China - Second Shuikou Hydroelectric Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 10610-CRA SThA APPRAISAL REP(rJT CfINA SECOND SHUIOU FDROELECTRIC PROJECT August 10, 1992 MICROFiCHE COPY Report No. :1o61o-CHA Type: (SAR) Title: SHUIKOU HYDROELECTRIC PROJECT Author: TRE:MATH, B Ext.: 82891 Roora:F10045 Dept.: ASTEG Industry and Energy Operations Division Country Department 11 E-ast Asia and Pacific Regional Office This document has a resticted distibion and may be used by recipients only in the performance of their offlcial duties. Its contents may not otherwlse be disciosed without World Bank authorization.  CURRENCY EOUIVALNTS (As of January 31, 1992) Currency = Yuan (Y) Y 1.00 - 100 fen $1.00 = Y 5.q3 Y 1.00 = $0.18 FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES km = Kilometer (= 0.62 riles) kWh = Kilowatt hour (= 860.42 kcals) GWh = Gigawatt hour (1,000,000 kilowatt hours) TWh = Teraw&tt hour (1,000,000,000 kilowatt hours) kW = Kilowatt (1,000 watts) MW - Megawatt (1,000 kilowatts) GW = Gigawatt (1 million kilowatts) kcal = Kilocalorie (= 3.97 British thermal units) kV = Kilovolt (1,000 volts) kVA = Kilovolt-ampere (1,000 volt-amperes) MBtu = Million British thermal units MJ = Mega-joule (1 million joules) MVA = Megavolt-ampere (1,000 kilovolt-amperes) GVA = Gigawatt-ampere (1 million kilovolt-ampere) m = Milligram *,- = Cubic Meter toe = tons of oil equivalent ABBREVIATIONS AND ACRONYMS USED BERI - Beijing Economic Research Institute for Water Resources and Electric Power ECIDI - East China Investigation and Design Institute FPEPB - Fujian Provincial Electric Power Bureau FPG Fujian Province Grid GFP - Government of Fujian Province GNP - Gross National Product GOC - Government of China HIPDC - Huaneng International Power Development Corporation IER - Independent Evaluation of Resettlement MKE - Morrison Knudsen Engineering Company MOE - Ministry of Energy MOF - Ministry of Finance MWREP - Ministry of Water Resources and Electric Power NEPA - National Environmental Protection Agency PCBC - People's Construction Bank of China SAA - State Audit Administration SBC - Special Board of Consultants SCADA - Supervisory Control and Data Aquisition System SEIC - State Energy Investment Corporation SPC - State Planning Commission SRRO - Shuikou Reservoir Resettlement Office  FOR OMCAL USE ONLY CHINA SECOND SHUIKOU HYDROELECTRIC PROJECT Loan and Proiect Summary Borrower: People's Republic of China Beneficiary: Fujian Provincial Electric Power Bureau (FPEPB) Amounts $100 million equivalent Terms: Twenty years, including five years grace, at the Bank's standard variable interest rate, with level principal repayments. Onlendinq Terms: The proceeds of the loan will be onlent from the Borrower to FPEPB under a subsidiary loan agreement, with a 20- year term, including five years grace, at the Bank's standard variable interest rate, with level principal repayments. FPEPB will bear the foreign exchange risk and the commitment charges. Proiect Obiectives and DescriDtion: Background. The Bank's involvement in the Shuikou Hydro- electric Scheme dates from its inception in 1987. In view of the long gestation period of the project, the Bank approved a loan (Loan 2775-CHA) covering the initial implementation period and agreed to consider a second loan covering the later years of implementation. The first loan has served to support the introduction of modern planning, procurement and construction methods, and the enhancement of environmental and resettlement policies. Achievements to date include: relocation of the railway and other infrastructure; completion of exca- vation and placing about 75 percent of dam concrete; commencement of powerhouse equipment erection; and reset- tlement of about 57,000 peopl.. Construction is current- ly on schedule. Studies dealing with optimal mixed sys- tem operation, power system planning, and automated con- trol of the power grid, have also been largely completed. Obiectives. The proposed second loan would help finance the completion of the ongoing Shuikou Hydroelectric Scheme, thus furthering the objectives of the first phase. In addition the project would promote: (a) transfer of modern power system technology; (b) power price reform; (c) management training to assist the power bureau to cope with increasing demands placed on it by decentralization; and (d) optimal system expansion. of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  D ii - Proiect Descriotion. The proposed project would first pro de for the completion of the Shuikou Hydroelectric Scheme, all components of which were partly or fully covered covered under the first loan. These are: (a) construction of a concrete gravity dam (101 m high) with associated spillway, powerhouse and navigation lock; (b) provision and installation of seven 200 MW generating sets; (c) environmental management and resettlement of some 67,000 people; and (d) consultancy services for design, procurement and construction management. In addition, the second-phase project would include: (a) increased capacitv of navigation facilities by construc- ting a shiplift in addition to the originally proposed shiplock; (b) provision of an automated control (SCADA) system for the Fujian power grid; (c) implementation of an action plan for tariff reform; (d) provision of tech- nical assistence and training for planning, commercial and financial management, and project-related technology and meaagement; and (e) a study to explore hydro-based seasonal energy storage options in Fujian Province and completion of studies on system planning and operations. Benefits and Risks: Benefits. The proposed project will provide reliable and economical electricity supply to the Fujian Province, without major adverse environmental impacts. It will help Fujian to cope with a rapidly growing industrial demand resulting from the province opening to the outside world and will contribute to a further improvement in the living standards of the population. The project is part of the least-cost investment program for the Fujian grid, which has an IERR of 11.4 percent based on the average tariff required to meet financial covenants, and 19 per- cent, valuing incremental consumption using, as "willing- ness to pay," the price paid for new consumption under the multitier tariff currently applied in Fujian. Indi- rect benefits arise from an improvement in navigational conditions in the Min River, upgrading of infrastrt^ture and housing as part of the resettlement program and avoidance of thermal generation with associated environ- mental impacts of burning 1.6 million of standard coal/ year. Risks. The risks generally associated with hydroelectric projects, related to potential cost and schedule over- runs, are very low for the current project, in which foundations and river bed work are complete, only one flood season remains prior to dam completion, and the first generating unit is on schedule for commissioning in June 1993. Similarly, the risk of poorly handled reset- tlement has largely receded with successful implementa- tion to date. The risk remains that some people affected by the resettlement program will be disadvantaged during the period taken to bring new production systems up to  - iii - full capacity. This risk is being minimized by the Inde- pendent Evaluation of Resettlement (IER), and assurances being obtained from the Government that it will ac'; on the results of the IER to supplement incomes as necessary during the transition period. Estimated Costs: Local Foreign Total