specialist I Environment specialist I IT specialist 11/2000 1 Economist S S I Engineer I Energy specialist 3 Resettlement specialists I Financial specialist 5/2001 1 Economist S S 1 Engineer I Energy specialist 2 Resettlement specialists I Financial specialist 2 Environment specialists I Agri. development specialist I Micro credit specialist 11/2001 1 Economist S S 2 Engineers I Resettlement specialist I Financial specialist ICR 4/2002 2 Economists S S I Engineer 2 Resettlement specialists Note: Barry Trembath, Lead Power Engineer, assisted in managing and supervising the project and played a first role in assisting EHDC in adequately addressing technical issues as they arose. (b) Staff Stage of Project Cycle 'Actual/Latest Estima.te .___________ :_____ No. Staff weeks . US$ ('000) Identification/Preparation 89.0 356.00 Appraisal/Negotiation 36.2 187.50 Supervision 97.1 585.25 ICR 12.4 45.20 Total 234.7 1173.95 Notes: 1) Figures are as of end of June 2002; 2) Regional markup from direct cost to full cost is 25 percent for prior fiscal years (1990-2001); 3) For the ICR, the cost is an estimation, including the cost for I consultant for 24 days. -41 -  Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable) Rating Macro policies O H OSUOM O N * NA Sector Policies OH OSUOM ON O NA M Physical *H OSUOM ON ONA Financial OH OSU-M ON ONA M Institutional Development 0 H * SU O M 0 N 0 NA OEnvironmental OH OSUOM ON O NA Social 0 Poverty Reduction O H OSUOM O N O NA M Gender O H OSUOM O N * NA 0 Other (Please specify) * H OSUOM O N O NA Achievement on local economic development was high. N Private sector development 0 H O SU O M 0 N 0 NA N Public sector management 0 H 0 SU O M 0 N 0 NA O Other (Please specify) O H OSUOM O N O NA - 42 -  Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating O Lending OHS*S OU OHU O Supervision *HS OS OU O HU OI Overall OHS OS OU O HU 6.2 Borrowerperformance Rating FII Preparation OHS OS OU O HU D Government implementation performance OHS OS 0 U 0 HU Ej Implementation agency performance OHS OS O U O HU O Overall OHS OS O U O HU -43-  Annex 7. List of Supporting Documents Additional supporting information 1. Executive Summary of EHDC's Own Evaluation 2. SAR and ICR Key Dates 3. Key Financial Indicators--Historical and Projections (2006, 2010) 4. EHDC's Financial Statements 5. Technologies transferred by the project 6. Project photos 7. Maps List of Supporting Documents 1. Financial Analysis of EHDC 2. Borrower's comments on Bank's ICR 3. Borrower's Implementation Completion Report 4. Bank's ICR Aide-Memoire (April 2002) and Follow-up Letter (April 22, 2002) -44-  1. Executive Summary of EHDC's Own Evaluation Borrower: People's Republic of China Beneficiary: EHDC Loan amounts: First Bank loan US$380 million equivalent (1991 to 1995) Second Bank loan USS400 million equivalent (1995 to 2001) The World Bank guarantee for US$150 million equivalent; cofinancing from international financial institutions. Project ID: CN-PA-3507 The Project Ertan Hydroelectric Project is located in Panzhihua City (in Sichuan Province of China) where one of the most important steel works is based. The major purpose of the Project is to generate power. The Project consists of a concrete double-curvature arch dam 240 meters high, two flood-releasing tunnels, and an underground powerhouse system equipped with 3,300 MW power generation facilities. The annual energy output of 17 TWh is transmitted to the Sichuan and Chongqing power grids via four circuits of 500 kV transmission lines. Construction of the Ertan Hydroelectric Project has opened a new chapter in the development of the rich water resources of the Yalong River, one of the major tributaries of the Yangtze River. Project Objectives: 1) Alleviation of acute power shortages in Sichuan and Chongqing through added power generation capacity; 2) Reduction in the cost and duration of large-size hydropower project construction by introducing advanced technologies and construction methods into China; 3) Enhancement of capacities in the assessment of environmental impacts from water resource development and in the design of mitigation measures for negative impacts; 4) Further institutional development of EHDC through training in modern management practices and principles for power pricing; 5) Technical assistance in project design, implementation, optimization of power system operation, establishment of a perfect financial management system and human resource management. Project Implementation 1) International Competitive Bidding was introduced for procurement for the Project. Following the best international project management practices and the principle of combining technology transfer, co-production and import for the procurement of mechanical and electric equipment, project implementation management in China has been upgraded to a new level, and the manufacturing of hydro turbines and generators and associated auxiliary equipment has been upgraded to an international advanced level. -45 -  2) Outstanding consulting services. The advantages of the Special Board of Consultants (SBC) were fully taken in the initial stage of Project implementation. The SBC also played a very important role in decision-making and consultancy on technical issues, ensuring the smooth completion of project implementation. Pushed by the Environment and Resettlement Panel (ERP), environment protection measures have been taken for the reservoir area and the objective of environmental sustainability has been attained. 3) Perfect contract management system. Both Chinese engineers and international consultants were involved in contract management. The Dispute Resolution Board practice was first introduced for large-size project and it ensured timely settlement of contractual disputes. This has a far-reaching impact on contract management practices for project implementation in China. 4) In the 10 years of the Project implementation, construction progress followed the planned schedule and satisfied all milestones; quality met design requirements, and cost was controlled within the State-approved budget Project Operation and Energy Production 1) Data collected by the dam safety instrumentation system for the past four years after completion shows that the displacement and seepage of the dam body are less than design allowances. The project is in normal operation. 2) Since commissioning in 1988, 27 TWh of electricity has been generated as of 2001, equivalent to the total energy output of Sichuan Province in 1992. The power station has served 33 percent of the energy demand in dry seasons and 25 percent of the peak load of Sichuan and Chongqing power grids since commissioning, and has secured the stable operation of the power grids. Corporate Restructuring Preparation for setup of EHDC was initiated in 1987 and EHDC was officially established as an independent power producer (IPP) in 1990. The company becarne the Ertan Hydropower Development Company Ltd. in 1995, in line with the Corporate Law. Its shareholders include the State Development Investment Corporation (SDIC), the Sichuan Investment Company (SIC), and the Sichuan Electric Power Company (SEPC), holding 48, 48 and 4 percent of shares, respectively. Studies were carried out in 1996 for restructuring its organization and reforming its financial system. Implementation of the restructuring and reform was started in 1999 and EHDC shifted from project construction management to energy production and business operation with commercially oriented departments in its organizational structure. EHDC has become a famous IPP in China. Difficulties and Prospects Over the period 1998 to 2001, EHDC generated 27 TWh of electricity in total, with an average annual growth of 50 percent and a highest annual growth of 60 percent. Energy output could reach 14.6 TWh in 2002. Operating revenue has increased by 45.4 percent per year and will reach Y3.15 billion (including VAT) in 2002. Still, EHDC's financial indicators are lagging behind the financial covenants specified in the Project Agreement. The major causes are that (a) it takes time for the markets to absorb the energy from a large-size hydropower station and the timing is determined by the stability of the transmission system and the market demand. The Ertan hydro station was commissioned in 1998-2000 when demand -46 -  growth paused due to macroeconomic adjustment and market condition changes; (b) coordination of power industry development planning was insufficient; (c) construction of the transmission lines for Ertan was delayed; and (d) reformn of the power industry is still in progress. The Government of China (GOC) has made great efforts in improving EHDC's financial health and making full use of the benefits of Ertan, considering the important role that Ertan is playing in the operation of the Sichuan and Chongqing power grids and in the development of western China. With a series of measures taken including VAT rebates, EHDC's financial performance is recovering its health. Along with the demand growth in the Sichuan and Chongqing power grids, the enhancement of transmission line stability, and implementation of the strategy of exporting energy from the west to the east of China, EHDC will have a great future. -47-  2. SAR and ICR Key Dates Items SAR Completion Date ICR Completion Date Instruction to commence work September 14, 1991 September 14, 1991 River Diversion November 26, 1993 November 26, 1993 Dam foundation excavation completion December 1994 Dam concrete start February 1995 February 25, 1995 Diversion tunnel closure June 1, 1998 November 4, 1997 Completion of powerhouse draft tube liner: Unit 6 October 1, 1996 Unit I June 1, 1998 Commercial operation: Unit 6 October 1, 1998 August 18, 1998 Unit I June 1, 2000 December 4, 1999 - 48 -  3. Key Financial Indicators - Historical and Projections (2006, 2010) The financial covenants set in the Project Agreements have not yet been met by the end of 2001(see the table below). Ertan Hydropower Development Company, Ltd. Key Financial Indicators (As of December 31) And Financial Projections (for 2002, 2006 and 2010) (Unit: Y million) 1998 1999 2000 2001 2002 2006 2010 Energy Sales (GWh) 750 4,998 8,226 12,497 146.00 146.00 146.00 Average Tariff (fen/kWh) 15.81 15.50 17.87 18.41 18.80 29.15 31.55 Average Tariff 18.50 18.14 20.90 21.54 22.00 34.10 36.91 (incl. VAT) (fen/kWh) Operating Revenue 119 775 1,470 2,301 2745 4255 4606 Net Income After Tax (145) (673) (935) (377) 124 1269 1572 Operating Ratio (%) 177.84 114.21 75.09 58.16 47.8 32.0 30.2 Current Ratio 1.44 0.28 0.77 0.80 1.3 2.2 3.0 ROR on Revalued Assets - WBCovenants 12% 15% 15% 15% 15% 15% 15% - Actual -1.7% -1.1% 1.5% 3.9% 5.9% 11.1% 12.3% Debt/(Debt + Equity) - WB Covenants 80% 80% 80% 70% 70% 70% 70% - Actual 92.4% 94.6% 97.8% 98.0% 95.6% 87.5% 65.5% Debt Service Coverage Ratio - WB Covenants 1.3 1.5 1.5 1.5 1.5 1.5 1.5 - Actual 0.3 0.5 0.8 0.8 1.5 1.4 1.3 Assumptions for projections: I) Tariff kept constant at 22 fen/kWh (including VAT) for 2002-05, increased to 34.1 fen/kWh in 2006, and adjusted by 2 percent for inflation for the ensuing years; 2) Sales kept at 14.6 TWh constant; 3) VAT rebated until 2002; 4) Debt service reserve fund not considered when the actual debt service coverage ratio calculated; 5) The tenure of SIC's loan rescheduled from 2001-2009 to 2006-2019. -49-  4. EHIDC's Financial Statements 1) Balance sheet Ertan Hydropower Development Company, Ltd. Balance Sheets (As of December 31) (Unit: YMillion) Item 1997 1998 1999 2000 2001 ASSETS CURRENT ASSETS _ Casb 164.3 302.8 101.8 261.1 459.2 Accounts receivable 0.0 138.7 189.5 494.0 527.1 Inventories 4.1 34.4 52.0 81.1 79.3 Others 50.6 412.6 277.8 113.3 463.0 Total current assets 219.0 888.5 621.0 949.5 1,528.7 Long-term investrnents 0.0 3.3 3.4 10.1 11.3 FIXED ASSETS Plant in service 70.8 11,023.4 24,966.0 27,411.7 27,360.7 Less: Accumulated depreciation 22.6 210.8 997.1 1,938.0 2,969.8 Net plant in service 48.2 10,812.6 23,968.8 25,473.7 24,390.9 Work in progress 20,598.4 13,792.1 1,860.2 92.3 133.9 Total fixed assets 20,646.6 24,604.6 25,829.1 25,566.0 24,524.8 Deferred and intangible assets 0.0 32.6 95.1 256.2 313.9 Total Assets 20,865.6 25,529.1 26,548.6 26,781.8 26,378.7 EQUITY AND LIABILITIES CURRENT LIABILITIES Accounts payable 40.6 420.6 362.8 339.2 168.1 Short-terrn loans 370.0 158.0 624.0 0.0 50.0 Others 0.4 38.3 1,193.6 897.8 1,703.9 Total Current Liabilities 411.0 616.9 2,180.4 1,237.1 1,922.0 Long-term debt 18,794.5 23,027.9 23,056.8 24,989.7 23,969.0 EQUITY Paid-in capital 1,640.2 2,000.2 2,100.2 2,278.3 2,586.9 Capital surplus 18.8 28.6 28.6 28.6 30.0 Reserve surplus 0.0 0.0 0.0 0.0 0.0 Retained earnings 1.1 (144.4) (817.3) (1,751.9) (2,129.3) Total Equity 1,660.1 1,884.3 1,311.4 555.0 487.7 Total Equity and Liabilities 20,865.6 25,529.1 26,548.6 26,781.8 26,378.7 RATIOS Current ratio (times) 0.53 1.44 0.28 0.77 0.80 Debt as % of debt and equity(%) 91.9 92.4 94.6 97.8 98.0 - 50 -  2) Income statement Ertan Hydropower Development Company, Ltd. Income Statements (As of December 31) (Unit: Y Million) Item 1997 1998 1999 2000 2001 Energy Sales (GWh) 750 4,998 8,226 12,497 Increase (%) 566% 65% 52% Average Tariff (incl. VAT) (fen/kWh) 18.50 18.14 20.90 21.54 Average Tariff (excl. VAT) (fen/kWh) 15.81 15.50 17.87 18.41 Increase (%) _ -2% 15% 3% Operating Revenues 118.6 775.0 1469.7 2300.7 Value-Added Tax 20.2 131.8 249.9 391.1 Operating Revenues (Including VAT) 138.7 906.8 1719.6 2691.8 Operating Expenses Fuel 0.00 0.00 0.00 0.00 Purchased Power 0.00 0.00 0.00 0.00 Operating and Maintenance 18.35 57.42 89.51 186.85 Depreciation 188.17 786.37 940.84 1031.87 Sales Tax 2.88 18.83 33.17 56.12 Admninistration ______ 1.50 22.49 40.17 63.18 Total Operating Expense 210.90 885.12 1103.69 1338.02 Operating Income (92.31) (110.12) 366.06 962.70 Financial Expenses 53.26 483.95 1299.71 1345.08 Net Nonoperating Income 0.00 (79.07) 0.00 (1.51) Other Income 0.11 0.20 (0.87) 6.48 Taxable Incomes (145.47) (672.93) (934.52) (377.41) Income Tax 0.00 0.00 0.00 0.00 Net Income After Tax (145.47) (672.93) (934.52) (377.41) Profit Distribution Net Income (145.47) (672.93) (934.52) (377.41) Retained Earnings at Beginning of year 1.06 (144.41) (817.34) (1751.87) Balance of Profit Available for Distribution (144.41) (817.34) (1751.87) (2129.28) Reserve Surplus Allocation 0.00 0.00 0.00 0.00 Dividend 0.00 0.00 0.00 0.00 Retained Earnings at End of year 1.06 (144.41) (817.34) (1751.87) (2129.28) Rates Rate Base 5430.4 17390.7 24721.3 24932.3 Operating Ratio (%) 177.8 114.2 75.1 58.2 Return On Net Fixed assets (%) -_ (1.70) (1.09) 1.48 3.88 - 51 -  3) Cash Flow Statements Ertan Hydropower Development Company, Ltd. Cash Flows (As of December 31) (Unit: Million) Item 1997 1998 1999 2000 2001 SOURCES Net Income (145.5) (672.9) (934.5) (377.4) Depreciation 188.2 786.4 940.8 1,031.9 Borrowings 4,466.1 983.2 2,455.8 410.3 Equity 369.8 100.0 178.1 310.1 Total 4,878.6 1,196.7 2,640.2 1,374.8 APPLICATIONS Capital Expenditures 4,178.8 2,073.3 838.9 48.4 Long-term Investments 3.3 0.1 6.7 1.2 Change in Working Capital 325.2 (1,630.0) 1,112.4 (303.8) Dividend 0.0 0.0 0.0 0.0 Loan Repayment 232.8 954.3 522.9 1,431.0 Total 4,740.1 1,397.7 2,480.9 1,176.7 Changes In Cash 138.5 (201.0) 159.4 198.1 Cash balance at beginning of years 164.3 302.8 101.8 261.1 Cash Balance at End of Years 302.8 101.8 261.1 459.2 - 52 -  5. Technologies transferred by the project The following is the list of modem technologies and practices transferred to China by Ertan Hydroelectric Project I (Loan 3387-CHA) & II (CPL-39330; SCL-3933A; SCL-3933B) Technologies for the design and construction of double-curvature arch dams a) Double curvature arch-dam design Dam profile optimization Dam foundation face optimization b) Concrete placement Cooling optimization Placement layer thickness optimization Joint grouting c) Cofferdam seepage control High-pressure jet grouting d) Underground works engineering and construction methods Supporting by shotcrete and bolting e) Penstock design Design concept (allowing cracking in surrounding reinforced concrete) Inner water pressure balance calculations f) Construction machinery Programs for calculations of climbing cable crane g) Topography-adaptive layout of concrete aggregate system h) Design and application of U-shape anchorage cables for the sector gates of middle-level outlets Technologies for design and manufacturing of 550 MW hydro turbines and generators a) Technologies for Francis turbines Computer technologies and CFD software for analysis of flow passage Development and manufacturing of turbine runner models Five-axis manufacturing of runner blades Runner assembly and welding Structural design and manufacturing of head covers and stay rings b) Design technologies for generators Electromagnetic system design Ventilation system design Multipoint spring supported trust bearings Structural design and manufacturing of stator-bar insulation Manufacturing of field windings c) Calculation of large-size component strength and stiffness by finite element methods Project management a) Use of FIDIC guidelines for consultant services bidding b) Claim management Setup of claim evaluation comnmittee Claim treatment procedures HAR procedures Documentation management - 53 -  International cooperation a) Bulk power pricing b) Optimization of power plant and reservoir operation c) Organizational restructuring d) Model power purchase agreement e) Hardware and software for real-time control and dispatching of hydropower plant Resettlement a) Independent supervision and evaluation on implementation of Resettlement Action Plan (RAP) b) Sampled household surveys on income restoration Environment management a) Independent supervision and evaluation on implementation of EMP b) Forestation of reservoir zone financed by project owner for the first time in China c) Surveys on varieties of biota financed by project owner for the first time in China d) Competitive tendering and contract management for EMP implementation -54 -  6. Project Photos 1) The dam ,~~~~~~ I 2) The reservoir - 55 -  3) The plunge pool undler lmaintenance