China - Shuikou Hydroelectric Project

Document of The World Bank FOR OFFICIAL USE ONLY A,4 /1. 2 > )J-- Report No. 6189-CHA STAFF APPRAISAL REPORT CHINA SHUIKOU HYDROELECTRIC PROJECT November 24, 1986 Projects Department East Asia and Pacific Regional Office 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 Currency - RMB Yuan (Y) US$1.00 = Y 3.70 Y 1.00 = US$0.27 Y 1.00 = 100 fen (As of September 1986) Fiscal Year January 1 to December 31 Weights and Measures km - Kilometer (= 0.62 miles) kWh - Kilowatt hour (= 860.42 kcals) GWh - Gigawatt hour (1,000,000 kilowatt hours) TWh - Terawatt hour (1,000,000,000 kilowatt hours' kW - Kilowatt (1,000 watts) MW - Megawatt (1,000 kilowatts) kV - Kilovolt (1,000 volts) kVA - Kilovolt-ampere (1,000 volt-amperes MVA - Megavolt-ampere (1,000 kilovolt-amperes) TPD - Ton per day PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ECEPA - East China Electric Power Administration ECHIDI - East China Hydroelectric Power Investigation and Design Institute ECG - East China Grid FPEPB - Fujian Provincial Electric Power Bureau FPFB - Fujian Provincial Finance Bureau PPG - Fujian Provincial Grid FTPS - Fuzhou Thermal Power Station GOC - Government of China GPF - Government of the Province of Fujian GVIAO - Gross Value of Industrial and Agricultural Output HIPDC - Huaneng International Power Development Corporation IAEA - International Atomic Energy Agency MKE - Morrison Knudsen Engineering Company MOP - Ministry of Finance MOR - Minsitry of Railways MWREP - Ministry of Water Resources and Electric Power PCBC - People's Construction Bank of China SAA - State Audit Administration SBC - Special Board of Consultants SEC - State Economic Commission SHPC - Shuikou Hydroelectric Project Corporation SPC - State Planning Commission TCC - Technical Cooperation Credit WREPERI - Water Resources and Electric Power Economic Research Institute  FOR OMCIAL USE ONLY CHINA SHUIKOU HYDROELECTRIC PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I.THE ENERGY SECTOR,. .. I. T..EEGY..TR..........O....O.....O..................... 1 A. ............ .......... ................ ............ 1 B* Resource Endowment.... 00 ........... ........... * ; ... 2 C. Efficiency of Energy Use ............... ........... 2 II. THE POWER SUBSECTOR....................................... 3 A. Background ...................0..*. .000.0000.0.o.......e 000 3 B. The Market for Electricity............................... 4 C. Institutions .................................... 4 D. Tariffs0.0..............................., 0000000 000**00.0......... 5 E. Manpower and Training ........ ............. 5 F. Planning.00 ...0..0.000000...00000...0000000....00..0000..00000...000000000.... G. Technology Transfer ............................... . 7 H. Subsector Problems ..............................0....... 7 I. Subsector Objectives and Policies.*.*#................... 8 J. Role of the Bank ......................................... 9 III. THE BENEFICIARY . ...O............... 10 A. Legal Status and Organization ............................ 10 S.Baaetet................................... 10 C. Staffing and ........................................... . 11 E. Accounting .o.* ,.****...........e...........s..............e....... 12 F. Audit*................................................. 13 G. Tariffs ........ . 13 H. Billing and .........................00000000009000000000 14 I. Computer Applications and Information Management00.....0. 15 J. Insurance*.... .... ............ 15 This report was prepared on the basis of an appraisal carried out during February 14 to March 8, 1986, by C.K. Chandran, W. Cao, R. Morton, A. Liebenthal, I.H. Cheng and M. Cernea and a follow up mission in September 1986 by C.K. Chandran, W. Cao, R. Morton and I.H. Cheng. The following consultants participated: A. Raizen and D. Graybill. This document has a restricted distribution and may be used by recipients only in the performnce of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -ii - Page No. IV. THE POWER MARKET AND THE PROGRAM-.*..* ..................... 16 A. The East China Grid...................................... 16 B. The Fujian Power Grid.................................... 16 Co Load Forecast ...............o............................. 18 D. The 1986-1995 Power Development Program.................. 19 V. THE PROJECTo...............................................,o 21 A. Project Objectiveso...... o. o........o. . o.....*.....o.... . ..oo 21 B. Project Description..................................... .......... 21 C. Cost Estimate............................................o 25 D. Financing Plan.. ...........................................* 26 E. Procurementaton........o....o.o..o...................oooo 27 . Projet Implementation ............................................ 29 Co Disbursemental Apets...oo..o.................o.............o 31 H. Resettlementgo ........................... ..o....o......... 32 I Environmental Aspects ............................................... 36 Jo Monitoring and Reporting ......o..o......o.ooooo...o.o..o..e..... 37 K. Riskso o.ooooo..oooooo...oooooo..oooo......ooo....ooo.. 38 B. Past and Present Financial Performance................... 39 CA Future Finances .............................0............. 40 VIIo ....................U..... oo.ooooo o.ooo...ooooo.oo6..oo..... 45 A. Need for the Project..................................... 45 B. Least Cost Studieso.......................................o 45 C. Economic Rate of Return..........................o..... ..... 47 VIII. AGREEMENTS REACHED AND RECOMHENDATIONSo.o..o..oo.oooo ..... 48  - iii ANNEXES 1. Installed Capacity, Electricity Generation and Sales in the Power Subsector 2. Electricity Generation by Region and by Type of Plant 3. Performance Indicators for FPEPB 4. Staffing of FPEPB 5. FPEPB's Existing Training Facilities and Expansion Program 6. Electricity Tariff of FPEPB (1985) 7. Installed Capacity, Generation and Energy Sales of FPEPB 8. Energy Consumption by Category of Customers 9. Development Programs of East China Grid and Fujian Province 10. Development Planning of Min River Basin 11. Salient Physical Features of the Project 12. Terms of Reference and Program for Studies of Regional Integrated Operation 13. Cost Estimate by Category and Purpose 14. Annual Distribution of Expenditures 15. Procurement Schedules 16. Schedule of Disbursement 17. Resettlement Plan and Environmental Actions for Monitoring and Reporting 18. FPEPB's Financial Statements (1981-85) 19. FPEPB's Financial Forecasts (1986-95) 20. Assumptions to Financial Projections 21. ECEPA's Key Financial Indicators (1981-85) 22. Economic Evaluation of Railway Relocation Component 23. Economic Rate of Return 24. Least Cost Studies for ECG 25. Selected Documents and Data Available in the Project File CHARTS 1. Organization of the Electric Power Industry Within MWREP 2. Organization of FPEPB 3. Project Implementation Schedule MAPS 1. Link with East China Grid (IBRD 19561) 2. Scheme of Min Jiang Valley Development (IBRD 19562) 3. Fujian Power Grid (IBRD 19563)  CHINA SHUIKOU HYDROELECTRIC PROJECT Loan and Project Summary Borrower: The People's Republic of China Beneficiary: Fujian Provincial Electric Power Bureau (FPEPB) Amount: $140.0 million equivalent Terms: 20 years, including five years grace, at standard variable interest rate Onlending Terms: The proceeds of the loan would be onlent from the Government to FPEPB under a subsidiary loan agree- ment with a 20 year term, including five years of grace and at an interest rate of 8.5% p.a. The foreign exchange risk (between the dollar and RMB) and commitment fees would be borne by FPEPB. Project Objectives The project seeks to support economic growth in East and Descriptions: China and Fujian province through development of a major hydroelectric site on the Min river. The project would be the Bank's first involvement in the power subsector in Fujian province, and the fifth Bank loan to the power subsector in China. It would help to:. (a) develop a major hydro site to serve primarily as a peaking station in the East China Grid; (b) effectively introduce the most modern technology available for speedy construction of a large dam and power station; (c) link the East China and Fujian systems and promote more effective integrated operation of a major regional grid; and (d) provide training in management of international contracts for large civil works and in financial management. The project comprises the construction of a 101 m high concrete gravity dam, a spil way, a powerhouse and a navigation lock; provision and installation of seven generating units of 200 KW each; construction of a single-circuit 500 kV trans- mission line and installation of equipment at an associated substation; provision of consulting services for design and construction management; the resettlement of the reservoir area population and a program for its economic and social reestablishment; and carrying out of studies and a training program.  - ii - Benefits: The project will provide a dependable capacity of 1,000 MS to meet the peak demand for the combined East China and Fujian provincial grids and generate 4,950 CWh annually on the average. Indirect benefits include the improvement of navigational conditions on the Min river, and the expansion of the capacity of the Waiyang-Fuzhou railway. Risks: The geological conditions are very good, investi- gations have been thorough, and engineering compe- tent. There is an inherent risk of delay because of the sixe of the project and its long gestation period but arrangements wjade for construction have reduced it to a minimum. Estimated Costs: /a Local Foreign Total ---- Q( million) Preparatory work 19.9 2.9 22.8 Resettlement 100.5 - 100.5 Civil works 59.7 139.4 199.1 Metal works 9.8 3.8 13.6 Electrical and mechanical works 71.8 80.9 152.8 Transmission lines 30.4 25.0 55.4 Engineering and construction supervision 7.8 10.9 18.7 Administration 10.5 - 10.5 studies and training 0.5 1.0 1.5 Total Base Costs /b 310.8 264.0 574.8 Contingencies Physical 27.7 23.1 50.8 Price 118.8 111.4 230.2 Total Project Cost: /b 457.3 398.5 855.8 Interest During Construction IBRD loan - 72.7 72.7 Other loans 83.2 76.1 159.3 Total Financing Requiredt /b 540.5 547.3 1j087.8 /a The project will be eempt from import duties and taxes. rb Figures may not total exactly due to rounding.  - ifii Financing Plan: Local Foreign Total ---(US-$ milliron) - IBRD loan - 140.0 140.0 Foreign exchange loan(s) to be arranged - 260.0 260.0 Local bank loan(s) 540.5 147.3 687.8 Total 540.5 547.3 12087.8 Estimated Disbursements: Bank FY 1987 1988 1989 1990 1991