China - Shuikou Hydroelectric Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15843 IMPLEMENTATION COMPLETION REPORT CHINA SHUIKOU HYDROELECTRIC PROJECT (LOAN 2775-CHA) June 28, 1996 Infrastructure Operations Division China and Mongolia 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 Unit: Yuan (Y) At Appraisal (March 1986) $1 = Y 3.7 Exchange Rates During Project Years Year Avg. 1987 - 3.73 1988 - 3.73 1989 - 4.73 1990 - 5.24 1991 - 5.45 1992 - 5.77 1993 - 5.81 1994 - 8.46 1995 - 8.33 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ADB - Asian Development Bank CAD - Computer Assisted Design ECIDI - East China Investigation and Design Institute EMP - Environmental Management Plan EPO - Environmental Protection Office FIDIC - Federation Instructionale des Ingenieurs Conseils FPEPB - Fujian Provincial Electric Power Bureau GOC - Government of China ICB - International Competitive Bidding ICR - Implementation Completion Report IERR - Internal Economic Rate of Return LC - Letter of Credit MOE - Ministry of Energy RCC - Roller Compact Concrete SBC - Special Board of Consultants SHPC - Shuikou Hydroelectric Project Corporation SRRO - Shuikou Reservoir Resettlement Office FOR OFFICIAL USE ONLY CONTENTS Preface E v alu atio n S u m m ary ........................................................................................................i PART I: PROJECT IMPLEMENTATION ASSESSMENT A. Project Objectives 1 B. Achievement of Project Objectives ...........................2 C. Implementation Record and Major Factors Affecting the Project ...................3 D. Project Sustainability.......................... 17 E. Bank Performance .............................. .......17 F . B orrow er P erform ance........................................................................... . 18 G . A ssessm ent of O utcom e ......................................................................... 19 H . Future O peration ................................................................................... . . 19 I. K ey L essons L earned ............................................................................ . . 20 PART H: STATISTICAL TABLES Table 1: Summary of Assessment ............................22 Table 2: Related Bank Loans ..................................23 Table 3: Project Timetable.....................................26 Table 4: Loan Disbursements: Cumulative Estimated and Actual..............26 Table 5: Key Indicators for Project Implementation..................................27 Table 6: Key Indicators fo- Project Operation .......................................... 28 Table 7: Studies Included in Project ....... ...... ......................................... 29 T able 8a: P roject C osts ............................................................................. . 3 1 T able 8b: Project Financing ...................................................................... . 32 Table 9: Economic Analysis of Power Plant............................................... 33 Table 10: Status of Legal Covenants ........................................................... 36 Table 11: Compliance with Operational Manual Statements.........................37 Table 12: Bank Resources: Staff Inputs...................................................... 38 Table 13: Bank Resources: M issions ........................................................ 38 FIGURE 1: Actual Progress vs. Target Schedule........................39 ANNEX 1: Projected and Actual Financial Statements of FPEPB ................40 ANNEX 2: Implementation Review prepared by the Borrower........ ................43 ANNEX 3: Aide-Memoire Extract fRr Completion Mission..... ..... .......54 This document has a restricted distribuion and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed wihout World Bank authorization.  IMPLEMENTATION COMPLETION REPORT CHINA SHUIKOU HYDROELECTRIC PROJECT (LOAN 2775-CHA) PREFACE This is the Implementation Completion Report (ICR) for the Shuikou Hydroelectric Project in China for which Loan 2775-CHA in the amount of $140 million was approved on January 15, 1987 and made effective on March 25, 1987. It was the first of two loans for the Shuikou dam and power plant, the second being Loan 3515-CHA, approved on September 1, 1992. This somewhat unusual approach was adopted because of the long implementation period and monolithic nature of the project facilities. The loan was closed on June 31, 1993, 18 months beyond the date originally envisaged. Final disbursement was made on August 5, 1993 when the balance of the loan ($929.20) was canceled. At the time of closing of the first loan, construction of the project facilities was well advanced, but by no means complete, with construction continuing under the second loan. It was decided therefore to delay the issue of the ICR until substantial completion of the components covered by the first loan, to allow meaningful evaluation of the project and distillation of lessons learned. An ICR for the second loan is scheduled for May 1998. This will update conclusions from this ICR, and also cover additional scope under the second project. The ICR was prepared by Barry Trembath, Infrastructure Division, China and Mongolia Department of the East Asia and Pacific Region, and reviewed by Mr. Richard Scurfield, Division Chief, and Mr. Juergen Voegele, Acting Project Advisor. The Borrower/Beneficiary provided comments, which are included as an annex to the ICR. Preparation of this ICR was begun during a completion mission in March 1996. It is based on the Staff Appraisal Report, the Loan and Project Agreements, Supervision Reports, correspondence between the Bank and the Borrower/Beneficiary, internal Bank memoranda and interviews with Bank and Borrower/Beneficiary staff involved in project implementation. The Borrower/Beneficiary contributed to the preparation of the ICR by preparing their own evaluation of the execution and implementation of the proJect, and by providing comments on the draft Bank ICR that were incorporated in the final version.  IMPLEMENTATION COMPLETION REPORT CHINA SHUIKOU HYDROELECTRIC PROJECT (LOAN 2775-CHA) EVALUATION SUMMARY Project Objectives 1. The objectives of the Shuikou Hydroelectric Project were to: (a) develop a major hydroelectric site to serve the Fujian and East China grids; (b) introduce the latest technology for dam and power station construction; (c) link the East China and Fujian power grids, and promote effective integrated operation of a major regional grid; and (d) upgrade Fujian Provincial Electric Power Bureau (FPEPB) capability in financial management and management of large civil works contracts. 2. The project comprised: (a) construction of a 101 m high concrete gravity dam, a spillway, a powerhouse, a navigation lock and appurtenant works at Shuikou on the Min River in Fujian Province; (b) provision and installation of seven generating units of 200 MW each and the associated electrical system including a 500 kV step-up substation; (c) construction of a single-circuit 500 kV transmission line from Shuikou to Hangzhou, including necessary equipment in a substation at Jinhua; (d) resettlement of about 63,000 people in the reservoir area; (d) consulting services for design and construction management; and (f) studies and staff training. 3. The objectives were relevant and important in the context of Government and Bank strategy in the power sector at the time of appraisal. Government strategy focused on acceleration of hydro development, with construction of necessary transmission lines, and updating technology in the sector. Bank strategy was to assist the Government in funding power system expansion in priority areas and in association with these investments to introduce modern utility management concepts as well as updating technology in technical areas. The objectives of the project were therefore consistent with Government and Bank strategies. Implementation Experience and Results 4. The project achieved its primary objective of developing a major hydroelectric site. The ex-post internal economic rate of return (IERR), at 21.5 percent, substantially exceeds the original expectations of 15 percent, because demonstrated "willingness-to- pay" is greater than original estimates, and because power and energy is entirely absorbed by the Fujian grid, obviating the necessity to construct a long transmission line to connect 11 to the East China grid. Modern construction technology was successfully introduced, enabling the civil works to be completed substantially on schedule despite setbacks from force majeure events. The objective of promoting effective operation of a major grid has been achieved with the completion of studies and carrying forward the results into FPEPB operations and subsequent investments. The objective of upgrading local capabilities in management of large civil works was convincingly demonstrated when the implementing agency and its construction manager had a major influence in recovery from initial delays during implementation. 5. The first generating unit was commissioned on August 1, 1993 two months behind the appraisal schedule. The subsequent three units were commissioned four to seven months behind schedule, and the remaining three approximately one year behind schedule due to delays in equipment deliveries, which for later units were exacerbated due to casting defects resulting in rejection of the castings. However, despite these delays, energy generation has been close to original targets. In 1995, with only four units in operation for most of the year, the output of the power plant was 4,763 GWh, which is only slightly below the design output in an average year of 4,950 GWh with all units operating. 6. With regard to final costs in comparison with appraisal, there was a cost overrun of 0.5 percent when expressed in US dollars and 72 percent when expressed in local currency. These variations are due to the higher-than-expected inflation in China and devaluation of the local currency from an exchange rate of Y3.70 to $1 at the time of appraisal to Y8.33 to $1 at the end of 1995. If actual expenditures are de-escalated to the appraisal date, then overall costs are about 18 percent above those originally anticipated, excluding the effects of inflation and devaluation. The cost overrun is almost entirely explained by resettlement costs which overran by 78 percent in real terms. The increase in resettlement costs was largely due to increased compensation costs which outpaced inflation. The responsiveness of the resettlement process to changing circumstances must be viewed positively. 7. The resettlement task was carried out according to plan, with all affected persons relocated on time. New infrastructure and housing represents a considerable improvement on that originally existing. Average income has already surpassed the before-moving level, after allowing for inflation, and this situation should improve in the next few years as newly planted orchards come into production. However, the progress is not evenly distributed among all new villages, with some having been done quite well and some having been done poorly. The independent agency appointed to evaluate resettlement is identifying villages and individuals still experiencing difficulties. Continuing resettlement efforts will concentrate on identified problem areas. 8. All elements are present to ensure sustainability of the project. Technically, the finished hydroelectric development is of good quality and the units have operated at a high availability over the initial operating period of up to three years. The pricing arrangements for the power plant output will ensure satisfactory economic and financial returns. On the institutional side, the upgrading of local capabilities has already been carried over to future Ill operations. The resettlement and rehabilitation process once it has fully achieved its objective will be sustainable in terms of the presence of an economic base that will continue to provide households with income over the long term. 9. Both Bank and Borrower performance are rated as highly satisfactory from identification to appraisal. Of particular note were the ultimately successful efforts made on both sides to get implementation back on track after initial implementation difficulties which threatened the success of the project. The performance of the implementing agency, its designer and construction manager are particularly commendable. Summary of Findings, Future Operations and Key Lessons Learned 10. The objectives of the project were consistent with those of the Chinese Government and the Bank and the project achieved its major objectives. The outcome is rated as highly satisfactory, and sustainability as likely. 11. The Project Operation Plan summarizes the arrangements made for future operations in terms of organization and staffing, training, operating and maintenance procedures, power dispatch, methodology for efficient use of water, dam safety procedures, flood warning and environmental monitoring. Resettlement activities are continuing with future funding being largely provided by the reservoir development fund which will generate income based on energy production of about Y20 million per year. The Bank is continuing its involvement with FPEPB in connection with the Second Shuikou Hydroelectric Project which is scheduled to close at the end of 1997. Supervision of this project will be the vehicle for supervising the resettlement process up until full restoration of income. The second project built on the first project's limited objectives for institutional development of FPEPB by including a tariff reform action plan which is being implemented. Beyond this, FPEPB has been selected by the Government as one of the 100 state-owned enterprises to be commercialized and corporatized on a pilot basis, the only power company so chosen. 12. The key lessons to be learned from this project are: (a) It is important that prequalification criteria with respect to joint ventures ensure that each partner of the joint venture is qualified to carry out its responsibilities, and that an acceptable joint venture agreement detailing rights and responsibilities, including joint and several liability, be obtained before contract signature. (b) The two-stage loan approach achieved its objective in reducing the early repayment burden before power plant commissioning. It was also appropriate in the environment of a fast growing economy and power system in that it allowed reevaluation of project scope and financial and institutional objectives at mid-term. However, disadvantages were difficulties in opening letters of credit in the absence of Bank commitment for the second loan, and the considerable cost of processing the second iv loan on both Bank and Borrower sides. This might indicate the desirability of adding a two tranche investment loan to the Bank's product line, with reduced requirements and documentation for the second tranche. (c) Resettlement activities are continuing and it is intended to produce a detailed report on positive and negative lessons learned from the process which will be summarized in the ICR for the Second Shuikou Hydroelectric Project. A preliminary assessment of lessons learned, with emphasis on areas where further improvements in the Chinese resettlement process are possible, is as follows: (i) While decentralization of resettlement planning and implementation to local levels works well in terms of maximizing participation, it is still essential to have a strong central resettlement office, preferably answering directly to the implementing agency, that can provide the necessary leadership, technical assistance and monitoring of resettlement activities at the local levels. (ii) Comprehensive resettlement monitoring systems providing as much disaggregation as possible should be developed along with resettlement plans. (iii) Resettlement planning should be further advanced at appraisal stage, to allow more detailed cost estimates to be carried out. These estimates should develop costs for measures necessary to restore income for comparison with compensation costs which finance these measures. (iv) Implementation of resettlement implementation should be advanced as much as possible, particularly land development for agriculture, to reduce or even eliminate the time lag between reservoir filling and full restoration of income. IMPLEMENTATION COMPLETION REPORT CHINA SHUIKOU HYDROELECTRIC PROJECT (LOAN 2775-CHA) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. PROJECT OBJECTIVES 1. The objectives of the Shuikou Hydroelectric Project were to: (a) develop a major hydroelectric site to serve the Fujian and East China grids; (b) introduce the latest technology for dam and power station construction; (c) link the East China and Fujian power grids, and promote effective integrated operation of a major regional grid; and (d) upgrade the capability of the FPEPB in financial management and management of large civil works contracts. 2. The project comprised: (a) construction of a 101 m high concrete gravity dam, a spillway, a powerhouse, a navigation lock and appurtenant works at Shuikou on the Min River; (b) provision and installation of seven generating units of 200 MW each and the associated electrical system including a 500 kV step-up substation; (c) construction of a single-circuit 500 kV transmission line from Shuikou to Hangzhou, including necessary equipment in a substation at Jinhua; (d) resettlement of about 63,000 people in the reservoir area; (e) consulting services for design and construction management; and (f) studies and staff training. 3. Four and a half years into the implementation of the project, during appraisal of the Second Shuikou Hydroelectric Project (Ln. 3515-CHA), the Bank agreed with the Borrower that, due to exceptional load growth in the Fujian grid, interconnection to East China to export Shuikou power was no longer viable since Fujian would absorb the full output of the power plant. The objective of linking the two grids was therefore dropped, and this was reflected in the statement of objectives for the second project. Nevertheless, with the growing size and importance of the Fujian grid in its own right, the objective of promoting effective integrated operation of a major grid was retained. 4. The development of the reservoir population, while not singled out as a specific development objective, would be undertaken in the context of OPN 10.08 and OMS 2.33; these Bank guidelines call for the relocation of the reservoir population in a manner that 2 would leave them after relocation as well off as before, possibly better. To this end a detailed resettlement plan was prepared in 1984 for the relocation and re-establishment of 63,495 persons living in 15 townships and 88 villages at a cost of US$100 million. The plan, summarized in Annex 17 of the Staff Appraisal Report (SAR), showed that due to a shortage of replacement land for traditional agriculture, alternatives such as forestry and orchards would be developed on hill slopes. Apparently due to a misunderstanding, the SAR project resettlement numbers only included resettlement in rural areas, and did not include urban resettlement in Nanping City involving an additional 17,125 persons. This component was separated in the resettlement planning process since it did not require any income restoration activities, only reconstruction of infrastructure and housing which the Chinese planners considered to be relatively straightforward. 5. The primary objectives were clearly stated in the appraisal report, and are judged to have been realistic. The objectives were also relevant and important in the context of government and Bank strategy in the power sector at the time of appraisal. 6. Important elements of government strategy were acceleration of hydro development; construction of extra high voltage transmission lines to transmit power from remote hydro sites to high growth areas, and for interconnection between regions; and introduction of modem techniques in project design and system planning. 7. Bank strategy was to assist the government in funding power system expansion in priority areas, and in association with these investments, to introduce modem concepts of utility management and facilitate technology transfer in planning, design, construction and operation of power systems and their components. The objectives of the project were consistent with Bank strategy in all of the above areas. B. ACHIEVEMENT OF PROJECT OBJECTIVES 8. The project achieved its primary objective of developing a major hydroelectric site. Despite some delays in project implementation, the ex-post IERR at 21.5 percent substantially exceeds the original expectation of 15 percent because (a) demonstrated "willingness to pay" is greater than original estimates; and (b) power and energy is entirely absorbed by the Fujian grid, obviating the need to construct a long transmission line to connect to East China. Even before completion of installation of the last generating unit, revenue from the project is already approaching half the cost of the dam and power plant. 9. The modem technology for dam and power station construction was successfully introduced. This enabled the project civil works to be completed generally on schedule, despite setbacks from force majeure events. The modern construction techniques pioneered at Shuikou are now being accepted as the norm for large projects in China, validating the "demonstration" strategy. 10. The objective of promoting effective integrated operation of a major grid has been achieved with the completion of studies and the carrying forward of their results into FPEPB operations and subsequent investments. While the Fujian grid is smaller than that 3 of East China--originally envisaged as the target of the studies, its projected size in the year 2000 (in terms of installed capacity) is in the same order as that of the East China Grid at the time of project appraisal. 11. The objective of upgrading local capabilities in management of large civil works contracts was convincingly demonstrated when the executing agency, FPEPB and its construction manager, Shuikou Hydroelectric Project Corporation (SHPC), played a major role in overcoming initial delays during project implementation. 12. Achievements in financial management were modest, but commensurate with the limited objectives of the project training component in this area. 13. The resettlement task was carried out according to plan between 1988 and 1992; 67,239 persons in rural areas, and 17,215 persons in Nanping City, were physically relocated. By mid-1995, 34063 new jobs had been created approaching the total requirement. Average income had already surpassed the before moving level, and this situation should improve in the next few years as newly planted orchards come into production. On the physical side, per capita housing space has increased from 30.0m2 before moving to 37.9 m2 in 1994 and inundated infrastructure has been replaced. To date, Y1,034 million has been spent on resettlement and rehabilitation. The original budget was Y410 million. C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT Implementation Organization 14. FPEPB was the executing agency for the project. For the Shuikou power plant a special organization, SHPC, was set up to manage construction of the project and exercise the functions of the engineer under the Federation Instructionale des Ingenieurs Conseils (FIDIC) Conditions of Contract. East China Investigation and Design Institute (ECIDI) served as the designer. The contract for the main civil works was awarded to a Chinese- foreign construction joint venture while the contract for the installation of electro- mechanical equipment was awarded to an experienced national level construction bureau after local competitive bidding. Resettlement in the reservoir area was managed by the Shuikou Reservoir Resettlement Office (SRRO), a special unit established by the Fujian Provincial Government for this purpose. International consultants were employed to assist SHPC in all aspects of construction and contract management, and ECIDI in design management and the review of bid documents. A Special Board of Consultants (SBC) was also appointed to review and comment at various stages during design and construction on the major technical issues, scheduling, management, environment, and resettlement. 4 Preparatory Works 15. Major preparatory works were carried out prior to commencing the main civil works, providing excellent conditions for a rapid start-up of the main contract. These included: (a) relocation of 21.9 km of highway; (b) a 350 m long construction bridge across the Min River; and (c) construction power, communications, a railway freight yard and a pilot construction camp. In addition, relocation of 59 km of railway line began on August 1, 1986 before commencement of the main civil works and was completed in November 1989, in time for the closure of the Min River. Dam and Power Plant Construction Overall Progress in Comparison with Schedule in SAR 16. The implementation schedule established in the SAR provided for commencement of the main civil works in January 1987, commissioning of the first unit after 6/2 years (June 1993) with the six subsequent units commissioned at four month intervals. There were three critical intermediate dates related to the river diversion schemes, main river closure on September 30, 1989, transition from Stage II to Stage III in September 30, 1991 and reservoir impoundment on March 31, 1993. In addition, there was a critical date for handover of the assembly and powerhouse bridge cranes to the power house equipment installation contractor in December 1991. The schedule was demanding, even by the standards of an experienced international contractor. 17. With the joint efforts of all concerned parties, many difficulties and problems were overcome and key dates were essentially met. The Min River was closed on September 25, 1989 with the river diverted through a diversion channel. The transition from Stage II to Stage III was carried out on November 20, 1991, and the reservoir impoundment started on April 2, 1993. Generating unit commissioings were delayed slightly because of delays in supply of turbine and generator components. The first six units were put into operation on August 1, 1993, February 8, 1994, September 2, 1994, December 28, 1994, November 6, 1995 and December 28, 1995, respectively. (Refer to the bar chart "Actual Progress vs. Target Schedule", included as Figure 1.) While delays associated with contractor problems and equipment procurement caused an 18-month delay in loan closing (from December 1991 to June 1993), implementation performance was notable. Main Civil Works Contract 18. After International Competitive Bidding (ICB), the main civil contract was awarded to a joint venture of a foreign contractor and three Chinese partners. The bid was the lowest by a considerable margin, but after extensive clarification and deliberation, the Engineer judged the construction method to be reliable, and the bid to represent the lowest evaluated price. The Bank indicated no objection to the evaluation and award. About 18 months into the construction period, it became evident that the contractor could not achieve the required progress with existing equipment on which his bid was largely based, and substantial additional purchases of new construction equipment would be 5 required. Other factors contributing to delays were management problems and many internal conflicts within the joint venture, and financial constraints imposed by the very low bid price. Discussions between the parties to the contract resulted in proposals for contractual reorganization, with a Chinese partner taking over management responsibilities from the foreign partner, an increase in advance payment from 15 percent to 25 percent with repayment over a longer period, and increase in foreign exchange proportion from 48.4 percent to 65 percent. The Bank agreed to these contract amendments, and the Ministry of Energy supported the effort by transferring experienced construction groups to the region to act as subcontractors. As a result of these measures, progress improved considerably. 19. A review carried out by FPEPB in February 1989, while indicating that the first key diversion date could be met, revealed that progress in later stages would again be affected by lack of equipment. The Bank was therefore requested to finance the purchase of construction equipment by the owner, which would be hired out to the contractor. The Bank declined, taking the position that equipment finance was the responsibility of the equity partners. As expected, the cot.tractor met the critical date for river diversion in September 1989, but by this time concrete preparation activities critical to second stage diversion were estimated to be some six months behind schedule. 20. Immediately after the river closure, cofferdam work in 1990 progressed well. Plastic concrete cut-off walls below the upstream and downstream main cofferdams were completed on January 6, 1990 and February 9, 1990, respectively. The foundation pit dewatering was finished on February 21, 1991 allowing excavation of dam and powerhouse foundations to commence. The upstream and downstream cofferdams reached their design elevation in May 1990. 21. However, the delayed procurement of components of the concrete production system and inadequate technical personnel and labor resulted in low initial foundation concrete placing rates although foundation areas were ready for placing. By the time of the completion of Stage II concrete systems, including the batching plant, cooling system and cable crane placement systems in August 1990, concrete placement in the dam and powerhouse was about three months behind schedule. 22. In order to speed up the progress and simplify the construction, ECIDI investigated design changes, and SHPC took the lead in computerized scheduling studies, resulting in a revised master schedule which took advantage of some design adjustments and diversion schedule modifications to maintain the overall completion date. These adjustments included the following measures: (a) Since the cooling plant was not available for placing dam foundation concrete during the first summer after diversion, MgO concrete was used to simplify temperature control of mass concrete. (b) Roller Compacted Concrete (RCC) was used in the lower blocks of the dam and powerhouse and in the downstream training wall separating 6 spillway and powerhouse discharges. This allowed the use of dump trucks to transport RCC supplementing the placing capacity of the crane. Related design changes included the contraction joint for RCC dam blocks, raising the diversion conduit bottom slab elevation to increase the quantity of RCC in the spillway section and changing the training wall into a gravity, rather than reinforced concrete, structure. (c) Slip forms were used for powerhouse tailrace piers, intake trashrack frames and the diversion conduit bulkhead gate frames. In situ concrete connecting slabs and columns in these areas were changed to precast members and the longitudinal joint between block A and B in the spillway section was relocated to allow Block A to be raised independently. (d) Soffits of the diversion conduits and intake bellmouths were changed to precast members to eliminate the time required for forming, curing and formwork removal and to simplify construction. (e) Intake stop logs originally intended to be manufactured by the contractor were eliminated, and the permanent emergency gates provided by the Owner were used as stoplogs. Reinforced concrete structures for draft tube gates and the powerhouse roof were changed to steel gates and steel trusses respectively. (f) Adjustments were also made to the diversion scheme. According to the contract schedule, floods in the 1992 high flow season would be discharged through 10 temporary diversion conduits and over the spillway ogee. The Stage III cofferdam at the upstream end of the diversion channel was an embankment designed to survive a one in ten year dry season high flow. To lower concrete placement requirements for the headblocks of the navigational facilities and dam blocks prior to the 1992 flood season and prior to the diversion transition from stage II to stage III, the diversion scheme was changed to 10 diversion conduits plus I 00m wide low sections in the spillway section. The embankment cofferdam was changed to an RCC section, designed to withstand a 10 year flood before overtopping and to survive overtopping. The schedule for diversion transition from stage II to stage III was adjusted from September 30, 1991 to the drier season in November extending the stage II placing period and facilitating the underwater removal of main cofferdams. 23. All of these measures proved to be practicable and effective in recovering from schedule delays. The main cofferdams were breached on October 25, 1991 and the upstream end of the diversion channel was closed on November 20, 1991, thus completing the transition from stage II to stage III of the diversion scheme, one and a half months behind schedule. 7 24. Concrete placement entered into the peak production period from October 1990. The monthly production from November 1990 to June 1991 (eight months) exceeded 100,00Om in every month and the maximum monthly production in December was 123,000m3. 25. After diversion transition, flood protection measures were all completed as scheduled. The seven intake gates were set into place on March 20, 1992, which successfully protected against an early wet season flood of 13,600 m3 on March 27, 1992 (100 year return period for March). However, on July 7, 1992, the project was subjected to an extraordinary flood, with a 50 year return period on an annual basis, which caused the overtopping of the uncompleted spillway and upstream and downstream cofferdams of the navigation facility. For the intake, spillway and powerhouse the overtopping resulted in schedule delays of about one month. In the navigation facility, since the downstream embankment cofferdam was washed out and construction equipment in the pit was damaged, delays of over six months resulted. 26. In order to accommodate the delay in spillway construction which carried over to tainter gate erection, it was decided to provide two more spillway maintenance gates, bringing the total number to four. These were installed in four spillway bays, initially retaining the reservoir and enabling the tainter gate installation in these four bays to proceed into the reservoir filling period. By February 1993, the project situation met the requirements for plugging the 10 diversion conduits and starting reservoir impoundment by the end of March. The first three diversion conduits were plugged with cast-in-place concrete in December 1992, six more in March 1993, and the last gate was set on April 2, 1993, as dictated by hydrologic conditions and downstream water supply requirements. The successful reservoir impoundment meant that the last milestone of dam construction was realized on schedule. Electrical and Mechanical Equipment Supply of the Generating Unit Equipment 27. After ICB, the contract for the first two generating units was awarded to a foreign/Chinese joint venture. This contract was not financed by the Bank. The contract for the remaining five units was awarded to the Chinese partner of the joint venture. Subsequently, the Bank indicated no objection to an extension of the ICB contract, to cover specialized components (governors and exciters) for all seven units. 28. Contracts for all seven generating units were signed in August 1988. However, payments for the equipment were scheduled to extend beyond the closing date of the loan, and while the Bank had agreed to consider the second loan this had not even been appraised, much less approved. This led to unanticipated difficulties in issuing the letter of credit (LC) and time consuming discussions and negotiations to find a way around the problem. Eventually, a guarantee was obtained from the Bank of China to cover the outer years, and the LC was eventually issued at the end of 1989, a delay of almost one year compared to the contract stipulations. The manufacturing schedule and equipment 8 delivery schedule were correspondingly affected. The following table shows the contractual vs. actual equipment delivery for the first six units. Because of excessive commitments of the local manufacturer, and the fact that Shuikou turbines are among the largest Kaplan turbines in operation today requiring complex manufacturing technology, the delivery intervals between units were longer than four months as established in the contract. These factors resulted in the commissioning dates of the various units being delayed by varying extents in comparison with scheduled dates. Equipment Delivery - Units 1 to 6 Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Item Contract Actual Contract Actual Contract Actual Contract Actual Contract Actual Contract Actual Date Date Date Date Date Date Date Date Date Date Date Date Embedded 05/91 01/92 08/91 06/92 05/93 06/93 07/93 08/93 11/93 03/94 05/94 08/94 parts Distributor 08/91 05/92 12/91 09/92 10/93 05/94 01/94 09/94 06/94 04/95 10/94 06/95 system Runner 05/91 12/91 12/91 12/91 10/93 02/94 01/94 07/94 05/94 05/95 09/94 08/95 assemblies Stator 12/91 06/92 03/92 02/93 08/93 01/94 11/93 04/94 03/94 10/94 07/94 02/95 assemblies Rotor 03/92 11/92 06/92 06/93 10/93 03/94 02/94 07/94 04/94 02/95 08/94 08/95 aasemblies Main Shaft 12/91 11/92 06/92 05/93 12/93 04/94 02/94 07/94 06/94 05/95 10/94 08/95 Thrusthead 09/92 01/93 09/92 07/93 10/93 04/94 02/94 07/94 06/94 05/95 10/94 08/95 and support Thrust 09/92 09/92 09/92 09/92 12/93 05/94 03/94 09/94 06/94 06/95 10/94 09/95 bearings Upper 12/91 12/92 03/92 02/93 10/93 12/93 02/94 09/94 06/94 06/95 10/94 06/95 bracket Notes: 1. The equipment delivery of units 1 and 2 refer to the date stipulated in the international contract. 2. The equipment delivery of units 3-6 refer to the date stipulated in the supplementary agreement of Units 3-7. Mechanical and Electrical Installation 29. The electrical and mechanical installation contract was signed in January 1991, and the contractor commenced mobilization on site in March 1991. The execution bay and bridge crane were handed over to him in December 1991 and the Unit I area was handed over in February 1992. According to the provisions of the contract, the installation duration for each unit was 18 months counted from the installation of stay ring to completion of 72-hour trial operation with units commissioned at four intervals. With 9 contributions from other concerned parties, the installation contractor was able to reduce the effect of delayed equipment deliveries and expedite the installation work to catch up some of the time lost through delayed deliveries. The installation time and commissioning date of units 1 through 6 are shown in the following table, which shows that even for the first unit the erection period was three months less than the contract period, with progressive reduction in the erection period for subsequent units, reducing to 10.5 months--or 7.5 months less than the contract period--for the sixth unit. The performance of the contractor in achieving these dates must be rated as outstanding. Installation Progress for Shuikou Units 1 to 6 Item Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Installation 15 13.5 12.5 11 12 10.5 duration (month) Including: 107 90 87 80 98 70 second stage (incl. holiday) cone placing time (day) Operation date 08/01/93 02/08/94 09/02/94 12/28/94 11/06/95 12/28/95 Operation date 05/31/93 09/30/93 01/31/94 05/31/94 09/30/94 01/31/95 established in SAR Actual vs. 2 4 7 7 13 11 Target (month delayed) Navigation Facilities 30. Navigation facilities included in the scope of the first project were a three flight shiplock to accommodate two 500 ton ships and a raft lift to accommodate a 10.5m x 64m x Im timber and bamboo raft. The transportation capacity of the shiplock was estimated at 3.2 million tons per year, while that of the raftlift was 1.6 million m3 per year. By the time of the appraisal of the second loan in mid-1991, FPEPB had decided to upgrade these facilities to convert the raft lift to a vertical shiplift which could also accommodate two 500 ton ships at the same time. 31. The shiplock is located inside the temporary diversion channel, and therefore a large portion of its excavation was finished before the operation of the diversion channel in 1989. The second stage excavation for the shiplock and shiplift started after the closure of the diversion channel on November 20, 1991. In December 1991 concrete placement commenced and the cumulative placement of the shiplock and head block of the shiplift reached 245,000m3 by June 1992 when construction was halted by the extraordinary 50 10 year flood on July 7, 1992 which delayed construction about six months. In order not to delay reservoir filling, SHPC extended the originally planned duration of the transshipment operation, that transported cargo around the dam during the period after closure of the diversion facilities until commissioning of the shiplock. After reservoir impoundment commenced, construction of the shiplock was expedited, but was not able to catch up to the original schedule. Civil works construction, metal structure, gates and hydraulic hoist installation were completed by April 1994 and mechanical equipment testing and electrical equipment installation were completed in September 1994 after which, water filling and trial operation were commenced. In October, when water filling had reached high levels, some cracking was observed in bottom slabs and walls of the lock chambers, and commissioning and trial operations were suspended. A meeting of a panel of eight local experts invited by the Ministry of Electric Power was held to review the design and construction of the shiplock in February 1995. Comprehensive treatment measures including crack grouting, leakage drainage systems and strengthening of walls and bottom slabs of two of the chambers by using prestressed cables were recommended. In May 1995, the remedial works were started and they were completed in September 1995. In October, the testing of equipment and hydraulic facilities was completed, followed by watering up the lock. Internal trial navigational operation was carried out in December, and on February 10, 1996 public trial operation started with traffic twice a day. Based on initial operating experience, it was decided to replace domestic hydraulic equipment and electric control elements with imported equipment to ensure reliable and stable operation of the shiplock in the long-term. This will be carried out in the upcoming dry season. Resettlement 32. The main factor that affected resettlement implementation was the emphasis on physical relocation and the subsequent development of household and village production systems. Production systems such as orchards, forestry and fish cages require a lead time of a number of years before yielding revenue. The gap between the loss of income and produce from reservoir lands and the start of cashflow from new systems is always present in resettlement, but in the case of Shuikou it was minimized, as old lands could still be farmed for several years after relocation but prior to inundation. On the whole, implementation was carried out successfully. 33. Early on in project supervision, the Bank initiated an Independent Evaluation of Resettlement. This evaluation by ECIDI took place over a five year period (1992 to 1996) and involved samples of 524 households and 35 villages. The annual reports of the evaluation proved particularly valuable in providing FPEPB, SRRO and the Bank with regular feedback as to achievements and outstanding problems. The Independent Evaluation is the first of its kind in China and provides a thorough case study. 34. Overall, physical resettlement works have been carried out in a timely and satisfactory manner. The economic re-establishment of households has also been generally handled in a timely and satisfactory manner, resulting in income levels having, on average, regained previous levels. However, the progress is not evenly distributed among all new villages, with some having done quite well and some having done poorly. SRRO has been II urged to identify those villages still experiencing difficulties and to provide further assistance. Environment 35. An environmental management plan prepared for the appraisal of the second loan grouped activities into four categories: environmental protection, environmental monitoring, special studies and instrumentation, equipment and training. 36. The three major items under environmental protection were relocation of water supply intakes, reconstruction of navigation facilities, and afforestation of construction site areas. Water supply intakes needed to be relocated to avoid possible fouling from downstream waste water outfalls after reservoir filling. This was accomplished well before reservoir filling. Existing navigation facilities were also reconstructed and considerably upgraded, in line with the anticipated use of the reservoir for navigation. The new works covered 26 wharves of various sizes, three navigation administration buildings, navigation channel reconstruction to accommodate 2 x 500 ton barge fleet, re- establishment of navigation markers to Grade I of the National Standards on Inland Navigation. Afforestation of the areas around the construction site is well underway and is expected to be completed by the end of 1996. 37. Environmental monitoring focused on three areas: water quality monitoring particularly in the areas of pollution inflows near Nanping City, hydrological monitoring in the catchment and sediment deposition in the reservoir. Water quality monitoring to date has indicated no deterioration in river water quality through Nanping City. Because of the small volume of the reservoir in relation to average flow, velocities through the reservoir are relatively high even in the dry season. This results in efficient flushing and dilution of pollution loads. Nanping City's program to improve effluent quality is continuing. The originally envisaged hydrological monitoring has been expanded to include a comprehensive flood warning system, with real time transmission of readings from precipitation and streamflow gauges to the Shuikou power station, where projected flood hydrographs are automatically computed. The first survey of sediment deposition in the reservoir since its filling was carried out in 1995. This indicated no significant deposition to date. The next survey will be carried out in 2000. 38. The special study consisted of the development of a mathematical model to enable a study of the assimilation capacity of the stretch of the river bordering Nanping City after reservoir filling. This study was completed before reservoir filling, and predicted adequate capacity to assimilate the biological load from Nanping effluents, which has been borne out by monitoring results reported above. A small unit consisting of two to three people has been established in the Shuikou Power Plant to be responsible for environmental and hydrological monitoring and the flood prediction system. These staff have received specialized training in each aspect. 12 Procurement 39. In all, there were eleven prior review contracts financed under the loan, one for civil works, six for goods and materials and four for consulting services. The major value was concentrated in the civil works contact and the two contracts for generating units, one mechanical and one electrical which were both awarded to a single joint venture. In general, procurement proceeded smoothly and there were no significant delays in evaluation and award of contracts. For the main civil works contract, with a value of about US$150 million equivalent, the following schedule was achieved: Bid opening July 31, 1986 Bid evaluation report submittal October 7, 1986 Approval by the owner October 14, 1986 Approval by the government October 30, 1986 Approval by the Bank November 12, 1986 Issuing invitation letter for bid award November 15, 1986 Signing contract December 15, 1986 40. With regard to the generating units, turbine documents were issued four months ahead of the generator documents. This was at the Bank's insistence, so that the evaluation report for the turbines would have been submitted to the Bank prior to the receipt of bids for the generator, thus avoiding any temptation to deviate from ICB procedures in evaluating the turbine bid. The time from receipt of generator bids to signing of contract was 5.5 months which is also considered good for this type of equipment. 41. Procurement activities which had a substantial effect on implementation were the prequalification of main contractors in the case of civil works, and qualification criteria for suppliers in the case of the generating unit contract. 42. For the civil works, 32 applications for prequalification were received involving seven individual foreign contractors, seven foreign joint ventures and 18 foreign-local joint ventures with a total of 80 contractors seeking participation. 43. Candidates were required to demonstrate the adequacy of their experience in similar works, qualified personnel, available and suitable equipment and adequate working capital. Specific qualification criteria were established for experience in similar works. Domestic price preference was allowed for qualified domestic contractors and joint ventures with majority Chinese ownership. Thirteen of these applicants were eventually recommended by the Chinese side, and the Bank provided no objection to this short-list. 44. According to the standards applying at the time, the prequalification evaluation criteria were quite stringent and might have been expected to result in a well qualified shortlist for the civil works contract. However, it is evident in retrospect that there was at least one significant shortcoming in the process, in that prequalification criteria were related to the joint venture as a whole, with no requirement that each partner should be qualified to fulfill his responsibilities under the joint venture agreement. This was 13 important since the domestic price preference provision encouraged Chinese participation above 50 percent. An analysis of the capability of Chinese partners to contribute 50 percent of inputs (principally finance) to the joint venture would probably have revealed their inadequacy in this area, which was later revealed by cash flow problems during implementation. 45. With regard to the qualification criteria for generating unit manufacturers, there were also significant shortcomings by today's standards, in that joint venture partners were not required to be jointly and severally liable. The accepted bid was from a joint venture of four parties, a Chinese trading company and manufacturer and a foreign trading company and manufacturer. The foreign partners were responsible for imported components and the Chinese parties for local components. There was no requirement for the foreign parties, who fully met the qualification criteria, to assume responsibility for the performance of the local partners who did not fully meet the prequalification criteria. The joint and several liability requirement was a general requirement for civil works joint ventures at the time, but was not common for mechanical and electrical supply contracts. In the event, this did not affect quality, but may have affected delivery time for local components. 46. The above shortcomings have been recognized and taken into account in subsequent operations, particularly Ertan and Xiaolangdi projects. In addition, the Bank standard prequalification documents which apply to both civil works and major equipment installations now require joint and several liability and specification of individual qualification criteria for partners. Consulting Services 47. Four main contracts were awarded for foreign consulting services, one relating to design and construction supervision of the Shuikou Dam and power plant and three relating to studies to upgrade FPEPB institutional capability. Contracts with individual consultants were also signed, mainly in relation to the SBC. 48. For the design and construction supervision services, the SAR estimate allowed for 700 man months of foreign personnel. However, the contract provided for assessment of actual requirements on an annual basis, and actual inputs up until the end of 1995, were about 220 man months. The Bank closely monitored implementation to ensure that services specified were adequate, and on the few occasions where additional input was recommended, the recommendations were accepted by FPEPB. Since the quantity and nature of services were specified by FPEPB in consultation with the recipients of the assistance, ECIDI and SHPC, they enjoyed a high degree of "ownership" by them. With respect to the designer, ECIDI, support was provided in the following areas: (a) preparation of drawings and specifications for civil works to international standards; 14 (b) more than 30 special consulting reports relating to design optimization, and specialized components; (c) ICB bid documents and technical specifications for internationally procured equipment; (d) evaluation of ICB bids; (e) establishment of a CAD software package, and establishing a CACMA data base compatible with China's standard specifications; and (f) planning and management of the process of design and drawing production to ensure timely delivery of drawings. 49. With respect to the Engineer, SHPC, assistance was provided in the areas of (a) Project Administration: Procedures for administering design changes, payments and claims; (b) Contract/Claims Management: Performance review, avoidance of potential claims, variation orders, review and settlement of claims; (c) Construction Management: Methods and procedure review, quality control; and (d) Schedule Control: Schedule review, and coordination, work simplification and design change recommendations. Technologies transferred to ECIDI and SHPC were highly valued by them, and this has led to their replication in other projects under their control. 50. The Special Board of Consultants met on seven occasions between November, 1985 and February, 1992. Although this represents about once a year on average, the interval between meetings varied between five and twenty months, coordinated with key construction activities and identified problems. Beyond a core group, the composition of the Board was also varied with time to involve expertise relevant to the implementation plan. Both of these approaches have proven to be very effective. 51. The two studies envisaged in the SAR were subsequently divided into three, generally covering the same scope. All three studies were successfully carried out, all yielded results which have been carried forward into FPEPB operations and subsequent investments (see Table 7). Project Costs 52. The estimated cost of the project at appraisal (excluding interest during construction) was $398.40 million in foreign costs and Y1,692. 10 million in local costs, 15 equivalent to a total of $855.80 million (Y3,166.4 million). The final cost was $179.06 million in foreign costs and Y4,152.99 million in local costs, equivalent to a total of $914.86 million (Y5,333.40 million) (see Tables 8a-1 and 8a-2 for details). Considering overall costs (foreign plus local), there is a cost overrun of about 7 percent when expressed in US dollars and 151 percent when expressed in local currency. The variation in cost overrun is due to the higher-than-expected-inflation in China and the devaluation of the local currency from an exchange rate of Y3.70 to the dollar at the time of appraisal to Y8.33 to the $1 at the end of 1995. However, it should be noted that there are two significant changes of scope between the appraisal and final cost estimates. Firstly, the 500 kV transmission line included in the original estimate was not constructed and therefore does not appear in final costs. Secondly, the appraisal estimates excluded railway relocation costs, since they were considered to be economically justified in their own right, whereas FPEPB have included them in the final costs. If these two factors are excluded from both estimates, overruns are reduced to 0.5 percent when expressed in foreign currency and 72 percent when expressed in local currency. While the comparison of costs expressed in US dollars gives a reasonable estimate of cost overruns excluding the effects of inflation and devaluation, a more accurate estimate can be obtained by de- escalating both foreign and local costs to the appraisal date, using respective foreign and local inflation rates, combining the two at the appraisal exchange rate, and comparing the resultant value with the appraisal estimate (including physical contingencies). This analysis indicates a cost overrun, excluding the effects of escalation and devaluation, and adjusting for scope change of about 18 percent. This represents relatively good agreement between estimated and final costs, considering the large local inflation during the period, which may be imperfectly estimated by the Consumer Price Index at the national level. Carrying out a similar analysis with major components, indicates that the cost overrun is almost entirely explained by resettlement costs, which overran by 78 percent, excluding the effects of inflation. Economic Performance 53. Economic Performance . For the appraisal, generation planning studies were carried out to demonstrate that Shuikou was part of the least-cost expansion plan for the East China Grid. This was independently verified by comparing Shuikou with a combination of coal-fired power plants and a pumped storage plant in Jiangsu Province. The latter analysis indicated an equalizing discount rate of 14.9 percent. A similar analysis was carried out ex-ante using coal-fired thermal power plants as the alternative, which is appropriate to the Fujian grid. This yielded an equalizing discount rate of 46.7 percent. The long-run average incremental cost (LRAIC) of Shuikou is calculated at 22.10 fen/kWh (1995 prices, 12 percent discount rate), in comparison with 50.8 fen/kWh for the coal alternative, strongly demonstrating that even with modest cost overruns and completion delays, Shuikou is very economical in comparison to thermal alternatives. 54. At appraisal, the IERR was calculated by valuing the output of Shuikou at the cost of providing peaking energy using the next best project. This yielded an IERR of 15 percent, which is effectively the equalizing discount rate in the analysis described in para 16 55. As noted in para 55, this type of analysis, which uses the alternative costs as a "benefit", carried out ex-ante, yields an IERR of 46.7 percent. 55. The appraisal also used an alternative approach valuing Shuikou energy at FPEPB projected 1995 tariff level, deflated to 1985. This approach, which was considered to significantly underestimate the value of Shuikou as a supplier of peaking energy, yielded an IERR of 8.0 percent. This type of analysis was repeated ex-ante using the average price of energy sold to the grid from all power plants in 1995, plus power development surcharges applied at provincial and local levels, as a minimum proxy of "willingness-to- pay". This yields an IERR of 15.1 percent. However, overall system tariff considerably underestimates "willingness-to-pay". Due to tariff policy changes since the original appraisal, the price of energy from "new power plants" is passed through to the consumer, and all incremental consumption since 1983 is charged at a "new price". If the average new price is used as a proxy for willingness to pay, then IERR increases to 21.5 percent. Even this value underestimates the value of Shuikou energy because it takes no account of the higher value of peaking energy to the system. Nevertheless, it is taken as a minimum proxy for "willingness-to-pay". FPEPB Financial Performance 56. Comparative financial statements containing the projected and actual amount for the period 1986 to 1995 are summarized in Annex 1'. FPEPB fixed assets in 1994 amounted to Y9,103 million, higher than the estimate by Y3,358 million, mainly due to the Shuikou project cost overrun and a 1993 asset revaluation applying to all power companies in China which added Y1,200 million. To meet the higher capital needs, FPEPB incurred more borrowings, so its outstanding loans at end of 1994 reached Y8,705 million. Despite the additional borrowings, FPEPB maintained a balanced financial structure and kept the debt/equity ratio below 75/25. 57. Over the ten years, from 1986 to 1995, energy sales have increased by a factor of 3.5 percent, an average increase of 15 percent per annum, reflecting the fast economic growth in Fujian Province. The average tariff has been adjusted from 7.6 fen/kWh in 1986 to 30.3 fen/kWh in 1995--an increase in constant terms of 16.6 percent per annum--and in real terms of 5.8 percent per annum. Actual operating revenues in 1995 amounted to Y5.33 billion, about fourteen times of that in 1986 and 65 percent higher than projected at appraisal. Along with the increase in revenues, operating costs also rose rapidly, largely contributed by much higher than expected power purchase cost since 1989. This results from changes in the power sector structure, whereby most new plants are constructed by semi-independent joint investment partnerships which sell power to the FPEPB grid. FPEPB role has thus largely changed to that of a purchasing and transmission agency. In 1994, FPEPB purchased 8, 920 kWh at an average cost of about 19 fen/kWh, compared with original projections of 1,550 kWh and 5 fen/kWh, respectively. Apart from power 1995 figures are based on unaudited financial statements. 17 purchase costs, the value added tax introduced in 1994 had a substantial effect on total operating cost. As a result, the operating ratio has been as high as 90 percent since 1989. 58. Over the course of project implementation, the debt service ratio has been satisfactorily kept at higher than 1.3 as covenanted under the first loan. In 1995, this increased to 1.5, thus complying with the more stringent covenant of the second loan. Regarding the self-financing ratio, FPEPB met the break-even covenant of the first loan in all years. The self-financing covenant of the second loan was complied with in all years except 1994 when the ratio achieved was 21.2 percent in comparison with the covenanted 25 percent. This can be attributed to several factors: (a) a change in the taxation system in 1994 which resulted in much higher transfers to the government, concurrently with a government imposed tariff freeze for macroeconomic purposes; and (b) peak expenditure on Shuikou concurrently with delayed commissioning of some generators due to casting defects. A review of the unaudited financial reports for 1995 indicate that all covenants were met, with the self-financing ratio rising to 31.8 percent, comfortably in excess of the covenanted value of 25 percent. Overall therefore, it can be concluded that FPEPB financial performance has been satisfactory. D. PROJECT SUSTAINABILITY 59. All elements are present to ensure sustainability of the project. Technically, the finished hydroelectric development is of good quality and the units have operated at a high availability over the initial operating period of up to three years. Efficient and economic operation is expected based on FPEPB past record of hydroelectric plant operation and the arrangements for the current project, as set out in the Operational Plan. Financially, the pricing arrangements for the plant output will ensure satisfactory financial and economic returns. On the institutional side, the upgrading of local capabilities in design and management of hydroelectric construction has already been carried over to future operations. ECIDI has provided consulting services to local entities in preparing projects for international bidding. These include at least three Bank financed projects. SHPC will carry over its construction management capabilities to the Asian Development Bank (ADB) financed Mienhuatan project. The limited institution development objectives in relation to FPEPB itself have been built on under the Second Shuikou Hydroelectric Project, and further developed under the ADB Mienhuatian Project. 60. The resettlement and rehabilitation, once it has fully achieved its objective, will be sustainable in terms of the presence of an economic base that will provide households with a flow of annual revenues. Income targets have generally been met on an average basis although there is still a seven percent poverty level among resettled households. The replacement of rice agriculture with orchards has the further potential to significantly improve standards of living on an ongoing basis. E. BANK PERFORMANCE 61. The inclusion of the Shuikou project in the Bank lending program dates from 1983, but expenditures were minimal until FY86. The first significant mission was the 18 preappraisal in November/December 1985. This was quickly followed by an appraisal in March 1986, with the timing of subsequent phases dictated by the desire to receive civil works bids before negotiations. Despite the substantial number of issues to be dealt with during 1986, including the civil works bidding, the preparation, processing and advance procurement were carried out efficiently and economically. The Bank showed particular flexibility in varying its standard procedures to accommodate the Borrower's request for a loan for the first four years of implementation, and agreeing to consider a second loan at a later date. Judged by today's standards, there could be criticism of the Bank's no objection to qualification criteria for civil works contractors and equipment suppliers, but as discussed in paras. 43 and 44 this was then considered best practice. Bank appraisal of project related resettlement concentrated on re-establishment of income rather than only on relocation. During implementation emerging construction delays were quickly matched by increased inputs from Bank staff and the attention of Bank management. The solutions which emerged for dealing with the delays were appropriate and the flexibility of the Bank in amending the Loan Agreement to provide funds in needed areas was a large contributor to the solutions. At a later stage, when the project continued to be behind schedule, advice from Bank technical staff precipitated scheduling studies which were largely responsible for the achievement of the second stage diversion key data and avoiding a one year delay. 62. Based on the above, Bank performance is rated highly satisfactory from identification through supervision. F. BORROWER PERFORMANCE 63. FPEPB, as the implementing agency, was strongly supported by ECIDI, the designer, and SHPC, the construction manager. The performance of all organizations is rated as highly satisfactory. 64. FPEPB successfully implemented the project with only modest cost and time overruns. It overcame problems as they arose, was open to new technologies and construction management techniques, and did not stint when it came to employing the best available foreign expertise to support the local implementation entities. It was also responsible and far sighted in demonstrating a strong commitment to successful resettlement, including strong support to necessary budget increases on two occasions. 65. ECIDI proved itself to be a world class design organization, exhibited professional maturity in identifying areas where it could benefit from overseas experience, and took advantage of the project to upgrade its capabilities in these areas. Its expertise and flexibility in carrying out design changes to enable construction to be expedited is especially commendable. They also performed well in their non-traditional role as independent evaluators of resettlement, consistently demonstrating their independence and objectivity over the course of the evaluation. 19 66. SHPC had perhaps the biggest challenge, being a new organization, fulfilling a non-traditional function in Chinese implementation of large projects. However, it rose to the challenge, gaining confidence and authority as implementation progressed. It took on the considerable responsibilities of managing the construction, supervising and coordinating the activities of twenty six contractors, including a detailed coordination of deliveries for the generating unit contracts. It took advantage of the project and the Bank's loan to fully acquaint itself with modem project management techniques and equip itself with appropriate management software. 67. The most impressive demonstration of the performance of the three implementing organizations was in the recovery from initial delays, when all three organizations worked closely together, exhibiting a high level of competence, flexibility and versatility in working with the contractors and suppliers in overcoming the delays. 68. Overall the SRRO has performed satisfactorily in terms of works completed and jobs created. As the full rehabilitation is not yet completed, the SRRO should continue its efforts, financed by the Reservoir Maintenance and Construction Funds. SRRO monitoring and periodic reporting has been lacking, perhaps in the mistaken belief that the ECIDI evaluation would take care of this. G. ASSESSMENT OF OUTCOME 69. The project outcome is rated as highly satisfactory. All of the development objectives were achieved. The economic rate of return has increased in comparison with appraisal estimates. Sustainability is highly likely, and both Borrower and Bank performances are rated as highly satisfactory. H. FUTURE OPERATION 70. The project commenced operation in August 1, 1993 with the commissioning of the first generating unit. In 1995, with only four units in operation for most of the year, due to favorable hydrology, the output of the power plant was 4,763 GWh, which is only slightly below the design output in an average year with all units operating, i.e. 4,950 GWh. Total generation to date is 8,290 GWh which has generated revenue equal to almost 50 percent of the construction cost of the powerhouse including interest during construction. SHPP presented figures which indicate a mature forced outage rate of about six hours per year per unit or 0.07 percent, which is remarkably low. Overall availability, after forced and planned outages, is about 93 percent. 71. Trial operation of the shiplock was commenced on December 26, 1995, and it was put into public trial operation on February 10, 1996. Up until March 22, 1996, 538 boats had passed through the lock in 92 passes. Total tonnage passed was 16,557 tons or 30.8 tons on average. Typically, the lock can pass 12 boats at one time. At present, no toll charge is levied, but it is planned to introduce charges once shipping volumes have been established. Based on initial operations, an annual volume of 120,000 tons, well below the 3.2 million ton estimated capacity of the facility, is projected but this is likely to increase 20 substantially once the availability and reliability of the lock is more widely known, and boat sizes increase to the size that can now navigate the river and reservoir. 72. The FPEPB Operation Plan summarizes the arrangements made for future operations of the power plant in terms of organization and staffing of the operating unit, training technical and financial staff, operating procedures, regular maintenance program, power dispatch, methodology for efficient utilization of water, dam safety procedures, the flood and environmental monitoring. With regard to resettlement, Y23 million of the budget of YI,057 million remains to be spent on production development. Thereafter, the reservoir development fund will generate income based on energy production of about Y20 million per year. This should sustain the workplan of the SRRO. With regard to environmental operations, a small unit has been established in the Shuikou Power Plant to be responsible for environmental and hydrological monitoring and operation and maintenance of the flood warning system, ensuring the continuation of these activities. 73. The Bank is continuing its involvement with FPEPB in connection with the Second Shuikou Hydroelectric Project which is scheduled to close at the end of 1997. Supervision of this project will be the vehicle for supervising the resettlement process up until full restoration of income. The second project built on the first project's limited objectives for institutional development of FPEPB by including a tariff reform action plan, which concentrated on tariff restructuring including the unification of 'old' and 'new' tariffs, such that each user in the same category pays the same price. The implementation of this plan, which is ongoing, is putting FPEPB ahead of all other Chinese power companies in this area. Beyond this, FPEPB has been selected by the Government as one of the 100 State Owned Enterprises to be commercialized and corporatized on a pilot basis, the only power company to be so included. The Bank cooperated with the ADB during the preparation of the Mienhuatian Hydroelectric project, under which the objectives of commercialization and corporatization of FPEPB will be pursued. I. KEY LESSONS LEARNED 74. With respect to procurement, it is important that prequalification criteria with respect to joint ventures ensure that each partner of the joint venture is qualified to carry out its responsibilities under the contract. In addition to technical capabilities which are the usual focus of qualifying criteria, financial capabilities (ability to finance the contract and absorb losses if necessary) and capacity to carry out the work along with other commitments, are also very important in the Chinese context. Financial capabilities are particularly important with regard to civil contractors, and manufacturing capacity is important for equipment suppliers. A comprehensive joint venture agreement detailing the rights and responsibilities of each partner and management arrangements should be required before contract signature. In the case of power generating units, where components are being supplied from various sources, it is important that a fully qualified manufacturer takes full responsibility for the overall supply contract. 75. The two stage loan arrangement achieved its objectives in reducing the early repayment burden before power plant commissioning and reducing commitment charges. 21 It was also appropriate in the context of the fast growing Fujian system, in that it allowed reevaluation of project scope at mid-term. As a result of this, the transmission line to East China was deleted, the navigation facilities were upgraded by the addition of a shiplift, a grid control component was added based on the outcome of studies carried out in the first stage, and the financial and institutional objectives were strengthened. However, two disadvantages of this approach were: the lack of Bank commitment to the second phase, creating difficulties in opening letters of credit for equipment, and the considerable expenditure by both the Borrower and Bank in processing the second loan. It would be worth considering the addition of a two tranche investment loan to the Bank's product line. This could provide approval in principle to the second tranche, subject to satisfactory performance, and additional provisions to be negotiated at mid-term. Documentation for the second tranche could be simplified. 76. Overall, Shuikou resettlement appears to have been carried out successfully. A comprehensive evaluation of the resettlement process and the positive and negative lessons to be learned from it is underway. Income restoration and evaluation activities are ongoing and final outcome will be assessed at the time of the ICR for the second project due in 1998. Meanwhile, a preliminary assessment of lessons to be learned is as follows: (a) The decentralization of resettlement planning and implementation to counties and townships works well, but resettlement offices at the lower levels need strong leadership, supervision and technical assistance from a strong, central resettlement office. Preferably, this office should be directly responsible to the implementing agency rather than to the province which is not a signatory to the loan or project agreements. Covenanting the resettlement plan through the loan agreement signed by the Chinese Government is not particularly effective. (b) Comprehensive resettlement monitoring systems, as disaggregated as possible, should be developed along with resettlement plans. (c) Resettlement planning should be well advanced at appraisal stage, to allow more detailed cost estimates to be carried out. Cost estimates should include the costs of facilities to reestablish income, for comparison with compensation costs that finance these measures. (d) Implementation of resettlement should also be advanced as much as possible, particularly land development for agricultural activities, to reduce or even eliminate the time lag between reservoir filling and re-establishment of income. 22 PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENT Achievement of Objectives Not Substantial Partial Negligible Applicable Macroeconomics policies X Sector policies X Financial objectives X Institutional development X Physical objectives X Poverty reduction X Gender concerns X Other social objectives X Environmental objectives X Public sector management X Private sector development X Project Sustainabflity Likely Unlikely Uncertamn x Bank Performance Flighly Satisfatctory Satisfactory Deficient Identification X Preparation assistance X Appraisal X Supervision X Borrower Performance Highly Satisfitctory Satisfactory Deficient Preparation X Implementation X Covenant compliance X Assessment of Outcome Ffighly Satisfactory Satisfactory Unsatisfactory Hfighly Unsatisfactory x 23 TABLE 2: RELATED BANK LOANS Year of Loan Title Purpose Approval Status Ln. 2382-CHA To construct a rockfill dam, a spillway, an 02/21/84 Loan was closed on Lubuge Hydroelectric underground powerhouse, to install 4 06/30/92. Project generating units of 150 MW each, 3 single circuits of 220 kV transmission lines; to provide consultant services and a training program. Ln. 2493-CHA To construct a 500 kV transmission line 02/19/85 Loan was closed on Second Power Project from Xuzhou to Shanghai and 5 06/30/92. associated substations totaling 3,500 MVA in capacity, to install tele-control and telecommunications equipment for load dispatching, and to provide training for 400 kV transmission lines and substations. Ln. 2706-CHA & To construct a coal-fired thermal power 05/29/86 & First loan closed Ln. 2955-CHA project with two units of 600 MW and two 06/14/88 06/30/94. Second Ican Beilungang Thermal single circuit of 500 kV transmission closed 06/30/95. Power Projects I and II lines, and to carry out a tariff study, a study on ZPEPB reorganization and management improvement and a study for improvement of distribution networks for the cities of Ningbo and Hangzhou. Ln. 2707-CHA To construct a 110 m high concrete 05/29/86 Loan was closed on Yantan Hydroelectric gravity dam, a spillway, a powerhouse, 06/30/94. Project and a shiplift; to install 4 generating units of 275 MW each, 2 single circuits of 500 kV transmission lines and 3 associated substations; and to carry out a training program. Ln. 2775-CHA & To construct a 101 m high concrete 01/06/87 Closed 6/30/93. C.-rent Ln. 3515-CHA gravity dam, a spillway, a powerhouse and ICR Shuikou Hydroelectric a navigation lock; to install 7 generating Projects I & II units of 200 MW each; to carry out a resettlement program in the reservoir. To complete the ongoing Shuikou dam 09/01/92 12/31/96. Request and hydroelectric power plan, upgrade the received to extend to control and data acquisition system of the 12/31/97. Fujian grid, carry out an action plan for tariff reform, and a training program for planning and financial management. 24 Year of Loan Title Purpose Approval Status Ln. 3387-CHA & To construct a 240 m high arch dam with 07/02/91 Implementation under Ln. 3933-CHA an underground powerhouse, to install 6 & way. Closing dates Ertan Hydroelectric 550-MW generating units and associated 08/22/95 12/31/96 & 12/31/2001. Projects I & II equipment; to carry out an environmental management program, studies of power pricing and reservoir operation, and a training program. Cr. 2305-CHA & To construct a 56 m high gravity dam and 10/31/91 Implementation under Ln. 3412-CHA an underground powerhouse with 4 x 60 way. Closing date Daguangba Multipurpose MW generating units; to erect a 36 km 12/31/97. Project long double-circuit 220 kV transmission line and to build canals to irrigate 12,700 ha of land. Ln. 3433-CHA To install 2 300-MW generating units and 01/14/92 Implementation under Yanshi Thermal Power 5 220-kV transmission lines and way. Closing date Project associated substations; to carry out a tariff 12/31/97. study, a tariff action plan, and a training program for upgrading the technical, financial and management skills for HPEPB staff. Ln. 3462-CHA To install 2 additional 600 MW 04/12/92 Implementation under Zouxian Thermal Power generating units; to construct 500 kV and way. Closing date Project 220 kV transmission lines and 06/30/99. substations; and to carry out an air quality control study, a power tariff study, an action plan for tariff adjustment, and a training program for the technical, financial, and management staff of SPEPB. Ln. 3606-CHA To construct a pumped-storage hydro- 05/18/93 Implementation under Tianhuangping electric power plant with six 300 MW way. Closing date Hydroelectric Project reversible pump-turbine units, together 12/31/2001. with upper and lower reservoirs, a water conveyance system, an underground powerhouse; to erect 250 km long 500 kV transmission lines; to carry out studies of optimal power plant operation and its output pricing; and to strengthen the beneficiary's organization through technical assistance and training. 25 Year of Loan Title Purpose Approval Status Ln. 3718-CHA To construct a coal-fired thermal power 03/22/94 Implementation under Yangzhou Thermal plant with two 600 MW generating units; way. Closing date Power Project to erect two 500 kV transmission lines (30 12/31/2000. km long); to extend technical assistance for the development and implementation of improved accounting and financial management information systems; and undertake management development and staff training. Ln. 3848-CHA To construct a new 500 kV transmission 02/28/95 Implementation Sichuan Transmission network consisting of 2,260 km of commenced. Closing Project transmission lines and 5,250 MVA of date 12/31/2001. substations; provide technical assistance for implementation of sector reform plan, organizational improvements and financial management systems. Ln. 3846-CHA To construct Beilungang Phase II power 02/28/95 Implementation Zhejiang Power plant consisting of three 600 MW coal- commenced. Closing Development Project fired units; to construct 400 circuit-km of date 12/31/2002. 500 kV transmission lines, 2,250 MVA of 500 kV substations and reinforce distribution networks in Hangzhou and Ningbo; to extend technical assistance to assist the power company in commercialization and corporatization, establish computerized financial management information system, improve transmission and distribution planning and upgrade environmental monitoring. Ln. 3980-CHA To construct two 600 MW coal-fired 2/27/96 Not yet signed. Closing Henan (Qinbei) Thermal thermal power units; to erect two 165 km date 12/31/2002. Power Project 500 kV transmission lines; to assist HPEPB in engineering procurement and construction supervision; and to extend technical assistance to support the implementation of the power sector reform action plan. 26 TABLE 3: PROJECT TIMETABLE Steps in project cycle Date planned Date actual/latest estimate Preappraisal 11/85 Appraisal 02/86 02/86 Negotiations 11/86 11/86 Board presentation 01/06/87 Signing 01/15/87 Effectiveness 03/25/87 Project Completion 12/31/96 12/31/97" Loan closing 12/31/91 06/30/93 n Subject to the Board's approval, project savings are expected to allow an expansion of the project to include an additional transmission line. This would necessitate prolonging the project period by 12 months. TABLE 4: LOAN DISBURSEMENTS: CUMULATIVE ESTIMATED AND ACTUAL FY87 FY88 FY89 FY90 FY91 FY92 FY93 Appraisal estimate 4.0 28.0 56.0 92.0 140.0 Actual 3.0 16.6 56.5 77.4 90.1 111.0 140.0 Actual as % of 75.0 59.2 100.9 84.2 64.4 estimate Date of final disbursement: June 2, 1993. Note: Disbursement schedule was slower than anticipated at appraisal because of two factors. Firstly, in relation to the civil works contract, the Borrower elected to use the Bank loan for the direct foreign exchange costs only rather than 70 percent of total costs as provided in the Loan Agreement. Secondly, the 500 kV transmission line to Hangzhou was deleted from the project scope. See para. 3. 27 TABLE 5: KEY INDICATORS FOR PROJECr IMPLEMENTATION (Refer to Figure 1) 28 TABLE 6: KEY INDICATORS FOR PROJECT OPERATION (Not Applicable) 29 TABLE 7: STUDIES INCLUDED IN PROJECT Purpose as defined at Study appraisal/redefined Status Impact of study Study on To study the energy Contract signed January Rule curves were derived for Coordinated interchange between 1990. operation of Shuikou at Year Operation of subsystems, reservoir 2000 load level. Hydroelectric operations and output Final report December 1994 Plants and Related capacities under Use of the software has System coordinated operation. enabled an increase in the Improvements utilization of hydro energy by an estimated four percent per year. Since 1994, the FPEPB dispatch center has used the transferred software to do their annual planning. Use of the derived rule curve made a major contribution to the very high generation of Shuikou in.1995. Studies demonstrated the high predicted spill from Shuikou in a wet year, leading to a commencement of work on the Jiemian hydropower plant which is capable of providing substantial energy storage to the system. 30 Purpose as defined at Study appraisal/redefined Status Impact of study Study on Power To study the effects of This study was divided Study B: Static security System Controls introducing Shuikou into two parts: Study B to calculations indicated the and Load Hydroelectric Plant on research the regulation need for network Dispatching the Fujian-East China function and emergency strengthening between Systems interconnected system automatic control of the Yongan and Zhangping power and the effect of the grid after the introduction plants. Optimal reactive system on the technical of Shuikou. Study C power calculations, suggested and economic consisted of a feasibility a capacitor at Nanjiao characteristics of the study for upgrading the substation which was Shuikou Plant. Fujian grid dispatching accepted. Automatic control system, leading to a analyses assisted in the recommended plan for an specification and location of Energy Management automatic security devices. System appropriate to the The transferred software is Fujian grid. The contract used by FPEPB technical staff for Study B was signed in on a routine basis for system May 1989. The final planning. report was submitted in November 1991. The Study C: contract for Study C was signed in November, 1989. The feasibility study derived a The final feasibility report plan and specifications for an was submitted in January, EMS system for the Fujian 1992. grid, which is being procured and installed under the Second Shuikou Hydroelectric Project (Ln 3515-CHA). 31 TABLE 8A-1: PROJECT COSTS Appraisal estimate ($ M) Actual/latest ($ M) Item Local Foreign Total Local Foreign Total Preparatory works 19.9 2.9 22.8 271.3 1.8 273.1 Resettlement compensation 100.5 0.0 100.5 198.0 0.0 198.0 Civil works 59.7 139.4 199.1 108.9 116.0 224.9 Metal works 9.8 3.8 13.6 16.3 15.0 31.3 Electrical and mechanical equip. 71.8 80.9 152.7 93.3 37.1 130.4 Transmission lines 30.4 25.0 55.4 0.0 0.0 0.0 Engineering and construction 7.8 10.9 18.7 14.6 0.9 15.5 supervision Administration 10.5 0.0 10.5 20.0 0.0 20.0 Technical Assistance and training 0.5 1.0 1.5 8.1 8.2 16.3 Total Base Cost 310.8 264.0 574.8 730.5 179.0 909.5 Contingencies Physical 27.7 23.1 50.8 1.7 0.0 1.7 Price 118.8 111.4 230.2 3.6 0.0 3.6 Total Project Cost 457.4 398.4 855.8 735.8 179.0 914.8 Interest during construction 83.2 148.8 232.0 240.0 77.2 317.2 Total Financing Reuired 540.5 547.2 1087.8 975.8 256.2 1232.0 32 TABLE 8A-2: PROJECT COSTS Appraisal estimate (Y M) Actual/latest (Y M) Item Local Foreign Total Local Foreign Total Preparatory works 73.5 10.9 84.4 1307.3 14.2 1321.5 Resettlement compensation 371.7 0.0 371.7 1006.6 0.0 1006.6 Civil works 220.9 515.8 736.7 715.3 748.3 1463.6 Metal works 36.3 14.0 50.3 109.7 97.2 206.9 Electical and mechanical works 265.8 299.4 565.2 754.6 271.4 1006.1 Transmission lines 112.3 92.5 204.8 0.0 0.0 0.0 Engineering and construction 28.8 40.4 69.2 86.7 7.7 94.4 supervision Administration 38.8 0.0 38.8 108.2 0.0 108.2 Studies and training 1.9 3.7 5.6 40.5 41.5 82.0 Total Base Cost 1692.1 1474.3 3166.4 4128.9 1180.4 5289.3 Contingencies Physical 102.6 85.5 188.1 14.4 0.0 14.4 Price 439.5 412.1 851.6 29.7 0.0 29.7 Total ProJect Cost 1692.1 1474.3 3166.4 4153.0 1180.4 5333.4 Interest during construction IBRD loan 0.0 269.1 269.1 0.0 523.7 523.7 Local loans 307.9 281.5 589.4 1822.0 0.0 1822.0 Total Financing ReAuired 2000.0 2024.9 4024.9 5975.0 1704.1 7679.1 TABLE 8B: PROJECT FINANCING Appraisal estimate ($ M) Actual/latest ($ M) Item Local Foreign Total Local Foreign Total IBRD 140.0 140.0 179.1* 179.1 Local bank 540.5 147.3 687.8 975.8 77.2 1052.0 Foreign Exchange loans to be 260.0 260.0 arranged Tgg 540.5 547.3 1087.8 975.8 256.3 1232.1 * Includes $39.1 million from Loan 3515-CHA. TABLE 9: ECONOMIC ANALYSIS OF POWER PLANT YEAR 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 SHUIKOU POWER ABSORPTION BY GRID (MW) 200 600 800 ENERGY ABSORPTION BY GRID (GWh) 0 0 0 0 0 0 0 0 564 2,963 4,773 ECONOMIC CAPITAL COST (million V, 1995 CONSTANT) la 39.01 134.94 324.36 483.74 493.48 650.69 1,032.44 665.89 729.87 969.36 413.77 OPERATING COST (million V) 11.43 34.29 45.71 TOTAL COST (million Y) 39.01 134.94 324.36 483.74 493.48 650.69 1,032.44 665.89 741.30 1,003.64 459.49 AIC OF Shuikou (Yuan/kWh) 0.2210 COAL ALTERNATIVE EQUIVALENT COAL CAPACITY (MW) 235.72 707.15 942.87 EQUIVALENT COAL ENERGY (GWh) 0 0 0 0 0 0 0 0 598.33 3,140.45 5,059.04 INSTALLATION SCHEDULE (MW) 300 600 300 CUMULATIVE CAPACITY (MW) 300 900 1200 COAL UNIT 1 192.81 578.43 771.24 385.62 COAL UNIT 2 192.81 578.43 771.24 385.62 COAL UNIT 3 192.81 578.43 771.24 385.62 COAL UNIT 4 192.81 578.43 771.24 385.62 COAL UNIT 5 192.81 578.43 771.24 385.62 COAL UNIT 6 192.81 578.43 771.24 CAPITAL COST (million V) 192.81 964.05 2,120.91 2,699.34 2,313.72 1,735.29 1.156.86 FUEL COST (million V) 86.88 455.99 734.57 OPERATING AND MAINTANENCE. (million V) 57.84 173.53 231.37 TOTAL COST (mihion V) 0 0 0 0 192.81 964.05 2,120.91 2,699.34 2,458.44 2,364.81 2,122.80 AIC OF COAL ALTERNATIVE (YUAN) 0.5081 COST DIFFERENCE (COAL- HYDRO) (39.01) (134.94) (324.36) (483.74) (300.67) 313.36 1,088.47 2,033.45 1,728.57 1,395.46 1,709.03 EQUALIZING DISCOUNT RATE 46.73% NPV OF SHUIKOU PROJECT COSTS 2,953.50 NPV OF THERMAL ALTERNATIVE 7,724.04 NPV OF THERMAlJNPV OF HYDRO 2.62 IRR CALCULATIONS BENEFIT (FPEPB 1995 AVERAGE TARIFF) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 156.11 819.40 1,319.99 BENEFIT - COST (39.01) (134.94) (324.36) (483.74) (493.48) (650.69) (1,032.44) (665.89) (573.75) (149.96) 906.22 IRR BASED ON FPEPB 1995 TARIFF 15.12% BENEFIT (TARIFF TO THE GRID) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 214.49 1,125.82 1,813.62 BENEFIT - COST (39.01) (134.94) (324.36) (483.74) (493.48) (650.69) (1,032.44) (665.89) (515.37) 156.47 1,399.85 IRR BASED ON SHUIKOU TARIFF TO GRID 19.04% BENEFIT (WILLINGNESS TO PAY) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 255.70 1,342.10 2,162.02 BENEFIT - COST (39.01) (134.94) (324.36) (483.74) (493.48) (650.69) (1,032.44) (665.89) (474.17) 372.74 1,748.25 IRR BASED ON WILLINGNESS TO PAY 21.45% a/ Costs for Shuikou do not include railway relocation costs which appraised separately in original appraisal. Economic costs calculated annually by (i) multiplying the local cost with standard conversion factor; (ii) converting at the official exchange rate to USS; (iii) adding to foreign cost (iv) converting to 1995 constant prices by using MUV index- and (v) reconverting to Yuan using the 1995 exchange rate. YEAR 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 ASSUMPTIONS COAL PLANT (ECONOMIC COSTS) SHUIKOU CAPACITY COST (Y/KW GEN.) 6,427 OPERATING AND MAINT. HYDRO ( Y/KW) 57.14 FUEL CONSUMPTION (G/KWH GEN) 330 DESIGN LIFE HYDRO (YEARS) 50 COAL COST (YITON STD.yb 440 AUXILIARY POWER USE (%) 0.1 FUEL COST PER KWH GEN 0.1452 FORCED OUTAGE (%) 0.5 DISBURSEMENT RATE COAL PLANTS 0.1 0.3 0.4 0.2 ANNUAL OVERHAUL (DAYS) 41 OPERATING AND MAINTENANCE ( Y/KW) 192.81 ECONOMIC LIFE (YEARS) 30 with Sucharge ( V/KWh) -4 AUXILIARY POWER USE % 6.0 FPEPB 1995 AVERAGE TARIFF 0.293 0.348 FORCED OUTAGE % 10 SHUIKOU TARIFF TO GRID 0.325 0.380 ANNUAL OVERHAUL (DAYS) 42 WILLINGNESS TO PAY 0.398 0.453 b/ Coal price based on FOB Qinhuangdao (USS35.4/ton, 5500 kcal/kg). Shadow freightage of Y48.0/ton (from Qinhuangdao to Fujian) was added to price, and two percent transportation losses were assumed. Calculated price was therefore Y349/ton which is Y444/ton of standard coal. YEAR 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 SHUIKOU POWER ABSORPTION BY GRID (MW) 1,200 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 ENERGY ABSORPTION BY GRID (GWh) 4,900 4,950 4,950 4,950 4,950 4,950 4,950 4,950 4,950 4,950 4,950 ECONOMIC CAPITAL COST (million l, 1995 CONSTANT) la 605.93 243.92 105.00 0.00 OPERATING COST (million V) 68.57 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 TOTAL COST (million V) 674.50 323.92 185.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 80.00 AIC OF Shuikou (Yuan/kWh) COAL ALTERNATIVE EQUIVALENT COAL CAPACITY (MW) 1,414.30 1,650.02 EQUIVALENT COAL ENERGY (GWh) 5,194.00 5,247.00 5,247.00 5,247.00 5,247.00 5,247.00 5,247.00 5,247.00 5,247.00 5,247.00 5,247.00 INSTALLATION SCHEDULE (MW) 300 300 CUMULATIVE CAPACITY (MW) 1500 1800 1800 1800 1800 1800 1800 1800 1800 1800 1800 COAL UNIT I COAL UNIT 2 COAL UNIT 3 COAL UNIT 4 COAL UNIT 5 COAL UNIT 6 385.62 CAPITAL COST (million V) 385.62 0.00 0.00 FUEL COST (million V) 754.17 761.86 761.86 761.86 761.86 761.86 761.86 761.86 761.86 761.86 761.86 OPERATING AND MAINTANENCE. (million V) 289.22 347.06 347.06 347.06 347.06 347.06 347.06 347.06 347.06 347.06 347.06 TOTAL COST (million V) 1,429.00 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 L AIC OF COAL ALTERNATIVE (YUAN) COST DIFFERENCE (COAL - HYDRO) 823.08 865.00 1,003.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 1,108.92 EQUALIZING DISCOUNT RATE NPV OF SHUIKOU PROJECT COSTS NPV OF THERMAL ALTERNATIVE NPV OF THERMALNPV OF HYDRO IRR CALCULATIONS BENEFIT (FPEPB 1995 AVERAGE TARIFF) 1,355.21 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 BENEFIT - COST 749.28 1,125.12 1,264.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 1,369.04 IRR BASED ON FPEPB 1995 TARIFF BENEFIT (TARIFF TO THE GRID) 1,862.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 1.881.00 BENEFIT - COST 1,256.07 1,637.08 1,776.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 1,881.00 IRR BASED ON SHUIKOU TARIFF TO GRID BENEFIT (WILLINGNESS TO PAY) 2,219.70 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 BENEFIT - COST 1,613.77 1,998.43 2,137.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 2,242.35 IRR BASED ON WILLINGNESS TO PAY 36 TABLE 10: STATUS OF LEGAL COVENANTS Co- orig.ia R~vi.d Agee- nut Pri= fitiff ~ fulfiEnt mt Sedian type smus dae date Descripion ofcovant Connnt LOan 3.01(b) 13 C GOC al enter ito a nhidiay loæn agem t wilh FPEPBur emu sati~etny to the Bank. 3.04 1 C GOC sal mure thatthe peman t railwy relocation at Shuikou dll be cied out 3.05 5 C 0OCtocyotaretlent rognn accetabletote Bank. Projed 2.06(a) 10 C FPEPBshl cary out sudi of: (a) courdnated opeaion of hydroeltric plars inthe Fujian and East China Grich d relatedsysemimprovem~; i; (b) powr syst centmls and load diep~ing sytms in Fujian and Eat Qin. 2.06(b) 10 C FPBslcarryoitainmgofaffin uy manamen financial plannig and cm cienmazna t 3.04 6 C FPEPBto provide for peodic indepdt inpe~ian of dam during om*ruion and after anpleti. 4.01(b) 2,1 C FPEPBsha l fuishaaalyaued (ii) fiancal staemrts ad auditor's repot to the Bank, not later tha June 30. 4.02(a) 2 C FPEPB will take, or caue to be tak, measurs shl be required to prduce fbr cad ofits fiscal yeauM after December 31, 1986, operatingrev~ucs equivltto not lathanthe sm of it&ttaloperting epense and the an~t by whi ite financial obligaions exced the prov~son for deprcatien and any othern n-cash opeating expe 4.03(a) 2 C FPEPBshllnot incur any debt urdms a remnable frecat ofthe reen and p sho,wsthatthe projected intemal cash generation for me fiscal year duing* term ofthe det to be umrred shallbe at leat 1.3 tirm the atimatedebt induding the debt to be hoiund 4.04 2 C FPEPB will fuishto he Bnk by Decnber 31 of each yew, fr commnt a financial plan cmtainingforecat inme tatement, souce and umes of flu, and balame ~heets for ach ofthe next five yCe 37 TABLE 11: COMPLIANCE WITH OPERATIONAL MANUAL STATEMENTS The project was carried out in full compliance with the following Operational Directives: Statement Number and Title Describe and comment on lack of compliance 1. OMS 3.80 - Dam Safety Fully Complied. 2. OD 4.00B - Environmental Policy for Dam OD not in force for first project, but fully and Reservoir Projects reflected in second project. 3. OD 4.01 - Environmental Assessment OD not in force for first project, but fully reflected in second project. 4. OD 4.02 - Environmental Action Plans OD not in force for first project, but fully reflected in second project. 5. OD 4.30 - Involuntary Resettlement OD not in force for first project, but its provisions were catered for under the Borrower's resettlement policy, and were fully implemented under second project. Resettlement included as component of both projects. 38 TABLE 12: BANK RESOURCES: STAFF INPUTS Planned Revised Actual Stage of project cycle Weeks $'000 Weeks $'000 Weeks $'000 Preparation to appraisal 53.5 96.7 Appraisal 53.4 96.4 Negotiations through Board 36.4 74.4 approval Supervision 107.7 241.6 Completion 6.6 14.5 Total 257.6 523.6 TABLE 13: BANK RESOURCES: MISSIONS Pammn..ace rating Specialized Imple- Devel- Stage of project cycle Month/ No. Of Days staff skills mentution opment Type of year persons in field represented14 status objectives problems Ikrough appraisal 2/86 2 SA.E Appraisal through Board approval Board approval through effectiveness Supervision 1 09/87 2 7 1 2 04/88 2 6 E,FA 1 3 07/88 2 11 EE 4 01/89 1 7 SA 1 5 03/89 2 11 Ec,E 1 6 09/89 4 11 Ec,A,E,FA 1 7 04/90 5 8 Ec,Ec,A,E,FA I 8 07/91 5 4 E,FA,A,Ec,En 9 10/92 2 5 ER I 10 05/93 2 7 E,R I Completion 04/96 3 7 E,R,R /g A-- Anthropologist E: Engineer, Ec: Economist, En: Environmntal Consuhant, FA: Financial Analyst, R: Resettlement Specialist, SA: Sociology Advisor 39 FIGURE 1 nuvti Eay r.ty Targal Taget . · 10n t01AU n 87 31ar9 o01JAN87* 30APR90 Diversion Works Foundation Excavation of Diversion Channol 2000AG711UL89A ý01AUG87* 31JUL89ur<atiF 'n( Concretin of Diversion Waill 2020 01APR88A 28FEB90AO1OCT87*|31MA6Y88 Construction of Coff*rdams 2050 101DEC87 30APR88A01JAN88* 131MAR88 Cc C>fda n fr Div 11 2060 01AUG89 31MAY90 01AUG89* 31MAR90 . sructior ol Ma n Gofferams i 2070 10CT91A 3 01AUG1 31 MAR92 i .'CQnslr CM f r igof v C. n Manuf. Sinking of Div.Condutt Gate% 1 Conc. Plug 2060 010CT92A131MAR93 01JAN92* 31MAR93 ML nu S nkicg DfNyw Ca id. ,ail Cine Plia Dam Excavation of Dam Foundation 3010 010CT87A31MAY88 010CT87 31MAR88 ' m 3020 01OCT88A 31DEC90A 010CT88* 31.JUL90 r Daý Fluriadn tat el| Conereting 3030 01DEC88 31MAY89 010CT88*131MAR89 D n m c n0 - age 3040 01APR90A 30APR93A101MAY90°|31JAN93 :-:__________s_g«11 Erectof Gates & Hot & imbadded Parts 3050 ¡O1APR91A 31MAY93 01APR91* 30APR93 Erection of Ponstocks 3060 O10CT90A 3DEC91A 010CT90° 310EC91 ItErr n 5fen; to Powerhoug Foundation Excavaton 4010 01SEP88A13OSEP90Al01SEP88* 31JUL90 - --- I on u$@ oudtioia Concreting 4020 01JUN90A130SEP93A 01MAY90 31JUL93 Er*ct. of Tailracs Gate,Holstis & Imbedded Parts 14030 01APR91A 310CT91A O1MAR91- 30SEP91 4040 01DEC92 31MAR93 01NOV92* 31JAN93 of Ta, Eraction ofTrm .Gnorator 4050 01AUG90 30SEP96 01JUN90° 31MA95 Er.ct,onEre et rbbmiI .nrto 2201500 Switchyard Excevetrt and Concr.tn 50110 101MAY89 128FEM9AJO IJJLBg- 31AUG91 ,r Ex aveon &Coher tin 0 2 0 00 tcrYts 5020 t010CT92A31MAY93 OOCT91 310EC92 ErictnEr n Fra &Ele- trk EtujXrrmnti Transmission Line - 500 kv 6000 01JUL90A 31MAR93 01JUL90" 31MAR93 Naviggtlon Workz n7010 1ODEC91aA30APR92A 01SEP91, 31JAN92 - E ti F o iiý > Concratn 1 gr, '' 7020 O1JAN92A 30APR94A 01NOV91 31JAN93 Eraction of Gates, Hoits Å Imbadded Parts 7030 01MAY93 31AUG94 01MAR92 31MAR93 Er In at 7040 010CT93A 31DEC95 01APR93* 30JUN93 FPEPSISHPC SHUILKOU HYDROELECTRIC PROJECT ACTUAL PROGRESS va TARGET SCHEDULE e«en..r. *eem..me. 3Y22j96 reeeled and Acimal Finashli 3tawrmeuts af FPEPi (1986-1995) Tabte I: INCOA3&ESATEMENT <Y na~en) 1986 1987 19101 199 1990 1991 1992 1993 1994 1995 YeerFd Dec m 31 Projeed Adud Progjected Acou.d lrscceed AcInd Pr.ected Acual Injecled Aclual Prujected Acul IN.ectcd Acliml Pr.lmie Acul l',,ceed Acieal Procced A,1n, ~ "escrsse(%) 66 116 79 137 202 165 19 179 02 36 16 211 20 ill 16 179 315 189 211 151 EnryS~ l(GWh) 4,70 5000 3.160 5.690 6.200 6,631 6,315 7,817 6.328 8,095 6,428 9.03 6.559 10,892 6,663 12,840 8.764 15,274 10,637 17.578 A~egPr"c(fetkWh) 7.4 76 8.0 88 90 103 92 133 9.3 152 94 172 96 172 98 218 110 261 12 303 ]_j_Oern nu e~ »4 $2 413 49< 3518 63 581 1,037 588 1229 605 1689 610 1.932 654 2,795 964 1,982 .76 5,326 Fud 85 112 04 151 131 175 138 198 137 172 140 262 142 260 145 377 129 378 125 334 Pøihed Pøwa 41 33 44 33 45 53 48 475 53 599 60 945 67 931 73 1,356 78 1,688 80 2,042 Op"es&Maienme 36 24 42 29 56 41 64 47 69 56 77 63 85 85 91 135 116 207 157 236 AdMissn~ 19 <0 20 14 23 19 27 Is 31 26 33 12 39 39 42 86 45 166 51 235 5Sl Txr to 53 89 62 108 84 119 87 121 88 131 91 <50 94 197 98 157 145 616 191 832 D.e 36 39 41 53 57 64 63 74 66 88 72 83 75 143 78 175 li8 332 172 58 Oru 0 17 0 23 0 26 0 30 0 46 0 63 0 73 0 104 0 180 0 0 OtheExpenss 0 0 0 0 0 0 0 0 0 6 0 13 0 23 0 0 0 0 0 265 Les Fon ThnlRevene 0 0 0 0 0 0 (15) 0 (30) 0 (42) 0 (44) 0 (59) 0 (71) 0 (86) 0 I11tapeinCoIs 270 324 313 .115 396 517 412 960 414 1.124 331 <390 4M 1750 .16 2610 560 3j67 690 4,1X2 patanciege 84 58 <00 83 162 366 169 77 174 <05 174 9 172 182 16 186 40 1<3 186 81.1 Olhah~incm(13oss) 0 (2) 3 ) 0 1 3 2 ø 7 <3 12 (.1 0 21 3 37 i 37 hI~eCesI~ged Opesann 7 0 7 < 2% 1 28 l 27 0 21 33 22 11 22 7 i5 12 12 2Ž0 NtIwBef n Tg 77 56 93 83 17 166 141 78 347 <32 151 77 <50 <46 164 206 359 249 54 32 Icm~e Tax 36 26 38 23 50 54 53 23 51 26 47 36 26 42 34 17 112 83 175 109 Nc<j0ncome 41 3 55 60 «7 112 8U 5 96 .6 33:4 43 124 105 130 189 237 166 33) ?21 D,nbubn of Net mne ReminancG~nmnt 21 12 22 1 31 16 32 12 29 12 25 0 6 0 3l 0 74 0 123 0 Tr~nferd %oCok nm~iFund 12 7 23 35 48 55 45 27 54 54 66 0 102 0 102 0 155 0 397 0 EmploymnB&nfitSpecalFund 9 11 9 17 in 4 t i1 17 13 20 14 0 I5 0 17 0 i8 0 20 0 CperhgRabo(%) 76 83 76 B3 71 76 71 93 70 91 71 94 73 91 72 93 58 90 54 8 Rate %«se 1,011 921 1,260 1.058 .15X0 <1<M 1,669 1,654 1,750 1.928 1.831 2,229 1,862 2,406 2,%11 2,866 3.93 5,315 5,352 8.6x3 Rate o Reltun ( ) 83 63 79 78 103 12 1 101 4 7 99 54 9 5 4 4 92 7 5 7 .1 65 10 1 78 300 9 7 ls a fr in 1994 sid 1995 rewpesnt vulue-sdded-lax K.eje-led and Actn,al i..nancal S sa(ents of FPEPB (1986-1995) Tabte2: BAL,ANCESIEET (Y mihon) 5986 1987 i9M 1959 1990 1>991 1992 1901 1994 105 At odceber 31 Prødected Actlw Io1.lcd A,1u.I '1t rd Acul hoje,tedd n .1 A,Ac, Pojend Ac . 5.ecId Aclual Piojcee Actual 5:ojeclcd Acu,l Current Aset C.sh 24 47 30 61 41 6 56 68 67 567 79 210 8.5 697 10) 929 126 J,456 559 1,869 inenorie 40 45 44 52 50 51 55 76 65 76 66 68 71 410 7S 365 81 472 86 625 Accouns R.c.vble 25 13 27 12 28 23 30 52 33 67 34 108 36 122 37 337 39 528 410 5.59 OlherCmnentAst 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 9 0 17 0 279 TosaiCurnnlSAssets 89 105 505 128 122 16 555 596 16> 310 179 386 19) 1,228 213 1,610 246 273 28 3,122 I.ug-nn Snvestment 0 0 0 0 0 0 ( 0 0 0 i 0 0 0 0 127 0 557 0 241 Fxed Asels P~n in Sence 1,363 1,261 1,901 1.585 2,1<12 1,9Sf 2,198 2,319 2,39-1 2,654 2.197 3.110 2,604 3,240 3,947 4,610 5,745 9,103 7.116 12.166 Less AccumulIedDeprasnhM (352) (340) (393) 1389) (.150) (4455 (511) (516) (579) (601) (651) (706) (726) (831) (80) (1,306) (922) (1,797) (1,0955 (2.309) Ndet Pla Sn~e 1,011 923 1,508 1,191 1,652 1,505 1.685 1,083 1,815 2,053 1,846 2.404 1,878 2,409 3,141 3,124 4.823 7.306 6,041 10.060 Costucton WIP 663 1,183 704 1,505 875 5,898 5.180 2,628 1.627 2,619 2,425 3,490 3,197 4,126 2,629 5,927 1,591 3,323 907 2,-46 ToQedAncf L4 2104 ;.212 2.699 2,527 3.501 2,865 4.431 3442 4,692 4,271 5.K94 3073 6,534 5,766 9,25) 6457 10629 6.91 12.505 Spec Fwd A-seb 92 140 95 178 137 1535 149 176 146 169 151 204 123 354 168 0 200 0 222 0 Ddferrdnd dngble Asts 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 94 0 30 0 473 TotaAset 5853 2.349 2_408 300 2.M76 j'25 i 155 4,863 37-49 I.571 4605 6484 5389 8557 6147 >Jdl S _6j i3.2_89 7-5 5 6,5.5 LtaDi 1ES& AOUMTY Acnnwd.Payabwe 29 47 1 55 11 55 35 85 1s 5M5 40 55 .52 282 13 28 45 260 .7 355 D3uelo ernn .. ~ 8 7 8 5 K m 9 lI 9 24 9 19 10 58 10 32 10 26 11 11 I ss,r ' 0 0 0 0 0 0 0 0 0 0 0 9 0 0 0 0 0 3 0 0 ObeCw L"~aabes 0 0 0 0 0 ø 0 0 0 0 0 0 0 0 0 587 0 660 0 891 TokCuenkLabit 37 54 39 59 1 63 44 96 47 _55 49 159 52 340 53 866 55 949 58 1.268 Wrk.gC~psaFns" 27 33 27 37 26 40 29 49 30 47 79 34 30 53 27 0 33 0 41 0 Lnt~n Debt 812 1,177 1.311 1,650 1,66 2,116 1,809 3,202 2,275 3,139 2,996 4.214 3,656 5,319 4,237 7,287 4,690 8.705 4,961 10,293 Governmnwn FMns 865 770 902 830 964 959 5.059 1,110 1,170 1,207 1,279 1.318 1,421 1,528 1,533 0 1,729 0 1,987 0 Spec.ilFns 114 158 128 209 587 258 214 285 227 34R 248 487 230 562 297 0 356 0 405 0 CCabnstsanAoaions 0 207 0 220 0 53 0 61 0 75 0 272 0 316 0 0 0 0 0 0 CaGial 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1,796 0 3,000 0 3,266 C Sups 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5,023 0 385 0 1,242 RetindEw~ip 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 141 0 250 0 171 I ""alLaaiÉtie&Euty L -349 2,407 3,5< JS 2.786 3.721 ,55 4,803 3749 5171 4601 6484 52 8, 557 6,147 1,12 6863 55282 7.455 56543 DbongtermDet%asofLT DebIandEquty 453 548 560 614 576 6%9 387 697 620 682 662 700 689 78 698 71 692 705 675 67.1 Debt/EquyRaRo 084 101 528 l32 136 584 142 219 163 208 196 207 221 230 231 276 224 266 206 232 DI/Eqsly Rio 045768 050275 0 56086 056872 057681 064794 058732 0 68665 061917 067569 066181 067438 0.68807 0 697168 0697901 0 733711 0 691389 0 726441 0673642 06985 DebV/Eqaty R~o 46/54 50150 56/44 57 /41 55 42 6 359 59/41 69531 62/38 68532 66/345 67/33 69/31 70)30 7010 71527 69/31 7327 67 133 70)30 Cuei Rato 2 4 19 7 6 2 2 lo 26 12 20 3 4 20 17 2 4 3 7 36 40 1 45 26 -19 2 6 ProIecIed and At1ui kInanial Stalmenls of FFEPR (1986-1995) ja.3: FUNDS FLOWSTATEMENT (Y nblon) 1986 1987 1988 1989 1990 1991 1992 1993 1994 YearF.nded cembeT31 Nrected Actual Ptolee AcIal Pmoected Actual 'Io1ecled Ac,M Proecied Actual Prolet,d Atual Irojeed Acna PrecIed ActP"I-e Acual ed AcIui SOURCES OF 1UNDS Internal Cash Geneeaton NetIncomeplineres hxpense 48 30 62 (0 112 lil 116 56 123 86 127 74 116 1362 6 292 348 Ill 730 DepreLahn&AmrZatbn 36 39 41 53 %7 64 63 74 66 88 72 83 75 143 78 180 lig 407 172 N17 Ma1ien I 17 1 23 1 26 2 30 2 46 2 61 2 73 2 1 4 0 6 (i Disbunn Epasn SpeiaJFund 20 38 25 38 19 32 74 49 67 57 39 73 18 100 71 269 92 28.1 102 200m OtherResources 0 43 0 11 0 21 0 30 0 109 0 217 0 102 0 I)0 ø 0 0 Tolld lnieal Soiuces 105 167 129 20x 2 il 26 2'>S 29 238 396 260 31ø 2-11 74 10% , 31506 ,1>39 II lyS l'ropsed HRD lui. - 'he l (i ; j I] i 32 9 t 219 1953 si N,, 63 I) 1613 i / 0 ø 0 P,liipedIIRD Ioan - lael, . 0 l 1 0 ) 0 0 0) 0 ) '12 C) 131 1) I7 Oliel Snkou Projecl .oan 90 0 16- 0 160 ø 178 0 321 0 719 0 747 0 (1 0 357 0 125 1) Olle, Loans/a 342 598 270 491 sm 500 36 635 17 740 24 907 24 1,200 177 1.611 291 1,507 425 1,891 Ta AM! wmgå 432 598 527 523 119 532 307 854 536 R21 799 992 771 1363 692 1,778 6161638 550 1900 Gw-inen l-unLs - GCans 0 190 0 13 0 8 0 8 0 26 0 70 0 7 0 0 0 0 0 0 ToalSonc., _fn_d, 53 955 656 7.14 MA 6I 562 L<03 794 I2 1 03 1 20)) L1l2 L2 4 937 I23 IJ52 267 1,211 1,7 5 APPLICATIONS OF 141NDS Captal Expendiure Proposed5hukoureecI 87 141 242 471 201 100 232 422 461 435 675 610 604 710 3431 85 18 1,212 (1 711 Ohe,Cnstructon/b 327 647 247 62 78 160 29 440 10 412 19 697 20 56 170 1.157 281 338 199 1.152 InlerestDrmgConsmitruon 17 37 17 46 66 101 147 181 181 160 Renoli~s/DitribuitonExpanin 52 54 93 106 104 108 79 122 155 171 TotCap!iWaExjtwes 483 788 580 536 il V0 413 862 641 817 906 1307 850 766 914 1992 802 1370 7 L1 63 Qperaina Reqaxrement Cl~angesmWcingCapIal 3 4 5 I I > I 38 5 (33 5 78 3 173 9 11) ti 221 <1 (lianges m Special Fund. Asses 0 25 0 38 Ø 21 0 20 0 12 0 82 0 63 0 0 o 0 0 ø DebtService 21 19 M0 l 9 123 92 Ill 98 31I 300 166 11 22 133 110 231 52' il Iu,1 RemiltancesinGoenineil 21 12 22 x 31 16 32 12 29 12 2% (0) 6 (6) 1) 0 7.1 0 123 0 SpecialFundExpendøtues 8 104 8 47 9 '>6 9 104 10 32 12 172 13 413 11 0 16 0 17 0 lnceasinLong-ieminvnestmenl 0 0 0 0 0 0 0 0 0 0 0 0 0 0 112 0 12 0 07 Toa_OperanoalRequemenbn 53 164 70 9 112 263 137 265 142 327 142 197 16 871 166 199 329 780 1m5 7<0 TotalApcionsofFunds 536 952 650 711 516 8213 550 3L27 783 174 ,018 1rO_ 1006 637 980 L Lt3 I.130 2350 3209 333 In(de)reasesmcash l 3 6 13 33 14 12 (26) lI 59 1l (202 6 487 17 212 22 527 32 11I AnnualDeblServceCovragethmes,) 0 59 29 I5 19 16 19 134 19 20 20 2 3 16 2 17 32 1 7 14 17 I ' Self-finaningRaho(%)/C 170 330 170 312 31)0 191 310 85 220 283 180 170 110 153 180 290 30 212 10 3 m la actual boirreig amunt mcludes other Shuikou projecl loan and other loans /b aca expendre inelude ivestients m other consnchon, renovnons, disnliul,on e,panslon. .mn- IDC /e distiubn enpanson special finds are mcluded si mernal cash generaton snce 1992 43 ANNEX 2 IMPLEMENTATION REVIEW FOR SHUIKOU HYDROELECTRIC PROJECT FUJIAN, CHINA (LOAN No.: 2775-CHA) FUJIAN PROVINCIAL ELECTRIC POWER BUREAU MAY, 1996 44 IMPLEMENTATION REVIEW FOR SHUIKOu HYDROELECTRIC PROJECT FUJIAN, P.R.CHINA PROJECT IMPLEMENTATION Foreword 1. The Shuikou Hydroelectric Project is the largest hydroproject in East China with a total installed capacity of 7 x 200 MW, a dependable output of 260 MW and an average annual generation of 4,950 GWh. It is a large multipurpose project planned mainly for power generation, but for navigation as well. It is a key project in the national 7th and 8th Five-Year-Plan, and it is a pilot project for managerial system reform in the field of large- scale hydroelectric project construction. The project is partially funded with World Bank loans in two phases. (a) Phase 1: Loan amount of US$140 million with an original closing date of December 31, 1991, an extended closing date of June 30, 1992, and final closing date of June 30. 1993. (b) Phase II: Loan amount of US$100 million with an effective date of October 20, 1992, and planned closing date of December 31, 1996. 2. ICB procedure was introduced in the construction of main civil works and procurement of imported electromechanical equipment. The competitive bidding system was also adopted for all temporary work and local procurement items. 3. The construction period for the project from commencement of the project in March 1987 to commercial operation of the first unit on August 6, 1993 was only about six years and five months, which was about two months behind the original implementation schedule in the SAR. However, the milestone dates for various stages of the project had been realized timely. The main river was closed on September 25, 1989. During 1990, excavation of the dam and powerhouse foundations were started and completed, the placement of concrete was entered into peak production and a record of 123,000 m3/month was created. In 1991, the annual concrete placement reached 1.15 million m' and the transition from Stage II to Stage III was carried out. In 1992, the project withstood successfully an early flood and overcame all the difficulties caused by the extraordinary flood (50 years in return) on July 7, 1990, and was kept ongoing to form a basis for the first unit operation in 1993. The peak labor forces during construction of the project did not exceed 4,000. Overall construction quality was verified in the first rank among the under construction of five large hydroelectric projects scaled over 1,000 MW in the national quality evaluation for priority projects organized by Ministry of Energy (MOE). The requirement of 'high speed, quality and efficiency' was realized in the project. Up to the end of 1995, six of all seven units were put into operation with an 45 accumulated electricity generation of 8,290 GWh. All of these achievements received benefit from taking the advantage of using World Bank loan actively to introduce the experience and practice of international project management and to import advanced, foreign technology and equipment, as well as from national reform and opening policy, and joint efforts as team work from all parties involved. Review Implementation of Main Works Organization 4. FPEPB is the owner and proprietor of the project. Representing the owner, SHPC implements overall management of project construction and also exercises the functions of the construction unit and engineer. East China Investigation and Design Institute (ECIDI) serves as the designer. The contracts for main civil works and for the installation of electromechanical equipment have been awarded to a construction joint venture (Chinese/Japanese) and the Fourth Hydroelectric Construction Bureau of China respectively through competitive bidding procedures. Resettlement in the reservoir area is implemented by SRO under the Fujian Provincial Government. The Morrisson Knudsen Engineering Co. (MKE) of the USA was hired to provide consultancy services for SHPC in the aspects of construction and contract, management and for ECIDI in the reviewing of bidding documents and design management. In the meantime, a Special Board of Consultants (SBC) was appointed to review and comment on the major technical issues, project management, environment, and resettlement during the design and construction of the project at various stages. Progress in Each Stage 5. According to the implementation schedule established in the SAR for Shuikou, Phase 1, the construction schedule provided for commencement in January 1987, commissioning of the first unit after 6-1/2 years (June 1993) with the six subsequent units commissioned at four month intervals. There were three critical intermediate dates related to the river diversion schemes, main river closure on September 30, 1989, transition from Stage 11 to Stage III in September 30, 1991, and reservoir impoundment on March 31, 1993. The schedule is demanding, even by the standards of an experienced international contractor. 6. With joint efforts contributed by all concerned parties including FPEPB, SHPC ECIDI and the contractors, each milestone schedule was finished on time. The Min River closure was fulfilled on September 25, 1989, the diversion transition from stage 11 to stage III was carried on November 20, 1991 and the reservoir impoundment started on April 2, 1993. The generation of each unit was delayed slightly because of the delay in supply of the equipment. The first six Units were put into operation on August 1, 1993, February 8,1994, September 2, 1994, December 28, 1994, November 6, 1995, and December 28, 1995 respectively. 46 Progress Before Min river Closure 7. The commencement of main civil work was carried on March 9, 1987 and the overall excavations of the dam foundation on right bank and the diversion channel were carried out in June 1987. However, the contractor was a joint venture established by two countries and four companies. The main project problems arose from (1) the exceptionally low bid price, resulting in financial constraints on the contractor, and (2) his very weak construction organization, which caused in many internal conflicts within the JV and low production. About 18 months into the construction period, the progress was about 6 months behind the river closure schedule. After discussions amongst all concerned parties and pressure from Government of China, the contractor decided to take measures to have a major reorganization of their corporation, with a Chinese partner taking over management responsibilities from the Japanese partner. The Owner proposed an amendments to the Civil Works contract under the approval of the World Bank, which included: (1) an increase in the construction equipment mobilization advance from 15% to 25% with repayment over a longer period; (2) decrease from RMB 5,000,000 to RMB 2,000,000 of minimum monthly contract expenditure required for payment authorization; (3) increase in foreign exchange proportion in contract price from 48.5% to 65%, (4) Establishment a bonus/penalty systems. As a result of these measures progress improved considerably. The daily excavation production reached to 10,000 M3 for six months continuously with maximum monthly production of 345,700m3. Finally, the excavation of the diversion channel was completed timely. The first milestone of river closure was fulfilled on time on September 25, 1989. 8. In order to increase the foundation of the Dam Blocks 34#/3@.# which form as a part of diversion wall and to relieve the difficulty caused by the leakage of the cofferdam, a design change to relocate the diversion conduit No. 10 from Dam Block 34#/35# to the middle of river, Blocks 23#/24# so as to ensure the smooth construction of diversion work and the river closure. Progress Before Diversion Transition-from c-stage H to Stage III 9. After the river closure, flood protection projects in 1990 were progressed well. However the financial constrains on the contractor made the delay in procurement of plant for stage 11 concrete production system and labor force and technician were not sufficient to meet the requirement of massive concrete placement in Powerhouse and Dam, all of these caused a low placement at beginning though the foundations were ready for placing. The completion of stage 11 concrete systems including the batching plant, cooling system and cable cranes transportation system were delayed from April 1990 to August 1990. In this case, the progress before stage III diversion was delayed for about three months. 10. In order to speed up the progress and simplify the construction, ECIDI investigated design changes, and SHPC took the lead in computerized scheduling studies, resulting in a revised master schedule with some measures and diversion schedule adjustment, but with the overall completion date maintained, such as: use of RCC, slip forms, precasted members, steel structure, etc. as well as changing of the Diversion 47 Scheme. In addition, the Owner made some decisions, such as compensating the additional cost during the expediting, introducing bonus/penalty system etc., to relieve the Contractors financial constrain further. 11. In fact, all of these measures were practicable and effective for catching up schedule. The main cofferdams were breached on October 25, 1991 and stage III diversion channel inlet cofferdam was closed on November 20, 1991, the diversion transition from stage 11 to stage III was realized. Progress Before Reservoir Impoundment 12. After diversion transition, the project successfully prevent an earlier Min river flood of 13,600m3/s on March 27, 1992 (100 year in March). Up to May 1992, the overall project situation met the designed flood prevention requirements. The subsequent works concerned to reservoir impoundment, such as the spillway section were still tight. On July 7, 1992, the project was encountered an extraordinary 50-year flood, which caused the tight schedule even more tight. In intake trash rack, spillway, and powerhouse, the duration was affected about one month. In the navigation facility, the cofferdams were topped over, the equipment located in the pit were damaged, the duration was affected more than 6 months. 13. In order to release the constrains created by the delay in spillway construction especially the installation of tainter gates, it was decided to add two service gates i.e. 4 in total to retain the reservoir water at the beginning and to provide a dry condition for installing tainter gates during the flood season. Up to February 1993, the project situation met the requirements of plugging 10 diversion conduits and starting reservoir impoundment by the end of March. And the last gate was set on 2 April 1993 according to the hydrology condition and d/s water supply requirement. The successful reservoir impoundment meant that the last milestone of the project was realized. Electric and Mechanic Works Supply of the Units Equipment 14. The signature of procurement contracts for the seven units of main equipment and their accessories was made in August 1988. However, since the payment for equipment delivery spanned over Phase I loan while the Phase 11 loan was not available at the time, it created a big trouble and time consuming to issue the LC though every effort was involved. The LC was not available until the end of 1989, which was delayed for nearly one year compared to the contract stipulations. The manufacturing schedule and equipment delivery schedule was affected. Because the manufacturers proceeding capability was limited and many manufacturing contracts were signed as well as Shuikou's seven turbines are among the largest Kaplan turbines in operation today with big size and complex manufacturing technology, the actual delivery intervals for each unit was longer than four months as established in the contract and the casting defect of the runners for the later units made the part delivery delayed for one year 48 E/M Installation 15. The E/M installation contract was signed in January 1991, and the contractor mobilized to site in March 1991. As the Statements in the contract document, the installation duration for each unit was 16 months counted from the installation of stay ring to completion of 72-hour trial operation with units commissioned at four months intervals. The installation duration for Unit #1 to #6 are 15, 13.5, 12.5, 11, 12, 10.5 months respectively. Others Construction Situation of the Navigation Facilities 16. The stage 11 excavation for the shiplock and the shiplift bottom slab foundation started after the closure of the channel on 20 November 1991. The construction of shiplock was affected by the extraordinary 50-year flood on July 7, 1992 about six months. The lock should be put into operation by July 1993. However, water filling and trial operation of shiplock was started in September 1994. Unfortunately, some cracks occurred in each bottom slab of the lock chambers, lock walls and the watering galleries during the trial operations. The commissioning and trial operation of lock was suspended. A meeting presented by an panel consisting 8 local experts invited by the Ministry of Power was held to review the design and the construction of shiplock in February 1995. Some comprehensive treatment measures such as cracks grouting, leakage drainage and strengthening the chamber l# and 2# walls and bottom slabs by using prestressed anchorage were proposed. In May 1995, the defect treatment and strengthening works were started and finished in September 1995. In October, the independent and combined tests of E/M equipment and hydraulic facilities were finished. Then watering up the lock and started trial operation again in November and the internal trail navigational operation was carried out in December. On February 10,1996 public trial started with traffic twice a day. Up until March 22, 538 boats had passed through the lock in 92 passes. Total tonnage passed was 16,557 tons. However, it was decided to use the imported equipment to replace the domestic hydraulic equipment and electric control elements so as to ensure reliability and stability operation of shiplock. The replacement will be carried in following October and November and then will be ready for operation. Change of the Projects Scopes 17. In 1990 the design was changed as the three flights shiplock plus a vertical shiplift. Additionally, the location of shiplock and shiplift were reversed to allow the shiplift close to right bank. The construction of shiplift was added in the World Bank for second Shuikou. 18. FPEPB decided and approved by the Bank to suspend the 500 kV tieline project with East China. 49 Resettlement works: Progress 19. According to the requirements of the civil works progress, an overall resettlement works was commenced in the end of 1987. The works was divided into three stages: Stage I before March 1990, 32,000 people were resettled; Stage 11 before March 1992, 20,000 were resettled and Stage III before March, 1993, the rest resettler were arranged to move the reservoir area. The main progress were summarized as follows: (a) The resettlement organizations at provincial, prefectural and county levels were established in the second half year of 1986, and the propaganda and mobilization for resettlement were started. (b) In 1987, site investigation, planning and design were made for the concentrated resettlement area. (c) The period for rebuilding is between 1988 and 1991. The land leveling, housing bases, water and electricity supply and access road were constructed sequentially for the Sage I and part of Stage 11 resettlement places. The housing bases of 1,620,000 M2 were distributed on the township and village basis. The house building and resettled work were performed in great swing. Many difficulties were encountered due to the tight schedule and financial shortage. In order to meet the requirements of river transition from Stage 11 to Stage 1II, the operations of 'the house reconstruction, resettlement and land leveling were carried out parallel as well as the Stage I resettlement standards was changed from twenty years round to ten years round. Ground leveling for stage 11 and III resettlement started. (d) After 1992 the resettlement compensation was raised and the resettled work for Stage 11 and III were executed smoothly by taking the experience in Stage I resettlement work. At the same time, the perfection work of the new resettlement places and the protection of the reservoir banks were carried out. Some of resettlement places were integrally inspected and accepted. With the joint efforts and full support from various parties and resettlers, the overall resettlement work was finished half a year ahead so as to ensure the requirements for timely reservoir impoundment and power generation be met. (e) By the end of March 1996, of the total resettlement budget of 1,057 million yuan, 1,034 million yuan has been spent(97.8 percent). The overall resettlement work has been basically finished. The main remaining works are as follows: Further perfecting the protection project for the reservoir banks and the control of environmental aspects in the reservoir area; giving aid to the production and development in the reservoir area and speeding 50 up the investment to the beneficial items; specially supporting the resettlers who are still below the poverty line; and particularly planning and properly managing the reservoir maintenance and construction fund. Production Development in the Resettlement Area 20. Since 1988, The resettlers has been led to develop the production system while the resettlement physical works such as housing reconstruction and resettlement of people were undertaken. From the second half of 1991 to 1992, the attention was paid on the establishment of production development shifting from mobilization to the full swing execution. In 1993, the production development was deepened further. In 1994, the resettlers experienced a change from their house building to the production development, from which they have increased their income. 21. In general, a great achievement was made in the resettlement work of Shuikou Project. The resettlers have worked and made a new life in their reclaimed land and production system. Most of the resettlers have restored or exceeded their living standards comparing with that before the resettlement. The production development has shown its initial results, with the increasing of employment and economic opportunity, the adjusting of industrial structures, and the perfecting of the infrastructure which has taken on an alive new appearance in the resettlement area. The construction of Shuikou Hydroelectric Project has not widened the gap between the rich and the poor resettlers in the reservoir area, and the production and livelihood in the reservoir area has shown that the developing future is hopeful. The resettlement project of Shuikou reservoir is a successful example. Environmental Aspects 22. Based on the sediment deposition observation during construction and the earlier stage of the reservoir impoundment, the changes of sediment deposition amount in Minjing reservoir channels are little, and the flushing/siltting amount is generally balanced. The mean annual sediment charge still maintains about 0.143 kg/m3 . The service life of the reservoir will be very long (over thirty years). 23. The water regimen automatic measurement & recording system for Shuikou Hydropower Station has been put into operation since 1994. The forecasting accuracy of the system is around 80 percent with 6-9 hours forecast period, which allows to dispatch and control flood in time and to fully use of reservoir storage to generate power. Also, it is convenient for the downstream to adopt flood control measures when a big flood occurs. 24. According to "Regulations of Grouding Water Observation in Fujian Province", a total of five sections were set by the authority of Ninping City in Mingjian River, Jianxi River and XiXi River to observe and analyze the water quality. By analyzing the water quality index in the end section the reservoir before and after the reservoir impoundment in 1993, it showed that the water quality index changes slightly between 1990 and 1995, which indicates that the water quality before and after the reservoir impoundment does not 51 change evidently and the water in the reservoir has a strong migrating diffusion and dilution capability. 25. The reconstruction and extension navigation facilities included twenty-six docks, three navigation administration stations, two sections of navigation channel and some relevant navigation marks. The construction of all these project were started in March 1989, and were completed in the end of 1994. The total investment for the works was 21.48 million RMB yuan. The operation of river traffic for goods and passenger from Nanping to Shuikou started in 1995. The navigation operation would be greatly improved with the official operation of Shuikou Shiplock. Fishery has become a scale production, and water and soil conservation around the resettlement area will be controlled effectively by afforesting, bank slope protection and environment control in the reservoir area. 26. The reforestation in construction area of main work includes the construction site recovery, embankment access to Anrenxi and spoil area and service roads, etc. The total area is about 210,000 M2 with 11.8 km long. The reforestation planning was started in 1994. Trees planting from the beginning of 1996 to the end of April 1996 reached to 27639, among which there are 1871 arbors, 18448 bushes, 1670 wies and 5650 flowers. The reforestation will be finished by the end of 1998 when the site cleaning for shiplift construction is completed. The total cost of the reforestation is about 3.07 million RMB yuan. 27. The environmental monitoring and evaluation for Shuikou Hydroelectric Project indicates that no major environmental problems are expected under the project. OPERATION PLAN OF SHUIKOU POWER PLANT Dam and Powerhouse Works Operation Management 28. From August 1,1993 to the end of 1995, power generation of six units of Shuikou Power Plant accumulated to 9.29 billion kWh, with unit cost of 111.10 yuan/GWh. The mature forced outage rate is remarkable low with about six hours per year per unit or 0.07 percent. Overall availability, after forced and planned outage, is about 93 percent. 29. The preparatory works for Shuikou Power Plant was started in May 1992, and preparation for production was ready in July 1993, Through the actual operation and inspection for near three years, the preparation for production is in a better and solider condition. Shuikou Power Plant established in light of the new management method is an streamlined organization and its personnel have a high level of competence through professional training. The management of the plant reaches to a efficient way. 52 Procedures for Equipment Operation and Maintenance of the Power Plant 30. Work in powerhouse is carried out according to the relative regulations of the Ministry of Electric Power and the rules made by the Plant. Every operator has one copy of Operation Manual in hand and implements regular maintenance schedule. Once some problems appear, they must be solved in time. The regular maintenance schedule for units and main equipment shall be made, i.e. one overhaul every 5 years and two routine maintenances every year. Reservoir Dispatch 31. Reservoir dispatch shall be carried out correctly and effectively to ensure efficient utilization of water energy and more power output. Safety procedures of the Plant shall be carried out in view of the safety standard procedure and regular maintenance procedures for the dam and powerhouse operations, including regular inspection and maintenance for the hydraulic-structure in the dam and powerhouse and safety inspection for flood prevention facilities, such as the spillway and gate operating system and flood- forecasting system. Environment 32. After the operation of the units the main environmental works shall be followed the domestic regulars and the Bank's requirement, including the following activities monitoring: submergence in the reservoir area, sediment deposition and water quality in the reservoir, water regiment, earthquake, ecological aspects, bank caving and depression, as well as the sediment siltting in the downstream navigation channel around the Plant. Resettlement 33. The compensation cost for resettlement was estimated to be 1.05 billion RMB yuan in total. Up to the end of March 1993, there still remains 23 million yuan, which will be mainly used for bank slops protection and production and development as well as poverty-assistance. 34. In February 1995, Fujian Province passed the 'Temporary Provision (No. 145) for the Ten years Shuikou Reservoir Maintenance and Construction Fund". These provisions are designed to channel 0.004 yuan/kWh of the output for the further development of the population resettled due to the Shuikou Reservoir. The revenue estimated to be generated should be as follows: 1995 4,763 GWh Y19,052,000 1996 4,800 GWh Y19,200,000 1997-2004 4,950 GWh Y17,800,000 53 35. SRRO has received a payment of YlO million for 1995. The regulation states that about 50 percent of the fund should be used for public infrastructure improvement in the first two years, and 50 percent should go towards improvement of new production activities, with this proportion increasing up to 100 percent after two years. So there will be a sum of 20 million yuan for reservoir maintenance each year. which will be used for production and development and improving living standard of the resettled people. 54 ANNEX 3 CHINA SHUIKOU HYDROELECTRIC PROJECT (LN. 2775) AIDE MEMOIRE EXTRACT 1. This is an extract from the aide memoire of the completion mission for the Shuikou Hydroelectric Project. Since the same mission also supervised the ongoing Second Shuikou Hydroelectric Project, those parts not relevant to the first project have been deleted. 2. A World Bank mission consisting of Messrs./Mmes. Barry Trembath, Martin ter Woort and Zhu Youxuan visited Fuzhou over the period March 20 to 25, 1996 to supervise the above mentioned projects. The main objectives of the mission were to collect information for the completion report of the first project, and appraise the proposed additional scope for the second project. The mission would like to express its appreciation to FPEPB, SHPC, SHPP, SRRO, ECIDI for their participation, the excellent documentation provided and the gracious hospitality extended to the mission. Status of Project Execution 3. SHPC made a presentation on progress of the project. Since the last mission, the fifth and sixth generating units were put into operation generally as scheduled in early 1995, as delayed by casting defects at Harbin. The seventh unit is planned to be commissioned in September 1996 as projected during the last mission. Unfortunately, this commissioning will miss the 1996 high flow season. The shiplock was put into public trial operation on February 10, 1996 and it is operating satisfactorily. However, it is planned to take it out of operation for about two months in the 1997 dry season to replace the locally manufactured hydraulic equipment with imported equipment. With regard to the shiplift, schedule has been maintained on the critical path activities, although delays of some non critical activities are delayed about one month. It is still planned to complete the towers to El. 74 m by the end of 1996. Removal of the downstream cofferdam will be commenced in May 1996, and the shiplift chamber will be floated through the cofferdam in August or December 1996. Shiplift procurement, and equipment manufacturing is proceeding on schedule. FPEPB awarded the shiplift equipment erection contract to Wuhan Shipbuilding Industry the local equipment manufacturer. 4. Finishing and architectural works on the dam and powerhouse are underway. These are scheduled to be substantially complete by the end of 1996. 55 Operation of the Project 5. The project is operating satisfactorily. In 1995, due to favorable hydrology, the output of the power plant was 4,763 GWh, which is only slightly below the design output in an average year with all units operating i.e. 4950 GWh. Total generation to date is 8,290 GWh which has generated revenue equal to more than 50 percent of the construction cost of the powerhouse including interest during construction. SHPP presented figures which indicate a mature forced outage rate of about six hours per year per unit or 0.07 percent, which is remarkably low. Overall availability, after forced and planned outages is about 93 percent. 6. Trial operation of the shiplock was commenced on December 26, 1995, and it was put into public trial operation on February 10, 1996. Up until March 22, 538 boats had passed through the lock in 92 passes. Total tonnage passed was 16,557 tons or 30.8 tons on average. Typically the lock can pass 12 boats at one time. The mission observed a smooth upstream passage of 11 boats of which five were barges carrying sand, while the other six were empty. At present, no toll charge is levied, but it is planned to introduce charges once shipping volumes have been established. Based on operations to date, an annual volume of 120,000 t is projected but this is likely to increase substantially once the availability and reliability of the lock is more widely known. RESETTLEMENT Shuikou Reservoir Resettlement Office of Fujian Province (SRRO) 7. SRRO reported that by the end of March 1996, some 23 million yuan of the resettlement budget remains to be disbursed. Of the total resettlement budget of 1,057 million yuan, 1,034 million yuan has been spent (97.8 percent), of which 45 million yuan was spent between October 1995 and March 1996. It was pointed out that monies flow from SRRO to the counties, but that the counties may not have fully spent the monies received. The resettlement expenditure per capita will stand at 15,720 yuan once the budget has been completed. While 97.8 percent of resettlement funds have been spent, it is not clear if 97.8 percent of the overall resettlement task ((1) physical relocation, (2) infrastructure replacement, and (3) income restoration of affected households), has been completed. While task (1) is complete and task (2) may be reasonably complete, it is not certain if task (3) is complete. See our comments under ECIDI. 8. On February 2, 1995, Fujian Province passed the "Temporary Provisions (No. 145) for the 10 Years Shuikou Reservoir Maintenance and Construction Fund". These provisions are designed to channel 0.004 yuan per kWh of output for the further development of the population resettled due to the Shuikou Reservoir. The revenue estimated to be generated should be as follows: 56 1995 4,763 GWh Y19,052,000 1996 4,800 GWh Y19,200,000 1997-2004 4,950 GWh Y19,800,000 9. SRRO has already received a payment of Y10 million for 1995. The regulation states that the fund should be used according to suggestions made by SRRO. However, SRRO has not as yet proposed a budget for the use of the funds. It stated that in the first few years, about 50 percent should go towards infrastructure improvement, and 50 percent towards improvement of new production measures, with this proportion increasing up to 100 percent after two years. Considerin,Q the findings of the mission's field visit (see next paragraphs), this would seem to be appropriate. However, the overall level of funds available on a yearly basis (about 20 million yuan) may not be sufficient to deal with the remaining problems in the reservoir area. This is an issue that should be investigated. ECIDI - Independent Evaluation of Resettlement 10. Discussions were held with ECIDI staff on the results of the 1995 field survey work undertaken as part of the 5-year Independent Evaluation of Resettlement. Based on two days of discussions in Fuzhou and one day visit to reservoir villages, the mission recorded its comments and recommendations which are presented as Annex B. It is pointed out that the last evaluation field survey will take place in the summer of 1996 and that in order to take full advantage of this opportunity, the field work be organized to collect the maximum of useful information to provide a clear indication to Provincial Authorities what still remains to be done. The mission also noted that the quality of evaluation reports has been steadily improving and hopes this trend continues. COMPLETION REPORT PHASE I Overall Completion Report 11. The mission received an overall report on the completion of the project. This is a very good report, but there are some areas where amplification would be useful. Mission comments are appended as Annex . One main comment is that this report, representing the overall completion report for the project, should include summaries on environment and resettlement aspects, which are dealt with comprehensively in annexes. Sections should also be added under Performance of Units Involved in the Project and Key Lessons Learned. Project Investment 12. A report on project investment was received by the mission. The mission requested some revisions to enable comparisons with appraisal estimates to be made and to present the information in suitable form for ex-post economic evaluation: 57 (a) The costs should reflect the original scope as covered in the Staff Appraisal Report for the first project. (b) The cost headings of Figure I and Figure 2 should be used for Figure 4. (c) Separate tables should be presented for foreign costs (in US$) and local costs (in RMB). (d) A second total column should be provided showing currency conversion (at exchange rate applying during each year of expenditure). Thus the foreign portion should be converted to RMB and the local portion to US$. These four total columns should be identical to those presented in Figures 1 and 2. Ex-Post Economic Evaluation 13. The analysis required was discussed with ECIDI representatives. Demonstration that the project is least cost will be carried out by comparison with 300 MW coal fired plants with imported coal. The IERR should be based on the 1996 price of Shuikou energy to the grid (39.8 fen/kWh) with the addition of provincial and local surcharges averaging about 5.0 fen. This price can be taken as a lower bound estimate of "willingness to pay". Sensitivity analyses should be conducted based on average grid price at generation level (about 33 fen) plus surcharges of five fen, and for maximum price currently being paid or planned to be paid to any generating plant (plus surcharges). Resettlement Aspects 14. SRRO presented the information requested by the November 1995 mission. While the information lacks some of the detail required, it will be incorporated into the Bank's report on Shuikou Resettlement. SRRO will later this year have an opportunity to review a draft of this report and supplement any information at that time. In the mean time, SRRO will provide FPEPB the information required to finalize its completion report on Shuikou I to the Bank. Environmental Aspects 15. The mission received two reports dealing with environmental aspects both prepared by ECIDI (a) Sediment Deposition Observations in Shuikou Reservoir during construction period, February 1996. The report suggests that sediment measurements continue for the next five years, in order to obtain useful information on the post-construction operation period This recommendation seems to be justified. (b) Water Regimen Automatic Measurement and Recording System for Shuikou Hydropower Station, September 1995. The system in 1994 58 predicted four floods with an accuracy of 80 percent. However, due to equipment failure, two large floods greater than 20,000 m3/s were not accurately predicted. Verbal reports during the mission indicated that seven floods greater than 10,000 m3/s were predicted. if this is so, the report needs to be amended to reflect this fact. 16. These reports pertain to Environmental Management Plan (EMP) activities 4.2 and 4.4. However no comprehensive report on the overall implementation and budget of the EMP, as requested by the two previous missions, has been prepared. This summary should follow the outline shown in Annex B of the November 1995 aide memoire. The Environmental Protection Office (EPO) of FPEPB should coordinate the production of the report. Particular attention should be paid to the water quality section of the report. Summary Completion Report 17. The summary completion report, to be published with the Bank ICR is in preparation. FPEPB Financial Aspects 18. FPEPB have been working with Ms. Alice Huang (in Taiwan) to assemble financial data in the required form. When complete, Ms. Huang will forward the data to Washington. Operation Plan 19. This report suitably summarizes the plans for operation of the project. However, for completeness it should also summarize ongoing activities in relation to environment and resettlement. Schedule for Elaborations/Revisions 20. The mission requested that the revised investment data be forwarded to Washington for comment by April 15, 1996, and all other reports be forwarded to Washington by April 30, 1996.