Document of The World Bank FOR OFFICIAL USE ONLY Report No. 19700 IMPLEMENTATION COMPLETION REPORT CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305) September23, 1999 Energy and Development Sector Unit 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) 1991 $1 = 5.45 1992 $1 = 5.75 1993 $1 = 8.70 1994 $1 = 8.45 1995 $1 = 8.32 1996 $1 = 8.30 1997 $1 = 8.30 1998 $1 = 8.30 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS EIRR - Economic Internal Rate of Retum GOC - Government of China HEPCO - Hainan Electric Power Company HMC - High Main Canal HMCMD - High Main Canal Water Management Division ICR - Implementation Completion Report MSDI - Mid-South Investigation and Design Institute O&M - Operating & Maintenance RCC - Roller-Compacted Concrete SAR - Staff Appraisal Report SDPC - State Development and Planning Commission Vice President Jean-Michel Severino, EAPVP Sector Director Yoshihiko Sumi, EASEG Country Director Yukon Huang, EACCF Task Manager Barry Trembath, EASEG CONTENTS PREFACE EVALUATION SUMMARY .........................................................i PART I: PROJECT IMPLEMENTATION ASSESSMENT ..................................1 A. Statement/Evaluation of Objectives ........................................................l 1 B. Achievement of Project Objectives ......................................................... 2 C. Implementation Record and Major Factors Affecting the Project ................4 D. Project Sustainability ........................................................ 17 E. Bank Performance ........................................................ 17 F. Borrower Perfornance ........................................................ 18 G. Assessment of Outcome ........................................................ 19 H. Future Operation ........................................................ 19 1. Key Lessons Learned ........................................................ 21 PART II: STATISTICAL TABLES ........................................................ 22 Table 1: Summary of Assessments ........................................................ 22 Table 2: Related bank loans ........................................................ 23 Table 3: Project Timetable ........................................................ 28 Table 4: Loan/Credit Disbursement: Cumulative Estimate and Actual ........... 28 Table 5A: Key Indicators for Project Implementation ..................................... 29 Table 5B: Key Indicators for Project Implementation ..................................... 30 Table 5 C: Key Indicators For Project Implementation .................................... 31 Table 6A: Key Indicators For Project Operations ........................................... 32 Table 6B: Key Indicators for Project Operations ............................................ 33 Table 7: Studies included in Project ........................................................ 34 Table 8A: Project Costs ........................................................ 35 Table 8B: Project Costs ........................................................ 36 Table 8C: Project Financing ........................................................ 37 Table 9A: Economic Costs and Benefits ........................................................ 38 Table 9B: Economic Costs and Benefits ........................................................ 39 Table 10: Status of Legal Covenants ........................................................ 40 Table 11: Compliance with Operational Manual Statements .......................... 42 Table 12: Bank Resources: Staff Inputs ........................................................ 42 Table 13: Bank Resources: Missions ........................................................ 43 ANNEX A: FINANCIAL STATEMENTS OF HEPCO ........................................ 44 ANNEX B: BORROWER'S CONTRIBUTION TO THE ICR ............................ 47 ANNEX C: ICR MISSION'S AIDE MEMOIRE ................................................... 55 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. IMPLEMENTATION COMPLETION REPORT CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305) PREFACE This is the Implementation Completion Report (ICR) for the Daguangba Multipurpose Project in China, for which Loan 3412 in the amount of U$30,000,000 million equivalent and Credit 2305 in the amount of SDR 28,100,000 million (US$37,000,000 million equivalent) were approved on October 31, 1991 and made effective on February 20, 1992. The loan and credit were closed on December 31, 1998. They were fully disbursed, and the last disbursement took place on February 24, 1999. The ICR was prepared by Barry Trembath and Yuling Zhu in the Energy and Mining Sector Unit, and Qun Li in the Rural Development and Natural Resources Sector Unit of the East Asia and Pacific Region, and reviewed by Mr. Yoshihiko Sumi, Sector Director. The Borrower/Beneficiary provided comments, which are incorporated in the ICR, its own completion report, an executive summary of which is included as an annex to the ICR. Preparation of this ICR was begun during the Bank's final supervision mission in October 1998, and an ICR mission visited the Province in March 1999. A follow-up mission to obtain outstanding data was undertaken in June 1999. This ICR is based on the documents and data received during those missions, discussions with Beneficiary staff and consultants, Staff Appraisal Report, the Loan and Project Agreements, supervision reports, correspondence between the Bank and the Borrower/Beneficiary, and internal Bank memoranda. CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305) EVALUATION SUMMARY Introduction 1. The Daguangba Multipurpose Project is located in the western part of Hainan Island, the driest and poorest region of the Hainan Province. As a newly established province in China, Hainan's potential for economic growth remained largely untapped partly due to the lack of infrastructure. It was in this context that the Project was approved by the Bank and the Government of China. The Beneficiary of the Project was the Hainan Electric Power Company (HEPCO). Project Objectives 2. The main objectives of the Project were to: (a) develop non-polluting and cost- effective hydropower resources; (b) increase agricultural production and the income of poor farmers; (d) improve the environmental quality and public health of the region by implementing an environmental management program; (e) promote prudent investment programming; (f) promote rational pricing of electricity and irrigation water; and (g) enhance the operational efficiency and financial management of HEPCO. 3. To meet the above objectives, the project included two categories of components: power and agriculture/resettlement. The power components included: (a) a 56 m high, 719 m long concrete gravity dam; (b) an underground powerhouse, equipped with four 60 MW generation sets; (c) some 36 km of double circuit 220 kV transmission line and a substation; (d) a computerized load dispatch system for the Hainan power grid; and (e) technical assistance and training in project design, power system planning and tariff studies, utility and financial management. The agriculture/resettlement components included: (f) a 16 km long main irrigation canal; (g) about 154 km of branch and lateral canals and on-farm works for irrigation of about 12,700 ha of which about 1,400 ha would be related to resettlement; (h) resettlement of about 23,800 people; (i) and agricultural support services. 4. The objectives remained unchanged for the duration of the project. They were clearly stated. The physical objectives were realistic. The institutional development objectives may have been too ambitious, given HEPCO's status as a province owned power bureau and an unlikely candidate to pilot reforns in the power sector. Both power and agricultural development objectives were important in supporting economic growth and alleviating poverty in an a very poor region. - ii - Implementation Experience and Results 5. The project achieved its primary objective of developing hydropower resources, to provide needed peaking power and auxiliary services in a system which is now predominantly thermal. Though the irrigation facilities have not been fully completed due to shortage of counterpart funds, the project objective of increasing agricultural production and income of the poor farmers has been partly achieved and there are good prospects to extend this achievement with the recent allocation of funds by the provincial government to allow completion of this component by the end of 2000. The objective of improving environmental quality and public health of the region has been at least partly achieved with a general improvement of public health in resettlement villages. Success in achieving objectives of promoting rational pricing of electricity and irrigation water and institutional development has been modest. 6. The ex-post Economic Internal Rate of Return (EIRR), based on a minimum proxy of "willingness to pay" for power benefits is calculated as 16.1 percent in comparison with 15.0 percent estimated at appraisal using similar methodologies. The appraisal estimate is exceeded despite the fact that the irrigation component is not complete and energy production has been less than planned because of severe drought. 7. The major shortcoming in achievement of objectives is in relation to the restoration of income of resettlers. The overall standard of resettlement housing and community facilities is better than before the move and based on sample surveys average income is about 10 percent higher than that before the move, after allowing for inflation. However, incomes are unevenly distributed and about 40 percent of villages have average incomes which are still at least 20 percent lower than before the move. Development plans have been prepared specifically targeted at problem areas, and with the recent approval of additional funds by the provincial government it is hoped that needed agricultural development work can be completed by the end of 2000. 8. The dam and power plant were started and completed basically on schedule. The first generating unit commenced trial operation on December 29, 1993 and the entire power component was completed and put into commercial operation on December 30, 1995. The dam and power plant are of good quality. The reservoir first filled to full supply level in November 1996, and in 1997 the generation was close to the design level of 520 GWh. However, there was a decrease in 1998 due mainly to an exceptional drought in the region. 9. The power transmission facilities constructed under the project included: 35.4 km of double circuit 220 kV transmission lines from Daguangba to Emaoling and 194.2 km of 220 kV line fom Emaoling to Sanya; extension of Emaoling 220 kV substation and a new 220 kV substation in Sanya City. The Emaoling substation was put into operation in November 1993 and the Sanya substation in July 1995. The extension to Sanya was not included in the project scope but in May 1993, the Bank agreed that Bank financing could - iii - be used to finance the purchase of imported materials and equipment for the extension to Sanya providing for a more effective usage of Daguangba power in the Hainan grid. 10. The first phase of the High Main Canal was also completed generally as planned and is of a high standard. It entered operation in June 1994 and has been operating successfully since then. The second phase is not yet complete due to shortage of local funds, however with the recent approval of additional funds by the provincial government it is expected that the project can be completed by the end of 2000. Achievements in agriculture support services substantially exceed appraisal targets. Agro-technical extension services system were also strengthened with construction and rehabilitation of four new county and township centers, and introduction of various new production technologies. 11. The detailed resettlement plan, prepared in 1987, provided for the relocation and re-establishment of 20,516 persons. The plan provided for resettlement to be primarily land based. Actual numbers of people requiring relocation increased to 22,243 which is still less than the SAR estimate of 23,800 people. However, the above numbers do not include a further 5,343 people in 13 additional villages who are affected by loss of land, raising the total number of project affected persons to 27,586. The original resettlement budget of Y 150.5 million was adjusted twice during implementation, in 1993 and in late 1997, eventually reaching 269.4 million. However, because of slow arrival of funds from the provincial government, by the end of 1998 only Y 206.3 million had been allocated by HEPCO. Achievements of the resettlement plan up until the end of 1998, included: construction of new housing and community facilities, providing substantially more floor space of considerably higher quality than before the move; land development accounting for 93 percent of the plan target. However for land-loss villages, because of the late start and lack of finance, only 14 percent of land development targets had been achieved. Restoration of livelihood is being achieved albeit gradually. According to the most recent survey carried out by the independent momitoring agency, the average per-capita income of all resettlers in 1997 was 9.7 percent higher than before the move after allowing for inflation. However, income restoration was unevenly distributed. Most villages served by the HMC have considerably improved their income. Another third of villages seem to be well on the way to full restoration, but about 40 percent had a 1997 per-capita income at least 20 percent below that before the move. Development plans have been prepared specifically targeted at the problem areas and with the provincial government approval, on August 13, 1999 of an allocation from the provincial development loan, HEPCO are optimistic that the remaining development work can be completed by the end of 2000. 12. The estimated cost of the project at appraisal (excluding interest during construction) was equivalent to a total of $193.0 million (Y 1,086.5 million). The final cost was equivalent to a total of $197.5 million (Y1,514.4 million). There is an apparent cost overrun of some 2.3 percent when expressed in US dollars and 39.4 percent when expressed in local currency. The difference in the two figures for cost overrun is due to the higher-than-expected-inflation in China and the devaluation of the local currency. - Iv - The comparison of costs expressed in US dollars is considered to give a reasonable estimate of cost overrun excluding the effects of inflation and devaluation. Given the size of the project and the uncertainties involved, this slight increase of 2.3 percent is considered to be reasonable. 13. The ex-post Economic Internal Rate of Return (EIRR), based on a minimum proxy of "willingness to pay" for power benefits is calculated as 16.1 percent in comparison with 15.0 percent estimated at appraisal using similar methodologies. The appraisal estimate is exceeded despite the fact that the irrigation component is not complete and energy production has been less than planned because of severe drought. Summary of Findings, Future Operations, and Key Lessons Learned 14. The objectives of the projects were consistent with those of the Chinese Government and the Bank. While major objectives were achieved there is a significant shortfall in the area of resettlement where 40 percent of resettlement villages are still some way from full restoration of income. However, with recent approval of additional local funds, it is anticipated that this achievement will be eventually achieved. 15. Daguangba Hydropower Plant is well staffed and has comprehensive and well- documented operation and maintenance procedures in place to ensure proper operation and maintenance of the power plant. With regard to performance indicators, the Daguangba power plant has already been accredited as meeting State Power Corporation standards for safe and efficient operation as well as aesthetics and working environment. The H1MC Phase I was completed and started operation in June 1994. The Water Resource Bureau of Dongfang City has operated and maintained the new irrigation facilities since May 1994. Future operations will focus on efficient operation and maintenance of the completed irrigation works and facilities so as to achieve the project's full development. To further enhance the project's economic benefits, the irrigation areas and agricultural support service facilities will be progressively adapted to a market- oriented production economy with a self-supporting operation mechanism, responsible for its own profits and losses. 16. For resettlement, the additional Y50 million recently allocated by the provincial government should allow general completion of the remaining works after which the reservoir maintenance fund will generate income based on energy production of about Y 2.1 million per year for ten years which should sustain annual workplans for the resettlement unit within HEPCO and two county resettlement offices. 17. In line with Bank management's response to the OED report "Recent Experiences with Involuntary Resettlement (Report No. 17538), it is recommended that the Bank continue to supervise the resettlement component until it is clear that incomes have been restored in real terms, or at least until physical facilities are in place to ensure this. It is recommended that in FY00, two supervision missions are mounted for this purpose. - v - 18. Key lessons mainly relate to the resettlement and irrigation components. Those relating to resettlement serve to reinforce those derived from other Chinese reservoir resettlement projects. Lessons are: (a) the need to carefully appraise: proposed institutional arrangements for resettlement, both at overall project level and implementation (county and township) level; the treatment of land acquisition even where, prima facie, relocation is not required; the feasibility of "moving back resettlement strategies where there is a tendency to over-estimate remaining land resources. (b) the need to further advance resettlement planning at the planning stage to allow better assessment of resettlement strategies, and the preparation of more accurate cost estimates. (c) the need to consider in the project design measures to ensure borrower commitment to all elements important to the success of the project, including increased level of Bank financing for these elements and staged performance targets so that implementation can be carefully monitored. - 1 - CHINA DAGUANGBA MULTIPURPOSE PROJECT (LOAN 3412/CREDIT 2305) PART I: PROJECT IMPLEMENTATION ASSESSMENT A. STATEMENT/EVALUATION OF OBJECTIVES 1. The Daguangba Multipurpose Project is located in the western part of Hainan Island, the driest and poorest region of the Hainan Province. As a newly established province in China, Hainan's potential for economic growth remained largely untapped partly due to the lack of infrastructure. It was in this context that the Project was approved by the Bank and the Government of China (GOC). 2. The main objectives of the Project were to: (a) increase the development of non-polluting and cost-effective hydropower resources to provide needed peaking power in a predominantly thermal system; (b) increase agricultural production to meet the needs of a growing population; (c) increase the income of the poor farmers by intensifying agricultural production and increasing the productivity of cropland by alleviating water shortages and optimizing the cropping pattern; (d) improve the environmental quality and public health of the region by implementing an environmental management program; (e) promote prudent investment programming and strengthen local capabilities in development planning of both power and agricultural sectors; (f) promote rational pricing of electricity and irrigation water; and (g) enhance the operational efficiency and financial management of HEPCO. 3. The development-based resettlement of the reservoir population, while not singled out as a specific development objective, would be carried out in the context of OPN 10.08 and OMS 2.33. These Bank directives called for the relocation of reservoir population in a manner that would leave them after relocation as well off as before, possibly better. 4. To meet the above objectives, the project included two main categories of components: power and agriculture/resettlement. The power component included: -2 - (a) Construction of a 56 m high, 719 m long gravity dam of roller-compacted concrete (RCC), flanked by about 5,100 m long earth embankments; (b) Construction of an underground powerhouse, equipped with four 60 MW generation sets, a surge shaft and 420 m long twin tailrace tunnels; (c) Erection of about 36 km double circuit 220 kV transmission line and Changjiang substation; (d) Installation of a computerized load dispatch system for the Hainan power grid; and (e) Technical assistance and training in project design, power system planning and tariff studies, utility and financial management. 5. The agriculture/resettlement component included: (a) Construction of the 16 km long High Main Canal (HMC), about 154 km long branch/lateral canals and on-farm works for irrigation of about 12,700 ha in Dongfang County, of which about 1,400 ha would be related to resettlement; (b) Resettlement of about 23,800 people in Dongfang and Ledong Counties, and provision of housing, infrastructure (including public buildings), on- farm works and land development for irrigation of about 2,300 ha; (c) Provision of agricultural support services; (d) Provision of environmental management; and (e) Technical assistance for the preparation of an agricultural development plan. 6. The objectives remained unchanged for the duration of the project. They were clearly stated. The physical objectives were realistic. The institutional development objectives may have been too ambitious, given HEPCO's status as a province owned power bureau and an unlikely candidate to pilot reforms in the power sector. Both power and agricultural development objectives were important in supporting economic growth and alleviating poverty in an a very poor region. B. ACHIEVEMENT OF PROJECT OBJECTIVES 7. With the successful completion of the dam and the hydropower plant as originally designed, the project achieved its primary objective of developing hydropower resources, to provide needed peaking power in a system which is now predominantly thermal. There have been no major operating problems since the rather extensive teething -3 - problems encountered in the early stages of project operation. As of end 1998, about five years after the commercial operation, all four units have generated a total of electricity of 1,981.3 GWh. The project improved the balance and location of thermal and hydro power resources in Hainan power grid. It also provides the badly needed functions of load following and frequency regulation in a grid which has become somewhat unbalanced towards large thermal plants. 8. Though the irrigation facilities have not been fully completed due to shortage of counterpart funds, the project objective of increasing agricultural production and income of the poor farmers has been partly achieved and there are good prospects to extend this achievement. The currently completed irrigation facilities can supply water to about 97,100 mu (6,473 ha) of agricultural land, and extensions are currently underway to increase this by 30,000 mu (2000 ha) by the end of 1999, thus irrigating two thirds of the originally planned area. In addition, funds have now been allocated to complete works required to irrigate the full planned area by the end of 2000. The irrigation system developed under the project can also supply water for industrial and residential use. It plays a significant role in alleviating the long-term drought situation in the southwest area of the province. 9. The ex-post Economic Internal Rate of Return (EIRR), based on a minimum proxy of "willingness to pay" for power benefits is calculated as 16.1 percent in comparison with 15.0 percent estimated at appraisal using similar methodologies. The appraisal estimate is exceeded despite the fact that the irrigation component is not complete and energy generation has been less than planned because of drought, because of higher demonstrated willingness to pay for power and higher irrigation benefits due to improved cropping patterns. 10. The objective of improving environmental quality and public health of the region by implementing an environmental management program has been at least partly achieved with a general improvement of public health in resettlement villages. Hygiene and sanitation have considerably improved and infectious diseases are dramatically down since before the move. The standard of health care in the villages has also improved considerably. 11. The major shortcoming in achievement of objectives is in relation to the restoration of income of resettlers. The overall standard of resettlement housing and community facilities is better than before the move, and based on sample surveys, average income is about 10 percent higher than that before the move, after allowing for inflation. However, incomes are unevenly distributed among the resettlement villages. Among 29 resettlement villages, only 7 villages have increased per capita income, while some 40 percent have incomes which are still at least 20 percent lower than before the move. Development plans have been prepared specifically targeted at the areas which are having difficulties re-establishing income, and budgets have been approved by central government authorities. However, both the provincial government and HEPCO have suffering severe funding shortages due to the economic downturn and fund allocations -4 - have arrived very slowly. The situation is expected to improve with the allocation on September 13, 1999 of a provincial development loan to enable the resettlement development work to be completed. 12. Success in achieving objectives of promoting rational pricing of electricity and irrigation water has been limited. While power pricing studies were completed, the proposed tariff structure reform was not implemented because of lack of approval from the provincial government. Water charges are being levied but are well below O&M costs. Similarly, achievements with respect to the objective of enhancing the operational efficiency and financial management of HEPCO are also modest. C. IMPLEMENTATION RECORD AND MAJOR FACTORS AFFECTING THE PROJECT Background 13. The major factors affecting the project during preparation and implementation largely relate to the changing administrative, political and economic enviromnent during this period summarized as follows: (a) At the time of project identification, Hainan had only recently been granted provincial status and establishment of government administrative arrangements, including the status of HEPCO, significantly slowed down decision making. To some extent this administrative uncertainty continued throughout the preparation and implementation period with HEPCO's relationship to the provincial government changing several times. It was initially established as a provincial power bureau under the provincial government. Later it "piloted" a separation of government and commercial functions (although allocation of functions to bureau and company did not seem to have been thought through). It was then established as a joint stock company with joint ownership by provincial and local governments. Finally, it went back to being a wholly owned subsidiary of the provincial government. Throughout this process it appears to have had little autonomy from the provincial government, and required approvals for virtually all activities. This was complicated by several changes for responsibility for HEPCO within the government. (b) The processing of the project in the Bank was adversely affected by the political events of 1989. Appraisal occurred in April 1989, but Board presentation was delayed until October, 1991. Large scale work started on the dam in March, 1990. Before Board presentation, Bank staff were limited in their ability to influence events on site with respect to construction, resettlement etc. (c) The project design (in the larger sense) was very much dictated by the desire of the Hainan authorities to limit the use of foreign exchange, - 5 - particularly as the central government was insisting from the outset that Hainan should assume the responsibility for foreign exchange convertibility for loan repayment. Bank finance was thus limited to peripheral elements rather than the main work. (d) Over the course of project preparation and implementation, Hainan went through a period of explosive economic growth from 1987 to 1995 with HEPCO energy sales increasing 25 percent per year on average. For 1997 and 1998 this reduced to about three percent before recovering to about II percent in 1998. The high growth period resulted in large provincial government commitments to infrastructure investments and power company commitments to power purchases, which left both in constrained financial conditions during the ensuing slow down. Power Component 14. The Power component consisted of construction of a dam, an underground power house, associated transmission lines and substations, and installation of a computerized load dispatch system for the Hainan power grid, as well as the related technical assistance and training. Implementation Organization 15. HEPCO, the owner of the project, was also the implementing agency. For the Daguangba Hydroelectric Power Plant, a special and temporary organization - the Project Comrmand Office - was set up to manage construction. Mid-South Investigation and Design Institute (MSDI) served as the designer. Guangxi Electric Power Investigation and Design Institute served as the supervision engineer. A Special Board of Consultants consisting of domestic and international experts was also appointed to provide consulting and advisory services during the project implementation. The dam and powerhouse civil works and equipment were not financed by the Bank and contracts were awarded based on local procedures. The Changjiang Gezhouba Project Construction Bureau was selected as the civil works contractor. Dongfang Electric Power Equipment Corporation was the supplier of the turbine and generator sets and the Tenth Water Resources and Hydropower Project Bureau conducted the installation of mechanical and electrical equipment. Implementation Status 16. The implementation schedule included in the SAR provided for commencement of the main civil works in the second quarter of 1990, commissioning of the first unit in the third quarter of 1993, the second unit in December 1993, the third unit in September 1994 and the fourth unit in December 1994. 17. The dam and power plant were started and completed basically in line with the above schedule. The civil works began in March 1990. It took 63 months for the -6 - concrete dam to reach its design height in June 1995, involving concrete volumes of 910,900 m3 including 258,500 m3 roller-compacted concrete (RCC). Generating Unit 1 started operation on December 29, 1993, followed by Unit 2 on May 26, 1994, Unit 3 on October 29, 1994 and Unit 4 on March 29, 1995. The entire power component was completed and put into commercial operation on December 30, 1995. 18. The associated power transmission facilities constructed under the project included: (a) double circuit 220 kV transmission lines from Daguangba Hydropower Plant to Emaoling (the length of the double circuit lines are 35.3 km and 35.5 km respectively); (b) 220 kV transmission line from Emaoling to Basuo in the length of 48.9 km; (c) 220 kV transmission line from Basuo to Sanya in a length of 145.3 km; (d) extension of Emaoling 220 kV substation (with 2 GIS bays and 2 x 120 MVA transformer capacity) which was completed and started operation in November 1993; and (e) a new 220 kV substation in Sanya City, which was put into operation in July 1995. The scope of the transmission component exceeds that envisaged at appraisal in that the original project scope simply provided for the connection of the Daguangba project to the grid at Emaoling including extension of the substation there. In May 1993, the Bank agreed that Bank financing could also be used to finance the purchase of materials and equipment for a line from Emaoling to Basuo and thence to Sanya including a new substation at Sanya. This reinforcement provided for a more effective usage of Daguangba power in the Hainan grid taking into account the rapid growth rates in the Sanya region. The additional lines and substation also serve to strengthen the interconnection between north and south load centers of Hainan. Implementation Experience 19. Adoption of Roller-Compacted Concrete (RCC). RCC was adopted in the construction of the Daguangba gravity dam. In the preliminary design, volcanic ash was selected to be the binding mixture in the process of making RCC. However, tests showed that the volcanic ash it was planned to use contained 50 percent of material which would accelerate setting and also cause drying shrinkage. Therefore, extensive testing was conducted on fly ash (which was available from a thermal power plant in the area) as a substitute for the volcanic ash and this testing eventually proved its suitability. 20. The proportion of the dam that was composed of RCC is substantially less - 28 percent - than in the original design, which projected 57 percent. This is attributed to the fact that detailing of the dam had been imperfectly adapted to accommodate RCC placing methods and the contractor found it impractical to use RCC in many areas. Review of the design by specialists with more experience in RCC may have allowed for the planned proportion of RCC to have been achieved with concomitant cost savings. 21. Geological Treatment of the Main Dam Foundation. Following completion of the dam and during reservoir filling, abnormal downstream movement (maximum about 11 mnm) was recorded in relation to one dam block. Drilling revealed a zone of weathered material, which was considered to be responsible for the movement beneath the dam, - 7 - which of the reservoir filling was temporarily halted and a 14 member panel was assembled to advise on required remedial works. Based on the recommendations of the panel, a program of drainage, buttress construction and anchoring was recommended and promptly implemented. On resumption of dam filling, no further abnonmal movements were observed Agriculture/Irrigation Component Overview 22. During the initial identification of the Daguangba project, the irrigation component was limited to that associated with the resettlement in Dongfang County, with further development of the High Main Canal and the area served by it left to the future. However, the Bank preparation team found that, as a pure power project, the economic justification of Daguangba was particularly sensitive to load growth projections, and therefore requested that the full development of the Stage 1 irrigation area be included in the scope of the project. Significantly, however, Bank financing was not increased to cover this additional scope. The project file records the visit of a deputy governor to the site during the "hiatus" period, and his confirmation that the provincial government would take responsibility for the implementation of the full Stage 1 development. However, during project supervision in October 1996, the mission discovered that the government were not intending to develop the full area until well into the future. The mission reminded the government of their commitment in accordance with the Hainan agreement, and followed up several times after that. While these endeavors succeeded to some extent, by the end of 1998 the irrigation area developed and supplied with water as limited to 55 percent that envisaged at appraisal. Plans were to complete the balance by the end of 2000, but until recently definite funding had only been identified to cover about one fourth of this expansion. The situation has recently improved with provincial govemrnment approval of an allocation of loan funds available to the government to cover the financing gap. Irrigation Development. 23. Despite the non-completion of the second phase of the HMC, and the associated restriction of irrigated area, physical targets of the irrigation component, as laid out in the SAR were largely achieved. The Phase I construction involved the construction of the HMC with a length of about 14.7 km and a discharge capacity of 14 cum/sec (about 94.2 and 116.7 percent of the SALR), 57.7 km of main branch canals (196 percent of the SAR), 47.1 km of lateral branch canals (245.3 percent of the SAR) and some 175.4 km of field ditches (154.8 percent of the SAR. Detailed comparisons are included in Table 5. The irrigation on-farm works resulted in improving 30, 000 mu of existing and expanding 97,100 mu of new irrigation areas, making a total of 127,100 mu (about 67 percent of the SAR). The extensions for Phase II are currently underway to increase this to 190, 000 mu (12,667 ha) by the end of 2000. The budget for HMC extension, approved by the government, is Y68 million. To date, about Y18 million has been financed, leaving a - 8 - financing gap of Y50 million. On September 13, 1999 the Provincial Development Planning Department approved an allocation from provincial development loan of YIOO million (Y50 million for the HMC, and Y50 million for resettlement). A copy of the approval document was provided to the Bank. With these funds, HEPCO are optimistic that remaining works will be completed in the year 2000. Farm development will be by contributed labor to the estimated value of Y1 7.75 million. Agricultural Support Services 24. Achievements in agriculture support services substantially exceed appraisal targets. For agricultural inputs, one seed company was established, which supplied 225 kg/ha of quality seeds. A total of 2,836 tons of fertilizer and 141.8 tons of agro- chemicals were procured and distributed to the project area. Some 22 sets of agricultural machinery and equipment, and 110 tractors were purchased and operated to increase the level of farm mechanization. On land and soil improvement, some 9,122 ha of cultivated land were leveled and some 1,789 ha of soil improved. Agro-technical extension services system were strengthened with construction and rehabilitation of four new county and township centers, and introduction of various new production technologies. Training 25. The project provided institutional strengthening and development mainly through staff training in project implementation and management and upgrading of technical skills and competence at all provincial and local government levels. Farmers completed 1,200 person-months of training, project staff 95 person-months, and project managers 8 person-months during implementation of the irrigation component. In addition, domestic study tours involving 30 person months and 450 person-months of domestic consultancy services were provided. Resettlement Implementation Organizations 26. Resettlement planning was carried out by MSDI and they were also employed periodically throughout implementation to carry out supplementary planning and to develop revised budgets for submission to central government authorities. In 1990, resettlement organizations were set up in the two affected counties and three state farms. In addition, for overall management of implementation, a resettlement office, with staff seconded from provincial departments, was set up under HEPCO project office. Unlike most other Chinese reservoir resettlement projects, there was no provincial resettlement office to provide leadership to the county offices in resettlement implementation. 27. HEPCO also employed MSDI to carry out a program of independent resettlement monitoring and evaluation as foreseen at appraisal. This monitoring and evaluation by MSDI is taking place over a five year period (1995 to 2000) and involves samples of 327 households and all 29 resettlement villages. The annual reports of this program have - 9 - proved to be very valuable in providing HEPCO and the Bank with regular information on progress of physical relocation, economic rehabilitation, and other measures of well- being of the resettled population. Implementation Experience 28. The detailed resettlement plan, prepared in 1987, provided for the relocation and re-establishment of 20,516 persons living in 29 villages, 6 townships, two counties, 80 percent of whom were rural, and 20 percent urban'. The plan summarized in Annex 16 of the Staff Appraisal Report (SAR), provided for resettlement to be primarily land based. Each resettler would be provided with one mu of paddy and one mu of dry land plus some additional land for tropical trees crops, housing plot and fuel wood. All paddy land was to be irrigated. 29. Actual numbers of people requiring relocation increased to 22,243. This includes 1682 persons in three villages which were not originally planned to be relocated since village infrastructure and buildings were not to be inundated. However, a 1997 survey revealed that remaining land resources were not viable and relocation became necessary. The total number is still less than the SAR estimate of 23,800 people. However, the above numbers do not include a further 5,343 people in 13 additional villages who are affected by loss of land, raising the total number of project affected persons (PAPs) to 27,586. Some allowance was evidently included in initial budgets as compensation for lost land in these areas but no detailed rehabilitation planning was carried out. Detailed rehabilitation plan for villages affected by loss of land only were not prepared until the end of 1997. 30. The original resettlement budget was Y 150.5 million. This was adjusted twice during implementation, in 1993 and in late 1997 primarily for inflation, but in the last adjustment to fully take into account rehabilitation measures which would be needed for land loss villages. The finally approved budget was Y 269.4 million. However, because of slow arrival of funds from the provincial government, by the end of 1998 only Y 206.3 million had been allocated by HEPCO. 31. Achievements of the resettlement plan up until the end of 1998, included: (a) Relocation of 22,243 persons, 18,162 of whom were agricultural; (b) Construction of 318,810 m2 of new housing and 107,837 m2 of community facilities, providing 11.2 percent more floor space of considerably higher quality than before the move; (c) Development of 25,002 mu of land accounting for 93.3 percent of the plan target. However for land-loss villages, because of the late start and lack of The SAR used a figure of approximately 23,800 people based on "1990 survey data adjusted for growth". No details of this survey are on file. - 10- finance, only 14 percent of land development targets had been achieved, mostly located in two newly relocated villages although the pace of land development is accelerating now with the allocation of additional funds. 32. Restoration of livelihood is being achieved albeit gradually. According to the 327 sample household survey by MSDI, the average per-capita income of all resettlers in 1997 was Y 532, which was 10 percent higher than that in 1996 and 9.7 percent higher than before the move after allowing for inflation. However, income restoration was unevenly distributed among resettlement villages, with only seven of 29 villages restoring their income on a per-capita basis. In general, these are villages that moved to Datian resettlement area (served by the HMIC) which now have reliable irrigation and developed paddy. Another third of villages seem to be on the way towards restoration of income. These are generally "moving back" villages in Ledong and Dongfang which have relatively greater land resources and developed irrigation. However, about 40 percent of villages have a per-capita income in 1997 at least 20 percent below that before the move. Development plans have been prepared specifically targeted at the areas which are having difficulties re-establishing income, and budgets have been approved by central government authorities. However, both the provincial government and HEPCO have been suffering severe funding shortages due to the economic downturn and fund allocations are arrived very slowly. The situation has recently improved with the provincial government approval, on August 13, 1999, of an allocation from the provincial development loan, which will basically cover the funding shortfall. Environmental Issues 33. It is evident from a review of correspondence in the project preparation phase that health issues were of primary concern to resettlement specialists, particularly infectious diseases such as malaria and hepatitis. The Resettlement Monitoring and Evaluation program reports have consistently described a general improvement in health and hygiene in resettlement areas. With the establishment of a medical service network, access to health care has been greatly improved. Access to potable water has also generally improved in comparison with pre-move conditions, and work is continuing to ensure all resettlement villages will have access to potable water in all seasons. Sanitation is also substantially better in the new villages. All of these factors have resulted in substantial drops in the incidence of infectious diseases as can be seen from the following table, although there was a partical resurgence of Malaria in 1997. This was reportedly due to several factors including climate factors in 1997, and the extension of access roads to poorer isolated areas, thus extending reporting to these areas. Infectious Diseases Among Resettlers Incidence per 1,000 Population 1992 1993 1994 1995 1996 1997 Malaria 6.80 5.00 4.25 2.39 1.82 3.65 Dysentery 0.75 0.67 0.10 0.14 0.04 0.08 Hepatitis 0.25 0.51 0.21 0.10 0.12 0.06 Measles 0.00 0.05 0.32 0.01 0.01 0.00 Poliomyelitis 0.00 0.01 0.00 0.00 0.00 0.00 7.00- 6.00 5.00 .[ Malaria 4.00 l Dysentery 3.00 l Hepattis 2.00 -j Measles 1.00 L Poliomyelitis I0.00Mb1 l_ csi co v Un co rl- O 0) 0') 0') 01) CD 0 0 0) ) 0) 34. In relation to other issues raised in the SAR: (a) Water quality monitoring is less frequent than desirable. However, results to date show no change from the pre-project situation i.e. generally high quality except for an excessive bacterial count attributed largely to human waste from Ledong upstream. The project financed sewage treatment plant for this area has only just been completed (due to lack of finance) and when the completion mission visited the site was still not in operation. Since then, HEPCO have reported that it commenced trial operation on August 18, 1999. Water quality should be fully acceptable when the plant comes into full operation. (b) Protection of the rare Datian deer has been improved by partially fencing- in and patrolling the protected area. The deer population is reported to have increased from about 40 at the time of appraisal to over 200. (c) The afforestation around the reservoir rim recommended by the SAR has been partially implemented. Houiniling forestry farm land planted, between 1991 and 1992, 2,400 mu of forest on the right bank of Changhua river, and 600 mu of forest in Datian area. The trees are mainly eucalyptus. Erosion into the reservoir is not significant. - 12 - (d) The slight moderation in temperature adjacent to the reservoir (attributable to the reservoir itself) is reported to be beneficial to agriculture. 35. In the irrigation area, the completed irrigation and drainage facilities, land and soil improvements, and afforestation (forest belts and fruit trees) have improved the land productivity and enhanced the general ecological environment of the project area. The increased water diversion to the western region of Hainan has improved the environment for agriculture, aquaculture, urban and rural water supply. Procurement 36. The procurement under the project was conducted in line with the agreed arrangements as stipulated in the Legal Agreements and SAR. Overall, 94 contracts worth $70 million equivalent were executed. As shown in the table below, ICB was the major procurement method used under the project, accounting for 67.7% of total contract value, in comparison with 63 percent projected in the SAR, followed by NCB for civil works contracts for irrigation and resettlement components. Procurement was generally uneventful. The only incidents occurred during initial LCB contracts when it was found that prior review procedures were not being correctly followed. On an exceptional basis, the Bank carried out post-review and accepted the contracts for financing. Procurement No. of Contracts Contract Value Method Number % of Total Value ($'000) % of Total ICB 33 35.1 47,403.5 67.7 LIB & IS 17 18.1 1,132.1 1.6 NCB (Works) 44 46.8 21,467.8 30.7 Total 94 100.0 70,003.3 100.0 Consultants Project Management Consultants 37. The SAR envisaged that HEPCO would employ foreign consultants to assist HEPCO in managing project construction. In the event, this did not occur. Because of the delay in loan approval, the civil works commenced well before the effectiveness of the Bank loan. In early supervision missions, the Bank attempted to catalyze the employment of international consultants. Shortlists and terms of reference were agreed and proposals were requested from three firms. The Bank questioned HEPCO's recommendation for award. Protracted correspondence ensued. Eventually, HEPCO advised that the construction was already at its peak and local project managers seemed to be performing effectively and there was no longer any need to employ foreign consultants, particularly in view of the scarcity of foreign exchange. The Bank accepted HEPCO's decision. - 13 - Special Board of Consultants 38. Earlier in the project a Special Board of Consultants (financed by Technical Cooperation Credit), consisting of domestic and international experts, was appointed to provide certain quality control for the project. The consultants conducted three missions respectively in the preparation stage of construction, early stage of construction, and peak period of construction. They reviewed the preliminary design, construction drawings and the project site situation, and provided many suggestions and recommendations related to design, construction and future operation. Most of the suggestions and recommendations were adopted and proved to be useful. Project Costs and Loan Disbursement 39. Project Costs. The estimated cost of the project at appraisal (excluding interest during construction) was $59.1 million in foreign costs and Y 754.5 million in local costs, equivalent to a total of$ 193.0 million (Y 1,086.5 million). The final cost was $68.4 million in foreign costs and Y954.1 million in local costs, equivalent to a total of $197.5 million (Y1,514.4 million) (see Table 8a and 8b for details). Considering overall costs (foreign plus local), there is an apparent cost overrun of some 2.3 percent when expressed in US dollars and 39.4 percent when expressed in local currency. The difference in the two figures for cost overrun is due to the higher-than-expected-inflation in China (91 percent between 1991 to 1996 compared with 37.5 percent estimated) and the devaluation of the local currency from an exchange rate of Y5.24 to the dollar at the time of appraisal to Y8.70 to the $1 in 1993 (with a slight recovery to 8.30 thereafter). The comparison of costs expressed in US dollars is considered to give a reasonable estimate of cost overrun excluding the effects of inflation and devaluation. Comparing the two sets of figures, major deviations are noted in the areas of civil works, canals and on-farm works beyond those required for resettlement. The civil work cost increase can be largely attributed to the increased proportion of conventional concrete in relation to RCC referred to earlier. The reduction in costs in relation to the irrigation canals can be attributed to the fact that this component is so far incomplete and the incomplete status has been taken into account in the economic analysis. The transmission cost increase relates to the revision of project scope to include the line to Sanya and an additional substation as referred to earlier. Given the size of the project and the uncertainties involved, this slight increase of 2.3 percent is considered to be reasonable. 40. Loan Disbursement. A comparison of the estimated loan disbursements at appraisal with the actual disbursements is given in Table 4. Loan disbursement was slower than the appraisal schedule in earlier years due to initial procurement delays for Bank financed contracts. However, by FY95 disbursements had accelerated and cumulative disbursements had reached 94 percent of the total amount of loan and credit. Thereafter, remaining funds were progressively reallocated to priority areas such as resettlement civil works, disbursement of which occupied the remaining time until project closure. Both the loan and the credit were fully disbursed. The last disbursement was made on February 24, 1999 for the loan and on March 3, 1999 for the credit. - 14 - Economic Performance Power Benefits 41. At appraisal an analysis was carried out to verify that the Daguangba power project was part of the least cost development for the Hainan grid by comparing it with a notional thermal alternative (85 MW coal and 225 MW gas turbine). A similar analysis was carried out for the ICR. Capital costs and fuel costs were derived based on recent project justification reports for power projects in China. Distillate was assumed as fuel for the gas turbine, rather than gas as assumed in the appraisal report as gas supplies to Hainan are fully committed, and there are no immediate plans for further resource development. The analysis summarized in Table 9A, yielded hydropower costs (at 10 percent discount rate )of 46.4 fen/kWh if all joint costs are allocated to power and 40.5 fen/kWh if allocation of joint costs is carried out in accordance with the "separable-costs- remaining-benefits" methodology. This compares with an alternative thermal cost of 61.7 fen/kWh. The equalizing discount rate is 21 percent ofjoint costs are fully allocated to power and increasing to 41 percent if they are only partially allocated to power. The ratio of hydro to alternative thermal costs, assuming full allocation of joint costs is 75 percent compared to 53 percent estimated at appraisal. Differences can be explained by conservative allocation of full transmission costs (increased scope) to the hydro project, and that the appraisal analysis evidently did not allow for lower energy generation in early years until completion of spillway crest gates. Nevertheless, it is clear that Daguangba is considerably more economical than a thermal alternative. Agricultural Benefits 42. The investment in the irrigation component has brought significant benefits in terms of increased agricultural yields and production due to the expanded irrigation facilities, improved extension services and input availability. The project was successful in expanding and improving an irrigation area of 8,473 ha with increases of crop intensity. At project completion, major grain crops (rice, corn, bean and sweet potato) and cash crops (off-season vegetables, sugarcane, mango and watermelon) generally exceeded the SAR-projected yields and production for the full development. Table 6B shows the area cultivated, yields and production achieved for each crop. 43. The main crop yields currently achieved in the project area are 4.7 tons for rice (109.2 percent of SAR), 1.9 tons for beans (105.8 percent of SAR), 10.3 tons for vegetables (103.1 percent of SAR), 51 tons for sugarcane (102 percent of SAR), and 21,221 tons for mangos (102.5 percent of SAR), respectively. Preliminary data show a further increase in yields and production for cash crop as farmners fully utilize the climate advantage of Hainan to diversify crop production and increase inputs in response to higher market prices. The total annual crop production increased during the project period (in 1998) by about 21,048 tons for rice, 2,653 tons for other grain, 1,594 tons for peanuts, 10,373 tons for off-season vegetables, 98,673 tons for sugarcane, 17,028 tons for mangos, 1,420 tons for pineapples, and 3,294 tons for melons. The increased outputs - 15 - from various crops resulted in higher incomes for beneficiary farmn households. The annual gross value of crop production was estimated at about Y 197 million. Rural Income and Poverty Reduction 44. The component has effectively reduced the incidence of poverty for the household beneficiaries (2,270 families/10,529 persons) in the project area, especially for about 5000 of the poorest famnilies in the western region of Hainan. The implementation of the project generated employment opportunities, both short- and long-term, including employment for women. An annual increase of about three million labor-days per year, equivalent to about 10,000 new jobs have been created. Together with the production gains especially from high-value cash crops, the project has helped to raise the income level of the farmers. The MSDI sample surveys of farm income among resettlement villages in the irrigation area indicated that villages which are served by the HMC have increased their income by an average of about 30 percent over that before the move after allowing for inflation. No detailed data has been collected in relation to non-resettlers, but spot interviews indicate a much larger increase, attributable to the fact that per capita land areas are considerably greater. Indirect Benefits 45. The irrigation project has contributed to an increase in local government revenues through the collection of agricultural and special product taxes derived from the expanded irrigated/reclamation land and the change of the cropping pattern (increased high-value cash crops) in the project area. The local govermments, in turn, have invested in infrastructure (roads, electricity, water supply, etc.) and other social amenities (health clinics, schools, etc.), all of which have contributed to the overall improvement of the quality of life for the project beneficiaries. Internal Rate of Return (EIRR) 46. At appraisal, an EIRR of 15% was calculated for the project as a whole based on the estimated benefits of power and irrigation. In the absence of willingness-to-pay data long run marginal cost was used as a proxy for benefit. For the ICR a "willingness-to- pay" type of analysis was carried out ex-post using prices of energy sold to the grid in 1996, plus power development surcharges applied at provincial levels. The generation tariff assumed was a 50/50 blend of two current generation tariffs: 59 fen/kWh from a 300 MW coal fired power plant and 65 fen/kWh for new industrial gas turbines burning gas2. The operating pattern for Daguangba supports this split with about 50 percent of output being scheduled for peaking. Surcharges of 2.4 fen/kWh for power development funds which are added at the consumer level were added to give a total tariff at generation level of 64.4 fen/kWh. The calculated ex-post EIRR with joint costs allocated in 2 This is less than the 74 fen/kWh tariff recommended for Daguangba by expert team from SPDC and construction Bank but considerably more than the 37 fen/kWh "temporary" tariff currently allowed by the pricing commission. - 16 - accordance with the "separable-costs-remaining-benefits" methodology is 16.1 percent overall, 16.4 percent for power and 15.1 percent for irrigation. Table 9B provides details. HEPCO Financial Performance 47. Comparative financial statements containing the appraisal projections and the actual data for the period of project implementation (1991 through 1998) are summarized in Annex A. Over the seven-year period of project implementation, HEPCO's energy sales have increased by a factor of 2.9, an average increase of 27.2 percent per annum, reflecting the fast economic growth in Hainan Province, the largest special economic zone in China. The average tariff has been increased by 65.3% from 32.0 fen/kWh in 1991 to 52.9 fen/kWh in 1998 (representing about six percent increase in dollar terms). The actual operating revenue in 1998 amounted to Y 1.45 billion, about 4.8 times of that in 1991 and 44.8 percent higher than projected at appraisal. Along with the increase in revenues, operating expenses also rose but more rapidly, largely due to much higher than expected power purchase costs. This resulted from changes in the power sector structure, whereby most new power plants were built by independent or semi-independent joint investment partnerships which sell power to the HEPCO grid. HEPCO role has thus changed to certain extent to that of a purchasing agency and transmission utility. HEPCO was profitable until 1996, but suffered losses in both 1997 (Y 1.6 million) and 1998 (Y 43.2 million). The main factor behind this change in fortune was the sharp slow down in demand growth that occurred in 1996, after HEPCO had entered into substantial power purchase commitments at high prices. Purchased power costs doubled from 1995 to 1996, while average tariff is actually lower in 1998 than 1995 due to lack of provincial government approval to pass through tariffs determined on the basis of the central government's "new power/new price" policy. For example, the "temporary" tariff approved by the provincial pricing commission for Daguangba power plant is only 37 fen per kWh in comparison with 74 fen recommended by a task force composed of representatives from Construction Bank and State Development and Planning Commission (SDPC). Another contributing factor to the losses is the wet season failure in 1998 which resulted in low inflows and low reservoir levels severely limiting the energy generation of Daguangba. 48. Three financial covenants were included in the Legal Agreements, namely: HEPCO should (a) cover all operating costs and debt service in 1991/92, and maintain a self-financing ratio of not less than 20 percent in 1993, 25 percent in 1994, and 30 percent thereafter; (b) ensure that its debt service coverage ratio is not less that 1.1 times in 1991- 1993, 1.2 times in 1994-1996, and 1.3 times thereafter; and (c) maintain a debt/equity ratio of no more than 85/15 in 1991, 80/20 in 1992/93, 75/25 in 1994/95 and 70/30 thereafter. Over the course of project implementation, HEPCO has been basically in compliance with debt service and debt equity covenants, but has generally not been in compliance with self financing covenants, and failed to break even in 1997 and 1998. - 17- D. PROJECT SUSTAINABILITY 49. Technically, the dam, power plant constructed under the project are of good quality, are being adequately maintained and operated. HEPCO could improve reservoir operations to maximize benefits. Financially, the "temporary" tariff allowed by the provincial government would not be adequate to sustain it as an independent power plant. However, as an operating unit of HEPCO its operations budget and debt repayment are being maintained. While HEPCO is in financial difficulties, it remains solvent partially through transfers from the provincial power development as "debt swaps". The situation should improve as power demand continues to recover and excess generating capacity is absorbed. 50. The irrigation component is likely to be sustainable because of: the good quality of the completed works; the commitment of the local government in the project area; the newly developed agricultural commodity (tropical crops) production bases; clearly defined and assigned responsibility in O&M Regulation of the HMC System to ensure sustained operation of the completed irrigation facilities; the effective agricultural support services system to_ensure sustained agricultural production; and project-promoted growth of the local economy and generated revenue for the local governments that, in return, provide continued support for the project area. 51. The rehabilitation strategy for resettlement is land based supplemented by income from tropical tree crops, and therefore is potentially sustainable in all cases. Sustainability has been proven for about 60 percent of resettlers. For the remaining 40 percent it will be sustainable provided existing plans for land development and provision of irrigation facilities are implemented. E. BANK PERFORMANCE 52. During project preparation, there appears to have been a tendency to equate the project with similar power projects in China and underestimate the effect of special circumstances such as the multipurpose nature of the project, the fact that the power company involved was under the province rather than the state, and that Hainan itself had only recently been upgraded to provincial level. However, internal review procedures resulted in adequate consideration being given to these matters. The originally scheduled appraisal review meeting was downgraded to a peer review meeting and a further pre- appraisal mission was undertaken. During the hiatus period, several brief missions were carried out in conjunction with other operational work in China, followed by a full post- appraisal mission to update data and analyses. Thus, by the time the project was presented to the Board all important issues had been addressed. One shortcoming in the appraisal process was the apparent failure to recognize inadequate resettlement planning in relation to villages which lost a major portion of their land but were not planned to be relocated. In addition, more consideration could have been given to methods of ensuring the provincial government met its commitment to irrigation development beyond that required for resettlement, including specific covenants and partial Bank financing. - 18 - 53. After loan approval, supervision was initially light, with the first supervision mission not occurring until about 15 months after Board presentation, although procurement review was intensive during this period. After this, supervision was intensified, particularly when it was recognized that there were shortcomings in resettlement implementation. From 1992 to 1999, there were a total of 14 missions 13 of which included a resettlement specialist. These missions (and the leverage applied at the time of closing date extension and ICR rating) played a role in improving resettlement implementation, including the contracting of the independent resettlement monitoring and evaluation program, the 1998 adjustment to the resettlement budget, preparation of a supplementary resettlement plan for land loss villages in 1998, the establishment of the reservoir maintenance fund in May, 1999 and finally in the approval of supplementary funds for the HMC Phase 2 and resettlement in August 1999. After recognition, in 1997, of the provincial governnent's intention to curtail irrigation development to the area serviced by the HiMC Phase 1, supervision missions also focused on this aspect.3 54. Overall, it is considered that the Bank's performance was satisfactory. F. BORROWER PERFORMANCE 55. The assessment of Borrower performance needs to cover the signatory to the various agreements: central and provincial governments and HEPCO. HEPCO's performance was good in relation to those aspects about which it cared most: the construction of the dam, power plant, transmission lines etc. It also performed adequately in construction of the HMC and reviewing and coordinating resettlement implementation. The resettlement office under HEPCO made great efforts in relation to the latter function. On the other hand, resettlement budget allocation apparently received a lower priority by HEPCO in comparison with other project components, often resulting in slow allocations and delayed completion of relocation and rehabilitation targets, although the slow arrival of provincial government funding was cited as the main reason for such delays. The central government generally performed satisfactorily including the approval of necessary revisions in revised resettlement budgets, not however without the usual delays associated with such revisions. It was also instrumental in putting together a financing plan for completion of the agricultural and resettlement components at the time of closing date extension in late 1997. However, this was not modified when the planned contribution from the Construction Bank of China did not materialize. The performance of the provincial government has been disappointing in the areas of fund allocation, approval of tariff level for Daguangba, approval of consumer tariff structure changes, approval of level of reservoir maintenance fund and approval of overseas training programs. On the other hand, it must be acknowledged that financing difficulties have been exacerbated by the East Asia economic crisis. The provincial government has now 3 The reason that this was not recognized earlier was due to confusion in the SAR definition of project scope which included HMC Stage 1, but the lengths given only covered Phase I of Stage 1. The remainder was apparently intended to be covered by Other Canals and On-Farm Works financed by the provincial government. - 19- allocated funds to complete the project and HEPCO report that tariff restructuring is being accelerated. Considered as a whole Borrower performance is rated as Satisfactory. G. ASSESSMENT OF OUTCOME 56. The overall assessment must take into account: the satisfactory achievement of objectives with regard to the power plant including environmental matters, the largely achieved objectives of the irrigation component, the limited achievement of institutional development objectives, and the currently unsatisfactory outcome with regard to the resettlement project, which however could be reversed in the near term with the recently approved allocation of resources and increased attention to this matter by HEPCO and the provincial government. Overall, a rating of Satisfactory is assigned. H. FUTURE OPERATION Power Plant 57. The Daguangba Hydropower Plant commenced operation on December 29, 1993 with the commissioning of the first generating unit. The commissioning of the fourth generating unit was on March 29, 1995. Since its operation, the power plant has generated a cumulative 1,981.3 GWh with breakdown by year as follows: Year 1994 1995 1996 1997 1998 Total GWh 312.4 372.6 426.1 501.5 368.7 1,981.3 58. The relatively slow buildup of generation can be attributed to the fact that in accordance with the design schedule, first generating units entered service prior to completion of spillway crest gates and reservoir filling. The reservoir first filled to full supply level in November 1996 and in 1997 the generation was close to the design level of 520 GWh. The decrease in 1998 was due to an exceptional drought in the area exacerbated by the fact that the dispatchers were overusing Daguangba generation based on system requirements. The reservoir water level has been at the minimum operating level for quite some time. The limited amount of water used each day is mainly to meet demands of irrigation and residential/industrial water supply. 59. Daguangba Hydropower Plant is well staffed with one director, two deputy directors (including one chief engineer), 83 employees in plant operation and maintenance, and 337 employees in non-core service businesses. Comprehensive and well-documented operation and maintenance procedures are in place to ensure proper operation and maintenance of the power plant. Methodology for efficient utilization of water, procedures for regular dam safety inspection and reporting as well as for flood forecasting and environment monitoring are also in place and followed. Nevertheless, it appears that there is room for substantial improvement in HEPCO's operation of Daguangba. Admittedly the project is unique in the HEPCO system and there is no previous experience in reservoir operation on this scale. Also the relative size of the - 20 - project in relation to the overall system will diminish. On the other hand flow diverted for irrigation - only nominal to date - will increase. As an overall guide, HEPCO should endeavor to maintain the reservoir at a relatively high level under normal conditions - closer to the MSDI upper rule curve. This will produce several advantages, namely: (a) maintaining plant capability at 240 MW; (b) minimizing the risk of reservoir failure, i.e. draw-down to MOL as at present; and (c) increasing energy by maintaining a higher average head. 60. With regard to performance indicators for the future, the State Power Corporation has set benchmarks including numerous parameters which collectively measure safety, reliability and efficiency of operation of hydroelectric power plants. Some of the main performance indicators are listed in Table 6A. In addition, a different set of criteria relate to factors such as cleanliness, aesthetics and working environment which, if met, qualify the power plant for "civilized" status. When both of these standards are met the power plant is accredited as having met the dual standards. A "first class" standard is also in place involving more rigorous performance indicators for some operating efficiency factors. The Daguangba power plant has already been accredited as meeting the dual standards. Irrigation Facilities 61. The HMC Phase I was completed and started operation in June 1994. The Water Resource Bureau of Dongfang City has operated and maintained (O&M) the new irrigation facilities since May 1994. The High Main Canal Water Management Division (HMCMD) in the Bureau is the unit responsible for O&M of the HMC irrigation system. Under HMCMD, four water management stations were set up. The O&M for the main, sub-main, branch, and lateral canals is carried out by each station according to the O&M Regulation of the HMC Irrigation System and to a schedule prepared by the Dongfang Water Resource Bureau. Sub-laterals and field ditches are maintained by water users twice a year. In addition, each township government, village committee and agro- economic development organization takes an active part in assisting the water authority in the O&M work. The agriculture technical support was provided to the project area by the South China Academy of Tropical Crops and the Dongfang City Agriculture Research Institute for the introduction, testing, and extension of new and improved varieties. Future operations will focus on efficient operation and maintenance of the completed irrigation works and facilities so as to achieve the project's full development. The existing HMCMD and staff will be maintained to concentrate on O&M aspects of the project. To further enhance the project's economic benefits, the irrigation areas and agricultural support service facilities will be progressively adapted to a market-oriented production economy with a self-supporting operation mechanism, responsible for its own profits and losses. - 21 - Resettlement 62. With regard to resettlement, about Y 56 million of the approved budget of Y 262.33 million remains to be spent on production development. On June 15, 1999, HEPCO, based on a review of action plans prepared by the two counties, submitted a plan outlining a list of remaining resettlement works which need to be completed between July 1999 and June 2000. The total cost for these remaining works totals Y 56 million, but the source of funds was not identified. The Y50 million recently allocated by the provincial government should allow general completion of the remaining works after which the reservoir maintenance fund will generate income based on energy production of about Y2. 1 million per year for ten years which should sustain annual workplans for the resettlement unit within HEPCO and two county resettlement offices. Bank 63. In line with the management's response to the OED report "Recent Experiences with Involuntary Resettlement (Report No. 17538), it is recommended that the Bank continue to supervise the resettlement component until it is clear that incomes have been restored in real terms, or at least until physical facilities are in place to ensure this. It is recommended that in FY00, two supervision missions are mounted for this purpose. I. KEY LESSONS LEARNED 64. Key lessons mainly relate to the resettlement and irrigation components. Those relating to resettlement serve to reinforce those derived from other Chinese reservoir resettlement projects. Lessons are: (a) the need to carefully appraise: proposed institutional arrangements for resettlement, both at overall project level and implementation (county and township) level; the treatment of land acquisition even where, prima facie, relocation is not required; the feasibility of "moving back resettlement strategies where there is a tendency to over-estimate remaining land resources. (b) the need to further advance resettlement planning at the planning stage to allow better assessment of resettlement strategies, and the preparation of more accurate cost estimates. (c) the need to consider in the project design measures to ensure borrower commitment to all elements important to the success of the project, including increased level of Bank financing for these elements and staged performance targets so that implementation can be carefully monitored. - 22 - PART II: STATISTICAL TABLES TABLE 1: SUMMARY OF ASSESSMENTS 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 Sustainability Likely Unlikely Uncertain x Bank Performance Highly Satisfactory Satisfactory Deficient Identification X Preparation assistance X Appraisal X Supervision X Borrower Performance Highly Satisfactory Satisfactory Deficient Preparation X Implementation X Covenant compliance X Assessment of Outcome Highly Satisfactory Satisfactory Unsatisfactory Highly 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, 02/21/84 Loan was closed on Lubuge Hydroelectric an 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 telecomnmunications 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 06/14/88 06/30/94. Second loan Beilungang Thermal two 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 transmnission 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. Shuikou Hydroelectric gravity dam, a spillway, a powerhouse Project and a navigation lock; to install 7 generating units of 200 MW each; to carry out a resettlement program in the reservoir. Ln. 3515-CHA To complete the ongoing Shuikou dam 09/01/92 Closed 6/30/98. Current Second Shuikou and hydroelectric power plan, upgrade ICR.. Hydroelectric Project the control and data acquisition system of the 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. First loan closed Ertan Hydroelectric 550-MW generating units and associated 08/22/95 12/31/96. Closing date Projects I & II equipment; to carry out an environmental second loan 12/31/2001 management program, studies of power pricing and reservoir operation, and a training program. Cr. 2305-CHA & To construct a 56 m high gravity damn 10/31/91 Closed 12/31/98. ICR Ln. 3412-CHA and an underground powerhouse with 4 x in preparation Daguangba Multipurpose 60 MW generating units; to erect a 36 km 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 01/14/92 Closed 12/31/97. Yanshi Thermal Power and 5 220-kV transmission lines and Project associated substations; to carry out a tariff 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 cany 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 Inplementation under Yangzhou Thermal plant with two 600 MW generating units; way. Closing date Power Project to erect two 500 kV transmission lines 12/31/2000. (30 km long); to extend technical assistance for the development and implementation of improved accounting and fnancial 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 H power 02/28/95 Inplementation 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 infornation system, improve transmission and distribution planning and upgrade environmental monitoring. Ln. 3980-CHA To construct two 600 MW coal-fired 2/27/96 Canceled 12/12/97 Henan (Qinbei) Thermal thermal power units; to erect two 165 km without disbursement. 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 reforn action plan. - 26 - Year of Loan Title Purpose Approval Status Ln. 41720-CIIA To construct the first two coal-fired 600 05/27/97 Implementation TuoketuobThermal MW units in Inner Mongolia underway. Closing Power Project Autonomous Region; to implement a date 7/31/2004. desertification control and dryland management program: to assist TEPGC with the introduction; of modem accounting and financial management systems, environmental management, operation and maintenance of the power plant and involvement of private investors in existing and new power projects in Inner Mongolia. To construct two 220 kV indoor substations in Beijing: to add a 250 MVA transformer to Wangfujing substation in Beijing; and to assist NCPGC to implement accounting and financial management systems. Ln. 41970-CHA To construct two 900-1000 MW coal- 06/24/97 Implementation Waigaoqiao Thermal fired supercritical units; to install FGD underway. Closing Power Project facilities at Shidongkou Power Plant to date 1/31/2006. offset SO2 emissions from the project; to construct two 500 kV transmission lines; to assist SMEPC to implement modem accounting and financial management systems, promote efficient management and power sector reforms including financial and corporate restructuring of the generation company. Ln. 4304-CHA To achieve large, sustained and growing 03/26/98 Implementation Energy Conservation increases in energy efficiency and underway. Closing Project associated reductions in growth of carbon date 6/30/2006. dioxide emnissions and other pollutants by: (a) introducing, demonstrating and disseminating new project financing concepts and market-oriented institutions to promote and implement energy efficiency measures in China; and (b) developing a more efficient national energy conservation information dissemination program. - 27 - Year of Loan Title Purpose Approval Status Ln. 4303-CHA To alleviate critical bottlenecks in power 03/26/98 Not yet effective. East China (Jiangsu) transmission infrastructure and increasing Implementation Power Transmission electricity trade on a commercial basis in underway. Closing Project the East China region by (a) the date 9/30/2004 construction of 500 kV transmission lines and substations; (b) implementation assistance for engineering and construction management; (c) technical assistance for improved interprovincial power exchange policies and procedures; (d) technical assistance for improved accounting and financial management systems; and (e) institutional development and training. Ln. 4350-CHA To remedy power shortages in Hunan by 06/18/98 Not yet effective; Hunan Power providing efficient, reliable, and Implementation Development Project environmentally sound power supply. underway; closing date Project components include: (a) 12/31/2004. development of two 300 MW anthracite- fired generating units; (b) supply and installation of about 794 km of 220 kV lines and 1,920 MVA of transformer substations capacity; (c) provision of technical assistance for construction management; (d) provision of technical assistance for preparation of commercial power purchase agreements and other relevant documentation; (e) provision of technical assistance for implementation of HEPC's restructuring plan; and (g) provision of technical assistance for improvement of the financial management system. - 28 - TABLE 3: PROJECT TIMETABLE Steps in project cycle Date planned Date actual Identification 09/23/1986 Preappraisal 05/15/1988 Appraisal 04/11/1989 Negotiations 03/05/1990 Board presentation 10/31/1991 Signing 11/22/1991 Effectiveness 02/20/1992 Project completion 12/31/1996 03/31/2000* Loan closing 12/31/1997 12/31/1998 * The dam and power plant were completed before the planned completion date. The delays are mainly for IMC and resettlement components. TABLE 4: LOAN/CREDIT DISBURSEMENT: CUMULATIVE ESTIMATE AND ACTUAL (US$ million) FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99 Appraisal estimate 17.9 36.2 53.1 65.0 67.0 Actual 7.76 15.43 44.50 60.92 64.10 64.70 67.72 69.28 Actual as % of adjusted estimate Date of fial disbursement February 24, 1999 - 29 - TABLE 5A: KEY INDICATORS FOR PROJECT IMPLEMENTATION PHYSICAL CONSTRUCTION Key implementation indicators in SAR Appraisal Actual Comparison Estimated Completion Completion Preparatory works 06/91 06/90 Civil works dam & power facilities 12/94 12/95 Hydraulic gates & hoists 09/93' 29/07/95 Generating units Unit 1 09/93 12/29/93 Unit 2 12/93 05/26/94 Unit 3 09/94 10/29/94 Unit 4 12/94 03/29/95 Overall commercial operation - 12/30/95 Substation 09/93 11/93 Transmission line 09/93 11/93 PLC & load dispatch system 12/94 Planned 11/992 MC & Sanjiaolu canal (3,667 ha) 06/94 06/94 HMC Phase I 06/94 HMC Phase II Planned 03/2000 Other canals (9,000 ha) & on-farm works 12/96 Planned 12/2000 Resettlement (physical relocation) 12/95 08/95 Environmental protection 12/93 Planned 12/99 Resettlement budget adjustment including 12/98 Baoying and Baoding villages As reported in SAR, which was evidently not in accordance with HEPCO schedule. 2 Delayed until new HEPCO building complete. - 30 - TABLE 5B: KEY INDICATORS FOR PROJECT IMPLEMENTATION HEPCO TRAINING PROGRAM Appraisal Estimates Actual Training Areas Number of Duration Number of Duration Trainees (months) Trainees (months) 2. TRAINING OF HIGH-LEVEL STAFF Overseas Training Department heads 5 1 6 1 Division chiefs 23 1 35 1 Domestic Training Department heads 5 6 6 1 Div. chiefs/project managers 23 6 40 2 Power plant superintendents 5 12 18 1 Teaching staff 20 12 10 5 Mgmt information system 5 6 10 3 Load dispatch & telecom. 10 6 20 9 Planning 5 6 5 3 3. TRAINING OF TECHNICAL STAFF (DOMESTIC TRAINING) Design staff Power plants 10 4 10 6 Transmission and distribution 10 4 10 6 Construction supervision Power plants 20 6 20 6 Transmission and distribution 20 6 20 3 Contract management 5 3 5 3 Tendering 3 3 10 2 Operation and maintenance Power plants 20 6 109 15 Transmission and distribution 20 6 50 6 - 31 - TABLE 5C: KEY INDICATORS FOR PROJECT IMPLEMENTATION AGRICULTURAL COMPONENT Item/Description Unit Estimated Estimated at Project Completed as % of at Project Completion (98-99) SAR estimate Appraisal IiTigation Component Total irrigated areaa Ha 12667.0 8473.3 66.9 Maximum draw off through Cuni/s 12.0 14.0 116.7 High Main Canal High Main Canal Km 15.6 14.7 94.2 Hongguan and Jiucun Km 19.2 47.1 245.3 Branch Canal Sanjiaolu Branch Canal Km 10.3 10.6 102.9 Lateral Branch Canal Km 29.0 8.9 30.8 Field Ditches Km 113.3 175.4 154.8 On-farm works and agriculture support Landleveling Ha 4320 9122 211.2 Soil improvement Ha 1200 1789 149.1 Fertilizer Ton 1502.3 2836 188.8 Agrochemnical Ton 102.3 141.8 138.6 Seeds Kg/ha 225 220 97.8 Seeds company No 1 1 100.0 Agriculture service center No 4 4 100.0 Training Irrigated agriculture No 1 1 100.0 research and training center Farmers m-month 500 1000 200.0 Project Manager m-month 6 8 133.3 Project Staff (local training) m-month 50 95 190.0 Consultant services m-month 300 450 150.0 Study tour (domestic) m-month 4 30 750.0 a A total of 6473.3 ha developed in 1994, and about 1333.3 ha has been developed for existing irrigation area to be supplied with supplementary irrigation. The balance of about 4000 ha will be completed by the end of year 2000, in which 666.7 will be completed by end of 1999. - 32 - TABLE 6A: KEY INDICATORS FOR PROJECT OPERATIONS POWER PLANT Index Unit Actual Target Value Target Value Completion Dual Standard First Class Standard' to 12/31/98 1. Continuous Safe Days 1026 Three 100 day periods Three 100 day periods Operation 2. Human accidents at year No 0 0 0 end 3. Dam Safety Evaluation2 Regular Regular Dam Regular Dam Dam2 4. Annual Energy Output GWh 368.73 495.0 495.0 5. Station Services as % of % 2.19 0.15 0.15 generation 6. Average Availability % 93.1 7. Perfect Operation of % of year 100 100 100 Main Equipment 8. Perfect Operation of % 100 95 95 Flood Forecasting System 9. Accuracy of Forecast of % 85 (peak) 92 92 Largest Flood 84 (vol.) 10. Average accuracy of % 83 (peak) 85 85 Flood Forecast 89 (vol) In addition to meeting targets listed, first class performance standard requires following: (a) Computerized MIS system for. (b) Computerized SCADA and EMS for plant. (c) Automatic hydrological forecasting system in place. (d) No leakage from equipment. (e) Plant labor force less than 0.15 persons/MW. 2 Routine safety evaluation every year. Reviewed by panel every five years. Compliance with all criteria required. See text. - 33 - TABLE 6B: KEY INDICATORS FOR PROJECT OPERATIONS AGRICULTURAL COMPONENT SAR estimate ICR estimate % of ICR/SAR Area Yield Production Area Yield Production Area Yield Production (ha) (ton) (ton) (ha) (ton) (ton) (%) (%) (%) Crops Rice 6000.0 4.3 25800.0 6018.0 4.7 28254.5 100.3 109.2 109.5 Corn 334.0 3.5 1169.0 340.0 3.5 1196.8 101.8 100.6 102.4 Peanuts 1140.0 2.1 2394.0 1150.0 2.1 2415.0 100.9 100.0 100.9 Beans 334.0 1.8 601.0 340.0 1.9 647.7 101.8 105.8 107.8 Sweet Potato 927.0 3.0 2781.0 930.0 3.0 2799.3 100.3 100.3 100.7 Vegetable 1334.0 10.0 13340.0 1350.0 10.3 13911.8 101.2 103.1 104.3 Watermelon 334.0 25.0 8350.0 340.0 25.0 8501.7 101.8 100.0 101.8 Sugar Cane 3212.0 50.0 160600.0 3153.0 51.0 160803.0 98.2 102.0 100.1 Pineapple 200.0 11.0 2200.0 157.0 11.0 1726.2 78.5 100.0 78.5 Pepper 134.0 2.5 335.0 0.0 0.0 0.0 0.0 0.0 0.0 Mango 1360.0 11.6 15780.0 1784.0 11.9 21220.7 131.2 102.5 134.5 Rubber 1534.0 1.3 2025.0 1100.0 1.4 1485.0 71.7 102.3 73.3 Sisal 1047.0 1.5 1571.0 439.0 1.5 658.5 41.9 100.0 41.9 Eucalyptus NA NA NA 2733 ? ? - 34 - TABLE 7: STUDIES INCLUDED IN PROJECT Study Purpose as defined at Status Impact of Study Appraisal/Redefined Power Pricing Study To transfer to HEPCO modem Completed 1994 Comprehensive tariff methods of power tariff design structure based on the criteria of economic recommended. efficiency, financial viability and HEPCO proposed to fairness to power consumers and the provincial suppliers; to look into the government to practical problems raised by the implement new tariff transition from the existing structure including pricing system to more desirable time-of-day tariff, but pricing arrangements and to has not obtained the propose a medium-term action government's approval. plan. Power System Planning To develop an appropriate Completed 1994 Least cost investment Study methodology for establishing plan with specific investment plans in Hainan power generation which take into account facilities identified. uncertainties about load forecast, Such plan was the availability and price of implemented. fuels, and the rate of connection However, due to of isolated systems to the main economic downtum in grid. This methodology later recent years, there is could be replicated for similar now excessive cases in mainland China. To generation capacity in strengthen HEPCO's capability Hainan. in routinely applying some of the planning methods identified from the study and in developing and maintaining the required database. - 35 - TABLE 8A: PROJECT COSTS (Yuan million) Appraisal estimate Actual/latest estimate Item Local Foreign Total Local Foreign Total Preparatory Works 24.0 0.9 25.0 41.7 0.0 41.7 Resettlement 135.4 15.1 150.5 205.8 63.6 269.4 Environmental Management 6.2 3.7 9.9 2.8 10.8 13.6 Civil Works (Dam and Power Facilities) 182.1 4.5 186.6 440.1 0.0 440.1 HMC and Sanjiaolu Canal System 39.1 13.2 52.2 24.4 64.2 88.6 Canals andon-farmworks beyond 62.8 16.3 79.1 37.7 0.0 37.7 resettlement Major constructionmaterials 5.2 133.1 138.3 75.6 192.5 268.1 Gates and Hoists 15.3 6.8 22.1 25.0 0.0 25.0 Turbines and Generators, and other plant 70.1 6.3 76.4 65.2 15.2 80.3 equipment T&G Governors and Static Excitation 0.9 19.6 20.5 0.0 20.5 20.5 PLCEquipment,transmissionline, 11.6 26.5 38.1 14.2 161.8 176.0 substation LoadDispatchSystemforHainanIsland 0.2 13.1 13.3 0.0 29.3 29.3 Grid Agricultural Support Services 4.2 0.0 4.2 0.0 0.0 0.0 ProjectManagementandEngmeering 26.0 5.4 31.5 58.8 0.0 58.8 Technical Assistance and Training 5.0 7.0 12.0 0.4 2.4 2.8 TotalBase Costs- 588.0 271.7 859.7 Contingencies Physical 59.0 15.4 74.3 Price 107.6 44.9 152.5 TotalProjectCos 754.5 332.0 1,086.5 991.8 560.4 1552.2 Interest during Construction IBRD Loan6 26.5 12.2 38.7 0.0 9.2 9.2 OtherLoans 101.5 0.0 101.5 451.9 0.0 451.9 Total Financing Required7 882.5 344.2 1,226.7 1443.7 569.6 2013.3 4 The project is exempt from taxes and duties. 5 The actual project cost excludes $12.1 equivalent (YIOO million) local cost allocated by the provincial government in August 1999 to complete HMC and resettlement components. Potential benefits also ignored in economic analysis. 6 Interest during construction (IDC) is based on onlending rate for projected disbursements of loan/credit proceeds. Foreign currency portion of IDC is based on Bank loan variable rate for projected disbursements of loan proceeds. 7 Figures may not total exactly due to rounding. - 36- TABLE 8B: PROJECT COSTS (US$ million) Appraisal estimate Actual/latest estimate Item Local Foreign Total Local Foreign Total Preparatory Works 4.9 0.2 5.1 7.7 0.0 7.7 Resettlement 25.9 2,9 28.8 26.8 7.6 34.4 Environmental Management 1.2 0.7 1.9 0.4 1.3 1.7 Civil Works (Dam and Power Facilities) 35.3 0.9 36.2 59.9 0.0 59.9 HMC and Sanjiaolu Canal System 7.5 2.5 10.0 4.1 7.5 11.6 Canalsandon-farmworksbeyond 12.0 3.1 15.1 4.6 0.0 4.6 resettlement Major construction materials 1.0 25.7 26.7 9.1 24.8 33.9 Gates and Hoists 3.0 1.3 4.3 2.9 0.0 2.9 Turbines and Generators, and other plant 13.5 1.2 14.7 7.7 1.8 9.5 equipment T&G Governors and Static Excitation 0.2 3.8 3.9 0.0 2.4 2.4 PLC Equipment, transrnission line, 2.2 5.1 7.3 1.7 19.2 20.9 substation LoadDispatchSystemfor HainanIsland 0.0 2.5 2.5 0.0 3.5 3.5 Grid Agricultural Support Services 0.8 0.0 0.8 0.0 0.0 0.0 Project Management and Engineering 5.2 1.0 6.3 8.9 0.0 8.9 Technical Assistance and Training 1.0 1.4 2.3 0.1 0.3 0.4 Total BaseCostsS 113.6 52.2 165.8 Contingencies Physical 10.5 2.9 13.4 Price 9.8 4.0 13.7 TotalProjectCosts- 133.8 59.1 193.0 133.6 68.4 202.0 Interest during Construction IBRD Loan'0 4.8 2.0 6.8 0.0 1.1 1.1 Other Loans 17.9 0.0 17.9 56.3 0.0 56.3 TotalFinancingRequired" 156.5 61.1 217.7 189.9 69.5 259.4 8 The project is exempt from taxes and duties. 9 The actual project cost excludes $12.1 equivalent (Y100 million) local cost allocated by the provincial govemment in August 1999 to complete HMC and resettlement components. Potential benefits also ignored in economic analysis. 10 Interest during construction (IDC) is based on onlending rate for projected disbursements of loan/credit proceeds. Foreign currency portion of IDC is based on Bank loan variable rate for projected disbursements of loan proceeds. 1 l Figures may not total exactly due to rounding. - 37 - TABLE 8c: PROJECT FINANCING (US$ million) Appraisal estimate ActuaVlate estimate Source Local Foreign Total Local Foreign Total IBRD/LDA 17.0 50.0 67.0 0.0 69.3 69.3 TCC 1112 - 0.3 0.3 0.0 0.2 0.2 UNDP - 0.1 0.1 0.0 0.0 0.0 MWR 12.0 - 12.0 20.5 0.0 20.5 SEIC 21.0 - 21.0 45.7 0.0 45.7 Hainan Government Loans 98.5 10.7 109.2 87.7 0.0 87.7 Grants 8.0 - 8.0 31.5 0.0 31.5 Local Government 4.5 0.0 4.5 Total Financing Required13 156.5 61.1 217.7 185.4 69.5 259.4 12 Credit 1664-CHA 13 Includes IDC of about $25 million; all of the financing sources would finance IDC relating to their own loans. -38 - TABLE 9A: ECONOMIC COSTS AND BENEFITS Comparison to Alternative Thermal Power (85MW coal & 225MW GT Plant) (Y million in 1997 Economic Prices) Year Thermal Fixed Costs Output (GWh!) Fuel Costs Summary Thermal Costs Proect Costs _Hydro - Thermal Investment O&M Investment O&M Total Coal GT Coal GT Total Coal GT Coal GT Total Invest. O&M Total Power Joint Power Joint Allocated Full Allocated Full 1990 46.8 0.0 0.0 0.0 0.0 0.0 o.0 0.0 0.0 0.0 46.8 0.0 46.8 0.0 102.4 0.0 0.0 84.6 102.4 37.9 55.7 1991 140.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 140.3 0.0 140.3 9.6 102.1 0.0 0.0 93.9 111.7 -46.3 -28.6 1992 187.0 90.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 277.0 0.0 277.0 57.1 270.7 0.0 0.0 280.7 327.8 3.7 50.8 1993 93.5 315.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 408.5 0.0 408.5 101.3 356.1 0.0 0.0 395.4 457.4 -13.1 48.9 1994 0.0 270.0 14.0 5.6 312.0 272.0 40.0 54.4 16.0 70.4 270.0 19.7 360.1 222.2 261.6 5.1 7.0 449.2 495.9 89.1 135.9 1995 0.0 0.0 14.0 16.9 373.0 253.0 120.0 50.6 48.0 98.6 0.0 30.9 129.5 70.7 163.1 10.1 14.1 227.2 258.0 97.7 128.5 1996 0.0 0.0 14.0 16.9 426.0 306.0 120.0 61.2 48.0 109.2 0.0 30.9 140.1 15.5 28.4 10.1 14.1 60.7 68.1 -79.4 -72.0 1997 0.0 0.0 14.0 16.9 501.0 381.0 120.0 76.2 48.0 124.2 0.0 30.9 155.1 16.4 72.0 10.1 14.1 97.7 112.7 -57.4 -42.4 1998 0.0 0.0 14.0 16.9 369.0 249.0 120.0 49.8 48.0 97.8 0.0 30.9 128.7 13.3 48.8 10.1 14.1 75.3 86.2 -53.4 -42.5 1999 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 10.1 14.1 21.7 24.2 -137.2 -134.7 2000 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2001 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2002 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2003 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2004 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2005 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2006 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2007 0.0 90.0 14.0 16.9 520.0 400.0. 120.0 80.0 48.0 128.0 90.0 30.9 248.9 0.0 0.0 8.3 11.1 17.5 19.4 -231.4 -229.5 2008 0.0 315.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 315.0 30.9 473.9 0.0 0.0 8.3 11.1 17.5 19.4 -456.4 -454.5 2009 0.0 270.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 270.0 30.9 428.9 0.0 0.0 8.3 11.1 17.5 19.4 -411.4 -409.5 2010 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2011 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2012 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2013 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2014 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2015 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2016 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2017 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2018 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2019 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2020 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2021 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2022 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 2023 0.0 0.0 14.0 16.9 520.0 400.0 120.0 80.0 48.0 128.0 0.0 30.9 158.9 0.0 0.0 8.3 11.1 17.5 19.4 -141.4 -139.5 Totals 467.5 675.0 1817.5 506.1 1405.3 Equalizing Discount Rate 0.41 0.21 Present Values 10% 362.8 558.2 90.3 101.7 3014.9 2291.9 723.0 458.4 289.2 747.6 921.0 192.0 1860.5 319.1 947.5 55.6 76.0 1220.2 1398.2 -640.4 -462.3 12% 346.1 493.7 71.8 80.0 2364.8 1795.9 568.9 359.2 227.6 586.8 839.8 151.8 1578.3 293.0 882.5 44.3 60.6 1116.3 1280.4 -462.0 -298.0 14% 330.5 441.8 58.1 64.1 1890.3 1434.3 456.0 286.9 182.4 469.3 772.3 122.3 1363.8 269.5 823.8 35.9 49.2 1026.6 1178.5 -337.2 -185.4 Average Energy Costs (10% discount rate) Thermal Cost 61.7 fen}kWh INTMM OlEr ~ ~~~~~~Hydro Cost 82.6% Joint to Power 40.5 fcn/kWh 100
Группа Всемирного банка · Implementation Completion and Results Report
China - Daguangba Multipurpose Project
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