China - Shanxi Qingshui Coal Mine Methane Project

Page 1 INTEGRATED SAFEGUARDS DATA SHEET CONCEPT STAGE 34575 Date ISDS Prepared/Updated: November 6, 2005 I. BASIC INFORMATION A. Basic Project Data Country: China Project ID: P095640 Project Name: Shanxi Qingshui Coal Mine Methane Project Task Team Leader: Jianping Zhao Estimated Appraisal Date: February 16, 2006 Estimated ERPA Signing Date: May 26, 2006 Managing Unit: EASEG Lending Instrument: Emission Reduction Purchase through Italian Carbon Funds Sector: Energy (100%) Theme: Energy and Environment, Climate Change Safeguard Policies Specialists in the task team: Peishen Wang, Youxuan Zhu, Loan/Credit amount (Euro, million): Carbon Funds: 32 Other financing amounts by source ($m): B. Project Objectives The objectives of the project are to: (i) create and trade GHG emission reduction (ER) credits under the CDM by reducing GHG emissions through capturing methane and use it as fuel by residential, industrial and commercial consumers; and (ii) reduce local air pollution through the reduction of coal use by industrial and commercial establishments and households. C. Project Description The CMM project would consist of the following two components: (i) the construction of four gas collection stations, five storage tanks and 85 km of medium pressure transportation pipelines together with metering and SCADA system to collect and transport about 240 million cubic meters of coal mine methane (50% methane content) gas annually from four mines to one municipality and two county towns; (ii) the construction of four gas storage stations, four high pressure casing distribution stations, 56 kilometers of medium pressure gas pipeline, 24 pressure stations, 413 pressure adjustment facilities, 30 kilometers of low pressure gas pipeline, 286 kilometers of in house pipelines, metering facilities and data acquisition and control system to distribute the CMM to 90,000 households and a large number of industrial and commercial establishments. Page 2 The total project cost is estimated at $72.54 million including the foreign exchange cost of $46 million and local currency cost of $26.54 million. An ADB loan of $46 million is to finance the direct foreign exchange cost and the remainder of the cost will be provided by an equity contribution of $17.54 million and a domestic loan of $8.8 million from the Industrial Commercial Bank of China. The total production of Emission Reductions (ERs) during the first 5 years of the project (2007-2012) is projected to be 8.4 million tons CO2 equivalent. Based on an indicative Certified Emission Reduction (CER) and Verified Emission Reduction (VER) price of Euro 4.25 per ton CO2, the total Emission Reduction Purchase Agreement (ERPA) value will be approximately Euro 35.7 million in which CF will purchase around Euro 32 million value of the CER. Implementing Agency The implementing agencies of the project are Shanxi Energy Industrial Group Corporation (SEIG) and Jincheng Municipal Gas Distribution Company (JMGDC). SEIG is a corporatized entity fully owned by the Shanxi Provincial Government. It has a large operation in developing coal mines, sale of coal, methane development, transportation and other downstream businesses. SEIG will establish an independent subsidiary for the construction and operation of the gas transportation project. D. Project location (if known) The proposed gas transmission and distribution project is located within the administrative jurisdiction of Jincheng municipality, in the south-western part of Shanxi province. It is about 500 km from Taiyuan, capital of Shanxi province, and 230 km from Zhengzhou, capital of Henan province. The Project spans across a total area of about 100 km2. The project area is mainly hilly dry-land. The Jincheng area is dominated by heavy industries and coal mining business where environmental quality has deteriorated over the past several years. Currently, the Jincheng municipal government is implementing various environmental improvement activities with the objective to receive the Government