Announcement of The World Bank's Thermal Power Project for China's Jiangsu Province on March 23, 1994

FOR IMMEDIATE RELEASE iWorld Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 News Release No. 94/72EAP Contact: Erin Burns (202)458-2210 External Affairs - East Asia & Pacific Region POWER FOR CHINA'S JIANGSU PROVINCE Washington, D.C., March 23, 1994 -- A $1.08 billion thermal power project will alleviate acute power shortages in Jiangsu Province, one of the fastest growing areas in China. The project will also support increased commercial autonomy for the Jiangsu Provincial Electric Power Company (JPEPC). According to Vukota Mastilovic, World Bank task manager, "the project is supporting a major step forward in China's reform of the power sub-sector." The Yangzhou thermal power project is being supported by a World Bank loan of $350 million and an Expanded Cofinancing Operation (ECO) of $120 million. The Bank introduced the ECO program as a new co-financing instrument in 1989. Under the ECO program, the Bank can provide partial guarantees in support of commercial borrowings by client countries. This is the first ECO operation in China and will guarantee 21.2 percent of the original $120 million principal after a period of 10 and one-half years. The project will provide 1,200 metricity oup in aina megawatts (MW) of power to the East China power grid after construction of a 754.2 thermal power plant and two 500 kilovolt transmission lines. According to 7 Mr. Mastilovic, "China's electricity / output has grown by leaps and bounds in 4W / 10.7 the past decade, but demand has easily 7 .6 outpaced this growth and it's forecast to 2 W1958 continue growing at about 11 percent a .s ."5 year through 2002. It's im perative that o 3-42i . i i i i , China meet this demand so as to not '9 m 1 1965 1970 1975 19 1e 6 Imim 19e bottleneck future growth." Meeting this demand will require the addition of 17,000 MW of power capacity each year. Construction of the plant is expected to reduce air pollution since it will allow the phased retirement and restricted use of old, small generating units, which are generally heavier polluters. About 1,053 households will have to be relocated because of construction. Relocation and compensation guidelines for these families have been established and an environmental and resettlement unit has been set up by Yangzhou Municipality and JPEPC to handle planning and implementation for this. JPEPC's environmental and resettlement unit will also be strengthened. Power Sector Reform Promotes Autonomy The project takes place within a national context of evolving reform in the power sector, emphasizing increased autonomy and self-accountability. "Jiangsu Province has been recognized as one of the most advanced provinces in pursuing the nation's power reforms," Mr. Mastilovic says. "The Yangzhou thermal power project will support continued reform in this area, including the first-time separation of government from the operation and management of JPEPC." To prepare JPEPC for this, the project will support the development and implementation of a modern accounting system in the company's day-to-day operations as well as other technical assistance and training. Attracting Private Investment JPEPC's use of the ECO will allow the company direct contact and access to the commercial markets, exposing it to market practices in commercial borrowing. Foreign commercial lenders and investors will also be able to "look into JPEPC's operations as well as the structural and regulatory developments taking place in the power sector in China.," Mr. Mastilovic says. "Hopefully, this will diversify financing sources in the Chinese power sector by attracting foreign, private investors. Financing for the additional 17,000 MW of power needed each year has to come from somewhere." This is the sixth thermal power project supported by the Bank in China. The total cost of the project is $1,081.4 million. The Bank loan is extended for twenty years, including five years of grace, at the Bank's standard variable interest rate, currently 7.27 percent.1 Yangzhou Thermal Power Project Financing Local Foreign Total --US$ millions- State Energy Investment Corporation (SEIC) 162.8 20 182.80 Jiangsu Provincial Investment Company (JPIC) 135.7 16.6 152.30 YangzhouMuMcipal Investment Company (YMIC) 189.9 23.3 213.20 Jiangsu Provincial Electric Power Company 54.3 6.6 60.90 IBRD 350 350.00 IDA (Institutional Support and Preinvestment Project) 2.2 2.20 Expanded Cofinancing Operation (CO) 120 120 Totals 542.7 538.7 1081.4 'Note that money figures are expressed in US dollar equivalents. 2/.