China - Yantan Hydroelectric Project

 Yantan hydroelectric project Report No: ; Type: Report/Evaluation Memorandum ; Country: China; Region: East Asia And Pacific; Sector: Hydro; Major Sector: Electric Power & Other Energy; ProjectID: P003470 December 29, 1995 China: Yantan Hydroelectric Project (Loan 2707-CHA) The implementation Completion Report (ICR) on the China Yantan Hydroelectric project (Loan 2707-CHA, approved in FY86) was prepared by the East Asia and Pacific Regional Office. The Borrower contributed Annex 2. The loan of US$52 million was closed on June 30, 1994, one year behind schedule when a balance of US$0.06 million was canceled. The Government of Norway contributed to the project with a grant of NK 18 million. The project objectives were to: (i) help address the energy shortage in Guangxi region and Guangdong province; (ii) promote electric interconnection with South China; (iii) provide transfer of technology in dam design and construction; (iv) upgrade financial planning and management practices in the electricity sub-sector; and (v) help the Bank build up relations with the Guangxi Electric Power Bureau (GEPB) and the South China Electric Power Administration (SCEPA) for future lending operations. The project components were: (a) construction of the Yantan 1,100 MW hydroelectric plant comprising a large dam, a powerhouse, and related facilities; (b) a 500 kV transmission system; (c) a resettlement program; (d) consulting services for construction management; and (e) a training program. The project objectives were met. GEPB built and commissioned the 1,100 MW hydroelectric plant and associated extra high voltage interconnection with South China. It is now contributing to the power supply of Guangxi and Guangdong. The reservoir of the hydroelectric plant will not impact adversely on the biota and public health of the area. About 43,000 people were resettled and new production arrangements set up for about 62,000 persons (vs. 36,000 estimated at appraisal). However, the resettlement program is still on-going because the income basis for two out of three resettlees is not yet fully restored. A comprehensive training program and a board of consultants were instrumental in the successful transfer of technology for building, operating and maintaining large dams. GEPB complied with all financial covenants and its financial performance continues to be good. Local contribution to project financing was high: equivalent to US$542 million or about 92 percent of project cost. The recalculated project economic rate of return, 12.5 percent, is very close to the 12 percent at appraisal. The Bank built up a good dialog with GEPB and SCEPA, and supported them effectively throughout project execution. The Operations Evaluation Department (OED) endorses the ICR's ratings: project outcome is satisfactory; project sustainability is likely; and institutional development is substantial. In addition, OED rates the Bank's performance as satisfactory. Three important lessons can be drawn: (i) local industry capability should not be overestimated when introducing modern techniques and technologies (in this case large turbines, generators, power transformers and high voltage switchgear); (ii) new production systems for people displaced by the reservoir impoundment should be operational by the time actual resettlement takes place; and (iii) a board of consultants for advising on a large dam will be most effective if its skill mix is adjusted as the implementation of the dam evolves from design through construction, commissioning and operation. The ICR is satisfactory. It contains a complete account of project execution, results and lessons. It includes plans for future project operation and completion of the resettlement program. It also highlights the problems faced by GEPB and the local industry in the procurement and fabrication of high quality equipment for this large and modern hydroelectric plant. The project may be audited together with three other hydroelectric projects (Lubuge, Shuikou and Daguangba).