China - Beilungang Thermal Power Extension Project

 Beilungang thermal power extension project Report No: ; Type: Report/Evaluation Memorandum ; Country: China; Region: East Asia And Pacific; Sector: Thermal; Major Sector: Electric Power & Other Energy; ProjectID: P003553 China: Beilungang Thermal Power Extension Project (Loan 2955- CHA) The Implementation Completion Report (ICR) for the Beilungang Thermal Power Extension project (Loan 2955- CHA, approved in FY88) was prepared by the East Asia and Pacific Regional Office. The Bank loan for US$165 million was almost fully disbursed (US$0.06 million was canceled), and closed in June 1995 with a delay of two years. Project objectives were to: (a) support the national policy of developing large coal-fired thermal power generating units to make effective use of China's abundant coal reserves; (b) continue the effort to introduce modern construction technology and management techniques for 600 MW thermal power units; and (c) provide technical assistance to the implementing agency, the Zehjiang Provincial Electric Power Bureau (ZPEPB), for reorganizing its operations and strengthening its management. This assistance was aimed at facilitating its transformation from a power bureau to a more autonomous power entity. The project components were: (a) the extension of the Beilungang Thermal Power Plant with the addition of a second 600 MW unit, the construction of the second single circuit of the 500 kV transmission line between Beilungang and Pingyao, and the extension of the Shaoxin and Pingyao substations; (b) the provision of consulting services for engineering, and project management; (c) a study of ZPEPB's reorganization and management systems; (d) a study of the distribution networks for the cities of Hangzhou and Ningbo; and (e) a training program for ZPEPB staff. All the project objectives were met, in spite of some implementation problems (a protracted procurement period; construction and commissioning delays due to problems in contractual interfaces among many suppliers; prolonged periods of poor weather; and the need to correct equipment defects detected during power plant commissioning). The successful completion of physical components contributed significantly to mitigating power shortages in East China and promoting industrial production and regional development. The study of the distribution networks of Hangzhou and Ningbo were carried out successfully. Training of technical personnel consolidated the transfer to ZPEPB of modern technology for the construction and operation of large coal-fired plants. Training of planning, utility and financial management staff built successfully on programs initiated under the first Beilungang project (Loan 2706-CHA). A reorganization study laid the ground for broader future sector reform. The project met the Bank and local environmental guidelines for coal-fired plants. Resettlement had already been carried out satisfactorily under the first Beilungang project. ZPEPB complied with most financial covenants (except for the average rate of return of 8.1 percent which fell somewhat short of the covenanted 12.2 percent). The ICR recalculated a project economic rate of return of 17 percent (15 percent at appraisal). The Operations Evaluation Department (OED) rates the project outcome as satisfactory, its institutional development as substantial, and its sustainability as likely. Bank performance is rated as satisfactory. These ratings are consistent with those in the ICR. One important lesson from this project is that procurement of large coal fired plants should be split into fewer, more self-contained packages to minimize coordination problems among suppliers. The ICR is satisfactory. It presents a good account of project implementation and results. In particular, it includes a plan for ZPEPB's commercialization and corporatization. However, it should also have included a set of indicators for monitoring and evaluating future project performance. The project may be audited together with other power projects in East China.