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Document otthe International Bank for Reconstruction and Development and

the International Development Association

Report No. 16274-CHA

PROJECT APPRAISAL DOCUMENT

ON A LOAN

IN THE AMOUNT OF US$430 MILLION EQUIVALENT(US$230 MILLION AND DEM 346.5 MILLION)

TO

THE PEOPLE'S REPUBLIC OF CHINA

FOR THE

XIAOLANGDI MULTIPURPOSE PROJECT: STAGE II

June 3, 1997

Rural and Social Development Operations DivisionChina and Mongolia DepartmentEast Asia and Pacific Regional Office

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CURRENCY EQUIVALENTS(as of March 1, 1997)

Currency = RenminbiCurrency Unit = Yuan (Y)

Y 1.00 = 100 fenY 1.00 = $0.12$1.00 = Y8.3

FISCAL YEAR

January I - December 31

ABBREVIATIONS AND ACRONYMS USED

AS - Antiepidemic StationCAS - Country Assistance StrategyCCPN - Central China Power NetworkCPLG - Central Project Leading GroupDSP - Dam Safety PanelEIA - Environmental Impact AssessmentEMO - Environmental Management OfficeEMP - Environmental Management PlanGOC - Govemment of ChinaGWh - Gigawatt hoursICB - International Competitive BiddingLRM - Lower Reach ModelMWR - Ministry of Water ResourcesNCB - National Competitive BiddingNCPN - North China Power NetworkNCHEI - North China Hydroelectric InstitutePAB - Provincial Audit BureauPRO - Provincial Resettlement OfficeRPDI - Reconnaissance Planning and Design InstituteSAA - State Audit AdministrationSBD - Standard Bidding DocumentSOE - Statement of ExpendituresWRPI - Water Resources Protection InstituteXECC - Xiaolangdi Engineering Consulting CompanyYRCC - Yellow River Conservancy CommissionYRCCRO - Yellow River Conservancy Commission Resettlement OfficeYRCHU - Yellow River Central Hospital UnitYRWHDC - Yellow River Water and Hydropower Development CorporationYRWHIDCRO - YRWHDC Resettlement Office

Vice President Jean-Michel Severino, EAPDirector Nicholas C. Hope, EA2Division Chief Joseph Goldberg, EA2RSStaff Member Daniel Gunaratnam, Principal Irrigation Engineer, EA2RS

CONTENTS

Project Financing Data .................................................................... 1

Block 1: Project Description .................................................................... 21. Project Development Objectives .................................................................... 22. Project Components .................................................................... 23. Benefits and Target Population ................................................................... 34. Institutional and Implementation Arrangements .................................................................... 3

Block 2: Project Rationale .................................................................... 45. CAS Objective(s) Supported by the Project .................................................................... 46. Main Sector Issues and Government Strategy .................................................................... 47. Sector Issues to be Addressed by the Project and Strategic Choices ....................................................................48. Project Alternatives Considered and Reasons for Rejection .................................................................... 59. Major Related Projects Financed by the Bank and/or Other Development Agencies ...........................................510. Lessons Learned and Reflected in the Project Design .................................................................... 511. Indications of Borrower Commitment and Ownership .................................................................... 612. Value Added of Bank Support .................................................................... 6

Block 3: Summary Project Assessments .................................................................... 613. Economic Assessment .................................................................... 614. Financial Assessment .................................................................... 715. Technical Assessment: .................................................................... 916. Institutional Assessment: ................................................................... 1017. Social Assessment ....... ............................................................ I 118. Environmental Assessment: ................................................................... 1519. Participatory Approach ................................................................... 1820. Sustainability ................................................................... 1821. Critical Risks ................................................................... 1822. Possible Controversial Aspects ................................................................... 19

Block 4: Main Loan Conditions ................................................................... 1923. Conditions of Effectiveness ................................................................... 1924. Other Conditions ................................................................... 20

Block 5: Compliance with Bank Policies ................................................................... 23

ANNEXES

Annex 1: Project Design Summary and Monitoring Indicators .................................................................. 24Annex 2: Detailed Project Description ................................................................... 26Annex 3: Estimated Project Costs .................................................................. 46Annex 4: Cost Effectiveness and Economic Analysis Summary .................................................................. 58Annex 5: Financial Analysis and Assumptions .................................................................. 72Annex 6: Financial Summary .................................................................. 76Annex 7: Procurement and Disbursement Arrangements .................................................................. 85Annex 8: Improving Project Environmental Management .................................................................. 91Annex 9: Resettlement Progress Report .................................................................. 97Annex 10: Construction Schedule .................................................................... 106

Annex 11: Terms of Reference for Xiaolangdi/Sanmenxia Dams Inspection Panel ......................................................... 111Annex 12: Guidelines for Emergency Preparedness Plan .......................................................... 113Annex 13: Guidelines for Dam Operation and Maintenance ........................................................... 114Annex 14: Principles for Efficient Water Delivery for the Lower Yellow River .......................................................... 116Annex 15: Documents in the Project File .......................................................... 117Annex 16: Project Processing Budget and Schedule ........................................................... 118Annex 17: Statement of Loans and Credits .......................................................... 119Annex 18: Country at a Glance .......................................................... 123

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENTINTERNATIONAL DEVELOPMENT ASSOCIATION

East Asia and Pacific Regional OfficeChina and Mongolia Department

Project Appraisal Document

China

Xiaolangdi Multipurpose Project: Stage II

Date: 23 May 1997 [ ] Draft [x] FinalTask Manager: Daniel Gunaratnam Country Manager: Nicholas HopeProject ID: CN-PE-34081 Sector: Water Resources POC:Lending Instrument: SIL PTI: [ 1 Yes F ] No

Project Financing Data [x] Loan [] Credit [ Guarantee [] Other (Specify]

For Loans/Credits/Others:

Amount: US$430.0 million equivalent US$230 million tranche and DEM 346.5 million trancheo._ro-p_osed Terms: [ Multicurrency [x] Single currency

Grace period (years): 5 [] Standard Variable [ Fixed [x] LIBOR-basedYears to maturity: 20Commitment fee: 0.75%

Financing plan (US$ M):Source Local Foreign TotalGovernment 1,116.0 459.2 1,570.2Local Loans 286.6 - 286.6IBRD Loan I - 460.0 460.0IBRD Loan 11 430.0 430.0Export Credit - 109.0 109.0Total 1,402.6 1,453.2 2,855.8Borrower: People's Republic of ChinaGuarantor:Responsible agency(ies): Ministry of Water Resources and Yellow River Water and Hydropower Dev. CorporationEstimated disbursements (Bank FY/US$ M): 1998 1999 2001 2001 2002 2003

Annual 80.0 130.0 130.0 70.0 20.0 0.0Cumulative 80.0 210.0 340.0 410.0 430.0 430.0

For Guarantees: [] Partial Credit [] Partial risk

Proposed coverage:Project sponsor:Nature of underlying financing:Terrms of financing:

Principal amount (US$)Final maturity

Amortizatio_n_r file… -_ _ _ _ _ _ _ __ __ __ _ __ __ __ ---- - -----------------Financing available without guarantee?: F] Yes [ ] NoIf yes, estimated cost or maturity:Estimated financing cost or maturity with guarantee:

Expected effectiveness date: 10/31/97 Closing date: 12/31/2003

Project Appraisal Document Page 2Country: China Project Title: Xiaolangdi Multipurpose Project: Stage 11

Block 1: Project Description

1. Project Development Objectives(see Annex I for key performance indicators)

The objectives of the project are: to provide flood protection for 103 million people in the North China Plain in ruralareas, several large and medium cities and major industrial centers; to control sediment accretion in the lower reach ofthe Yellow River for a period of about 20 years; to generate much needed hydropower; and to supply irrigation water(and increase the reliability of irrigation) for some 2 million hectares and ensure more stable water supplies fordownstream cities and industries.

2. Project Components(see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown):

The project will finance the second stage in the construction of a dam and hydroelectric power plant on the Yellow River.The main features of the Xiaolangdi Multipurpose Project consist of dam and structures: (i) a rockfill dam, 154 m high,with a crest length of 1,667 m and 51 million m3 of fill; (ii) a common intake structure, feeding nine large-diametertunnels and a surface spillway for river diversion, flood handling and sediment management; and (iii) a power stationwith six power tunnels with turbines and generators with an installed capacity of 1,800 MW (6 x 300 MW). Civil workshave been under construction since 1994 under three Bank approved contracts awarded following ICB. The contractshave an estimated total value to completion of US$883.2 million equivalent and Loan 3727-CH-A financed US$386million of this amount. The proposed project will provide Bank funding for (a) completion of the civil works contracts;(b) technical assistance for training in operation and maintenance (O&M) of the dam, powerhouse and related facilitiesand planning and personnel training for operation of the project; (c) implementation of the environmental managementplan (EMP); (d) implementation of a flood, sediment, ice and drought management system and real time reservoiroperation system including training and equipment; and (e) implementation of water institutional support progran,including optimizing institutional structures for regulation and management of water resources of the Lower YellowRiver reach, undertaking studies for pricing, improving financial management systems, upgrading water-level measuringdevices, and introducing communications systems.

Cost Including Contingencies Percent of(US$M) Total

Component Category Phase I Phase 11 Total(93-97 part) (97-2002) (93-2002)

Dam and Structures 1,150.00 1,068.44 2,218.44 99%Preliminary/Local Works Civil Works 297.28 72.57 369.85 16%Dam, Inlet, Outlet& Power Station Civil Works 565.55 584.85 1,150.41 51%Turbines, Gates and Metalwork Civil Works 78.80 174.27 253.07 11%Generators, Switchyard, etc. Civil Works 47.67 161.96 209.63 9%Contract Administration Proj. Management Services 149.34 59.69 209.03 9%Consultant Services Proj. Management Services 8.44 13.67 22.11 1%Training Institutional Building 2.92 1.42 4.34 -

Environmental Management Plan Proj. Management Services 4.54 5.57 10.11 -Flood/Sediment/lce and Drought Proj. Management 1.04 13.75 14.79 1%

Management Services/TAInstitutional Support for YRCC Institutional Building/Proj. 0.00 0.76 0.76 -

ManagementInstitutional Reform Training Institutional Building 2.91 1.39 4.30 -

(MWR/YRCC)

Total Costs 1,158.49 1,089.91 2,248.40 100%

Bank Loan Interest/Commitment 138.48 204.95 343.43 15%Charge

Other Loans Interest during Constr. 105.60 158.40 264.00 12%

Grand Total 1,402.57 1,455.87 2,855.83 127%


3. Benefits and Target Population

Economic Benefits: The project will generate enormous benefits: (a) Flood control measures will substantially reducethe risk of normal annual floods, ice-dam breaches, and major floods. The flood control benefits (about 18 percent of thetotal) have been calculated in terms of damage reduction for agriculture, urban and industrial areas. Benefits fromavoidance of massive loss of human life and suffering have not been quantified. About 103 million people will benefitfrom protection from infrequent catastrophic floods and about 3 million of some of the poorest people in China livingbetween the levees and in flood detention areas will benefit from prevention of annual and frequent floods (1-in-2 yearsand less); (b) Sediment control benefits (about 7 percent of total) have been calculated in terms of reducing theexpenditures for levee raising and maintenance; (c) Power benefits (about 41 percent of total) will arise from power andenergy generation that would replace energy from fossil-fueled power plants; and (d) Irrigation and water supply benefits(34 percent of total) will include a doubling of crop (mainly grain) yields and an increase in cropping intensities on about2 million ha and make more water available to major cities and towns. The net present value of total economic benefitsis US$2.262 billion (see Annex 4). The economic rate of return calculated on this basis is about 20.8 percent. Projectinvestments would increase productivity and incomes of about 2.7 million farm families with incomes rising by10.2 percent in Henan, and by 14.3 percent in Shandong. Urban families will benefit from flood control and a morereliable water and power supply.

4. Institutional and Implementation Arrangements

Implementation period: 5 years (1997-2002).

Executing agencies: Yellow River Water and Hydropower Development Corporation (YRWHDC) and Ministry ofWater Resources (MWR).

Project Coordination. MWR has overall responsibility for the Xiaolangdi Project. A Central Project Leading Groupwas established under the leadership of the State Council consisting of a vice-minister of MWR and directors from theMinistry of Finance, the State Planning Commission, and Vice Governors of Henan and Shanxi Provinces to oversee itsmanagement, resolve policy matters and solve interdepartmental/interagency problems. Since mid-1995, a Vice Ministerof MWR has been resident on-site to fulfill these functions.

Project Execution: The executing agency for implementing the dam, dam operations and maintenance, and EMPcomponents of the project is YRWHDC, which coordinates with the provincial project management offices of Henan andShanxi Provinces. YRWHDC is a state-owned enterprise whose main function is to build, operate and maintain the damand power station. The general manager of YRWHDC reports to MWR. MWR is the executing agency for the flood,sediment, ice and drought management system, real-time reservoir operation system and water institutional supportcomponents of the project. These organizations have performed well in implementing the first-stage project and willremain in place for the proposed second-stage project.

Accounting, Financial Reporting, and Auditing Arrangements: YRWHDC has submitted annually (since 1994) auditreports of the project account, SOEs, and the special account for the first-phase project and these have been found to besatisfactory. The State Audit Administration (SAA) undertakes these financial audits. Financial reporting is alsoindicated twice yearly in the progress reports. In general, the accounting and financial reporting are well in place and inorder.

Environmental Management and Audits: YRWHDC has an environmental management office (EMO), which isresponsible for implementation of the environmental management plan (EMP). The detailed implementation of EMP isperformed by the international contractors at the damsite. Detailed monitoring of the compliance by contractors isperformed by EMO, which hires institutions such as the Reconnaissance Planning and Design Institute (RPDI) of YRCCfor air, water, land quality protection and construction safety; YRCC Water Resources Protection Institute (WRPI) whichmonitors compliance of water supply and wastewater; and Yellow River Central Hospital Unit (YRCHU) for publichealth, rat control and mosquito control. In addition, an international/local panel visits the site twice a year to review the

Project Appraisal Document Page 4Country: China Project Title: Xiaolangdi Multipurpose Project: Stage ll

work of the EMO. Although the implementation of the EMP is satisfactory, there needs to be improvement in themonitoring. Hence, improvements have been recommended in Annex 8.

Block 2: Project Rationale

5. CAS Objective(s) Supported by the Project Report No. 1632 1-CHA, February 25, 1997

At the time of its appraisal in 1993, the Xiaolangdi Multipurpose Project was found to be consistent with the BankGroup's Country Assistance Strategy presented to the Board in August 1993 that emphasized poverty alleviation as thehighest priority objective. The current CAS, presented to the Board on March 18, 1997, is much more specific on howthese goals will be achieved. It specifically indicates investment in major water resource schemes in the dry north ofChina, and the importance of flood control and water storage as part of the Bank's rural development lending program.The proposed project, which would complete the highest-priority water resource development on the entire Yellow River,will directly fulfill such objectives.

6. Main Sector Issues and Government Strategy

Flood control has high priority in China's national development program. The struggle to tame the Yellow River has aprominent place in the earliest chapters of Chinese history. The fertile floodplain of the river has supported several ofChina's great dynasties and is regarded as the cradle of Chinese civilization. However, the lands along the river havealso been the scene of great human suffering from floods, droughts, and famines. For example, as many as 900,000people were killed in 1938 and the following years due to breaching of the flood dikes. Only since the founding of thePeople's Republic of China can the river be said to have been placed partially under control through the heightening ofthe 800 km of dikes along the river and through the establishment of flood-detention basins. Nevertheless, much remainsto be done. A great flood, like the one that visited the basin in 1843, could not be contained by the existing flood controlworks, and would cause severe damage and loss of life of up to I million people. In addition, frequent lesser floods stillcause considerable damage to about 3 million of some of the poorest people in China, living between the dikes and in thedetention basins. The river also carries a vast quantity of silt that accumulates every year in the lower reaches of the riverand causes the riverbed to rise ever further above the surrounding land. To keep pace with this, the flood embankmentshave to be raised at a rate of I meter every 10 years, costing several billion dollars for each dike raising.

In March 1992, the Bank and the Yellow River Conservancy Commission (YRCC) undertook the Yellow RiverInvestment Planning Study (Report No. 11 146-CHA, June 30, 1993). The aim of this study was to place water-relatedinvestment options for the Basin in a consistent, basinwide economic framework, and to evaluate them with respect to thedevelopment goals and the physical and economic constraints under which they operate. The study established that theXiaolangdi Multipurpose Dam is the most urgently needed, and the most economically viable multipurpose projectproposed in the basin. Without it, the specter of a major flood will continue to overhang the entire lower reach, includingsome of China's most productive farmland and major oil fields. The Xiaolangdi Project would reduce the flood of recordto a level that could be contained by the existing flood embankments, which protects about 103 million people, andwould also greatly reduce damage from floods of a lesser frequency for the people who live within the dikes anddetention basins. The project is also designed to be operated in such a way that it would trap sediment for the first 20years of its life. It would thereby prevent deposition of silt and make it possible to defer by 20 years the raising of800 km of dikes.

7. Sector Issues to be Addressed by the Project and Strategic Choices

The first-stage project addressed two important issues in sector development: the management of large multipurposeprojects and improvements in water resource planning. Accordingly, the project included (a) training and technicalassistance for YRWHDC in contract management, project scheduling, cost control, claims management, financialmanagement, management information systems, organizational support, corporate planning and personnel management;and (b) an institutional program for MWR and YRCC to support the reform process in the water sector includingsustainable resource mobilization for water resources projects, economic water pricing, water licensing, enhancing

Project Appraisal Document Page 5Country: China Project Title: Xlaolangdl Multipurpose Project: Stage 11

effectiveness of river basin organizations, and improved water-dispatching systems for basins. Based on the lessonslearned in the training and institutional development components in the first project, additional training and institutionalcomponents have been incorporated into this second project.

8. Project Alternatives Considered and Reasons for Rejection

The lower reach of the Yellow River is vulnerable to an extreme flood and a breach at any point in the dikes would havedisastrous consequences. Alternatives to Xiaolangdi for flood and sediment control, considered in the past, and thereasons for their rejection are:

a) Raising the dikes to control a 1,000-year flood: this option is very costly and would involve considerable uncertaintydue to structural weaknesses of the dikes. It would not reduce sediment deposition in the lower reaches of the Rivernor would it (nor any other nondam alternative) protect the millions living within the levees and detention basins;

b) Implementing large-scale conservation and rehabilitation measures in the Loess Plateau to reduce sediment loss atsource: this alone cannot solve the massive erosion problem in the operational future. The plateau covers over500,000 km2 and, in some regions, is eroding at a rate of 8-13 mm a year;

c) Constructing an emergency flood channel parallel to the existing river course: this would require relocation of700,000 to 930,000 people, disrupt irrigation, communication and transportation facilities, and present many difficulttechnical problems;

d) Modifying the existing river channel configuration, or creating a new channel, abandoning part or all of the existingchannel: this would have the same effects as the option above. It would require resettlement of up to 500,000 peopleand give no sediment control in the lower reaches.

9. Major Related Projects Financed by the Bank and/or Other Development Agencies(completed, ongoing and planned).

* Two ongoing projects directly related to the proposed project are the Xiaolangdi Multipurpose Project (Loan 3727-CHA) and the Xiaolangdi Resettlement Project (Credit 2605-CHA).

* Since 1982, the Bank Group has financed eight projects (5 ongoing and 3 completed) in the Yellow River Basin toimprove drainage, irrigation efficiency, and related agricultural and rural development activities. Over 2 million hahave benefited from these projects, most of which have been well managed and executed by the provinces and localgovernment authorities, and their specialized agencies.

* In 1994 the Loess Plateau Watershed Rehabilitation Project was financed by Credit 2616-CHA in the amount ofUS$150 million. This project has as one of its objectives a substantial reduction in sediment runoff from 15,600 km2

in the parts of the Yellow River Basin with the highest sediment yield. Excellent progress is being made in theimplementation of this project.

* Related projects outside the Yellow River Basin are mainly the hydropower projects: (a) Shuikou Hydroelectric(Loans 2775/3515-CHA) and (b) Ertan Hydroelectric (Loan 3387-CHA)

10. Lessons Learned and Reflected in the Project Design

Lessons learned from previous and ongoing projects such as the Shuikou Hydroelectric (Loans 2775/3515-CHA) andErtan Hydroelectric (Loan 3387-CHA) Projects with similar dam construction requirements have been reflected in thefirst-stage project and proposed second-stage project. These lessons include: (a) review of the project using internationaltechnical panels and consultants who have made substantial contributions in improving the designs, economic impactassessment, and resettlement planning and designs; (b) definition of civil works procurement packaging and joint-venturearrangements between foreign and local contractors to obtain transfer of technology and best international practices;


(c) early startup of procurement for major civil works so that bid award will correspond with loan effectiveness in orderto avoid delays and cost overruns; and (d) stringent prequalification criteria to ensure all partners of foreign and localjoint ventures are adequately qualified to fulfill their responsibilities.

11. Indications of Borrower Commitment and Ownership

Aside from timely counterpart financing of both the first-stage and resettlement projects and provision of other resourcesas needed, the Government has set up national and provincial steering groups including MOF and SPC, and moved aresponsible Vice Minister of MWR to residence on-site, which is indicative of strong borrower commitment.

12. Value Added of Bank Support

Bank involvement in the first-stage project is supporting the Central Government's effort in a major water resourcedevelopment with wide-ranging catastrophe prevention, irrigation, water supply, power, and other benefits that will cutacross several provinces. Bank involvement has assisted and will continue to assist the Government in resettlementplanning and implementation, and in the development of viable, autonomous river basin and project managementinstitutions for resource mobilization and efficient management of operations. The resettlement program of the project,financed as a separate IDA project (Xiaolangdi Resettlement Project, Credit 2605-CHA), though huge (198,000 totaleventual resettlers), has proceeded more smoothly than resettlement operations without Bank support. Bank assistance inthe preparation of the multipurpose project through the Second Technical Cooperation Credit (Credit 1664-CHA) hasalready made significant contributions to: (a) the establishment of YRWHDC, as a financially autonomous entity tomanage the sale of power and of water for irrigation and municipal and industrial users; and (b) clear definition of theauthority and responsibilities of the owner (YRW}HDC), the engineer, Xiaolangdi Engineering Consulting Company(XECC), and the contractors.

Block 3: Summary Project Assessments(Detailed assessments are in the project file. See Annex 4)

13. Economic Assessment Cost-Benefit Analysis: NPV = US$2,262 million; ERR = 20.8 percent(see Annex 4):

Cost-Benefit Analysis.

* Economic appraisal of the project was undertaken using standard cost-benefit analysis techniques. All investmentcosts (including resettlement costs of US$771 million),' including physical contingencies and operation andmaintenance costs, have been taken into account in estimating the economic costs of the project. Contributed laborfor farm construction and agricultural activities has been shadow-priced at the wage rate of Y 10/day prevailing inthe project area, and electricity at 40 fen/kWh. World Bank price projections were used to estimate farm-gate pricesin constant 1997 terms for traded outputs and inputs. Economic prices for nontradables were estimated usingconversion factors based on the deviation of social opportunity costs from actual financial prices.

* Measured economic benefits derive from (a) hydropower output, (b) flood control, (c)cost-savings from sedimentcontrol, (d) increased irrigation, and (e) improved reliability of urban water supply. The six generating units willsupply 1,500 MW of power and produce annual energy of 5,429 GWh when fully operational. Most of this energywill supply peak demands and is valued at the rate of 52 fenlkWh established through forward sales contracts. Powergeneration produces 41 percent of total discounted project benefits. Flood control benefits were estimated at lossesavoided based on a probability analysis of values of property protected, and the opportunity costs of lost farmerproduction and income. They comprise 18 percent of total benefits. On average, 300-400 million tons of silt isdeposited along the lower reach of the Yellow River annually, requiring periodic dike-raising programs and ongoingmaintenance works. The dam will trap much of the incoming sediment in the early years of operation, and otherwise

Do not include price contingencies, transfer payments, taxes and duties.


manage sediment deposition by helping to pass silt-laden water to the Bohai Sea. These operations will reduce theneed for dike works amounting to a discounted cost savings of Y 2,817 million, or 7 percent of benefits. Irrigationbenefits derive from a larger and more timely water supply to about 2 million ha of irrigated land in Henan andShandong provinces. Currently severe seasonal water shortages mean that in most years, farmers cannot getsufficient water in the spring and early summer months for maximum crop yields. About half of the reservoir'sshortage will be devoted to irrigation, with the result that grain production is expected to rise by about 686, 000 tonsper year, and cotton production, by 352,000 tons. Irrigation benefits comprise 30 percent of total benefits, anddirectly target poor farmers in the region. Diversions from the Yellow River to Hebei-Beijing-Tianjin and Qingdaocity provide significant shares of the urban water supplies to these areas, which are unreliable at present. The damwill significantly increase the reliability of these supplies, resulting in a discounted value of Y 1,717 million, or 4percent of total benefits.

* Total discounted economic benefits are US$4,880 billion (Y 40.5 billion), and total discounted costs including O&M,are US$2,618 billion (Y 21.7 billion). The economic rate of return is estimated to be 20.8 percent and benefit-costratio, 1.86.

Cost Effectiveness. Given the multipurpose nature of the project, it is difficult to conceive of a combination of worksthat could achieve the same objectives, let alone at a lower cost. The thermal alternative to the hydropower componenthas been estimated to be twice the cost of the power components of Xiaolangdi. To establish the same level of floodcontrol would require a massive program of dike-raising costing perhaps as much as the dam itself. There are virtuallyno alternatives to controlling sediment deposition, without which dike raising would become even more costly. Thereare no alternative means of ensuring timely water supplies to the region's farmers except for the proposed South-Northtransfer scheme. But that scheme, involving pumping water from the Yangtze, although eventually necessary, wouldcost at least twice as much as Xiaolangdi with no flood control or power benefits. Groundwater supplies are alreadyexploited beyond safe yield levels, and the only other reservoir in the region, Sanmenxia, does not have sufficientcapacity to regulate flows for flood control or irrigation.

14. Financial Assessment FRR=I 1.3 percent (Total Project)(see Annex 6) FRR= 19.7 percent (Power Component)

Project Charges. Irrigation Charges. Since the mid-I 980s, it has been government policy that the charges for irrigationwater should be high enough to recover all the capital and O&M costs, while fees for M&I water should be raised tolevels ensuring a reasonable return for production investments. In line with this policy, YRCC increased its charges onwater diverted at the lower reaches of the Yellow River to a full cost-recovery level in the early 1990s. For the proposedXiaolangdi Project, YRWHDC would be able to fully recover its capital and operating costs by applying a uniformsurcharge on all water diverted to end users of YRCC distributed water. Equally, YRWHDC will also initiate charges forflood and sediment control services which will be applied as a surcharge on the water bills for end users of YRCC. Atnegotiations, assurances were obtained from the Borrower that they would.: (a) develop, on the basis of guidelinesacceptable to the Bank and furnish to the Bank not later than December 31, 1998, a plan to ensure the efficient(i) delivery of water to users of waterflowing through the lower reaches of the Yellow River and (ii) collection of watercharges from users of said water; and (b) implement said plan not later than June 30, 2000, taking into account thecomments of the Bank on the matter. Power Tariffs: An existing power sales agreement with the Henan Electric PowerBureau provides that the Bureau will buy four-hour peak power from 2,700 GWh/yr in 2000, to 3,673 GWh/yr in 2001,4,223 GWh/yr in 2002, and 5,105 GWh/yr in 2003 and thereafter. While the initial price has not been set, the agreementspecifies that it will be set along market principles to enable the YRWHDC to fully recover both operating and capitalcosts as well as earn a fair return on invested capital. It is estimated that the tariff rate will be set at a base price ofapproximately 52 Y/kWh or a US dollar equivalent of 6.3 cents.

Financial Management. To increase financial incentives and accountability, the government has also greatlydecentralized its management system for the water resource sector. Water conservancy institutions were first asked toadopt business management systems in the early 1980s. Since the late 1980s, they have been allowed to convert

Project Appraisal Document Page 8Country: China Project Title: Xiaolangdl Multipurpose Project: Stage 11

themselves into publicly owned corporations whenever conditions permit, and become fully responsible for theirfinancial performance according to the Enterprise Law. This trend of decentralization is further enhanced by recentgovernment decisions to establish a market economic system in China.

Against this background, YRWHDC was set up in 1993 as an independent publicly owned enterprise with financialautonomy and accountability (as have other publicly owned enterprises). To further enhance the financial accountabilityof YRWHDC, profit centers (or unit) will be set up for the hydropower, water supply, and flood and sediment controloperations, and separate cost accounts will be maintained for each operating unit in order to fully assess the units'contribution to the consolidated financial operations. Although cross-subsidization is not avoidable for this multipurposeoperation because of the very different financial circumstances of the three major operations, separate accounting willtrack the cross-subsidization.

In addition to the organizational setup, the project would further enhance financial management of YRWHDC byfacilitating institution building, including (a) training in financial management for YRWHDC (see Annex 2); and(b) financial performance targets for YRWHDC that would provide a framework for financial discipline (Annex 6).

With a view to obtaining economic efficiency and promoting prudent financial management, YRWHDC's operations willmeet the following requirements.

* YRWHDC would take all measures, including but not limited to adjusting tariffs of all its services, to ensure that itsinternal cash generation is sufficient to maintain a debt service coverage ratio for consolidated operations of no lessthan 1.2 times in 2002 to 2007, and no less than 1.6 times thereafter;2

* YRWHDC would take all measures, including but not limited to tariffradjustments of all its services to earn an annualreturn on fixed assets as adjustedfor inflation3 of 2 percent in 2004 to 2007 and 5 percent thereafter;

* YRWHDC would set water charges, including cost recovery forflood and control services, at levels such that it willbe able to fully recover all direct operating expenses during the first operating year and recover capital expenses bythe year 2010.

e In terms of the management of working capital, once operations commence in 2001, YRWHDC will maintain acurrent ratio of at least 1. 0.

To buffer the impact of varying hydrological conditions YRWHDC would maintain a cash or cash equivalent accountwith a bank for unexpected shortfalls of cash during periods of low hydrology. Such account will be funded fromretained earnings and will be equal to at least 15 percent of annual operations and debt service requirements.

Future Finance. Annex 5 presents the financial assumptions and the financial projections are in Annex 6 for YRWHDC forthe period 1999-2010 along with a summary of important accounting principles employed by the Corporation and revenue,cost and financial management assumptions. It is recognized that the Corporation will rely substantially on its power salesto carry the finances of the enterprise. However, a reform progran has been established to enable YRWHDC to graduallyset and increase its charges for important services such as water supply, flood and sediment control. The projections reflectan action plan of water and other tariff adjustments designed with YRWHDC so that it may be able to achieve a favorablefinancial position throughout the entire projection period and achieve an overall pretax financial internal rate of return forthe project of 8.33 percent.

2 This represents a slight postponement of the requirement in Xiaolangdi I, which forecast a ratio of 1.2 from 2000.

3 Presently, accounts in China are revalued for inflation. However, given the importance of gauging total projected returns on anappropriate fixed assets base, an off-the-books adjustment will be made annually by YRWHDC by applying the inflation indexpublished annually by the Henan State Statistical Bureau to its fixed assets base of the Corporation.


Actual power supply will fluctuate substantially with changing hydrological conditions. According to the availablehydrological data, the worst recorded multiyear dry period lasted for 12 years. If this worst multiyear dry period occursimmediately after commissioning, it will cause an average annual reduction of 35 percent in power generation for almostthe entire repayment period. However, even under the worst scenario, peak power would only be reduced slightly(around 5 percent); therefore, the extent that the sales revenue is reduced will depend mainly on the price differentialbetween peak and base power.

15. Technical Assessment:

Dam and Powerhouse. The Xiaolangdi dam site was selected after detailed studies of five alternative sites extendingover a 13 km stretch of the river. The site geology is well understood as a result of extensive and thorough explorationsdating from 1958. Rock conditions on the left bank are considerably more favorable for the founding of concretestructures and excavation of large tunnels and caverns, and this factor was taken into account in locating all ancillarystructures on this bank. An international panel of experts reviewed all aspects of the dam site geology and confirmed thesite selected by YRCC. Responsibilities for design and construction are described in Section 16.

The dam is a 1,667-m long earth and rockfill embankment. The maximum height is 154 m and the volume of fill isabout 51 million m3 . Materials for construction of the dam are in abundant supply close to the site. The highest sectionof the dam, about 500 m in length, is founded on alluvial sands and gravels, while the abutment sections are supported onbedrock. Extensive investigations of the alluvium foundation have proven it to be dense, and dynamic analyses haveverified that liquefaction will not occur under the design earthquake.

Reservoir outflows for sediment management, flood handling and power are passed through 16 large-diameter tunnelsfed from a common intake tower with nine separate sections, each 60 m wide. The highest towers, which are thosefeeding the sediment and power tunnels, are 112 m above their foundations. The grouping of these facilities is dictatedpartly by geology and topography, but the compact intake structure and approach channel layout also allows operationsto keep all intakes free of siltation and debris. Total concrete volume is about I million cubic meters. Dynamic analyseshave been carried out to verify structural adequacy and strength under earthquake loading.

The underground powerhouse is located within the left ridge in a stratum of competent sandstone. The cavern has a spanof 26 m, a height of 45 m and a length of 193 m. There are six 7.8 m diameter power tunnels, one for each 300 MWgenerating unit, and six basically rectangular free-flow tailrace tunnels 12 m wide x 16 m high.

In addition to the extensive site investigations and mathematical analyses supporting the design of these structures, 51hydraulic model studies have been undertaken. Particular emphasis was given to sediment handling (11 models) and theorifice tunnels (30 models), since both features are virtually unique to the current project. The international panel ofexperts accepted, with minor modifications, the designs of the Yellow River Reconnaissance, Planning and DesignInstitute (RPDI) after three missions during which they had discussions with RPDI and site visits. There have been fivedetailed reviews by the international dam safety panel that have helped confirm the major design parameters and nomajor changes have been made to the original design.

Reservoir Operation. The second-stage project will provide training for project staff to operate the reservoir to meet arange of objectives (Annex 2). These are briefly described below.

The first objective of the Xiaolangdi Reservoir is to control flooding along the Yellow River below Huayuankou. Thereservoir will be operated to allow the level of protection to increase from the present 60-year return period to 1,000years. The reservoir will also be operated to reduce the peak of a 10,000-year flood so that it will not overtop the dikes.The project will also help to reduce flooding from ice jams in the river downstream of Xiaolangdi. Coordinatedoperation of the Sanmenxia and Xiaolangdi reservoirs will reduce river flows at the time of ice-jam formation andthereby eliminate flooding.

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The second objective is to manage the large volumes of sediments that are being carried by the river. The reservoir willtrap some of these sediments and pass the remainder through in a more controlled manner. This will result in a long-termpostponement in raising the dikes and thereafter reduce the frequency of subsequent raising of the dikes.

The third objective is to meet downstream water demands. The water demands along the Yellow River exceed theavailable supply. Nevertheless, large volumes of runoff, particularly from the middle reach of the river, flow into theocean every year due to lack of capacity to store it for future use. The reservoir will provide some of the required storagecapacity. These demands in order of importance are municipal and industrial water supply diversions to Hebei andTianjin, irrigation requirements in Henan and Shandong provinces, firm energy production and water supply to the oilindustry in the lower delta as well as fresh water to maintain spawning and hatching of fish in the lower delta.

16. Institutional Assessment:

General. The Ministry of Water Resources (MWR) has overall responsibility for the project under the guidance of theCentral Project Leading Group (CPLG) set up by the State Council. At the provincial level, the provincial leading groupsof Henan, Shanxi and Yellow River Water and Hydropower Development Corporation (YRWHDC) guide projectmanagement offices in implementation of both the resettlement program and the dam construction.

Executing Agency. YRWHDC is a state-owned enterprise whose main function is to build, operate and maintain the dam.Its general manager reports to MWR. It has, at present, 100 staff, many of whom have been involved in the constructionof large dams and water resource projects. Its general manager (Vice Minister of MWR) is the former director of aconstruction bureau and has been involved in the construction of several large dams. YRWHDC's resettlement office(YRWHDCRO) will coordinate implementation of resettlement phasing with dam construction.

YRWHDC is responsible for preparation and execution of all tenders for goods, services and civil works. It is alsoresponsible for contract management, cost control and quality control of all civil works and plant and equipmentinstallation. It is assisted by the Xiaolangdi Engineering Consulting Company (XECC) for construction supervision; theReconnaissance, Planning and Design Institute (RPDI) of YRCC for design changes and new designs; foreign consultantsfor contract management, cost control, etc.; and by a panel of experts to review major design and construction issues.Since 1994, the international consultants have been working with and assisting YRWHDC and XECC staff and havebeen undertaking on-the-job training for both groups of staff.

Construction Supervision. Construction supervision has been contracted to XECC, which acts as the "Engineer" for theclient and is responsible for construction supervision in terms of detailed fieldwork for quality control, authorization ofpayments to the contractor, maintenance of a field laboratory for testing of materials, revision of design documentsaccording to field conditions, etc. Several of the staff of XECC are from design and construction bureaus that have hadlong experience in implementing large dam projects. XECC, with support from YRWHDC and MWR and assistancefrom consultants, has demonstrated its capability to manage such a large dam project.

Engineering Design and Technical Assistance. RPDI has been retained by YRWHDC to assist in design. It is one of themost experienced design institutes in China, and in recent years it has completed the design of several large hydroelectricprojects. RPDI has over 3,000 professional staff and is equipped with modern facilities and laboratories. Nevertheless,YRWHDC recognizes the complex nature of the construction activities of this project, and therefore has employedforeign consultants to provide technical advice during the implementation of the project. These consultants have alsobeen actively involved in reviewing project design and resolving specific technical matters related to the dam,powerhouse, equipment, and log passing facilities. A number of technical delegations and prominent hydropowerexperts have visited the project site, offered valuable suggestions, and shared their experience with the Chinese inbuilding large and complex projects.

Panel of Experts. YRWHDC employs a dam safety panel (DSP) to assist in resolving particular project problems and inadvising on major design and construction issues. The DSP was appointed in March 1991. The original DSP consistedof 14 experts in relevant technical specializations, of whom 2 were Chinese and 12 were internationals. Presently, the


DSP consists of five experts (one Chinese, four internationals) who have been advising on detailed technical constructionmatters and on construction schedules of the project. YRWHDC has had five meetings with DSP between 1994 and1997 and has appreciated the advice given by the panel. With their assistance, technical and contractual issues have beenresolved.

Foreign Consultants. Due to the magnitude and complexity of the project and the use of foreign construction contractorsand equipment suppliers, YRWHDC has appointed experienced and qualified international consultants to assist inmanaging project construction. The scope of work for the consultants includes contract administration, cost control,scheduling, construction inspection and quality assurance, design engineering services, and construction siteadministration during the entire implementation period. The consultants added considerable insight to constructionsupervision, contract and claims management and quality assurance of designs.

Resettlement Coordination. Various agencies and jurisdictions are responsible for resettlement implementation. As arepresentative of the owner of the Xiaolangdi Project, YRWHDC's Resettlement Office (YRWHDCRO) is responsiblefor overall supervision and coordination of resettlement activities. It is assisted in this by RPDI and the Yellow RiverConservancy Commission Resettlement Office (YRCCRO). YRCCRO monitors progress independently and auditsreports prepared by the local government resettlement agencies and reports to YRWHDCRO. In addition, independentmonitoring of the welfare of the resettlers is undertaken by the North China Hydroelectric Engineering Institute's SocialScience Department (NCHEI). The institute was appointed in March 1993 and has conducted surveys of resettlers twiceannually. Most reports indicate that the resettlement program is very successful.

MWR has authority to ensure that guidelines for resettlement implementation are followed. Also, MWR can use thisauthority to exert indirect control on the disbursements of project-related resettlement funds from the Ministry of Financeto the provinces. In this way, MWR can act upon specific recommendations from YRWHDC. The MWR ResettlementOffice has assigned staff to coordinate and monitor the implementation of Xiaolangdi resettlement.

The provincial governments of Henan and Shanxi have ultimate authority for resettlement implementation and bear theresponsibility for the welfare of their citizens. The provincial Resettlement Bureaus are responsible for coordinating thevarious levels of local government and departments involved with implementation. Once funds are released from theMinistry of Finance, the provincial Resettlement Bureaus control the disbursement of resettlement funds. For thisreason, close liaison between YRWHDC/MWR and the provinces is maintained on a continuous basis.

17. Social Assessment

The social impacts of the project are those to do with project benefits and those resulting from the large program ofresettlement.

Project Benefits. The social benefits of the project arise from flood protection, irrigation and water supply. About 103million people will benefit from protection from infrequent catastrophic floods and about 3 million of some of thepoorest people in China living between the levees and in flood detention areas will benefit from prevention of annual andfrequent floods (1-in-2 years and less). Higher yields and cropping intensities on about 2 million ha of irrigated land willbenefit directly over 7.7 million farm families and indirectly benefit many others involved in processing and marketingof farm products. Several large cities will benefit from a more reliable water supply in a water-short area.

Resettlement. The project requires the resettlement of about 198,712 people in the moving year. This is being partiallyfinanced by a US$110 million IDA Credit (2605-CHA). The people will be moved in four stages over an 18-year period.About 56,074 people were resettled between 1992 and 1996 from the damsite and reservoir areas. This program ofresettlement is about nine months ahead of schedule.

The main objective of the resettlement plan is that both resettlers and host population affected will not be disadvantagedby the project and their living standard will be improved or at least restored. Resettled families will be established innew locations where the house, yard and amenities will be improved; the family's new earning potential will be at least

Project Appraisal Document Page 12Country: China Project Title: Xiaolangdl Multipurpose Project: Stage II

as good as previously; and income losses during transition will be compensated for. The following principles have beenadhered to in resettlement planning:

* The methodology for land compensation calculation stipulated in the Law of Land Management 1986 as amended in1988 is adopted. Land compensation should be used productively to restore and improve the living standard of therelocatees and host populations.

* Compensation for houses and caves should be paid at replacement costs.

* Compensation should be paid at replacement cost for equipment, structures and other facilities in industries andmines.

* Infrastructure should be reconstructed to restore its original function. The cost should be estimated according to thereconstruction technical design.

* Resettlement of the agricultural population should be land-based wherever possible.

* Land sharing with host villages should be based on the principle of mutual acceptance and should be planned so as toprovide higher incomes (from all sources) for relocatees and hosts.

* Houses and community facilities at new town and village sites should be constructed to higher standards thanpreviously.

* The financial resources to carry out the relocation and development proposals should be available when and whererequired. Development plans should be prepared in concert with relocation plans.

* All the daily wage laborers will receive a compensation equal to 3-6 month salary.

* If sharing farmlands does not result in achieving target incomes some of the labor force should be offerednonagricultural employment opportunities.

The resettlement project has three main components: (a) residential and infrastructure development; (b) transfer ofresettlers; and (c) livelihood development, vocational training, monitoring, supervision and social adjustment. These aredescribed in detail in Report 12527-CHA and updated plans are briefly summarized below.

* Residential and Infrastructure Reconstruction. This component will consist of constructing 233 villages and 112towns for the resettlers. About 49,800 new houses will be built covering a floor space of 4.29 million m2. Almost all

houses will be made of brick and will be provided with piped water supply, proper sanitation, electricity, drainage,etc. Public facilities such as schools, hospitals, clinics, cultural centers, etc. will be built to service all new villagesand towns. Commercial and industrial enterprises will be reconstructed in the new sites. New infrastructure willinclude roads, transmission lines, communications lines, broadcasting facilities, water supply works, hydraulicstations and other special items to service the settlement areas. A total of 1,832 km of roads will be built. Everyvillage will be serviced with electricity requiring the construction of 667 km of power lines and other facilities.Twenty-seven wharves around the reservoir will be built and 132 ferries procured. A total of 524 km of telephonelines and broadcasting facilities will be built to guarantee that every village is well linked with communications.

* Transfer of Relocatees. This component makes special provisions for transfer of all salvageable materials andpersonal belongings, factory machinery and other goods from the present to the new sites. A total of 32 percent ofthe people will be moved downstream to 34 host sites on the Wenmengtan plain and in three counties in Kaifeng, 42percent will move to new townships within their home counties at 120 host sites, and another 13 percent will moveback away from the reservoir perimeter within their home townships to 101 host sites. The town population totaling3 percent of the people will be moved to the 11 new towns created in the eight affected counties.

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* Livelihood Reestablishment. This component, designed to reestablish the livelihoods of the rural relocatees inagriculture, comprises irrigation, dryland development and the reestablishment of sideline activities. Severalproduction models have been studied and proposed for agriculture resettlement. The population to be resettled intoagricultural production will share existing land resources with the host population. A total of 206,406 mu of landwould be acquired for the resettlers in the hosting areas to ensure 1.2 mu of agriculture land per relocatee and 3.8 muper agricultural laborer. Significant resource development investments are planned in irrigation, land improvement,crop diversification and sideline activities to increase land productivity and maintain the living standard of both theresettlers and host population. Agricultural improvements cover an area of about 166,500 mu. These improvementswill include completion of the Houhe Irrigation Scheme of about 75,000 mu and the Wenmengtan Scheme, whichwill protect about 200,000 mu of cultivated land and create about 81,000 mu of new land for the resettlers.

* It was previously planned to develop or expand 84 county-based enterprises to create employment for 20,528 surplusrural laborers between 1993 and 2000. It was noticed, however, that after 1,700 jobs were established in thesecounty-based industries that these jobs were not very stable. The resettlement offices also found that township andvillage industries were more dynamic than these county-based industries. Given the instability of county-basedindustrial employment and based on lessons learned in the Phase I resettlement, the resettlement strategy has beenmodified to resettle all affected rural population in agriculture, allocating farmland for every resettler, with concertedefforts in diversified off-farm activities, including forestry, animal husbandry, aquaculture, service industries andvillage industries. This strategy has been fully reflected in the detailed resettlement designs for Phases II, III and IV.In addition, the latest inventory of the reservoir area indicated an increase in the number of factories and mines in thereservoir area, including 234 industries and mines in Phase II and 554 in Phases III and IV. Detailed resettlementdesigns have been completed for Phase II and preliminary designs have been completed for Phases III and IV. Afterdetailed consultation with the individual industries, for Phase II, 20 of the enterprises will be relocated and 128 willswitch to new production. Eighty-five will go out of production with compensation. Detailed consultation withvillagers was held in 1996 and detailed resettlement designs are under way for industries and mines in Phases III andIV. Regular industrial employees will be employed in new (fewer cases) or expanded industries and the temporarydaily laborers will be paid a compensation of three to six times their salary and they are assured alternativeemployment.

Implementation schedule. Resettlement is planned to be carried out in four stages. Phase I Resettlement at the damsiteoccurred between 1992 and 1994. Phase II (below EL 180) is planned to be implemented from 1994 to November 1997when the cofferdam is completed and the river will be closed requiring the resettlement of 46,133 people. Phase III(El 180-265) will take place from 1997 to 2000, resettling 118,985. Phase IV (EL 265-275) will take place from 2010 to2012, requiring the resettlement of another 23,020 persons by 2011. Overall, 198,712 people will require relocation andrehabilitation on account of the creation of the Xiaolangdi Reservoir.

Resettlement cost. The appraised resettlement cost in 1993 was US$571 million. With the latest inventory, priceescalation and optimization of resettlement designs, the resettlement cost was reestimated and reviewed by the Bank.The total cost amounts to US$839 million, including US$752 million for the reservoir resettlement, US$68 million forWenmengtan Scheme and US$19 million for Houhe Scheme. SPC has reviewed and will approve the revisedresettlement budget in a phased manner-Phase II had already been approved in April 1997, and Phase III and IV will beapproved in September 1997.

Resettlement progress. At the damsite 12 resettlement villages have been established with complete communityamenities of water supply, power supply, road, communication and broadcasting. A total of 2,315 households have

2moved into new houses with a total area of 296,000 m . Some 8,500 mu of cultivated land have been allocated to theresettlers and the objective of one mu of cultivated land per capita has been achieved. Seventeen enterprises haveemployed 963 resettlers and the affected villages have set up 31 rural enterprises and 408 resettlers have been employed.

In Phase II Resettlement, 11,268 households (45,500 people) have finished their house construction with a total area of1,011,000 m2 . The house completion rate was 88 percent by October 31, 1996. Also, by October 31, 1996, 16,580


people in 4,478 households had moved into their new houses. Although 88 percent of the households (9,915) havecompleted their houses, only 40 percent of them (4,478) have moved as whole families. The rest of the households areliving in the old and new places to maximize their incomes during the transitional period. The new housing is expectedto be completed by December 31, 1996 and most families would start to move to the new area and the entire movementof people will be completed by June 1997. Of the planned 38,781 mu of cultivated land, 34,467 mu of land had alreadybeen allocated to the resettlers by the end of 1996, including 26,654 mu of irrigated land. Extensive on-farmdevelopment works are under way to provide irrigation to the resettlers. After land acquisition for the resettlers, allhosting villages have redistributed their remaining farm land among the villagers. In the meantime, they have either usedthe land compensation on farm development to raise productivity of their remaining land or have started off-farm andside-line economic activities to restore income losses due to land acquisition. By the end of 1996, 28 township andvillage enterprises had been established.

The sample investigation of early 1995 carried out in the damsite area covered 82 families. As the results indicate, theper capita net income was increased from Y 485.8 before resettlement to Y 1,104.3 in 1995. The number of families withdifferent income levels included:

Per Capita No. of families No. of familiesIncome (Y) before resettlement Percent after resettlement Percent

<300 35 42.7 19 23.2300-500 20 24.4 11 13.4500-800 16 19.5 15 18.3

800-1,000 3 3.7 10 12.2>-1,000 8 9.8 27 32.9

The income composition before resettlement was 48.4 percent by farming, 39.4 percent by industrial activities, and 12.2percent by sideline activities. After resettlement, the percentages are, respectively, 15.3, 68.4 and 16.3 percent, showingthat industrial jobs are now the major income source, and that less importance is attached to agricultural production. Thisdegree of switching may actually be excessive if it occurs on a large scale. The local resettlement offices may need toprovide more input for development of farmland, for the sake of income security.

The follow-up survey covering the period December 1995 to August 1996 covered a total of 460 families from thedamsite area and the reservoir area, about 17 percent of the total families involving 37 villages (2,730 families).According to the results, the net per capita income levels are categorized as follows (the average per capita income isY 1,110/year):

Income (Y) Number of families Percent

<300 28 6.1300-500 35 7.6500-800 73 15.9

800-1,500 128 27.8>1,500 196 42.6

* Industrial and sideline activities contribute more than 80 percent to the total income. These incomes of resettlers aremuch higher than the preresettlement status. In most cases, incomes have risen over 100 percent. A detailedprogress report of the resettlement activities and updated Resettlement Action Plan has been completed in February1997 and is summarized in Annex 9.

Accounts and Audits. As a first step, the general principles of enterprise accounting have recently been revised by theMinistry of Finance (MOF) and these are now consistent with international accounting standards. Within this broad


framework, specific accounting standards has been developed with the assistance of the Bank Group under the FinancialSector Technical Assistance Project (Credit 2423-CHA).

Previously, YRWHDC established two sets of accounts, one set for capital construction and the other for operation.Since these two sets of accounts were not consolidated, the balance sheet for operations did not include constructionwork-in-progress and the related financing. However, under the newly revised general principles set forth by MOF,enterprises will have to consolidate the capital construction accounts with the operations accounts. YRWHDC hasconsolidated its accounts with help from consultants included as part of the first-stage project.

Audits of Bank-financed projects have been conducted by the State Audit Administration (SAA) Foreign InvestmentAudit Bureau, or by one of the Provincial Audit Bureaus (PAB) under its guidance. YRWHDC's annual accounts areaudited by SAA under the first stage project and this arrangement will continue. YRWHDC has developed an internalauditing section which periodically will examine the accounts of each operating unit. The objective of theseexaminations is primarily to test for accuracy and compliance with MOF regulations. The section serves as liaisonbetween external auditors and the project entity.

Monitoring. YRWHDC and MWR monitor the project's progress and keep a current account of physical and financialprogress of each of their respective project components. Physical indicators include such items as civil works (for dam,intake and outlets, and power house), equipment and materials to be procured and training undertaken. Financial reportstrack project expenditures and claims for disbursement against loan proceeds. Information on financial and physicalprogress are presented in semiannual progress reports prepared by YRWHDC, for submission to the Bank in April andSeptember each year.

18. Environmental Assessment: Environmental Category [x] A [ ] B [I C

The major environmental threat in the lower Yellow River region is catastrophic flooding. Xiaolangdi will offer virtuallycomplete protection in the downstream reaches against the 1-in-1,000-year flood. Due to the initial sediment trappingand longer-term sediment regulation operations in Xiaolangdi, the project will also defer dike raising and strengtheningfor 20 years and reduce the magnitude of dike reconstruction thereafter. An updated environmental impact assessment(EIA) was completed in February 1997 (updated from the initial EIA made in December 1992) and the updated EIAsummary (EIA/97) was distributed to the Board on March 11, 1997.

Although the EIA covers all environmental aspects, the updated EIA confirms the identification of three environmentalissues as being of primary importance: (a) dam stability and safety, (b) cultural heritage; and (c) public health. Thefindings on these are summarized in the following:

Dam Safety. This issue was the subject of extensive analysis by YRCC and DSP. The assessments of and provisions fordam safety are believed to be the most detailed ever undertaken for a major dam. A wide range of safety features areprovided in the project design including: (a) access road systems are located so that, if access to one bank is interrupted,access to the other bank will be maintained; (b) a comprehensive communications system will be provided, includingmicrowave and radio; (c) emergency power supplies are available; (d) an integrated reservoir flood regulation plan hasbeen prepared to utilize all reservoir capacities to minimize flood hazards under extreme flow conditions; (e) emergencyresponse planning has been completed to account for possible failure of the coffer dam during construction; (f) a FloodEmergency Response System has been established and is operational in the lower basin and elsewhere.

The water mass of the reservoir may increase the risk of induced earthquakes in or near the reservoir area. Because thedamsite is in a region prone to earthquakes, seismic sensitivity has been given particular attention. Studies wereundertaken by YRCC including geological mapping of the area, a thorough review of reservoir-induced earthquakeswithin China and abroad, and detailed earthquake probability assessments. These studies led YRCC to conclude that thepotential magnitude of induced earthquakes subsequent to flooding of the Xiaolangdi Reservoir is between 5.5 and 5.6 onthe Richter scale.


As agreed between YRCC and DSP, the dam, embankments and intake tower have been tested by modeling for stabilityduring a postulated earthquake of magnitude 6.25 on the Richter Scale with a hypocentral distance of 10 km and acorresponding horizontal peak acceleration of 0.5 g. The results indicate that the dam, embankment and the intaketowers would not be endangered under these conditions. The seismic design of the dam is considered to be fullyconsistent with the best state of the scientific knowledge on these aspects.

As noted in the updated EIA (EIA/97), the XLD seismic monitoring network consists of 9 seismoscopic stations,I repeater center, and I data processing center. The network uses telemetry module-module antenna transmission,visible and magnetic-medium recording, man-machine interaction, and computer real-time data processing. Networkconstruction was started in December 1994 and the overall network put into operation in November 1995. The system

2focuses on the area 40 km upstream and 8 km downstream, covering a total land area of 1,400 km . Within this rangeany seismic event at ML=0.5 will be recorded with epicenter positioning accuracy within 0.5 km. During the period fromNovember 1, 1995 to December 31, 1996, a total of 26 minor seismic events, with no consequences, were measured inthe network area and vicinity.

Cultural Heritage. The Yellow River runs through the "Cradle of Chinese Civilization," and archeological relics areplentiful throughout the river basin, especially in the main population and farming areas of the middle and lower riverreaches but less so near the dam site.

A comprehensive archeological exploration, classification and salvage program has been undertaken to locate, recoverand protect important underground and surface relics and cultural treasures in the inundated area. To date, work hasfocused in the area of known and important sites, and priority has been given to those areas that will be flooded first.There will be more time available to complete the required work in the host areas and the inundated areas at higherelevations. The EIA team, together with their government counterparts with expertise in the subject area, have monitoredthe salvage and curation of these archeological relics. The overall budget for the archeological detection and salvageprogram makes provision for exploratory borings, excavation, relocation and reconstruction. The archeological relicsprotection program is on schedule, and all critical tasks are expected to be completed within budget and according toplan. About 70 percent of the cultural relics have been salvaged from the reservoir areas and 30 percent will becompleted in this phase of the project.

Details on the relics program are given in Tables 4.2.4.4-1 and 4.2.4.4-2 in the revised EIA/97 for Henan and Shanxiprovinces respectively. Some 285 relics of graves, pottery, house foundations, structures, stone tablets, etc., datinghundreds of years have been retrieved. These tables show that, for Henan Province, the only remaining major work is forrelocation of the Xiwo Grottoes, to be completed in 1997-2000, and that the bulk of the work in Shanxi province hadbeen completed by the end of 1996.

Public Health. The prevalent communicable diseases common in the project area and for which the incidence could beincreased by the project without proper controls, are malaria, encephalitis, hemorrhagic fever, and sanitation-relatedenteric diseases including dysentery, hepatitis and typhoid.

The project will change the hydrology of the Yellow River by creation of a reservoir, and by providing an opportunity forincreased irrigation of the surrounding and downstream agricultural areas. These changes will modify the ecologicalconditions for vector-borne diseases such as malaria and encephalitis, and for communicable diseases such as dysentery,hepatitis and typhoid. Inundation of the reservoir area will also force out-migration of disease-bearing rats, almostcertainly resulting in an increased hazard of hemorrhagic fever in the surrounding area and population. The influx ofconstruction workers will increase the risk of both insect-borne and sanitation-related enteric diseases in the vicinity ofthe construction and host areas.

The public health vector control and sanitation programs to be implemented by the contractors at the damsite, withassistance from subcontractors including the Yellow River Central Hospital Unit (YRCHU) and local AntiepidemicStations, are the following:

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* Malaria and Encephalitis. During the construction phase, medical screening of construction workers (800 to 1000workers per month) for carriers of malaria (as well as other contagious diseases), and routine spraying ofconstruction site buildings and breeding areas to control mosquitoes are being undertaken. The screening reveals thatthe present incidence levels are very low (0-0.1 percent). During the operation phase, disease prevention will beundertaken in both the reservoir and irrigation areas comprising periodic medical checks of the affected population todetermine malaria incidence, and periodic monitoring of potential mosquito breeding sites for anopheline larvae todetermine the need for special control measures. The encephalitis control program is similar to that for malaria,except that different mosquito species are involved. No malaria has been reported in the region which has been orwill be affected by the project, and one incident of encephalitis was promptly controlled.

* Hemorrhagic Fever. Rats are the principal vectors of hemorrhagic fever. The prevention and control program to beimplemented during the construction and operation stages consists of: (a) destruction of rodents in the areainundated prior to inundation; (b) monitoring rodent density and the incidence of hemorrhagic fever in the peripheralarea around the reservoir in the year prior to inundation; and (c) monitoring after inundation and applying rodentcontrol and medical treatment as required. Monitoring data indicate that there has been no incidence of hemorrhagicfever between 1994 and 1997.

* Sanitation-Related Enteric Diseases. Enteric diseases are being controlled by hygiene, provision of clean water andadequate sanitation facilities at the construction site and in all resettlement village areas. Contract documents requireconstruction contractors to comply with relevant provisions and the Environmental Management Office monitorscompliance. Enteric diseases are prevalent in the damsite vicinity because of the large numbers of local workers wholive on the periphery of the damsite and who do not come under the jurisdiction of the damsite sanitation program.However, the incidence of enteric diseases is much lower than baseline levels originally in the villages close to thedamsite. For the resettlement villages, these hazards are being controlled by provision of safe water supply andadequate sanitation facilities together with village clinics. Monitoring of these facilities, including adequacy ofconstruction and operation, will be upgraded in 1997, as part of the Stage II conditionality, to ensure that entericdisease rates will be maintained at low levels.

Other Significant Environmental Issues (SE]s). Other forms of impact analyzed include fisheries (in-stream, aquaculture,estuarine and coastal), water quality, land accretion in coastal areas, inundation of physical resources, landslides in thereservoir, reservoir seepage, reservoir area clearing, rare species and special habitats, wetlands, and global environmentalissues. The analyses showed that the adverse effects on these impacts will be small and controllable with suitablemitigation and offsetting measures. Some forms of impact (e.g., on greenhouse gas emissions) are assessed as beingpositive. In addition the updated EIA includes evaluation of the issues of public participation, compliance withenvironmental laws, environmental economics, and environmental risk assessment.

Environmental Management Plan Improvements. The experience in implementing the Environmental ManagementPlan (EMP) specified in EIA/92 and in the Stage I Appraisal has shown, as expected, the need for improving the plan toachieve the target level of environmental protection (Annex 8). The recommended improvements, to be part of the StageII Agreement, include: (a) separation of the present Expert Panel on Environment and Resettlement into two panels, oneon environment and one on resettlement, (b) separation of the present EMO under the Resettlement Office into twoEMOs, namely EMO/Dam Project and EMO/Resettlement, together with (c) provision of expertise in environmentalmonitoring technology and of special environmental training, to assist the EMOs and all others involved in implementingthe EMP, in achieving the desired goals with maximum efficiency.


19. Participatory Approach Identification/Preparation Implementation Operation

Beneficiaries/community groups IS, CON and COL IS, CON and COL CON and COLIntermediary NGOs CON CON and COL CON and COL

Academic institutions CON and COL COL COLLocal government CON and COL CON and COL CON and COL

Other donors

Note: IS = sharing information, CON = consultation, COL = collaboration.

The participatory approach under the project as summarized above is generally very satisfactory.

20. Sustainability

The design of the dam is based on similar upstream dams functioning under large silt loads, and the designs have beentested by prototype technical studies. The safety factors used were conservative. The sustainability of technicaloperation of the project is therefore as certain as possible, given state-of-the-art technology in design of large dams.Project charges for power and water supply needed to recover the capital costs and to finance operation and maintenanceare not excessive, making financial sustainability reasonably certain.

21. Critical Risks(see fourth column of Annex I)

Risk Risk Rating Risk Minimization Measure

Project Outputs to Project DevelopmentObjectives

Insufficient Yellow River flows to fully MR A simulation of the entire Yellow River over 70 years of hydrology datautilize the reservoir. showed that there will be sufficient water, even under prolonged drought

conditions, unless provinces upstream of the dam significantly increasetheir consumption of Yellow River water.Risk Minimization Measure. The State Council has established strictlimits on consumption of Yellow River water for all provinces borderingthe river.

Low demand for and prices of agricultural NR Demand for grains and cotton continues to grow at a rapid pace, andoutputs prices for the major grain crops have doubled in the last four years. A

recent study of future grain demand and supply in China suggests aworsening agricultural product deficit in the coming decades.Risk Minimization Measure. None

Demand for Electricity NR The load growth forecasts for Henan province, which has agreed topurchase all energy from the project, were conservatively estimated at 6percent per year.Risk Minimization Measure. In the unlikely event of a demand shortfall,power could be transmitted to the North or Central China grids.

Project Appraisal Document Page 19Country: China Project Title: Xlaolangdi Multipurpose Project: Stage II

Risk Risk Rating Risk Minimization Measure

Project Components to Outputs

Timely completion and delays NR A one-year delay in completion would result in a decline in the IRR from20.8 percent to 18.6 percent.Risk Minimization Measures Close supervision by local andinternational construction experts.

Cost Overruns NR A 20 percent cost overrun for those costs not yet incurred (Stage I costsare "sunk") would result in a decline in the IRR from 20.8 percent to19.7 percent.Risk Minimization Measure. Close supervision by local andinternational cost accountants.

Mismanagement MR Agencies of the Yellow River Conservancy Commission haveconsiderable experience in operating Sanmenxia reservoir upstream ofXiaolangdi. But the latter will have far more storage and electricitygenerating capacity, and have more complex operational responsibilities.Risk Minimization Measure. Substantial resources are being devoted totraining operators of the reservoir. A state-of-the-art, computer-basedreservoir management system is being developed by internationalconsultants.

Overall project risk rating

Overall Risk NR China's long experience with constructing and operating dams similar toXiaolangdi has been drawn upon, as well as the advice of numerousinternational experts. A large-scale physical model of the Lower Reachand the dam has been thoroughly tested. Several mathematical models ofvarious aspects of the dam's characteristics have been developed andtested for design and operational aspects.

Note: MR = modest risk and NR low or negligible risk.

22. Possible Controversial Aspects

Large dams are often controversial. In the case of Xiaolangdi some international critics raised questions regarding theproject during the processing of the first-stage Bank Loan. These were carefully reviewed and the Government and theBank provided answers that in their view were responsive. Resettlement is the area where most dams attract criticismand disputes. In the case of Xiaolangdi, this has been and will continue to be avoided by the commitment of theGovernment, the Provinces, and the project authorities to careful planning and efficient execution of the resettlementplan, with the continuing financial assistance of Credit 2605-CHA (Xiaolangdi Resettlement Project) and intensive BankGroup supervision of that project.

Block 4: Main Loan Conditions

23. Conditions of Effectiveness

Execution of the Subsidiary Loan Agreement on behalf of the Borrower and YRWHDC would be a special condition ofeffectiveness.

ProJect Appraisal Document Page 20Country: China Project Title: Xlaolangdl Multipurpose Project: Stage 11

24. Other Conditions

The following agreements would be obtained at negotiations:

The Borrower would:

(a) maintain at all times throughout the period of Project implementation a central Project coordinating group, headed bya Vice Minister of MWR, acceptable to the Bank, to be responsible for the overall oversight of Project management; andcause each of the Project Provinces to maintain at all times the following structures acceptable to the Bank: (i) a leadinggroup to be responsible for providing guidance at the provincial level on resettlement and other policy issues that mayarise during Project implementation; and (ii) a Project office to be responsible for oversight of land acquisition andresettlement within its jurisdiction;

(b) onlend the proceeds of the Loan allocated for dam construction, YRWHDC management strengthening and the EMPto YRWHDC under a subsidiary loan agreement to be entered into between the Borrower, under terms and conditionswhich shall have been approved by the Bank, including repayment over 20 years (including 5 years' grace), interest andcommitment charges at the same rate payable by the Borrower to the Bank, and foreign exchange risk borne byYRWHDC;

(c) take and cause the Project Provinces to take, all measures required on its and their respective parts to ensure that theenvironmental management plan of the Project shall be carried out in accordance with guidelines acceptable to the Bank;

(d) take and cause the Project Provinces to take, all measures necessary to ensure that all persons displaced as a result ofthe Project shall be resettled in a manner designed to improve the living standards and productivity of all such persons,including: (i) take all measures necessary to ensure that the Resettlement Action Plan shall be implemented inaccordance with guidelines acceptable to the Bank; and (ii) ensure that the resettlement under the Resettlement ActionPlan is undertaken at a pace consistent with the pace of construction of the Dam, and if construction is four months ormore ahead of its schedule as anticipated in the Resettlement Action Plan, make such adjustments to the schedule ofimplementation of said resettlement, consistent with the adjustments made by YRWHDC in the schedule of constructionof the dam as necessary to ensure the consistency of the pace of such resettlement with the pace of such construction;

(e) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, with indicatorssatisfactory to the Bank, the implementation of the Resettlement Action Plan and the achievement of its objectives;prepare, under guidelines satisfactory to the Bank, and furnish to the Bank semiannual monitoring and evaluation reports,detailing activities performed during the preceding six-month period and setting out the measures recommended toensure the continued efficient implementation of the Resettlement Action Plan; exchange views with the Bank on eachreport; and then implement the recommendations taking into account the views of the Bank;

(f) take all measures necessary to ensure that 220-kV transmission lines connecting the power station constructed underthe Project to Henan's provincial power grid shall be constructed in accordance with an action plan acceptable to theBank;

(g) in order to ensure the safety of the Xiaolangdi Dam and Sanmenxia Dam and downstream life, property andactivities, take, through MWR, the following actions. (i) prepare, on the basis of guidelines acceptable to the Bank, andfurnish to the Bank not later than January 15, 1999 a plan for the operation and maintenance of the Xiaolangdi Dam andSanmenxia Dam and an emergency preparedness plan for said dams; afford the Bank a reasonable opportunity toexchange views with the Borrower; and thereafter implement the plans taking into account the views of the Bank on thematter; (ii) ensure that inspections of the Xiaolangdi Dam and Sanmenxia Dam and of their respective operation andmaintenance shall be undertaken at regular intervals, all in accordance with sound engineering practices acceptable to theBank, by a panel of qualified and experienced independent experts, in order to identify any deficiencies in the conditionof said dams or in the quality and adequacy of the maintenance or methods of operation of said dams or of their


respective plan for emergency preparedness, which may endanger the safety of said dams or of downstream life, propertyor activities, and to rectify any such deficiencies promptly;

(h) implement flood/sediment/ice and drought management and institutional support component of the Project inaccordance with a program acceptable to the Bank; prepare and furnish to the Bank not later than December 15 in eachFiscal Year, commencing December 15, 1997, a proposed action plan for the implementation of these components duringthe following Fiscal Year and thereafter, carry out said action plan during said following year, taking into account theviews of the Bank on the matter; employ consultants by May 15, 1998 to assist in developing the management system;prepare, on the basis of guidelines acceptable to the Bank, and furnish to the Bank not later than July 1, 1998, a plan toupgrade YRCC and assign to it the responsibility for management of flood, sediment, ice and drought in the lowerYellow River Basin; and taking into account the comments of the Bank on the matter, take all measures necessary toensure that YRCC shall be upgraded and assigned with said responsibility, not later than December 31, 1998, with termsof reference, staffing and other resources acceptable to the Bank; and develop, on the basis of guidelines acceptable tothe Bank and furnish to the Bank not later than December 31, 1998, a plan to ensure the efficient delivery of water tousers of water flowing through the lower reaches of the Yellow River and collection of water charges from users of saidwater, and implement said plan not later than June 30, 2000, taking into account the comments of the Bank on the matter;and

(i) through MWR: (i) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoingbasis with indicators acceptable to the Bank, the carrying out of flood/sediment/ice/drought and institutional supportcomponents of the Project; prepare and furnish to the Bank: semiannual reports, summarizing the monitoring andevaluation activities carried out in the preceding calendar semester, and proposed measures, to further the objectives ofthe Project during the current calendar semester; and (ii) a mid-term report, not later than July 31, 1999, summarizingthe monitoring and evaluation activities carried out and setting forth any proposed measures, indicated by monitoring andevaluation activities, to further the objectives of the Project; and exchange views with the Bank on each report, and takeall such measures as shall have been agreed between the Borrower and the Bank.

YRWHDC would:

(a) maintain records and accounts adequate to reflect in accordance with sound accounting practices its operations andfinancial condition and have its records, accounts and financial statements for each Fiscal Year audited, in accordancewith appropriate auditing principles consistently applied, by independent auditors acceptable to the Bank; and furnish tothe Bank audit reports and other supporting documents not later than six months after the end of each such year;

(b) (i) for each of its Fiscal Years 2002 to 2007, produce funds from internal sources equivalent to not less than 1.2 timesits estimated debt service requirements and (ii) for each of its Fiscal Years thereafter, produce funds from internalsources equivalent to not less than 1.6 times the estimated debt service requirements on all debt of YRWHDC;

(c) earn: (i) for each of its Fiscal Years 2004 to 2007, an annual return of not less than 2 percent of the average currentnet value of its fixed assets in operation; and (ii) for each of its Fiscal Years thereafter, an annual return of not less than 5percent of the average current net value of its fixed assets in operation;

(d) earn: (i) for each of its Fiscal Years 2001 and 2002, an annual return of not less than 5 percent of the average currentnet value of its fixed assets in operation attributable to power operations; and (ii) for each of its Fiscal Years thereafter,an annual return of not less than 10 percent of the average current net value of its fixed assets in operation attributable topower operations;

(e) maintain, during its Fiscal Year 2001, and during each of its Fiscal Years thereafter, a ratio of current assets tocurrent liabilities of not less than 1.0;

Project Appraisal Document Page 22Country: China Project Title: Xiaolangdl Multipurpose Project: Stage ll

(f) maintain a deposit account with a bank acceptable to the Bank and on terms and conditions acceptable to the Bankinto which it shall deposit out of its net cash earnings from operations such amounts as will enable it to maintain abalance in the account at all times, except during periods of Low Hydrology, of at least 15 percent of its annual cashrequirements; and use said amounts exclusively to cover its annual cash requirements during periods of Low Hydrology;

(g) in furtherance of its policy to recover the recurrent costs of operation and maintenance of the Xiaolangdi Dam andthe capital costs from the users of the water supplied from said dam, taking into account the need to provide incentives toencourage the efficient use of water and to relate the charges on the users to their ability to pay and income levels, chargeimmediately upon commissioning of the Xiaolangdi Dam, and collect from all users, water tariffs sufficient to recover(i) the costs of operation and maintenance of said dam in full as they are incurred and (ii) the capital costs of said dam infull not later than December 31, 2014; prepare and not later than December 31, 1999, furnish to the Bank for its review,the proposed schedule of such water tariffs to be charged and collected, and implement the schedule, taking into accountthe comments of the Bank on the matter;

(h) carry out a program acceptable to the Bank designed to achieve by the twelfth calendar year of operation of theXiaolangdi Dam a rate of collection of water tariffs charged by YRWHDC of not less than 85 percent;

(i) maintain at all times throughout the period of Project implementation, the following offices with terms of reference,staffing and resources acceptable to the Bank: (i) a Project management office to be responsible for the supervision of thedam construction, including procurement of goods and services and monitoring and evaluation of its progress; and oneenvironmental management office at the Xiaolangdi Dam site, to be responsible for coordination and supervision of theenvironmental management plan of the Project, as it relates to the impact of dam construction, and a separateenvironmental management office, to be responsible for coordination and supervision of the plan as it relates toresettlement implementation;

(j) furnish to the Bank by September 15 of each Fiscal Year, an annual action plan including all construction and trainingactivities for the implementation of dam and environmental activities of the Project, together with a financing plan andthen implement said plan taking into account the views of the Bank on the matter;

(k) continue to employ throughout the period of Project implementation, a panel of independent experts acceptable to theBank, to be responsible for undertaking reviews, at least once every year, or more often, if so required, of constructiondesigns and specifications of the dam and for advising on technical issues that may arise during construction and furnishto the Bank a report of the review and recommendations prepared by the panel and thereafter implement therecommendations of the report, taking into account the views of the Bank;

(I) take all measures necessary to ensure that the Resettlement Action Plan shall be implemented in accordance withguidelines acceptable to the Bank: (i) ensure that the construction of the dam is undertaken at a pace consistent with thepace of resettlement under the Resettlement Action Plan, and if the construction is four months or more ahead of itsschedule as anticipated in the Resettlement Action Plan, make adjustments to the schedule of implementation of theconstruction, (ii) ensure that the coffer dam constructed under the Project shall not be closed until the resettlement ofpersons displaced by the closure is completed in accordance with the Resettlement Action Plan; and (iii) ensure that thewater level of the Xiaolangdi Dam at no time rises above 265 meters unless and until the final resettlement arrangementsfor persons to be resettled during the last stage of resettlement under the Resettlement Action Plan shall have beenapproved by the Bank;

(m) employ a panel of experts, with qualifications, experience and terms of reference acceptable to the Bank, to beresponsible for monitoring and evaluating the implementation of said plan, and the overall impact of implementation ofthe Project on the environment;

(n) maintain policies and procedures adequate to enable it to monitor and evaluate on an ongoing basis, in accordancewith indicators satisfactory to the Bank, for the dam and environmental components and furnish to the Bank:


(i) semiannual reports each Fiscal Year, summarizing said monitoring and evaluation activities and setting forth themeasures to ensure the continued efficient implementation of the implementation of these components; and (ii) a mid-term report, not later than July 31, 1999, summarizing said monitoring and evaluation activities performed from theinception of the Project, and setting forth any proposed measures, indicated by said monitoring and evaluation activities,to further the objectives of the Project; and exchange views with the Bank on each said report, and promptly take suchmeasures as are agreed between the Bank and YRWHDC; and

(o) take all measures required on its part to enter into a power sales contract by June 30, 1999, with the entityresponsible for electric power transmission in Henan, under terms and conditions which shall be acceptable to the Bank,and which shall ensure that the structure and levels of the tariffs for such electricity payable by said entity shall bedesigned: (i) to ensure an efficient supply of power from said hydropower generation facility; (ii) to minimize thefinancial risk to YRWHDC of reduced supplies of electricity caused by low-flow hydrological conditions; and (iii) toenable YRWHDC to comply with its other financial obligations.

Block 5: Compliance with Bank Policies

[x] This project complies with all applicable Bank policies.

Task Manager: Daniel iGunaratnam Co try anager: Nicholas C. Hope


Annex 1: Project Design Summary

ANNEX 1: PROJECT DESIGN SUMMARY AND MONITORING INDICATORS

Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and RisksCAS Objective (CAS Objective to Bank* Promote agricultural * Value of gross agricultural * Provincial statistics data Mission)

development and the rural output increases by 15 * Project monitoring andeconomy percent in the project area evaluation data

* Incorporate major waterstorage, transfer, irrigation,drainage, flood control intoprojects

* Alleviate infrastructural * Industrial/urban productionbottlenecks (provision of growth is sustained in theurban and industrial water) project area between 6 and 9

percent a year between 2000-* Safeguard the environment 2020

* Flood damage reduction willincrease property values

Project DevelopmentObjectives* Reduce flood damage within * Eliminate annual flood * MWR annual report of floods * Flood of greater magnitude

the dikes and eliminate catas- damage of $91 million per than the design floodtrophic damage from major year 1: 10,000 years) does notfloods OCCUr.

* Increase farm incomes * Increase farm income by * Henan/Shandong provincial * Prices for agricultural com-about 15 percent in Henan statistics modities are stable in real

* Improved performance of and increase labor termsurban and industrial growth productivity in the farms bythrough provision of water 20 percent. * Henan/Shandong provincial * Economic growth continuesand hydroelectric power * Industrial downtime is industrial statistics at 6-9 percent between 2000

reduced to two days/year due and 2020.* Prevent river diversion to lack of water * Annual measurement of * Misoperation of the reservoir

* Riverbed ceases to rise riverbed elevations (YRCC does not occur.between 2001 and 2025 River Bureau reports)

Project Outputs for theLower Yellow River Area* Introduce flood control for * Flood damage within dikes is * Flood damage statistic in * Risk of incorrect operation of

103 million people; reduced from 2-year MWR's annual reports the reservoirs. Coordinationrecurrence to 7-year of the various agencies is

* Catastrophic flood damage imperative.will be eliminated

* Control siltation in the 800 * 800 km of the Yellow River * YRCC's reports on siltation * Risk of proper power saleskm of river and control the dikes do not have to be raised levels each year agreement with Henanstability of river between 2000-2025 Province not signed or

* Provide assured irrigation for * Grain yields will increase by * Henan/Shandong provincial adhered to.2 million ha 20 percent from 4 tons/ha to statistics on irrigated area * Risk of silt damage to the

4.8 tons/ha and production hydroturbineswill increase by 0.515million tons

* Generate hydropower to * 2,400 GWh of peak power * Project informationsupplement the baseload 2001-2003; 4,700- documentsthermal 5,400 GWh of peak power

2004-20 10 and onward


Annex 1: Project Design Summary

Narrative Summary Key Performance Indicators Monitoring and Supervision Critical Assumptions and RisksProject Components[See Annex 2 for a detaileddescription.]

* Dam and power station * River diversion in 11/97 * Project progress reports * Lack of counterpart funds* First generator installed by * Lack of strong management

12/99 at the site* Sixth generator installed by

1/2002* Project completion by 2003

* Training and Technical * 1998-50 stafftrained * Project progress reports * Lack of counterpart fundsAssistance (finance/organizational

management* 1999-50 staff trained (as

above)* 2000-50 stafftrained (as

above)

* Environmental Management * Contracts for activities signed * Project progress reports * Lack of counterpart fundsPlan 6/97

* Panel meeting 9/97

* Flood/sediment forecasts * Consultant appointed by 5/98 * Project progress reports * Lack of counterpart funds* Bid documents 3/98* Equipment installed 8/99* Test runs by 9/99

* Institutional support * Consultant appointed 9/97 * Project progress reports * Lack of counterpart funds* Studies completed by 9/98


Annex 2: Detailed Project Description

ANNEX 2: DETAILED PROJECT DESCRIPTION

Project Component 1-Dam and Appurtenant Structures and Hydropower Plant-US$2,218 million (total cost ofcomponent; phase 11 US$1,068 million). The main features of the component are:* construction of Xiaolangdi rockfill dam, 154 m high, with a crest length of 1,667 m;* construction of a common intake structure, feeding nine large diameter tunnels and surface spillway for river

diversion, flood handling and sediment management, discharging into a common plunge pool; andconstruction of a power station with six associated power tunnels with turbine and generators with an installedcapacity of 1,800 MW (6 x 300 MW) and associated switchyards, and transformers

Site Selection and Reservoir Sizing. The control of floods and the management of silt deposition in the lower reach ofthe Yellow River require a site with ample storage capacity, as close to the upstream end of the lower reach as possible.Xiaolangdi is the only project below Sanmenxia capable of storing an appreciable amount of sediment while maintainingthe long-tern capabilities of flood control and of managing the deposition of silt downstream. With its strategic locationwithin a deep valley and yet close to the upstream end of the lower reach of the Yellow River, Xiaolangdi cannot bereplaced by any other project to achieve the same objectives. The possibility of developing the Yellow River betweenSanmenxia and Xiaolangdi in stages has been considered. Along that stretch of the river, eight dam sites were consideredout of which Renjiadui, Eight-Li Lane and Xiaolangdi were the best. These sites are respectively located at 38.5, 100 and131 km downstream of Sanmenxia.

3A three-stage cascade development would have three low dams with a total effective storage volume of 500 million mThis scenario would not satisfy the multipurpose requirements of flood control, ice-jam prevention, sedimentmanagement, water supply and power generation. While the cost of the three dams is less than the cost of one large dam,the sediment and flood discharge facilities would be 4 to 5 times the cost of such facilities at Xiaolangdi as a one-stagedevelopment. This is because the size of the sediment and flood bypass tunnels would have to be larger for each of thethree low head-dams in order to pass the same volumes at much reduced heads. There are therefore no great economiesto be had by opting for a multistage development.

A two-stage development with two medium-high dams would feature a run-of-the-river type plant at Reniiadui. Withthis scenario, Xiaolangdi reservoir would only store I billion m3 of sediment, as compared to 7.55 billion m for a single-stage development. With respect to flood control, a flood storage volume could be provided of 3.60 billion m ascompared to 4.05 billion m3 for a single-stage scheme. A two-stage cascade development was recognized as a costlycompromise solution and a single, high dam at Xiaolangdi was clearly the preferred alternative.

Geological investigations of the site were started in 1958 and have continued ever since. Studies by YRCC confirmedthe suitability of the site for its intended multipurpose development. At the initiative of the State Planning Commission(SPC) and the Research Center for Rural Development, a meeting was convened in March 1983 with broad participationto discuss the long-term program of harnessing the Yellow River. In its 1983 report, the meeting concluded that thecrucial problem in harnessing the river is the effective management of its sediment load. Dikes alone are not the long-term solution. A substantial decrease in sediment delivery from the Loess Plateau into the Yellow River by means of soiland water conservation can only be expected after a considerable period of time. The meeting concluded that theXiaolangdi single dam project, with its flood prevention capability and sediment storage capacity, is the desirable nextstep in the development of the river. The Bank's own Yellow River Investment Planning Study of 1993, as well asinternational consultants and the panel of experts have repeatedly confirmed the findings of the Chinese studies, over thepast several years.

Design Flood. The present dikes are able to safely pass a flow of 22,000 m3/s at Huayuankou. At this flow there are stillseveral meters of freeboard in the dikes. The dikes will start to overtop when the flow is 30,000 m3/s (once in 200 years).Between 22,000 to 30,000 m 3/s the dikes are unsafe and the probability of dike breaching increases to 100 percent as



flow nears 30,000 m3/s. Without the Xiaolangdi Dam the flood flow for frequencies of 100, 1,000 and 10,000 yearsmeasured at Huayuankou are 24,500, 32,000, 45,000 m3/s, respectively. The probable maximum flood at Sanmenxia isestimated at 51,000 m3/s. The present level of protection by the dikes is very low considering the value of the assetsinvested in the lower reach environs estimated to be about $400-600 billion. This does not include the large number oflives that could be lost in the event of a catastrophic flood with a frequency of 100-year recurrence and upwards.'

Flows as low as 10,000 m3/s (1 in 2 year flood) will inundate 1.4 million people in the floodplain. At a flow of 22,000m3/s, 2,000 villages in the floodplain will be entirely inundated and about 1.7 million people will have to be moved out ofthe floodplain and the Dongpinghu detention basin. At a flow of 30,000 m3/s, a further 1.4 million people will beinundated in the Beijingdi Detention Basin and the Zhongguan oilfield, which produces about 10 percent of China's oilwill be inundated. Beyond 30,000 m3/s, the breach of the dike is certain.

The Xiaolangdi Dam and reservoir is designed to operate with all the other reservoirs (Guxian, Luhun and Sanmenxia) tomitigate catastrophic floods up to once-in- 10,000-years frequency, removing all possibility of dike breaching. A flood of45,000 m3/s is reduced to 27,500 m3/s and may pass through with a relatively good probability of dike endurance. Aonce-in-1,000-year flood with the dam is reduced to 22,500 m3/s and will pass through the lower reach safely. Inaddition, the dam will be operated to reduce very dramatically the smaller floods in the floodplains, which displace about1.4 million people every other year. For example a 12,000 m3/s flood (once in seven years), which would displace about1.4 million people in the floodplain, would be reduced to about 6,000 m3/s, which would be contained within the riverchannel and hence would not displace anybody. The detailed dam and power station parameters are provided in Table 1.

In the 1843 flood of 33,000 m3/s (slightly over I in 1,000 years), there were 54 breaches and the flood inundated 11,0o0 km2. Inpresent-day terms, this flood would affect about 9.2 million people and probably kill about 100,000 people.



TABLE 1: DAM AND POWER STATION PARAMETERS

Item Unit Amount

A. Dam parameters:type zoned earth and rockfill with sloping, impervious corefoundation sand and gravel alluvium, maximum depth 70 mcrest elevation m 281crest width m 15dam width at FSL, EL 275 m 41.1crest length m 1,667max. height of dam (above foundation) m 154embankment slopes, upstream 2.0 H: I V (above EL 274.33)

2.6 H: I V (below EL 274.33)embankment slopes, downstream 1.5 H: I V (above EL 268.72)

1.75 H: I V (below EL 268.72)volume of dam 10 6m3 51.0freeboard m 6

Flood -and sediment tunnels:

Orifice tunnels: using closely spaced orifices as energy dissipation devicesnumber nos. 3shape circular ID: 14.5 mlength m 1 100+/-invert elevation upstream EL 175, downstream EL 129.0 and 138.5max. capacity at FSL 1 632 + 2 x 1 580 = 4 792 m3/s

Freeflow tunnels:number nos. 3shape city gatewidth m 10height m 11.5 - 13.5length m I 000 +/-invert elevation upstream EL 195, 209, and 225, downstream EL 152.13, 173.79 and 175max. capacity at FSL 2 680 + 1 973 + 1 796 = 6 449 m3/s

Sediment tunnels: pressure tunnels with reinforced and prestressed concrete liningsnumber nos. 3shape circular ID: 6.5 mlength m I 000 +/-invert elevation upstream EL 175.0, downstream EL 148.0max. capacity at FSL 3 x 675 = 2 025 m3/s

Service spillway: chute type

width m 28weir crest EL 258.0length m 932max. capacity m3/s 3,764

Emergency spillway: weir, closed off by rockfill dam with impervious core. In case of emergency, the dam would be breached.width m 100weir crest 268 m, top elevation of dam EL 280.0 mmax. capacity at FSL m3/s 3,000


Annex 2: DetaIled Project Description

Item Unit Amount

Intake towers:number nos. 10free standing height of the towers above the substructure m 53total height including substructure m 112

Plunge pool: One concrete-lined plunge pool to serve all flood- and sediment tunnels as well as the service spillway. Pool is dividedinto three cells by two concrete walls. Max. depth of pool 25.2 m.

Power tunnels: pressure tunnels with reinforced concrete liningsnumber nos. 6shape circular ID: 7.8 mlength m 375invert elevation of intakes 2 at EL 190, 4 at El 195

Penstocks: steel lined, encased in rocknumber nos. 6shape circular ID: 7.8 m

Powerhouse: underground, 160 m x 26.2m. The six generating units spaced at 26.5m. One service bay, 59m long.

Draft tube tunnels: reinforced concretenumber nos. 6shape rectangular, 9.5 x 7 m changing to 9.5 x 13.5 m

Tailrace tunnels and channels: reinforced concretenumber nos. 3shape city gate 12 m x 19.6 m

Sediment gate at discharge of tailrace:number nos. 6openings 11.5 m x 14 melevation of sills EL 130

Switchyard: conventional, outdoor, 220 kV. Overhead circuits connect the switchyard to six 220 kV and one 500 kV powertransmission lines.

B. Main mechanical and electrical equipment

Turbines:number nos. 6type Francis, vertical shaftrated output MW 306rated head at initial operation m 112.0max. head at initial operation m 128.9min. head at initial operation m 64.9rated head at future operation m 112.0max. head at future operation m 139.2min. head at future operation m 86.5max. speed rpm 107.1rated discharge m

3/s 306

max. discharge m3/s 316



Item Unit Amount

Generators:number nos. 6type totally-enclosed, vertical shaft, synchronous, three phaserated output MWA 334max. output MWA 367rated power factor 0.9rated voltage kV 18frequency Hz 50rated speed rpm 107.1isolation class F

Step-up power transformers:number nos. 6type three phase, 18/242 kV, 50 Hz, 360 MWA, OFWF

Step-up power transformers:number nos. 2type three-phase, 242/550 kV, 50 Hz, 540 MWA, OFAF

Power bridge crane:number nos. 2hook (2) capacity t 2 x2 x250

Intake towers, gantry cranes:number nos. 2hook (2) capacity: t 2 x 400

Draft tube crane:number nos. Ihook (2) capacity t 2 x 250

Civil Works Quantities

Approximate quantities for major civil construction items:dam, rockfill 106 m3 38.2dam, impervious material 106 m3 9*3dam, filters 106 m3 2.5open earth excavation 106m3 15.2open rock excavation 106 m3 13.1underground excavation, tunnel 10 6 m3 2.7underground excavation, power facilities 106 m3 2.52concrete 106m3 2.8prestressed concrete m3 37,000shotcrete m3 174,000grouting, consolidation m 260,000grouting, curtain m 260,000steel reinforcement t 180,000



Project Component 2-Training for Operation-US$4.34 million (total cost of component; phase II $1.42 million)

During the first-phase project, most of the training was focused on training YRWHDC staff on construction management(cost control, contract management, scheduling). In this phase of the project, the main emphasis will be to complete thetraining on construction management and proceed more strongly into training for operation of YRWHDC after construction.The main objectives of the second phase program are:* to enable YRWHDC to function as a autonomous body in the efficient development and operation of water and

hydropower projects, and be capable of exploiting opportunities expected to arise from the current wave of enterprisereform in China; and

* to staff YRWHDC with appropriately skilled personnel capable of handling the planning, general management, andfinancial management during the running of YRWEDC as a business enterprise.

Scope: Training will relate to senior and middle management who will receive training in a wide range of general andfinancial management tools. These would include organizational arrangements, planning, monitoring and performanceevaluation, management information systems, advanced management skills development, management of change,budgeting, costing, auditing, quality assurance, information technology, computer skills and personnel management. Someinitial overseas training for top management has been performed in 1993/94 in some of the general and financial concepts,which would be useful in the early stages of YRWHDC's development. Much of the future training would, however, becarried out at various stages of the implementation phase, with particular emphasis on ensuring preparedness for the post-implementation phase.

The general approach would be:

- From 1997 to 1998, more emphasis will be placed on development of individual general and financial managementskills and management and financial reporting systems for senior and middle management to get equipped for thetransition.

- From 1999 to 2002, training on change management for senior and middle management and extensive training on newoperational conditions and procedures for supervisory and clerical staff will be provided to ensure smooth transitionfrom implementation to operation stage.

Organization of Training: While most of the training for senior management would need to be carried out overseas, asmuch of the remaining program as possible would be conducted in China. This would enable a greater number of staff to becovered by the program at less cost and would also enable the program to relate more readily to the operating environmentin China. The level of language skills of the trainees would also need to be considered in developing the training materialsand conducting the courses.

The training program should be undertaken with assistance from an overseas agency, which would arrange or undertake theoverseas element, and also be involved in the implementation of the remainder of the program in China. An organizationcurrently involved in the management of a large-scale organization with responsibilities in a river basin environment wouldbe well suited to undertake this assignment. The organization would also need a clear understanding of the way in which theemployees of a recently created and developing corporation can best be trained and developed to operate and carry out itsfunctions in a businesslike and efficient manner. This organization might have its own training capability or could workwith other training establishments to implement the program.

There is a clear understanding of the areas of training that need to be addressed during the period covered by the trainingprogram, but it is impossible to be certain that the actual needs will be as now understood. It is for this reason that aprovision for some 30 percent of the total training program has been left unspecified. This provision is a direct reflection ofnew and specific requirements that can be expected to emerge in the early part of the training period in the light of thetraining undertaken and the experience gained by senior management in the early stage of the development of YRWHDC.Full account would also need to be taken of the advice and experience of the overseas organization appointed by the

Project Appraisal Document Page 32Country: China Project Title: Xiaolangdl Multipurpose Project: Stage It


corporation to assist with the implementation of the program. A formal review of the training needs should be undertakenafter 18 months from commencement and at similar intervals throughout the training program to take account of suchrevisions as may be necessary. The controlled flexibility within this approach allows for the dynamic nature of thedeveloping training needs that can be expected to arise during a period of significant change.

Implementation. Provision has been made in the program for the training of some 120 employees in skills relevant to theirresponsibilities. Provision has been made for the training of a further 40 employees whose need for training is only likely toemerge during the period covered by the training program. Allowance has been made for the costs of overseas and localtraining, including consultants' costs, traveling costs, overseas training advisors and for contingencies and price inflationover the period. It is estimated that the cost of this program would be US$1.0 million, most of which relates to overseasconsultants.

Training Details. YRWHDC is a relatively new corporation and it has recognized the importance of training in developingthe skills and techniques of its staff in order to run the corporation as a business enterprise. YRWHDC will be concernedwith the construction stage of the Xiaolangdi project in the earlier years of its existence but in the period approaching theyear 2000, it will become more involved in operating the dam for power generation, irrigation and flood control purposes.The training needs have accordingly been identified and reflect the development stages through which YRWHDC willprogress in the period 1997-2000. Early attention will be paid to the needs of senior managers in the areas of contractmanagement and also in general and financial management concepts. After the initial stage, attention will be paid to trainingin specific management skills for senior and middle management. In the period immediately preceding the dam becomingoperational, attention will be paid to covering the management of change in the ensuing period as well as ensuring thatsupervisory and clerical staff are well equipped to cope with the new operating conditions and procedures.

The program that has been drawn up by YRWHDC addresses the following main areas:* Financial Planning and Budgetary Control. This will equip senior staff with the necessary expertise in undertaking

financial planning for both capital investment and operating costs and revenues. It will also ensure familiarity with thebudgeting process and an understanding of the importance of exercising proper controls in relation to any authorizedbudget.

* General Management and Organization. This is intended for senior managers to acquire a knowledge of basicmanagement and organizational concepts and skills. This would extend to running a corporation as a business entity andmaking senior managers aware of the external pressures to which businesses are subjected.

* Financial Accounting System, Reporting and Standards. This will provide expertise to senior financial staff to whateveraccounting standards may be required. It will cover aspects of financial accounting and will address the relevance ofinternational accounting requirements to this particular business undertaking.

* Quality Assurance System Development. This will make appropriate staff aware of the importance of quality assurancein all aspects for which YRWHDC is responsible. This will range from operational and administrative procedures toconstruction works.

* Information Technology (IT) and Computing Skills. This would enable staff at various levels to acquire a knowledge ofthe potential benefits to an organization from IT with attention being paid to the pros and cons of distributed processingvis-a-vis mainframe processing. The relevance of an IT strategy for a business environment would also be addressed.Appropriate staff would also obtain suitable computing skills to enable them to operate the equipment most suitable totheir needs.

* Cash/Treasury Management. This will provide a small number of financial staff with the necessary expertise tomaximize the benefits of cash handling and investments. The need for proper procedures will be stressed. Therequirements in respect of short-term and longer-term financial management will also be addressed.

* Management Information System (MIS). A knowledge of the availability of various management information systemswould be obtained, so as to enable senior staff to understand their importance and potential benefit to YRWHDC. Anunderstanding of the requisite flow of information in a normal business environment would be obtained along with aknowledge required of a computerized approach to MIS.

Project Appraisal Document Page 33Country: China Project Title: Xlaolangdi Multipurpose Project: Stage 11


* Planning, Monitoring and Performance Evaluation. This should equip senior staff with the necessary skills toundertake corporate planning, and obtain an understanding of the various elements covered by the planning process andof their interrelationships, and relevance to the determination of corporate objectives.

* Personnel Management. The management of human resources is very important to any organization and this shouldenable senior staff to become familiar with current thinking in this area. In so doing, it should identify how efficiencieswithin a corporation might be obtained through challenges and opportunities for development of staff, while maintainingdue regard to their welfare.

* Management of Change. This would be undertaken so as to equip senior and other staff to cope with the period duringwhich YRWIHIDC would be subject to fundamental change. It would enable such staff to identify the challenges andproblems which might arise and understand the importance of handling the transitional period satisfactorily.

* InternalAuditing. This is for a small number of specialized staff involved with internal auditing. Although much of thecurrent auditing procedures and requirements flow from the State's requirements, this training would also seek toacquaint the staff with a knowledge of internal auditing practices in other countries.

Project Component 3-Environmental Management Plan Implementation-US$10.1 million (total cost ofcomponent; phase 11 $5.57 million)

A salient feature of the recommended environment protection program in the first-phase project was the implementationof an Environment Management Plan. The Plan includes provision for an Environmental Management Office (EMO),which has lead and coordinating responsibility, during the phase I project, for implementing all needed environmentalprotection measures including:e Management of continuing periodic monitoring for assessing the actual effects of the project;- Planning and implementation of the needed correction measures identified through the monitoring program;- Preparation of routine periodic reports( and special reports, when needed) for distribution to concerned Government

agencies and to the Bank; and- Long-term monitoring of the downstream hydrology and sediment flows and deposition

This project will continue detailed monitoring ensure the environmental management plan is implemented. There arefive areas of monitoring:* Construction Site Monitoring. Under the project the contractor is required to monitor all the air, water, land, water

supply, waste disposal, dust and take all measures to maintain ambient environmental quality parameters. TheReconnaissance Planning and Design Institute (RPDI) and the Yellow River Water Resources Protection Institute(WRPI) are to undertake independent sample monitoring and ensure that there is compliance with environmentalquality standards. RPDI is also to review the site safety procedures adopted by the contractors and ensure that sitesafety is maintained at all times. The total input required under this project is 15 person-months of foreign, 180person-months of RPDI and 50 person-months of WRPI. Also included in this component is a small number ofcomputers (15) and software to keep records of the monitored data and two vehicles.

* Public Health and Cultural Relics Monitoring: Public health monitoring reviews the health statistics of workers;water and wastewater quality of sanitation and drinking water supply facilities; mosquito larvae and rat population;and incidence of communicable diseases such as malaria, encephalitis and hemorrhagic fever. The contractors arerequired in their contract to keep monthly records of each of these parameters. The Yellow River Central HospitalUnit (YRCHU) working with the County/Townships Antiepidemic Stations (ASs) will continue to review this dataon a three-monthly basis and determine if the monitoring and antiepidemic measures taken by the contractor aresufficient to maintain the public health standards required at the damsite. In addition the AS will continue toundertake rat eradication and mosquito larvae eradication programs around the reservoir if the monitoring programsindicate that these programs are required. The total inputs by YRCHU and AS will be 180 person-months (15person-years). Ten person-months of foreign consultants will be included for training and updating skills of the ASstaff. Included in this subcomponent is the procurement of 4 vehicles to YRCHU and AS and 10 computers andsoftware. Cultural relics will continue to be monitored by the damsite and resettlement EMOs using RPDI'sservices.

Project Appraisal Document Page 34Country: China Project Title: Xiaolangdl Multipurpose Project: Stage ll

Annex 2: Detailed Project Descriptlon

* Seismic Monitoring: The purpose of this monitoring is to determine if the dam or reservoir induce any additionalseismic activity as a result of the construction. Presently eight seismographs are placed in key locations 35 kmupstream and 10 km downstream. The Henan Geological and Seismological Department monitors the data and theyand the international contractors undertake analysis of the data recorded by the seismographs. RPDI will review thedata collected and the analysis and expeditiously report unusual events to the appropriate decision makers inYRWHDC and MWR.

* Downstream Catchment Hydrology and Sedimentation Monitoring, etc.. This program is to be undertaken by theYRCC Hydrology Bureau. The main purpose of this program is to monitor the baseline conditions in the LowerReach of the Yellow River and the changes during and after construction. The monitoring program will be for theriver water, ice and sediment flow volumes at about 10-15 sites upstream and downstream of the dam. Water qualitywill also be measured at all these sites. In addition rainfall and meteorological parameters will also be measured.The input will be mainly for construction of gauging stations, procurement of equipment and services by the YellowRiver Hydrology Bureau involving about 1,000 person-months.

* Special Studies and Monitoring: Studies will be undertaken for the Lower Yellow River Areas for: (a) surface andgroundwater balance for the areas outside the dikes within the influence of the river and setting up special surfaceand groundwater monitoring systems to establish the influence of the new regulation of the river; (b) special studiesfor reservoir navigation; and (c) special studies for river geomorphology and design of stabilization works for thelower reach.

Several recommendations have been made in the revised Environmental Management Plan. The revisions essentially areto: (a) separate the international/local panels for damsite and resettlement projects; (b) establish two environmentalmanagement offices (EMOs), one for the damsite and ariother for the resettlement project; (c) the monitoring of each ofthe EMOs will be more focused on each of their sites. The detailed monitoring requirements are indicated in Table 2.1.Detailed tasks managed by EMO/Dam and EMO/RS are given in Tables 2.2 and 2.3. Detailed tasks of environmentalconsultants (ECs) are given in Table 2.4. The organizational arrangements are shown in Figure 2.1. The costs arepresented in Table 2.5. The Bank financing will cover mainly consultants for the panel, monitoring and special studies,and for training.

TABLE 2.1: SUMMARY OF RECOMMENDED EMP IMPROVEMENTS

Improvement Measures Objectives of Improvement Measures

1. ENVIRONMENTAL PANELEstablish Environmental Panel separate from RS Panel. 1.1 In order to give due attention to EMP.

2. EMOs2.1 Establish separate EMOs, one for Dam Project and one for RS. 2.1 In order to give due attention to both Environment and RS.2.2 EMO report's in detail every six months by EMO on overall, plus 2.2 So Panel can check adequacy of EMP work and make

reports from each EMO subcontractor, suitable for Panel review, appropriate recommendations.showing evidence of attention to all ElA/EPMs.

3. DAM CONSTRUCTION MONITORING3.1 Each CC to submit detailed monthly report covering in adequate 3.1 Bulk of environmental monitoring should be done by CC.

detail how all EPMs in CC's contract are being met, includingresponses to notices from EMO.

3.2 Role of ECIs of RPDI, including log books kept by each ECI (daily, 3.2 To "monitor the monitoring" of CCs, not to do the basicweekly, monthly reports). monitoring (by CCs).

3.3 Role of YRWRPB on air pollution/dust/noise monitoring (every 3 3.3 To "monitor the monitoring" of CCs, with YRWRPB reportsmonths). furnished to CCs.

3.4 Role of YRCH and local public health agencies. 3.4 To assist CC in carrying out health protection activities, butCC must arrange for all health protection tasks including thosenot within capabilities of YRCH and local public healthagencies.



Improvement Measures Objectives of Improvement Measures

3.5 Modification of role of Engineering Construction Supervision/Safety 3.5 Engineer/Safety supervisors not responsible for environmentalDepartment. management. Their role is to be communications channel

between EMO and CCs without interfering with EMOresponsibilities.

3.6 Modifications in CC contracts to give more specific requirements on 3.6 This includes Item 3.1 above plus other specifics such asCC's obligations, if necessary. periodic spraying of buildings in residence and working areas

so daily mosquito biting of humans within buildings isadequately controlled.

3.7 RPDI's notices to CCs to be improved from stating 3.7 Previous notices lack specifics hence do not give CC cleargeneralities/principles to state specific quantified requirements. picture of requirements.

4. RS MONITORING4.1 Appointment of Environmental Chief for each RS village who will 4 1 Each RS village must do its own basic environmental

ensure adequate O&M for all RS village environmental components supervision/monitoring/reporting, with monthly reporting.including monthly reports, with suitable pay for this individual.

4.2 Delete YRWRPB involvement. 4.2 Not worthwhile.4.3 Expand RPDI role to include meaningful attention to RS program. 4.3 To monitor the work of Village Environmental Officer and to

check environmental adequacy of facilities being installed.4.4 Speed up development of MIS system for monitoring RS 4.4 To enable RO to be able to readily evaluate RS progress

performance. whenever needed, including environmental performance.

5. WATER QUALITY MONITORING 5 YRWRPB program must incorporate water quality monitoringprogram specified in EIA/92.

6. PUBLIC HEALTH PROTECTION 6 To require YRCH or others to furnish EPMs as specified inEIA.

6.1 Implement rat density monitoring in reservoir peripheral area (In 6.1 For protection against hazard of hemorrhagic fever.1997).

6.2 Implement mosquito larval monitoring program in EIA (1997). 6.2 For protection against hazard of malaria and encephalitis inESA.

6.3 Other tasks required by EIA including attention to disease statistics. 6.3 In order to be alerted to developing problems.6.4 Detailed reporting every six months. 6.4 To ensure compliance with requirements as specified in EIA.

7. ARCHEOLOGICAL RELICS7.1 Require detailed reporting by HSAls every six months. 7.1 To ensure compliance with requirements as specified in EIA.

8. ENVIRONMENTAL TRAINING8.1 Implement training program specified in EIA. 8.1 So EMP participants can develop skills nee.ded for them to do

their job.8.2 Include additional training program on Dam Construction Safety by 8.2 To ensure safety in construction activities.

two safety experts, one international and one Chinese



TABLE 2.2: TASKS TO BE MANAGED BY EMO/DAM

Tasks for EMO/Dam Assignments Duration

1. Office Work Staff of EMO/Dam and EC1. I Liaison with Participants, State, Provincial and Local agencies EMO Staff Continue1.2 Preparation and use of media releases EMO Staff Continue1.3 Public participation & consultation EMO Staff Continue1.4 Preparation and distribution of periodic EMO report EC 1997-20011.5 Management of Subcontractors EC 1997-2001

2. Monitoring and Supervision2.1 Supervision of CC activities RPDI 1997-20012.2 Earthquake Stability EMO Staff 1997-20102.3 Public Health in construction area YRCH 1997-20012.3 Water Quality (Yellow River, and Water Supply in Construction Zone) YRWRPB 1997-20102.4 Ecology 1997-20102.5 Project Benefit and Other Evaluations (included in Sections 4.2.8, 4.2.9 in EIA197) 2001-2010

3. Implementation of Special EMP Programs3.1 Seismic Monitoring RPDI 1997-20103.2 Hydrology, Sediment, Meteorology Hydrographic Bureau 1997-2010

4. Use of Environmental Consultants (EC) EMO Staff 1997-2001

5. Implementation of Training Program EMO/EC 1997-1998

6. Use of Expert Panel on Environment EMO/EC 1997-2001

7. Implementation of Special Studies Programs EC 1997-2001

TABLE 2.3: TASKS TO BE MANAGED BY EMO/RS

Tasks for EMO/RS Assignments Duration

1. Office Work Staff of EMO/Dam and EC 1997-2010L.I Liaison with Participants, State, Provincial and Local agencies EMO Staff 1997-20101.2 Preparation and use of media releases EMO Staff 1997-20101.3 Public participation & consultation EMO Staff 1997-20101.4 Preparation and distribution of periodic EMO report EC 1997-20011.5 Management of Subcontractors EC 1997-2001

2. Monitoring and Supervision2.1 Environmental Review of Resettlement RPDI 1997-20032.2 Archeological Relics EC 1997-20002.3 Public Health in Resettlement Villages and Reservoir Area YRCH 1997-20032.4 Reservoir Clearing EC 1997-19992.5 Resources to be Inundated EC 1997-1999

3. Implementation of Special EMP Programs3.1 Reservoir Clearing 1997-20013.2 Archeological Relics Protection and Salvage HAI & SAI 1997-2000

4. Use of Environmental Consultants (EC) EMO Staff 1997-20015. Implementation of Training Program EMO/EC 1997-19986. Use of Expert Panel on Environment EMO/EC 1997-20017. Implementation of Special Studies Programs EC 1997-2001



TABLE 2.4: EC FUNCTIONS AND ASSIGNMENTS

A. Detailed EC Functions for EMO/Dam

1. Furnishes technical assistance to EMO for management of Environmental Monitoring including:(i) Recommendations for distribution of assignments for all tasks including tasks by (A) to (H).(ii) Preparation of detailed recommended TOR for each task assignment including task description, skills required,timeframe, supporting services, reporting procedures, and estimated costs.(iii) On behalf of EMO, supervision of work of all subcontractors.(iv) Preparation of periodic reports (every 6 months) on overall EMP performance on Environmental Monitoring(v) Preparation of recommended TOR for monthly reporting to EMO by CCs, assistance to EMO in preparingnotices to CCs, and assistance to EMO in evaluating CC performance.

2. Management of Special Studies including:(i) Recommendation for selection of appropriate Subcontractor for carrying out each Special Study.(ii) Preparation of detailed recommended TOR for each Special Study including task descriptions, skills involved,timeframe, supporting services, reporting procedures, and estimated costs.

3. Furnishes technical assistance to EMO for management of Environmental Training specified in EIA/97 including:(i) Recommendation for selection of appropriate Subcontractor(s) for carrying out the needed training.(ii) Preparation of detailed recommended TOR for training program including faculty assignments, number ofstudents, procedures for selection of studies, arrangements for classrooms and other facilities, including timeframesand estimated costs.(iii) On behalf of EMO, supervision of work of Subcontractor(s), including periodic reporting to EMO onSubcontractor(s) performance.

4. Carries out selected tasks, as specified in TOR from EMO.

B. Detailed EC Functions for EMO/RS

1. Advisory services to EMO on management of environmental monitoring on reservoir clearing, on relics program, andon environmental training, including recommendations on selection of subcontractors, or preparing draft TORs foreach subcontractor (including needed skills and support services, timeframe, reporting, and cost estimates), for regionapproved by EMO. Each Subcontractor to prepare comprehensive reports every 6 months (March 31 and September30) for review by Environmental Expert Panel Meetings in April and October.

2. On behalf of EMO, technical supervision of work of all subcontractors, including periodic reports on subcontractorperformance.

3. Preparation, every 6 months, of draft reports, for review and approved by EMO, on performance of eachsubcontractor, with recommendations for improvement.

Project Apprisal Documnnt Page 38Country: China Project Title: Xiaolangdi Multipurpose Project: Stage 11


TABLE 2.5: ESTIMATED COSTS FOR EMP PROGRAMS (1997-2001)

(Y)A. DAM PROJECT (EMO/DAM)

Item Yearly Cost Bank

1997 1998 1999 2000 2001 Total Financing

1. EMO/Dam Office 528,000 528,000 528,000 528,000 528,000 2,640,000 Budget2. EC/Dam 970,000 970,000 970,000 970,000 970,000 4,850,000 Budget3. Monitoring 1,170,000 1,170,000 1,170,000 1,170,000 1,170,000 5,850,000 3,800,0004. Expert Panel 342,000 342,000 342,000 342,000 342,000 1,710,000 1,710,0005. Training Program 1,515,000 1,515,000 0 0 0 3,030,000 100,0006. Special Studies 782,000 782,000 782,000 782,000 782,000 3,910,000 1,990,0007. Hydrologic/Sed. Monitor 2,900,000 2,900,000 2,900,000 2,900,000 2,900,000 14,500,000 Budget

Total 8,207,000 8,207,000 6,692,000 6,692,000 6,692,000 36,490,000 7,600,000$900,000

Note: Exclusive of costs for Special EMP Program

B. RESETTLEMENT (EMOIRS)

Item Yearly Cost Resettlement1997 1998 1999 2000 2001 Total Credit

1. EMO/RS 369,600 369,600 369,600 369,600 369,600 1,848,000 Budget2. EC/RS 480,000 480,000 480,000 480,000 480,000 2,400,000 4,800,0003. Monitoring 680,000 680,000 680,000 680,000 680,000 3,400,000 3,400,0004. Expert Panel 342,000 342,000 342,000 342,000 342,000 1,710,000 1,710,0005. Training Program 408,000 408,000 816,000 816,0006. Special Studies (Reservoir Clearing) 500,000 500,000 500,000

Total 2,779,600 2,279,600 1,871,600 1,871,600 1,871,600 10,674,000 11,226,000$1,328,313

Note: Exclusive of costs for Special EMP Programs. It does not include the cultural relics programs etc.

Project Appmisal Document Page 39Country: China Project Title: Xiaolangdl MuMtipurpose Project: Stage. i

Annex 2: Dltaiid Project Description

FIGURE 2.1: PARTICIPANTS AND ASSIGNMENTS FOR EMP/DAM PROJECT

rXEC YRWHDC World BankEngineer

EC EMOIDAM EnvironmentI i (B) -- (A) Panel of

I ~~~~~~~~~~~~~~Experts (C)

I _____ _

RPDI (ECIs) YRCH YRWRPB Subcontracrtor(D) (E) (F) | forSpecial TorTraining (H)I , _ ~~~~~~~~~~~~~~~~Studies (G)

L ) - Line Authority or Contract Parties-____- MonitoringlSurvellance

NOTES:(A) Responsible for managing all EMO/Dam tasks. Carries out certain tasks with its own staff(B) Furnishes technical assistance to EMO for management of the implementation of the EMP/Dam project(C) Carries out surveillance of the work of EMO/Dam(D) Carries out monitoring in Construction Zone as specified by TOR from EMO.(E) Carres out public health/disease control monitoring in ESA including Construction Zone as specified by TOR from EMO.(F) Carries out (i) monitoring of water quality in Yellow River system, and (ii) monitoring of dust, air pollution, and noise in Construction

Zone as specified in TOR from EMO.(G) EMO selected agencies to perform special studies.(H) EMO contracts with selected agencies to perform training program.(I) Submit monthly reports to EMO following TORs from EMO. Notices to the CCs from the EMO/Dam are to be channeled through the

Engineer Supervisor's Safety Dept. Chart are not to be modified by the Safety Dept. except with approval of the EMO.

Project Component 4-Flood, Sediment, Ice and Drought Management System-US$14.8 million (total cost ofcomponent; phase II $13.75 million)

When the Xiaolangdi Dam is completed, it will play a major role in controlling floods, drought, sediment deposition andice dam formation in the Lower Yellow River Basin (LYRB). The present system for flood management in the LYRB isa fairly sophisticated system (see Figure 2.2). The Yellow River Flood Prevention and the Flood Information Offices areresponsible for managing floods in the LYRB. The YRCC Hydrology Bureau is responsible for inflow forecasting of alltributaries and the main-stem flows. Presently, there is no real regulation by reservoir except by Guxian and a little bySanmenxia Dams. However, the flood management system and inflow forecasting system need to be strengthened. Inaddition, the present flood prevention offices do not do any formal management of ice floods, droughts or sediment forthe lower reach. The importance of managing all the other aspects of the river flows cannot be underestimated. Forexample, in August 1996, a high sediment-laden flood of 7,600 m3/s at Huayuankou, which should only fill up the centerchannel of the river recorded the highest stage in the river since 1949 because of high sediment concentration in the flowand because the river channels had silted up. Hence, in this component is a design to upgrade the present floodmanagement system to be a flood, drought, sediment and ice management system.

The component has four different aspects.* Establishment of Institutional Arrangements for flood, sediment, ice and drought management. The arrangement

should clearly define the roles of different institutions within YRCC for (a) data collection; (b) databasedevelopment; (c) flood, sediment, drought and ice flow forecasting; (d) model building; and (e) operation of decisionsupport system. The tentative plan is to upgrade the present flood prevention and flood information offices to be



fully responsible for management of all other aspects of river flows. The Hydrology Bureau of YRCC will beresponsible for forecasting all flows (floods, droughts, sediment and ice) and also establishing a computer databasethat will be accessible by other agencies. RPDI and the Institute of Hydraulic Research will be responsible forbuilding and maintaining the sediment models for forecasting sediment flows and managing the operation throughthe reservoirs. The YRCC River Bureaus in Henan and Shandong will provide water stage and river cross-sectiongeometry data to the Hydrology Bureau.

* Upgrade the existing facilities, computer network, communications and computer systems in the various agencies.The hydrologic and technical information database to be established is shown in Figure 2.3. The computercommunications system and local area network is shown in Figure 2.4. These systems need to be upgraded asfollows: (a) 10 computer workstations, software to upgrade the existing hydrologic monitoring systems; (b) 40additional telemetric rainfall and runoff stations must be established above Sanmenxia Dam to complement the 60stations below Sanmenxia Dam; (c) river cross-section data real-time transmission stations; and (d) computersoftware for radar and satellite image processing, database management system for both the Hydrology Bureau(YRCC) and for the Flood Information Center, advanced graphical interface systems (GUI), and dam-breakmodeling.

In addition, international consultants will be needed for review panels (RPDI) and for flood system design and training.Local consultants have already been appointed for sediment modeling (Y 35 million), funded by the Government. Otherlocal consultant services are needed for more detailed reservoir sediment routing, flood-ice-sediment dispatch system anddesigning more detailed systems. In addition, there is foreign and local training for decision support systems and forconversion of some of the workstation-based programs to PC-based programs. The overall cost of this component isUS$14.79 million; the Government will fund US$8.68 million and Bank funding is US$6.11 million (Table 2.6).

Project Component 5-Water Institutional Support-US$2.46 million (all phase II). This component consists ofreforming the water institutions in the lower reach in order to ensure that water management in the lower reach of theYellow River is sustainable. It is necessary to make sure that charges are collected from the various sectors to recovercosts according to the measure of benefits that they receive. The present plan does not recover costs from the flood andsediment control beneficiaries because of fragmentation of the institutions. The table below shows sectoral economicbenefits, financial charges and the institutions in charge of the charging system.:

Sectors/Benefits Economic Financial Charges Institutions in Charge

Irrigation 34 percent 15 percent YRCC Henan/Shandong BureauPower 41 percent 85 percent YRWHDCFlood 18 percent 0 percent SanmenxiaNYRWHDC/YRCC/Shandong/HenanSediment 7 percent 0 percent Sanmenxia/YRWHDC/YRCC/Shandong/Henan

The institutional reform program will have the following activities:* Recruitment of foreign and local consultants to undertake detailed studies: (a) to demonstrate the best way to

integrate the various organizations so that the control of the Lower Yellow River water resources will be under oneinstitution. This institution will be responsible for flood control, sediment control, power generation and irrigationand urban water supply releases. This institution will be an amalgamation of YRWHDC, Sanmenxia Dam Bureau,and the water management sections of YRCC's Henan and Shandong Bureaus. The various government functions ofthe YRCC's Henan and Shandong Bureau will be separated from the enterprise functions for water management andwould be part of YRCC and would act as the regulator; (b) to deternine the mechanism for pricing of water forirrigation, urban and industrial use and charges for flood and for sediment control; (c) to combine the financialstatements of the various institutions to form a single statement; (d) to determine the staff implications for thevarious institutions; and (e) determine the legal requirements to set up the institution.

Project Apprabal Docurnont Page 41Country: China Project Title: Xibolangdi Multpurposo Project Stage II

Annex 2: Detailed Project D"criptIon

FIGURE 2.2: YELLOW RIVER BASIN FLOOD, SEDIMENT, ICE AND DROUGHT MANAGEMENT SYSTEM

Flood/Scdiment/ctc. Prcvention Command System Technical Flood/Sediment/etc PreventiorA gencies

State Council

National Flood & Drought PreventionCommand HQ Ministry of Water Resources

Yellow River Flood & National Flood Yellow River Conservancy CommisionDrought/etc. Prevention Prevention OfficeCommand HQ

Yelow River River Engineering BureauFlood /Drought Hydrological Bureau

Provincial Flood/ l|Preven- I Telecom Dept.Provinlcia Fioood/ lc Henan & Computer CenterDrought/etc. Shandong Prevention HQ River Bureaus(Shanxi, Shaanxi jHenan, Shandong)

v I

Flood/Drought/etc. River r* Prevention Engineering| District HQ District Bureau Telecom Rain-

* . ~~~~~~~~~~~~~~~~~~~~~~~Water m:LTle

Flod/rogh Level StationsFlood/Drought River Engineering Gauge

Prfeetlion t4 I PrefectureIt +Bureau

r Flood/Drought/etc CountyPrevention Engineering County Flood Sanmenx:a

TownshiD Office Prevention OfficeProject Office

Flood Prevention

Township HQ Constr. River Sluice XiaolangdiGrp Dike Maint- ................. Project Office

|Flood Prevention i Grp Village HQ I I

IDike Sluice Mobile Rescue Trans, MobilePlritccl- Protcct- Reserve Grp |nr:ation Rcscrvcion Grp ion Grp Grp Grp Grp

Project Appraisl Document Page 42Country: China Project Title: Xlaolangdi Multpurpose Project. StW 11


FIGURE 2.3: FLOW CHART OF TECHNICAL INFORMATION AND DATA FOR YRCC FLOOD, DROUGHT, ICE AND

SEDIMENT MANAGEMENT SYSTEM

Hydrologic Bureau Hydrologic Bureau S|nineoia Xi2olangdi RPDRI HydrologicProject Office Project Office Bnreau

1. Weather maps Key hydrologic stations Sediment2. Raadar data Telecom stationf Reservoir Vol. Reservoir Vol. yield maps Sediment conc.3, Weather data Rainfall, Water Level gaug & Water level & Water level & size distribution

Telemeter stations

ydrologic Bureauiver Eaiuheering Bureaus

ydrologu Bllreau s ~Hydrologic Flood Coiitrol

led sediment sizes Bureau Office -k "hannel Cross-sectionsood plain sections

r DATA BASE n Iver tainin2 works

RPDRI -modet devepiamnt R_R

ReseMoir Opetation Studies Sediment Yield Studies

Inst, of Hydraulic Research -Model development

Flood Control Office Hydrodynamic Flow Model Hydrologic ureau

Flow forecasting Hydrodynamic Sediment Model I I eI; Flowforecashng | | I< >l ~~~~~~~~~~~~Flow forecasting

(Unofficial) (Official) I

Hydrodynamic Flow Model Rainfall-Runoff-SedimentHydrodynamic Sediment Model + Yield ModelSystem Operation Model Hydrodynamic Flow ModelFlood Prevention Scenario Hydrodynamic Ice Flood Model

Hydrodynamic Sediment Model

Yellow River Flood & Drought Prevention Command HQ

Projet Appraisal Document Page 43

Country. China Project Tile: XiaalangdI Multipurpose Project; Stage 11Annex 2: Detiled Project Descripton

FIGURE 2.4: TOPOLOGY OF YRCC COMPUTER AND COMMUNICATION NETWORK

LANi of

LAN of LAN of Sanmenxia

YRCC HQ Flood Control Office LAN of Shandon_ Water ResourcesYRCC HQ Food Contl offlce River Enzinttrin-~ Bureau Br~

lAN of Network YRCC Network of _ ~~~Bureau

FibEc| Fibr 1 't;i

LAN of YelolowRivr I LAN of Yellow_River Key O Resou

Watr Reour ces CHINAPAC WResources Bureau StatiotsLANrefaNetworkXYRCC Network ofrBureau

ManaeetCntrCmuicatio

_ ub LA ublcf

LAN of HYdellog ice NA of Yellow Resourceys

BuprReache MideRa he na Bureauicwatet ResoutcesAPA Water ResourcesBreu Sttos

Buteau _ | XiaolanCli ProBurea

ilgstrict and City 1 |Office

LNoie: ~ nof Y pell ied, mirowaRi ver LiNk i used.|Bureaus

\iotc: lfnot specifted, microwave link iS Used.II



TABLE 2.6: SEDIMENT, FLOOD, ICE AND DROUGHT MANAGEMENT SYSTEM: DETAILED COSTS($ million)

Totals including contingenciesInvestment costs 1997 1998 1999 2000 2001 2002 Total

Hydrology/computer - 6.08 - - - - 6.08PC computers software - 0.60 - - - - 0.60Transmission river section - - 0.29 - - - 0.29

Foreign consultantSystem design flood - 0.12 0.12 - - - 0.24Sediment panel - 0.09 0.12 0.10 - - 0.31Panel reviewers - 0.14 0.19 0.19 0.24 - 0.76

Subtotal foreign consultant - 0.36 0.44 0.29 0.24 - 1.32

Local consultantSoftware & system design - 0.06 0.23 0.02 - - 0.31IHR modeling - 0.04 0.06 0.04 - - 0.14Design consultants - 0.05 0.07 0.05 - - 0.17RPDI modeling 1.39 1.42 1.45 0.50 - - 4.75Flood/ice/water dispatch - 0.03 0.08 0.11 0.06 - 0.28

Subtotal local consultant 1.39 1.59 1.89 0.72 0.06 - 5.64

TrainingForeign training/flood system - 0.18 0.25 0.19 - - 0.62Local training/DSS - 0.03 0.03 - - - 0.06

Subtotal training - 0.21 0.28 0.19 - - 0.68

Overseas study tour - 0.09 0.09 - - - 0.18

Total 1.39 8.92 2.99 1.20 0.30 - 14.79

* Procure and install/upgrade water level measuring devices in off-takes of the Lower Yellow River for measuringflows for urban, industrial and agricultural uses. Construct civil works needed for the installation of the measuringdevices.

* Procure and install a communications system to collect data and to coordinate the functions of the various groups ofpeople.

The Bank will fund a panel of local and foreign experts to guide the institutional reforms to take place (US$0.76 million).In addition, a MWR training (US$1.70 million) component has been included to train MWR staff on (a) water reformmodels; (b) mobilization of funds for water resource projects; (c) financing of water resource projects; and (d) waterpricing system implementation (see Table 2.7).



TABLE 2.7: INSTITUTIONAL SUPPORT: DETAILED COSTS

($ million)

Totals including contingenciesInvestment Costs 1994 1995 1996 1997 1998 1999 2000 2001 2002 Total

Accounting reform 0.07 0.14 0.14 - - - - - - 0.34

Mobilization of funds for WRProject 0.16 0.33 0.34 - - - - - - 0.82Water pricing system 0.12 0.24 0.24 - - - - - - 0.59Reorganization of river basin management & 0.11 0.22 0.22 - - - - - - 0.54

water allocation-licensing systemWater volume dispatchings - improved 0.12 0.24 0.25 - - - - - - 0.61

forecasting capacityLoan II MWR training - - - 0.40 0.42 0.43 0.44 - - 1.70Lower reach institutional development - - - - 0.14 0.15 0.15 0.16 0.16 0.76

Total 0.57 1.16 1.18 0.40 0.56 0.58 0.60 0.16 0.16 5.36

Project Appraisal Document Page 46Country: China Project Title: Xlaolangdi Multipurpose Project: Stage ll

Annex 3: Estimated Project Costs

ANNEx 3: ESTIMATED PROJECT COSTS

Project Component %

% Total Phase I Phase 11Local Foreign Total Local Foreign Total Foreign Base Total Total

------ ------ (Y million) --------------- -------- (US$ million) -------- Exchange Costs - (US$ million) -

A. Dam & Power Station1. Major Civil Works

a. Main Dam - Lot 1 513.23 1,799.48 2,312.71 61.84 216.80 278.64 78 16 101.90 176.74b. Intake Structures, Tunnels & Spill 1,296.31 2,946.05 4,242.36 156.18 354.95 511.13 69 30 293.91 217.22c. PowerFacilities -Lot 3 326.31 913.47 1,239.77 39.31 110.06 149.37 74 9 81.08 68.29

Subtotal Major Civil Works 2,135.86 5,658.99 7,794.85 257.33 681.81 939.14 73 55 476.89 462.252. Minor Civil Works

a. Site Preparation Works 894.94 - 894.94 107.82 - 107.82 - 6 107.82 -b. Civil Works by Local Contractors 1,198.55 - 1,198.55 144.40 - 144.40 - 9 94.53 49.88

Subtotal Minor Civil Works 2,093.49 - 2,093.49 252.23 - 252.23 - 15 202.35 49.883. Mechanic Works

a. Mechanic Plant/Gates 732.04 724.05 1,456.09 88.20 S7.23 175.43 50 10 58.11 117.32b. Installation of Mechanic Plant 22.57 - 22.57 2.72 - 2.72 - - 0.00 2.72

Subtotal Mechanic Works 754.61 724.05 1,478.66 90.92 87.23 178.15 49 10 58.11 120.044. Electric Works

a. Electric Plant/Generators 999.14 169.25 1,168.39 120.38 20.39 140.77 14 8 33.27 107.50b. Installation ofElectric Plant 16.38 - 16.38 1.97 - 1.97 - - - 1.97

Subtotal Electric Works 1,015.52 169.25 1,184.77 122.35 20.39 142.74 14 8 33.30 109A4Subtotal Dam and Power Station 5,999.47 6,552.29 12,551.76 722.83 789.43 1,512.26 52 89 770.66 741.60B. Administration/Engineering

1. Office/Design Equipment/a 5.54 10.42 15.96 0.67 1.26 1.92 65 - 1.92 0.002. Vehicles/b 4.54 18.16 22.70 0.55 2.19 2.74 80 - 2.74 0.003. Consultancy Services 21.87 123.92 145.78 2.63 14.93 17.56 85 1 7.14 10.424. Contract Management/Site Superv. 1,066.20 45.34 1,111.54 128.46 5.46 133.92 4 8 92.74 41.185. Training 16.32 12.36 28.69 1.97 1.49 3.46 43 - 2.40 1.06

Subtotal Administration/Engineering 1,114.47 210.20 1,324.67 134.27 25.33 159.60 16 9 106.94 52.66C. Institutional Support Loan 1 3.27 18.56 21.83 0.39 2.24 2.63 85 - 2.63 0.00D. Institutional Support Loan 2

I. MWRTraining2 1.38 7.85 9.23 0.17 0.95 1.11 85 - 0.00 1.112. Lower Reach Inst. Development 0.75 4.23 4.98 0.09 0.51 0.60 85 - 0.00 0.60

Subtotal Institutional Support Loan 2 2.13 12.08 14.21 0.26 1.46 1.71 85 - 0.00 1.71E. Environment Management

I. Environment Management 42.27 5.00 47.27 5.09 0.60 5.69 11 - 2.66 3.042. Environment Monitoring 11.84 13.10 24.94 1.43 1.58 3.00 53 - 1.38 1.62

Subtotal Environment Management 54.11 18.10 72.21 6.52 2.18 8.70 25 1 4.04 4.66F. Sediment/Flood/lce/Drought Management 58.85 45.80 104.65 7.09 5.52 12.61 44 1 0.95 11.66TOTAL BASELINE COSTS 7,232.30 6,857.03 14,089.33 871.36 826.15 1,697.51 49 100 885.22 812.29

Physical Contingencies 374.30 111.26 485.56 45.10 13.41 58.50 23 3 27.51 30.99Price Contingencies 3,087.49 1,317.64 4,405.13 392.13 100.25 492.38 20 29 245.75 246.63

TOTAL PROJECT COSTS 10,694.08 8,285.93 18,980.02 1,308.59 939.80 2,248.39 42 132 1,158.48 1,089.91Interest during Constr. & commitment charges - 2,975.01 2,975.01 - 343.43 343.43 100 20 138.48 204.95Other Loans IDC and Commitment Charges 1,992.00 213.60 2,205.60 240.00 24.00 264.00 9 16 105.60 158.40

Total Costs to be Financed la 12,686.08 11,474.54 24,160.63 1,548.59 1,307.23 2,855.82 46 168 1,402.56 1,453.26

/a Including taxes and duties./b All procurement in phase I only.

The total costs of the project are estimated to be US$2,855 million equivalent, of which US$1,307 million (46 percent)represents the foreign exchange component. These estimates exclude the costs of the resettlement program, totaling US$839million, being implemented under separate financing by IDA Credit 2606-CHA. The project base costs are in January 1997prices. The dam and powerhouse costs are based on the existing three international contracts with adjustments for variationorders (existing and expected) and changes in quantities for works. The costs of electrical and mechanical equipment,transformers and gates are based on recent quotations from manufacturers and suppliers for similar equipment and materialsinvolved. The costs of the remaining items are based on the consulting engineers' data for similar works. Physicalcontingencies are assumed as follows: 8 percent for the dam, underground powerhouse intakes, tunnels and outflowstructures and 10 percent for the remaining works, engineering, contract administration, technical assistance, environmental

Project Appraisal Docunent Page 47Country: China Project Title: Xiaolangdl Mulipurpose Project: Stage 11


management, studies and training; and 10 percent for the electromechanical equipment. These percentages are considered tobe reasonable in view of the site features, the stage of construction, design, and the contracts let to date. The price escalationfor costs expressed in foreign exchange (US dollars) has been calculated in accordance with the anticipated internationalprice escalation of 1.7 percent in 1997, 2.2 percent in 1998, 2.5 percent in 1999-2000, and 2.4 percent in 2001 and thereafter.The price escalation for costs expressed in local currency is calculated according to the projected local inflation rates, 6.2percent in 1997, 5.8 percent in 1998, 5.5 percent in 1999 and thereafter. Phase I costs are estimated expenditures between1993 and September 1997, whereas Phase II are between October 1997 and 2002. The interest during construction coversthe Bank loan I (Loan 3727-CHA), proposed Bank loan, local bank loans and from suppliers' credit for the purchase ofturbines.

- n

P.R China o B

Xiaolangdi Multipurpose Dam Project Stage I & IIProject Components by Year -- Totals Including Contingenicies W

(USS Million) 00nc

Totals Iiciliding Contingenicies 3

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Total


a. Main Dam -Lot 1 - 0 08 34 57 46 97 48 34 69 92 5918 43 29 2715 9 18 338 68b. Intake Structures, Tunnels & Spillway - Lot 2 - 17 69 70.72 123 29 186.38 149 48 43.91 38 99 6- 30.46c. Power Facilities - Lol 3 - 1.19 15 07 33 00 62 57 50.50 13 31 5 63 - - 181.27

Subtotal Major Civil Works - 1897 12036 20326 297.29 269.90 11640 87.91 27.15 9 18 1, 150412. Minor Civil Works

a. Sie Preparation Works 134 57 29.05 - - - - - - 16362

b Civil Works by Local Contractors 5228 31 39 7 25 1620 3539 3596 1211 1254 3,12 206.23Subtotal Minor CivilWorks 186.85 6044 725 1620 35.39 3596 12 11 12 54 3 12 - 369853. Mechanic Works

a. Mechanic Plant/Gates - - 005 24 95 71.73 102 49 40.52 6 31 2 59 0 09 248,73

b. Installation of Mechanic Plant - - - - 0 84 0 99 1 02 1 05 0 44 4 34Subtotal Mechanic Works - - 005 24 95 71.73 103.33 41 51 7 34 3 64 0.52 253.07

4. Electric Worksa. Electric Plant/Generators - - 376 58.48 6781 41.80 2499 944 028 206.57

b Installation of Electric Plant - - - - 0 06 0 73 0 76 0 74 0,77 3 06Subtotal Electric Works - 3 76 58 54 68 55 42 56 25 74 10.20 0 28 209.63

SubtotalDam&PowerSlation 18685 7941 12766 24817 462.96 47773 212.58 13352 44.10 998 1,982 96B. AdministrationlEngineering

1. Office/Design Equipment /a - 0 43 0.89 0 93 - - - - - - 2,25

2. Vehicles /b 060 1 22 1 26 - - - 3 08

3 Consullancy Services - 108 2 33 2 79 2 99 3 78 3 86 2 80 1.98 0 52 22114. Contract ManagemenUSite Supervision 111 36 770 8.53 9 19 9.63 11 47 2118 1009 966 490 203.705. Training 045 0 83 091 0 58 0 21 0 46 0.54 0 36 - - 4 34 -u

Subtotal Administration/Engineering 111 81 1064 1388 14 75 1282 1570 2558 1325 11 63 541 235A48

C. Institutional Support Loan 1 - 057 1 16 1 18 - - - - - - 291

D. Institutional support Loan 21. MWR Training 2 - - - - - 33 0 34 0 35 0 36 - 1 39

2. Lower Reach Inst Development - - - 014 015 0 15 016 0 16 0,76

Subtotal Institutional support Loan 2 - - 047 0 49 0 50 0 52 0 16 2 15 5'

E. Environment Management 0

2. Environment Management . 073 0 80 0 76 0 84 0 80 0 82 0 83 0 90 6 473 Environment Monitoring 013 053 038 077 067 069 041 004 - 363

Subtotal Environment Management 086 1 33 1 14 1.61 148 152 123 094 1011 C

F Sediment/Flood/Ice/Drought Management - - - 1.39 a 91 2 99 1 20 0 30 - 14 78 -6

Total PROJECT COSTS 298 65 91 47 144 03 265 24 478 77 504 30 243 15 149 72 57 49 15 56 2,248 39 m c

g U

\a including office equipment for YRCC\b including vehicles v or YRCC and XECC

o 0G 0

00

r- C

P R China O XXiaolangdi Multipurpose Dam Project, Stage I

Project Components by Year -- Totals Including Contingencies(US$ Millon) 0

Totals Includling Contingencies 31993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Total


a. Main Dam - Lot 1 0 08 34 57 46 97 36 26 - - - - - 117.88

b. Intake Structures, Tunnels Spillway- Lot 2 17.69 70.72 12329 139 78 - - - - 351 48

c. Power Facilities - Lot 3 - 1.19 1507 33.00 46.93 - - - 9619

Subtotal Major Civil Works - 18.97 120.36 203 26 222 97 - - - 565 55

2. Minor Civil Worksa. Site Preparation Works 13457 29.05 - - - - - - - 16362

b. Civil Works by Local Contractors 52.28 31 39 7.25 16.20 26 55 - 133 66

Subtotal Minor Civil Works 18685 60.44 7.25 16.20 2655 - - - - - 297.28

3. Mechanic Worksa. Mechanic PlantlGates - - 0.05 24 95 53 80 - - - - 78 80

4. Electric Worksa. Electric PiantlGenerators - 376 4386 - - - - - 4762

b. Installation of Electric Plant - - - - 0 05 - - - - 0 05

Subtotal Electric Works - - 3.76 43 91 - - - - - 47.67

Subtotal Dam & Power Station 186.85 79.41 127.66 248.17 34722 - - - - 98930

8. Administratlon/Engineerlng1. Office/Design Equipment /a - 0 43 0 89 0 93 - - - - 2 25

2. Vehicles/b 0.60 1.22 1 26 - 3 08

3. Consultancy Services 1 08 2.33 2 79 2.24 - - - 8 44

4. Contract Management/Site Supervision 111 36 7.70 853 9.19 722 144015.Training 045 083 091 058 0 15 - 292

Subtotal Administration/Engineering 111 81 1064 13.88 14 75 962 16070 2

C. Institutional Support Loan 1 - 0.57 1.16 1.18 - - - - - 2 91 -

0. Institutional support Loan 2E. Environment Management

2. Environment Management 2 73 080 076 063 - - 2 92 C

3. Environment Monitoring 0 13 0 53 0 38 0 58 - 1 62 ~Subtotal Environment Management - 086 133 1.14 121 - - - - 4 54

F. Sediment/Floodllce/Drought Management - - - - 1 04 - - - - 1 04

Total PROJECT COSTS 298 65 91 47 144 03 265 24 359 08 - - - - 1,158 48 -

rnc

\a including office equipment for YRCC\b including vehicles for YRCC and XECC

0 t

0 &)

O0

P R ChinaXiaolangdi Multipurpose Dam Project; Stage it w

Project Components by Year -- Totals Including Contingencies C)

(US$ Million) 0

Totals includinig Contingencies 0

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Total


a. Main Dam- Lot 1 - - - - 12 09 69 92 59.18 43 29 27.15 9.18 220.80

b. Intake Structures, Tunnels & Spilhway - Lot 2 - - - 46.59 149.48 43.91 38.99 - 278.98

c. Power Facilities-Lot 3 - - - 1564 50.50 13.31 563 - - 85.08

Subtotal Major Civil Works - - - 74.32 26990 116.40 87.91 27.15 9.18 584.85

2. Minor Civil Worksb. Civil Works by Local Contractors - - - - 8.85 3596 12 11 12.54 3,12 - 72.57

3. Mechanic Worksa. Mechanic Plant/Gates - - - - 17.93 102.49 40.52 6.31 2.59 0.09 169.93

b. Installation of Mechanic Plant - - - - 0 84 0.99 1 02 1.05 0.44 4.34

Subtotal Mechanic Works - - - - 17 93 10333 41 51 7.34 3,64 0.52 174.27

4. Electric Worksa. Electric Pta/tGeerators - - - - 14.62 67 81 41.80 24.99 9 44 0.28 158 95

b. Installation of Electric Plant - - - 0.02 0.73 0.76 0.74 0.77 - 3.01

Subtotal Dam & Power Station - - - 115.74 47773 212.58 13352 44.10 9.98 993.66

B. Administratlon/Engineering3. Consultancy Services - - - - 075 3.78 3 86 2.80 1 98 0.52 13.67

4. Contract Management/Site Supervision - - - - 2.41 11 47 21.18 1009 9.66 4.90 59.69

5. Training 0.05 0,46 0 54 0 36 - - 1.42

Subtotal Administration/Engineering - - - - 3.21 15.70 2558 13.25 11.63 5.41 74.79

C. Institutional Support Loan 1 - - - - - -

D. Institutional support Loan 2 S

1. MWR Training 2 - - - - 0 33 0 34 0 35 0 36 - 1.39 ¢

2. Lower Reach Inst. Developmenl t - - - 014 0.15 0.15 0.16 0.16 0.76 i

Subtotal Institutional support Loan 2 - - - - - 047 0.49 0.50 0 52 0.16 2.15 ¢

E. Environment Management x

2. Environment Management - - - 0.21 0 80 0 82 0.83 0 90 - 3.56 o

3. Environment Monitoring - - - 019 067 0 69 0.41 0Q04 - 2 01

Subtotal Environmerit Management - - - 0 40 1 48 1 52 1 23 0,94 5.57 a

F. Sediment/Flood/Ice/Drought Managemeni - - 0 35 8 91 2 99 1 20 0 30 - 13 74 °x3

Total PROJECT COSTS - - - - 119 69 504 30 243.15 14972 57.49 15 56 1,089 91 >1m c

o

0 oo i~ sw

20

P R ChinaXiaolangdi Multipurpose Dam Project, Stage I & I1 f-.

Table 1 Main Dam - Lot IDetailed Costs o

(US$ Million)

Totals Including Contingencies1993 1994. 1995 1996 1997 1998 1999 2000 2001 2002 Total

1. Investment CostsA. Mobilization/Demobilization - - 11.24 - - - - - - 9 11 20 35

B. River Diversion & Care of Water 003 0?3 0.27 1.28 0.42 - - - - 2.73

C. Excavation - 0.02 16.43 4.26 2,01 1.81 0 35 0.13 0.04 - 25 04

D. Jet Grouting - - - 5.54 0.06 - - - 560

E. Foundation Preparation/Access Road No. 15 0 03 0.02 0.02 004 - - - 0.12

F. Drilling, Grouting & Drainage - - 1.76 11.63 1.39 1.93 0.94 0.28 0.29 007 18.29

G. Embankment Filling - - 2.68 26.59 22.09 41.41 47.04 35.49 21 15 - 196.45

H. Concrete Cut-off Wall - - - - 4.76 9.75 - - - - 14.51

I. Concrete, Formwork & Reinforcement - - 1.17 2.76 0.31 0 78 0.39 0,91 6.31

J. Shotcrete - 0.07 0.14 0.18 - 0.03 - - 041

K. Instrumentation - - 0.02 0.54 1.64 1 20 0 69 0.85 0.81 - 5 75

L. Access Road Maintenance 0.03 0.43 0.45 0.53 0.54 0 55 0.56 0.22 - 3.32

M. Provisional Sum - - - - 0.98 098 0 99 - - - 2 95

N. Dayworks - - - 0.03 2.22 3 19 2.74 1.99 1.24 - 1 41

0. Claims & Variation - - - 0.30 1.03 1.49 - - - - 2.82

P. Contingencies-Potential Cost Exposure - - 4.36 6 31 5.46 3 99 2 50 - 22.62

Ttal - 0.08 34.57 46.97 48.34 69.92 59 18 43.29 27.15 9.18 338.68

Total~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Ca

M 3:

0 c

0 ;2

o-4a

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P.R.ChinaXiaolangdi Multipurpose Dam Project; Stage I & II -

Table 2. Intake, Tunnels & Spillway -Lot 2Detailed Costs 8(US$ Million)

Totals Including Contingencies1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Total

I. Investment CostsA. Mobilization/Demobilization - 8.11 17.17 - - - - 19.15 - - 44.42

B. River Diversion - - - 0.32 0.02 0.02 0.03 - - 0.39

C. Care of Water - 0.08 0.13 0.26 0.30 0.29 0.30 0.22 - - 1.57

D. Cleaning & Grubbing - - - 0.00 0.00 0.00 0.00 - - 0.00

E. Excavation - 6.66 39.79 36.26 17.84 0.62 0.78 0.65 - - 102.60F. Rock Support - 0.18 3.31 3.47 5.36 0.67 0.15 0.15 - - 13.28

G. Shotcrete - 0.11 1.86 1.90 1.79 0.14 0.09 0.08 - - 5.98

H. Surface Preparation - 0.02 1.11 0.16 0.81 0.74 0.03 - - - 2.86I. Drilling, Grouting & Drainage - 0.04 0.27 1.50 6.87 3.80 1.61 0.83 - - 14.93J. Concrete

Concrete Placement - - 0.25 20.76 53.60 48.12 10.94 4.48 - 138.15

Formwork - 0.09 3.06 11.41 17.66 2.59 0.35 - - 35.16Reifordng Steel - - 1.08 10.54 24.47 25.94 4.12 1.26 - - 67.41

Prestressed Concrete - - 3.31 1.83 0.19 - - - 5.33

Expansion Joints - - 0.04 0.14 0.80 0.90 0.89 0.40 - - 3.17Subtotal oncrete - - 1.45 34.50 93.59 94.45 18.73 6.50 - - 249.21K. Fill - 0.00 0.00 0.00 1.94 2.54 0.93 0.13 - - 5.54L. Instrumnentation - - 0.02 0.29 0.78 0.80 0.45 - - - 2.34M. Mechanical Works - - - - 0.52 0.32 7.44 1.33 - - 9.61N. Elctrical Works 0.00 0.03 0.14 0.15 0.09 - 0.400. Metal Works - - - 0.03 - 1.87 - - - 1.90P. Miscellaneous - - - - 0.13 - 0.18 0.04 - - 0.34

Q. Access Road Maintenance - 0.11 0.47 0.49 0.68 0.68 0.70 0.51 - - 3.65R. Compensation Payment - 2.39 5.13 24.07 - - - - - - 31.60

S. Dayworks - - - 0.10 7.54 6.05 1.88 1.63 - - 17.20

T. Clairns & Variations - - 20.23 13.63 10.89 - - - - 44.75

U. Contingenccies-Potential Cost Exposure - - - - 34.15 27.31 8.66 7.75 - - 77.87Total - 17.69 70.72 123.29 186.38 149.48 43.91 38.99 - - 630.46

'V

P R China r

Xiaolangdi Multipurpose Dam Project, Stage I & II

Table 3. Power Facilities - Lot 3 U

Detailed Costs o

(US$ Million) c

Totals Including Contingencies

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Total

1. Investment Costs

A. General - - - 0.23 - - 0.10 - - - 0.33

B. Mobilization/Demobilization - - 6 34 - - 4.62 - - 10.96

C. Care of Water - - - - 0.68 0 10 0 09 - - 0.87

D. Excavation 0.63 4.35 12.06 12.56 2.93 0.04 0 01 32.58

E. Rock Support - 0 02 0 99 5.37 4.49 0 92 0.20 0 07 - 12 06

F. Shotcrete - 0.40 1.27 1.48 0.26 - - - - 3.42

G. Drilling, Grouting & Drainage - - 023 0.77 2.15 1 19 026 0.02 4.63

H. ConcreteConcrete Placement - 0 05 1.29 7.61 8 06 2.50 - - 19.51

Formwork - 0.33 1.43 1.76 0.67 - . 4.20

Reinforcing Steel - - 0.00 1.73 2.91 5 21 1 69 - - - 11.54

Expansion Joints - - - 0.12 0.07 0.07 0.03 - - * 029Subtotal Concrete - 0.05 3.48 12.02 15.10 4.89 - - - 35.53

1. Steel Penstocks - - - - 11 10 14 70 4 10 - - - 29.89

J. Fill - - - - 0 01 0.03 0 01 0.00 - - 006K. Instrumentation - - 0.04 0.49 0.58 0 23 - - - - 1 34

L. Mechanical Works - - - - 0.77 1.49 1 02 - - - 3.29

M. Electrical Works 0.04 0.29 0.06 - - - 0.38

N. Metal Works - 0.03 0 07 0.100. Piping - - - - 0.14 0.21 0.10 - - - 0.45 -

P. Access Road Maintenance - 0.00 0.00 0.01 0.22 0 25 0 24 0.01 - * 0 74 a.

0. No. 8 Access Tunnel, Additional - 0.54 0 38 - - - - - - - 0 92

R. Dayworks - - - 0.01 2 52 2.04 0.61 0.25 - - 5.43S. Claims & Variations - - 2.28 9.28 6.94 5.65 - - 24.14

T. Contingencies-Potential Cost Exposure - - - - 6.63 5.33 1 58 0.64 - * 14.18

Total - 1.19 15.07 33.00 62.57 50 50 13 31 5.63 - 181.27 °->

x c

m c

o n

Ea0-U-.,o n(5..* -nf

o -00

20- C,

l'.Rt.:lsiitaa ->Xiaolanijdi Mulliptitpose Dam Project, Stage I & II 2 a

-l auble6 Mcchanir cPlanl v U

Detailed Costs aC0C

C

tLm;r (Cosi Negotialioil

1993 1994 1995 1996 1997 1998 1999 2000 2001 ;02 Total

I. Investment CostsA. Local Mechanic Plant /a

1. Powerhouse Mechanic WorksCranes & Hoisis - - - 0.64 0.68 002 -1.34

Air Compressors - - - 0.01 0.04 0.10 0.10 0.06 - 0.31Oil System - - - - 0.08 0.25 0.41 0.39 0.16 - 1.29Water Supply System 0- - 030 1.27 0.83 0.72 0.0 - 3.20Ventilation & Airconditioning - - - - - 0.04 0.08 0.08 0.05 - 0.25Repairing and Maintenance Workshop - - - - - 0.90 - - - 0.90Miscellaneous Equipment - - - - - 078 0.73 002 - - 1.53

Subtotal Powerhouse Mechanic Works - - - 0.64 1.07 2.40 3.05 1.31 0 35 - 8.822. Gates and Auxiliaries

Vehicles used in Powerhouse - - - 0.29 - - 0.29Free Flow Tunnel Gales - - - 1.18 8.93 3 24 - - - 13.35Power Tunnel Gales & Trashracks - - - 1.50 8 62 2.34 - - - 12.46DraH Tube Gales - - - 0.06 3.28 2.28 - - - 5.62Diversion Tunnel Gales - - - - 0.44 1.88 0.81 - - 3.13Irrigation Tunnel Gates & Trashracks - - - - - 0.27 0.54 0.03 - - 0.84Eleators & Other Accessories - - - - 0.32 0 29 0.19 - - 0.80Presure Balance Pipes & Valves - - - - - 0.12 0.12 0.12 0.04 - 040Gates Mainlenance Workshops & Olhers - - - - 0.03 0.03 0.03 0.01 - 0 11 Xi Gully Outlet Tunnel Gales - - 0.01 0.03 - - 0.04 aSudries - - 0.00 0.01 0.68 0.63 0.54 000 - - 1.87

Subtobal Gales and Auxiliaries - - 0.00 O.0t 4.18 24.06 10.41 0 19 0.05 38.90Subtotal Local Mechanic Plant - 0.00 0.65 5.25 26.46 13.46 1.50 0.40 - 47.72S. Imported Mechanic Plant

Turbies. iniddng sparparts - - - 17.32 21.41 2362 11 71 2.08 1.20 0.05 7739Spillway Gales - 0.10 0.66 1 14 0.87 0.27 0.01 - 305 iSedment Turmel Gales - - 0.02 0.40 3.90 5.66 0.60 0.18 - - 10.76Orifice Tumnel Gates - - 0.01 1.01 7.86 7.86 0.08 0 11 004 f16.97 1Outerdoor Instrumentation - - - 044 3.35 015 0.14 0.13 0.12 0.01 4.34 .E

Other Systems - - 8.45 5.48 1 27 15.20ToW - - 0.03 19.92 50.88 7037 28.13 4.27 1.77 0.06 175.43

ta hnsuon of gaes s coered by three civi wxks Fls.

P R ChinaX.aolangdi Mulipurpose Oam Project; Stage I & 11

Table 8. Electric Plant rDetailed Costs(US$ Million)

Totals Including Contingencies1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Total

1. Investment CostsA. Local Electric Plant

1. Local Electric WorksGenerators - - - 2.32 20.80 20.39 20.67 12 36 2.47 0.28 79 29220KV High Voltage System - - - 033 1.01 1.04 1.10 0.11 - 3.60Generator Voltage Regulators - - 006 0.38 0.55 0.55 055 0.19 - 2.28Control and Protection Equipment - - 1 64 1.51 - - - 3 tSDirect Current Equipment - 0.28 0.41 -- - 0 70Power System for Station - - - 0.06 2.57 2.28 - 4.91Electric Testing Equipment - 0.12 0.14 - - - 0.26Control and Power Cables - - - - - 3.49 3.50 3.49 - 10.48Bus Bar - - - - - - 1 07 1 07 1.07 - 3.22Local Carrier Communication - - - - - 0.15 - 0 16 - 032Mircowave Communication 0.50 - - 0 50Local Dispatching & Administrative Communication - - - - - 0.25 1.36 - - - 1.61

Subtotal Local Electric Works - - 2.37 21.57 26.81 33.19 18.58 7.51 028 110.322. Power Transmission - 32.96 31.50 0.11 - - 64.57

Subtotal Local Electric Plant - 2.37 54.53 58.31 33 30 18 58 7.51 0.28 174.89 8B. Imported Electric Plant e

Generator Associated Equipment 1 38 1 96 1.92 1.96 0 10 - - 7.32Cable System 3-- 339 3.47 3 56 - - 10 43 RMain Transformers . 0 64 2 01 2 75 2.76 1 59 - 9 76 x5Carrier Communication System - - 0 32 - 0.34 - 0 66 Microwave Communication System - 061 - - 0.61Dispatching and Administretive Communication 1 35 1 56 - - 2 91 2 Cf

Total - 3 76 58 4 G7 81 4 1I) 24 99 9 44 0 28 206 57 x

m c

U->

o a

P.R.ChinaXiaolangdi Multipurpose Dam Project; Stage I & i

Table 6. Mechanic PlantDetailed Costs 0

(US$ Million) c

Totals Including Contingencies -

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 Total

I. Investment CostsA. Local Mechanic Plant la

1. Powerhouse Mechanic WorksCranes & Hoists - - - 0.93 1.00 0.03 - - - - 1.97Air Compressors - - - - 0.01 0.06 0.16 0.16 0.10 - 0.49Oil System - 0.12 0.38 0.64 0.63 0.26 - 2.03Water Supply System - - - - 0.44 1.92 1.29 1.16 0.13 - 4.95Ventilation & Airconditioning - - - - - 0.06 0.12 0.13 0.08 - 0.40Repairing and Maintenance Workshop - - - - - - 1.40 - - - 1.40Miscellaneous Equipment - - - - - 1.18 1.14 0.03 - - 2.35

Subtotal Powerhouse Mechanic Works - 0.93 1.58 3.63 4.75 2.10 0.58 - 13.582. Gates and Auxiliaries

Vehicles used in Powerhouse - - - 0.45 - - - 0.45Free Flow Tunnel Gates - - - - 1.74 13.52 5.05 - - - 20.31Power Tunnel Gates & Trashracks - - - - 2.22 13.05 3.65 - - 18.92Draft Tube Gates - - - - 0.09 4.97 3.55 - - - 8.61Diversion Tunnel Gates - - - - 0.65 2.85 1.26 - - - 4.76Irrigation Tunnel Gates & Trashracks - - - - - 0.41 0.84 0.05 - - 1.30Elevators & Other Accessories - - - - 0.47 0.44 0.30 - - - 1.21Presure Balance Pipes & Valves - - - - - 0.18 0.19 0.19 0.07 - 0.63Gates Maintenance Workshops & Others - - - - - 0.05 0.05 0.05 0.02 - 0.16Xi Gully Outlet Tunnel Gates - - - - - 0.02 0.05 - - - 0.06Sundries - - 0.01 0.01 1.00 0.95 0.84 0.01 - - 2.83

Subtotal Gates and Auxiliaries - 0.01 0.01 6.18 36.43 16.22 0.30 0.08 - 59.23 -'

Subtotal Local Mechanic Plant - - 0.01 0.95 7.76 40.07 20.97 2.40 0.66 - 72.81B. Imported Mechanic Plant x

Turbines, including spar parts - - - 20.79 26.30 29.58 15.01 2.73 1.62 0.07 96.10 0Spillway Gates - - - 0.14 0.95 1.68 1.31 0.42 0.02 - 4.51Sediment Tunnel Gates - - 0.03 0.67 6.63 9.86 1.07 0.33 - - 18.59Orifice Tunnel Gates 0.02 1.68 13.30 13.63 0.14 0.20 0.07 - 29.05Outerdoor Instrumentation - 0.72 5.57 0.26 0.24 0.23 0.22 0.02 7.26Other Systems - - 11.22 7.43 1.76 - - - 20.40 C,

Total - - 0.05 24.95 71.73 102.49 40.52 6.31 2.59 0.09 248.73

\a Installation of gates is covered by three civil works lots.

f- i2'=



P R ChinsXiotangd Muttpuoose Otm Proect. Stag i & 1

Table 10 Adi.mstraaorvEngineanngDeted Costs(USS U4lion(

Totala hncluding Contingencies1"3 1994 1995 19 1997 199t 1999 2000 2001 2002 Total

I. Investment CostsA. Engineering & tnvestigetlon

Project Premmanry Studies 12.71 12.71Exploratory WorIks 9064 9_ - - - - 9864

Subtotal Engineering a Investigation 111 38 - - - - - - 111.36S. Supervision & Contract Administration

Conbtrct Admilnstretion 6.23 6 90 7 43 7 76 7.97 7 88 0 09 8 34 4 25 64 85Consultrtnrs & Tectnscal Services 1 47 1 63 1 76 1 83 1 88 1 66 - - 1043Preparatory Activites 9 - . 32 . 9 32

SubtotatSuperv,slon&ContractAdmtnistration - 770 853 9.19 959 986 t905 809 834 425 8460C. Officef Design Equipment

1. Office Equipment for YRWHOC & XECCCommunicabon Fachities 003 005 005 - - - 013Copier 003 005 006 - - 013Computer 012 C 26 0.27 - - - 0 64Other Ofrice Equipment - 0.02 004 004 0.10Training and Overseas Surey 004 0 09 0 .- 0 23

Subtotal Office Equipment for YRWHOC & XECC 0 23 C 49 0 51 - 1 242. Ofimce/Design Equipment for RP&DI

Communication Facilities 0 04 0 00 0 08 - 019Copier 0 02 0 05 0 05 - - - 012Comouter - 08 0 17 0 17 - - - - 0 42Other Office Equipment - 0 01 0 02 0 02 - - - 005Training & Overseas Training 004 009 0 Dg 023

Subtotal OfficelDeslgn Equipment for RP&DI 0 19 0 40 0 42 I - - - - 1 01Sjbtotul OfflcaiOesign Equipment 0 43 0 89 0 93 - - 2.25D. Vehicles

1 VehiclesforYRWiHytt &C XECC - 0.52 107 1"11 2712 Vehicies for RP&OI 007 015 015 . - 038

Subtotal Vehiclet 060 1 22 1 26 - - 308E. Foreign Consultancy Services

1 Panel of Expens 0 11 0 23 0 24 0 09 0 23 C 23 C 24 C 25 0 26 1 882 Dispute Review Board - - 009 023 0 23 0 24 25 0 26 1 303. Foreign Consultants

DesignAnstatallion Review of Equipment 005 0.01 0.02 010 0.25 026 0 19 C 14 1 02Consultants br Constnjcuon Supervision 0.38 0 51 1 29 1 57 1 39 1 25 0 94 C 67 - 8.00ConstrucbonManeogemenbCoatCon"o- 0.21 098 100 1 10 076 078 082 045 - 590Supervsion on Mechanic0Electnc Eeulpment -- 0.15 0 31 0 32 0.08 - 0 87ComrnmurctsonwitnHeeadOffice 0 04 004 0.04 004 006 0 35 005 003 - 036Design Management 0 29 0 55 ° 20 . 0 71 0 73 019 0 11 - 278

Subtota lForegn Consuttants 0.96 2 09 2.55 2 92 3 32 3 39 2 32 4 47 18 93Subtotal Foreign Consuttancy Services - I 08 2 33 2.79 2 99 3 78 3 66 2 80 1 98 0 52 22 11F Cltims Management 104 095 090 051 340G Others 0 04 0.57 1 17 110 0 81 0 65 4 34H. Training

1. Overses TrainingContract Management 003 003 003 003 014Financial Planningl0udgebng 0.02 0 02 0 03 0 03 0 01 0 01 0 11General ManagementiOrganization 0 05 0 05Accounting System Reporting & Standard. 0.02 0 03 0 01 001 - - - - 0 08Quality Assurance 001 001 001 0.01 0.01 - - - 005ifontrmation TechnologylComputer Sittut 0 02 0 02 0.04 0 04 - - - 0 12

Personnel Management 0.02 0 02 0.02 - - - - 005Cash/Trresury Management . 0 02 0 02 - - - - - - 0.03Management of Information System 0 02 0 03 0 03 0.06 0 07 - 0 20ritemal Audibng - 0 02 0 02

Management Dunng Transition Penod to Opetion Stage - - 0.03 - - - 003Othert 0.02 002 002 002 002 0.02 002 C02 - 015Training Organization Fees 0.01 0.01 0 01 00 1 o.0o 0 02 0 02 0 02 - - 0 12

Subtot Ovewsas Training 0.19 0.20 0.21 0.24 005 011 010 004 -D 1.142. Local Training

Fu al Ptanning/Sudgbng 0.09 007 008 0.08 - - - 0.32Oustity Assurance 0.12 0.09 010 0.11 011 - - - 053infation Tofogy & ComPuter Skitt 0.34 0.38 - - - 072Conasbuon ScheonutngfRpoting - 0.02 0 02 0 02 0.01 - - - 006Interal Audibng 0.09 009 0t10 - . 028Managernent Dunng Tranailon Poriod to 0oerabtn Stag 0.19 01S 0.15 - 0 50Otht 0.04 0.03 003 0.03 003 0 04 0 04 00 - - 028

Subttal Local Training 0.25 064 070 034 0.15 0.23 019 019 - 2.693. Training Loan It - 012 025 013 - - 0.51

Subtotal TraIning 0 45 0.83 0.91 0 58 0.21 0 46 0 54 0 36 4.34Total 111.81 10.64 13.38 14.75 12.U2 15.70 25.58 13.25 1163 S41 235.48


Annex 4: Cost Effectiveness Analysis Summary

ANNEx 4: COST EFFECTIVENESS AND ECONOMIC ANALYSIS SUMMARY

(US$ Million, 1997 prices)

Present Value of Flows Fiscal ImpactEconomic Analysis Financial Analysis /a Taxes Subsidies

Benefits 4,880 3,734 0 1,146LkCosts 2,618 3,856 550 688

Net Benefits: (12% discounting) 2,262 -122 550 1,590IRR: 20.8% 11.3%

L/ The subsidies are mainly for flood control and sediment control. The power and irrigation charges cross-subsidize thesediment and flood control beneficiaries. The Water Institutional Reform Component is expected to integrate thevarious sectoral institutions under one financial entity so that charges can be made for all the benefiting sectors andcross subsidy can be eliminated.

/b Returns on power unit are 19.71 percent.

Main Assumptions

A. General

The primary motivation for the Xiaolangdi multipurpose reservoir project is flood and sediment control. Xiaolangdireserves 4.1 billion m3 of long-term reservoir storage for major flood control in the wet season, and, in the dry season,2 billion m3 for downstream ice management. In the first 20 years of Xiaolangdi's operation, 7.5 billion m of coarsesediment can be trapped in reservoir dead storage, and, after the reservoir reaches long-run equilibrium, it can beoperated so as to pass floods (with the exception of major floods) and their sediment loads, together with all of thesediment accumulated during the nonflood season, through the reservoir and the lower reach. Secondary benefits of theproject are substantial, primarily from power generation and irrigation. The annual incremental economic benefits of theproject at full development (year 2015) include Y 1,228 million for flood control, Y 508 million for sediment control,Y 3,040 million for power generation, Y 2,008 million for more timely irrigation, and Y 339 million for reducedshortages in urban water supply. The present value of the economic benefits of the project, discounted at 12 percent tothe present, is Y 40,504 million (US$4,880 million).

There are also significant social and environmental project benefits. In particular, flood control will substantially reducethe risk of loss of life in the case of a major dike breach. Historical records of large floods, where there was bothadvance warning and orderly evacuation, suggest that fatality rates of nearly I percent of the affected population mightbe expected. Approximately 103 million people live and work in areas that could be inundated by a major floodcombined with a dike failure. No attempt was made to estimate the value of human lives that might be saved by theproject. Xiaolangdi's control of sediment deposition also reduces the risk of dike failure. Finally, Xiaolangdi'soperation will substantially reduce the environmental damage to the estuary by sharply decreasing the frequency of theriver running dry.

All investment costs, including physical contingencies, and operation and maintenance costs have been taken intoaccount in estimating the economic costs of the project. Economic O&M costs include: electricity, valued atY 0.4/kWh, contributed labor valued at the shadow wage rate, as well as other labor, management, maintenance, repair,overhaul and replacement costs expressed as economic values.


Annex 4: Cost Eflectiveness Analysis Summary

The investment costs for the Xiaolangdi hydropower plant and the alternative thermal power plants are based on shadowprices developed in local studies. Coal prices are based on the shadow price at the plant site and include handling andtransportation charges. Fuel price is based on coal equivalent using 7,000 kcal/kg. Investment costs were calculatedusing straight-line depreciation with a salvage value.

World Bank price projections are used to estimate farm-gate economic prices in constant 1997 terms for traded inputsand outputs. Economic prices for nontradables were estimated using conversion factors are based on an analysis of thedeviation of social opportunity costs from actual prevailing financial prices induced by tax and price distortions innontraded goods on the lower reaches of the Yellow River. All economic values were converted to local currency at ashadow exchange rate of Y 8.3 to $ 1. Agricultural labor has been valued at Y 10 per person-day, the average project arearural wage rate.

B. Economic Benefits

Flood Control Benefits. Flood and ice jamming control along the lower Yellow River are presently provided through acombination of main works, embankment dikes, storage reservoirs, and flood and ice run detention basins, and throughregular and coordinated programs of river training, dike maintenance and warping. If the storage reservoirs and dikescannot control large floods that threaten the main dikes, then, as a last resort, excess flood flows would be diverted intoheavily populated detention basins, so as to control flooding and avert catastrophic dike breaching. However, inundationof detention basins would become prohibitively expensive as the social and economic damages resulting from flooddiversion into these areas increase over time. As part of the YRCC's comprehensive flood control program, theXiaolangdi project would provide 4.1 billion m3 of flood storage capacity, substantially reducing flood risks in the

2 2 23,172 km of detention basins, in the 3,544 km floodplain areas and in the 125,000 km major protected area behind themain dikes (see Map 25533).

Flood control benefits are defined as the reduction in expected average annual flood damage due to operation of theXiaolangdi project. These benefits assume that without the Xiaolangdi Reservoir regular programs of main dikemaintenance and strengthening, ice run control, river training and warping will continue in order to prevent underminingand other types of dike failure. Further, it is assumed that the main dikes will be raised, as necessary, to keep up withfuture aggradation of the river channel due to sediment deposition. Underlying estimates of expected average annualdamages with and without the project were made for floodplains, detention basins, oilfields, and areas protected by themain dikes. Damages include personal and public property, and lost agricultural and industrial production. The damageestimates are linked to the flood frequency simulations through the use of percentage damage rates for different flooddepths and conditions developed by the YRCC. Table A4.1 summarizes the flood control benefits for the first few yearsof operation. Benefits from flood control will begin accruing in 1998, when the coffer dam is in place. Estimates havebeen disaggregated into the types of areas affected: floodplains, the flood detention basins Dongpinghu and Beijingdi,the oilfields near the mouth, and the areas protected by the main dikes.

The annual incremental flood control benefits of the Xiaolangdi project, with allowance for future growth of expectedbenefits, are calculated in constant 1997 prices as Y 732 million annually for the first year, rising thereafter at ratesvarying up to 5 percent (depending on type of damage) to reflect future economic growth and increases in property andproductive asset values. The total flood control benefits, discounted at 12 percent to the present, are Y 7,345 million, 18percent of total benefits.

Sediment Control Benefits. On average, between 300 and 400 million tons of sediment have been deposited on theriverbed along the lower reaches every year, resulting in a rise in the riverbed of 8-10 centimeters annually. In places,the riverbed is 10 meters or more higher than the surrounding plain. Under existing deposition conditions, it is necessaryevery decade to raise 696 km of the main dikes at least 1 meter, to strengthen 969 km of levees, to raise or strengthen5,395 spurs in vulnerable sites, and to reconstruct or complete 51 channel training works and 439 spurs totaling 40.8 km.The total cost of one of these decade-long comprehensive programs is now estimated, in present costs, to be at least Y 6.6



billion (US$795 million). These costs will increase over time as the base of the dike is widened and as the integrity ofdike foundations is threatened by seepage and salinity as the riverbed rises.

TABLE A4.1: FLOOD CONTROL BENEFITS(AVERAGE EXPECTED REDUCTION IN DAMAGES)

(Y million)

Dongpinghu BeijingdiFloodplains Basin Basin Oilfields Dike Areas Total

1998 324.0 128.1 96.9 24.3 158.8 732.01999 333.7 133.2 100.8 24.3 166.7 758.72000 343.7 138.5 104.8 24.3 175.0 786.42001 350.6 142.7 108.0 24.3 182.0 807.62002 357.6 146.9 111.2 24.3 189.3 829.42003 364.8 151.4 114.5 24.3 196.9 851.92004 372.1 155.9 118.0 24.3 204.8 875.02005 379.5 160.6 121.5 24.3 213.0 898.82006 387.1 165.4 125.2 24.3 221.5 923.42007 394.8 170.4 128.9 24.3 230.3 948.72008 402.7 175.5 132.8 24.3 239.5 974.82009 410.8 180.7 136.8 24.3 249.1 1,001.72010 419.0 186.1 140.9 24.3 259.1 1,029.4

The direct benefits of sediment reduction are defined as the difference between capital and resource expenditures onsediment management with and without the project. During the first 10 years of Xiaolangdi's operation, 7.5 billion m3 ofcoarse sediment, responsible for most of the aggradation in the lower reach, will be stored in the reservoir. In the sameperiod, there will also be some degradation along the lower reach to Lijin. Eventually, a new equilibrium alluvialchannel will develop through the deposited sediments in the reservoir that will allow the prevailing flows through theflood season to just transport all of the annual sediment load through the reservoir with neither deposition or erosion,preserving 5.1 billion m3 of long-term reservoir storage. After Xiaolangdi reservoir reaches equilibrium, depositionalong the lower reach will continue but at a slower rate, because the flows can be regulated to increase the duration offlows favorable to flushing sediments through the reach.

An extensive YRCC measurement and research program has culminated in a series of physical models of sedimentdeposition along the lower reach. Based on projected deposition, maximum safe channel flow capacities, upon whichsystem flood plans depend, were calculated and used as the basis for estimation of the dike elevations required tomaintain that capacity (as the river aggrades) at 15 cross-sections for the years 2000, 2020 and 2050. The cost of dikeraising was determined parametrically using the detailed quantities estimated for the current dike-raising work program.Recent review of this work program has confirmed that it is a practical basis for estimating future dike-raising needs.The analysis was repeated for 2020 and 2050 with and without Xiaolangdi and the difference between the discountedcash flows was taken as the major component of sediment management benefits.

Sediment trapping and regulation in Xiaolangdi will result in a sediment reduction time for the design series of 1950-74of about 25 years, which is repeated giving a 50-year series of joint Sanmenxia-Xiaolangdi Reservoir operation. Thedeposition reduction period is defined as the difference between accumulated deposition with and without Xiaolangdi forthe design time series. Over the life of the project (50 years), it will not be necessary to raise the dikes upstream ofHuayuankou, the dikes between Huayuankou and Aishan will need to be raised only twice, and the dikes between Aishan



and Lijin will need to be raised only four times. Unit labor and machine cost estimates, from YRCC engineering surveysof the 1974-85 Third Dike Raising and Strengthening Campaign works, appropriately adjusted to reflect differences indike works above and below Aishan and to 1997 economic prices, were used to estimate the annual incremental sedimentcontrol benefits of this component of the project. The completion of the cofferdam, in November 1997, will permitpostponement of major dike works downstream between then and the project commissioning date. Therefore, sedimentbenefits will accrue downstream during this early period. These benefits are independent of, and in addition to,downstream flood control benefits.

Incremental benefits from controlling sediment deposition on the main channel and floodplain are calculated in 1997prices as Y 508 million annually for the first two decades, and Y 197 million annually thereafter. The decline in annualbenefits reflects the slower pace of sediment deposition due to the expected operation of the reservoir. The net presentvalue of sediment control benefits, discounted at 12 percent, is Y 2,817 million, 7 percent of total measured projectbenefits.

Electricity Generation Benefits. Existing hydropower developments on the middle reach of the Yellow River arelimited to run-of-river plants at Sanshenggong (40 MW) and Tianqiao (128 MW) in Inner Mongolia, and Sanmenxia(250 MW) in Shanxi/Henan. The power output of the two daily storage facilities is fed into the North China PowerNetwork (NCPN), while that of Sanmenxia feeds the Central China Power Network (CCPN). Xiaolangdi (1,800 MWinstalled) is designed to operate as a peaking plant using only five of its six units, supplying 1,500 MW or 80 percent ofpower output to the CCPN through the Henan grid and 20 percent to the NCPN through the Shanxi grid. The NCPNcovers Beijing and Tianjin municipalities, Hebei and Shanxi provinces and the western part of Inner Mongolia. Thewestern part of this system is rich in coal reserves, but the loads are mainly concentrated in Beijing and Tianjin. Thissituation gives rise to large mine-mouth coal-fired power stations and high-voltage transmission lines, for example, theShentou and Datong thermal power plants in Shanxi supply power via a 500 kV transmission line to Beijing and Tianjin.There are only a few hydro resources located in the service area of this grid and hydropower accounts for only 4.5percent of capacity and 1.5 percent of energy. The hydropower proportion in the CCPN, primarily located in the YangtzeBasin, accounts for 40 percent of total capacity and 38 percent of energy. The only Yellow River hydro station feedinginto this network is the Sanmenxia power station. With run-of-river power stations accounting for half of total capacity,hydro energy output reduces to half during winter months, which, with very high system load factors, leads to difficultiesin meeting the load during these months.

For the decade of the 1990s, generating capacity for the whole of China is conservatively planned to grow at about thesame rate as the economy. Recent revised economic growth targets (as high as 10 percent) would also require upwardrevision of power generation targets.

The load forecast for the Henan Power Grid was reviewed with the Henan Power Bureau. The actual load for 1989 and1990 was 4,700 MW and 5,000 MW, respectively; however, about 1,400 MW of load was not met in 1989. The loadforecast for 1995 is 6,035 MW. However, this value still excludes some 1,000 MW that will be curtailed due to ashortage of generation. The load forecast in the year 1999, the in-service year for the first two units at Xiaolangdi, isabout 9,380 MW and it is assumed the load curtailments will be negligible. The load growth rate used in the study overthe following 10 years is about 6 percent and is considered to be reasonably conservative. The load forecast for theHenan grid is summarized in Table A4.2.

The benefit of electricity is traditionally valued on the basis of "willingness-to-pay," which is often computed by addingthe average tariff paid by the consumer to the estimated consumer surplus. It is appropriate to use "willingness-to-pay"or alternative cost, whichever is the lower. China has large reserves of low-cost coal, and manufactures low-cost coal-fired generation equipment. In the potential service area of Xiaolangdi, alternative power generation is limited to coal-fired thermal plants. If it can be shown that the "willingness-to-pay" is higher than the alternative cost of coal-firedgeneration, the appropriate benefit measure to use is the cost of coal-fired generation.


Annex 4: Cost Effectiveness Analysls Summary

TABLE A4.2: FORECAST OF PEAK LOAD AND ENERGY

Year Peak Load Energy Load Factor(MW) (GWh) (Percent)

1995 6,035 39,830 75.31999 9,384 61,209 74.52000 10,481 68,150 74.22005 13,801 86,950 71.92010 17,936 109,410 69.62015 22,731 136,400 68.5

Until 1986, electricity tariffs in China had been generally unchanged since 1953 and were well below the marginal costof supply. However, at that time, the Government recognized that large increases in electricity prices would be requiredto finance electricity system expansion. With this aim, the traditional practice of grant financing was replaced by debtfinancing of new power plants, and a "new power/new price" policy was formulated. This provided that all consumptionabove 1985 levels would be priced at higher levels, computed so as to permit new plants to repay debt. Since electricityconsumption has almost doubled since 1985, and demand is still constrained by supply, there is ample evidence that, atthe margin, consumers are willing to pay the higher price. In the NC and CC grids where additions have been largelycoal-fired plants, and where demand is particularly constrained, a "willingness-to-pay" tariff based on coal firedgeneration costs is amply demonstrated.

Generation costs for coal plant at various capacity factors were calculated based on assumptions concerning economiccosts and plant characteristics. The options considered as candidates for supplying the load are coal-fired plant (unitsizes of 200 MW, 300 MW, 350 MW and 600 MW), 100 MW combustion turbines, a pumped storage plant (4 x300 MW) at Bao Quan with the first two units coming into service in 2001 and Xiaolangdi (5 x 300 MW) with the firsttwo units coming into service in 1999. Because Xiaolangdi is designed with a capacity factor of 17 percent, it isappropriate to use the corresponding values derived from these assumptions for firm energy, that is, 51.7 fen/kWh. Thisinstalled capacity is fully supported by firm energy, therefore, the only value of secondary energy is the avoidance ofthermal generation, valued at the variable generation cost of 3.95 fen/kWh. These values are based on computationsmade for Stage II in 1993, and would be substantially higher today.

A forward power sales agreement between YRWHDC and Henan Province establishes a price of 76 fen/kWh for allelectricity generated by the project beginning in 1999 or whenever the power plant becomes operational. Discounted to1997, this price is 52 fen/kWh-which is most certainly greater than the thermal alternative valued in 1993.Accordingly, all firm power from the project is valued at 2 fen/kWh.

Table A4.3 summarizes mean annual power production from Xiaolangdi as simulated by RPDI for 56 years of runoff tothe dam. The changes in average annual energy production after project year 11 have to do with the changes in thereservoirs morphology as the sedimentation increases, which affect the effective head. The Lower Reach Model(discussed below) also simulates power production in an optimization framework, but for 70 years. The latter model'sexpected annual output at full development was 6,036 GWh-about 3 percent higher. For the economic analysis, wetake the more conservative figure of RPDI.

The total power generation benefits of the Xiaolangdi reservoir at full development are computed to be Y 2,660 millionannually after all five units are operational. Discounted at 12 percent to the present, the present value of these benefits isY 16,536 million, 41 percent of total benefits.

Project Appraisal Document Page 63Country: China Project Tle: Xlaolangdl Multipurpose Project: Stage 11


TABLE A43: POWER GENERATION AT XIAOLANGDI

Mean P90 Mean P90Project Calendar Number Energy Energy Value Valueyear year of units (GWh) (GWh) (Y million) (Y million)

I 1999 1,2 2,275 1,651 1,183 8592 2000 2,3 3,679 2,257 1,913 1,1743 2001 3,4 4,231 2,282 2,200 1,1874 2002 5 5,115 2,812 2,660 1,4625 2003 5 5,115 3,218 2,660 1,6736 2004 5 5,115 3,258 2,660 1,6947 2005 5 5,115 3,258 2,660 1,6948 2006 5 5,115 3,258 2,660 1,6949 2007 5 5,115 3,258 2,660 1,694

10 2008 5 5,115 3,258 2,660 1,6941 1 2009 5 5,115 3,258 2,660 1,69412 2010 5 5,801 3,258 3,017 1,69413 2011 5 5,801 3,258 3,017 1,69414 2012 5 5,801 3,258 3,017 1,69415 2013 5 5,846 3,258 3,040 1,69416 2014 5 5,846 3,258 3,040 1,69417 2015 5 5,846 3,258 3,040 1,69418 2016 5 5,846 3,258 3,040 1,69419 2017 5 5,846 3,258 3,040 1,69420 2018 5 5,846 3,258 3,040 1,69421 2019 5 5,846 3,258 3,040 1,69422 2020 5 5,846 3,258 3,040 1,69423 2021 5 5,846 3,258 3,040 1,69424 2022 5 5,846 3,258 3,040 1,69425 2023 5 5,846 3,258 3,040 1,69426 2024 5 5,846 3,258 3,040 1,69427 2025 5 5,846 3,258 3,040 1,69428 2026 5 5,846 3,258 3,040 1,69429+ 2027 5 5,864 3,255 3,049 1,693

Irrigation Benefits. Approximately 30 million mu (2 million ha) of cropland are currently irrigable along the lowerreach of the Yellow River, about one-third in Henan province, and two-thirds in Shandong. The total irrigable area isplanned to expand to 36.67 million mu by 2000, and 40 by 2010. The dominant irrigated crops are wheat, corn, cottonand paddy. To fully irrigate these crops requires about 23 billion m3 diverted from the Yellow in addition to about1 billion m3 of groundwater available for irrigation in Henan, and about 2 billion m3 in Shandong. The mean annualvolume of Yellow River flows in the lower reach is only 32 million. Given water demands for municipal and industrial(M&I) needs, extrabasin transfers, and sediment management, water available for irrigation is seldom sufficient. In mostyears, crop yields are substantially below biological maxima due to water shortages. Wheat, corn, and sometimes cottonsometimes get no irrigation at all, resulting in yields 50 to 70 percent below those possible with full irrigation. Inaddition, the timing of irrigation water availability does not match crop needs. River flows are highest in the July-September period, but irrigation demands peak during March-June.

Proect Apprasal Doculnnt Page 64Country: Chin. Project Title: Xiaolangdl Multipurpose Project: Stage 11

Annex 4: Cost Effectiveness Analysis Summaly

Xiaolangdi will partially alleviate this shortage situation through its ability to store up to 4.57 billion m3 and divert it toirrigation when it is needed most. Even with Xiaolangdi, there will not be sufficient water to fully irrigate all crops. Butthe gains from even partial irrigation are significant. Table A4.4 shows the increases in crop yields, and gross financialand economic benefits from additional irrigations for wheat, corn, and cotton (according to preferred practice, paddy getsfour irrigations (860 m3/mu) whenever possible. Irrigation water in the table is measured at the crop; because of lowcanal and field efficiencies, about twice as much water is required to be diverted from the river. But it can be seen thateven one irrigation per crop can nearly double the income per mu, depending on the cropping pattern.

TABLE A4.4. EFFECTS OF IRRIGATION ON OUTPUT AND INCOME(AVERAGE OF HENAN AND SHANDONG PROJECT AREA DATA)

Number of Irrigations/Total Application (m3/mu)Rainfed 1 2 3 4 5

Wheat 0 55 105 155 205 255Corn 0 50 100 150Cotton 0 50 100 150 200

Expected Crop Yield (kg/mu)Wheat 140 209 268 312 343 359Corn 136 232 296 368Cotton - 31 48 61 67

Farm Income (Y/mu)Wheat 132 170 222 287 324 346Corn 221 391 533 632Cotton - 144 262 359 429

Farm Income (Y/m3)Wheat - 3.1 2.1 1.9 1.6 1.4Corn - 7.8 5.3 4.2Cotton - 2.9 2.6 2.4 2.1

Economic Returns (Y/m3)Wheat - 1.9 1.4 1.3 1.2 1.0Corn - 3.0 2.4 2.0Cotton - (neg) 1.5 1.1 0.9

The irrigation benefits were computed with the assistance of the LRM,' a nonlinear optimization model covering watersupplies and demands within a framework of hydrologic, agronomic, and engineering constraints. The model solves inannual timesteps for the 70 years of runoff data, and includes monthly constraints on reservoir operations, resourcesavailable, and competing water demands. It can solve for either the present situation or for the future years 2000, 2010,and 2020. By maximizing economic benefits from all uses of Yellow River water, the LRM produces a pattern of

The Lower Reach Model and its derivation of economic benefits are described fully in "Xiaolangdi Multipurpose Project Stage 11Working Paper: The Lower Reach Model and Economic Benefits" available in the project files.

Project Appraisal Document Page 65Country: China Project Title: Xbsolangdl Multipurpose Project: Stage 11


diversions to irrigation that not only maximizes irrigation benefits, but does so while respecting other, perhaps morepressing, demands. One of these demands is for flood control, and the LRM is restricted in its storage of water forirrigation by the need to maintain sufficient free storage in Xiaolangdi and Sanmenxia reservoirs during the months June-September to handle incoming flows. Another is the need to supply M&I demands (discussed below), which are givenpreference in water allocation decisions. A third is the need to maintain sufficient flows in the lower reach to flushsediment to the sea to slow the pace of channel aggradation.

The necessit' of flushing sediment is not debated, but the volumes of water required to do so are, ranging from 10 to over20 billion m /year on average. This necessity gives rise to a conflict between sediment management and irrigation: partor all of the water used to flush sediment cannot be diverted to irrigation. The more water released by Xiaolangdi forflushing sediment, the lower will be the irrigation benefits. How much water is actually required is the subject ofongoing studies, not completed at the time of appraisal. But for the purposes of appraising irrigation benefits, somenumber is required, and that number is chosen as about 14 billion m (the actual volume simulated will depend on avariety of factors, but 14 is taken as the target). Considering M&I and extra-basin transfer demands, this leaves about 12billion m3 available for irrigation, a number which approximates the average of recent historical diversions to Henan andShandong.

The LRM also includes water allocation constraints that require that diversions be shared between Henan and Shandongin the ratio of 1:2. This allocation has been agreed to by the concerned provinces with the consent of YRCC and MWR.Without an allocation constraint, the model would attempt to divert a much larger share to Shandong irrigation becausethe yields and canal efficiencies are higher in that part of the lower reach.

Table A4.5 reports runoff, diversions, and flows to the sea for the with- and without project cases for the years 2000 and2010 (very little which might affect the results beyond 2010 has been planned). In 2000, Xiaolangdi permits diversionsto irrigation to increase modestly, by about 0.76 billion m3, and it also permits a greater reliability of extrabasin transfers.Because the same volumes of water are available to the with and without cases,2 flows to the sea must decline. Althoughthe same sediment flushing constraint applies to both versions, the without case shows higher flows to the sea that resultfrom water being available during times of no irrigation demand.

Although the increases in annual irrigation water are small, the impacts on production and incomes are not. Thesechanges are summarized in Table A4.6. In both 2000 and 2010, the LRM finds it preferable to reschedule irrigationdiversions away from wheat toward more profitable corn and cotton when it is able to do so (i.e., when it hasXiaolangdi's storage available). This results in a greater number of irrigations for corn and cotton, and significantincreases in yields. Overall, cotton production increase by nearly 140 percent with the project, and grain production, bynearly 5 percent. Farm incomes from irrigated agriculture increase by 12.9 percent, while the economic returns rise by9.3 percent.

In 2010, the main differences are (a) greater M&I and extrabasin demands, slightly more irrigable area, and plannedincreases in the efficiency of water distribution and use. Although there will likely be increases in yields due to betterfarm practices and more intensive use of nonwater inputs, these factors will be independent of the project, and are nottaken into account (doing so would increase the benefits from improved irrigation supplies). Combined, these factorsserve to lower the relative performance of irrigation, but not by much. Farm incomes are still 12.8 percent higher withthe project, and economic returns, 8.5 percent higher.

2 Actually, there is less water available with Xiaolangdi because of losses from the reservoir (0.039 billion m3/year) and requireddiversions to resettlement areas near the dam (0.232 billion mr/year).



TABLE A4.5: CHANGES IN WATER SUPPLY PATTERNS DUE TO XIAOLANGDI(billion m3 , average values from 70-year simulation)

Irrigation Irrigation Municipal Extrabasin Flows atRunoff Henan Shandong & Industrial Transfers Estuary

2000

Without project 32.615 4.771 9.543 1.550 1.419 14.826With project 32.615 5.024 10.049 1.550 1.495 13.720change 0.253 0.507 0.000 0.076 -1.106

Percent change 5.3% 5.3% 0.0% 5.4% -7.5%

2010

Without project 32.615 4.396 8.792 2.290 2.376 14.278With project 32.615 4.478 8.955 2.290 2.489 13.650change 0.082 0.163 0.000 0.113 -0.628

Percent change 1.9% 1.9% 0.0% 4.8% -4.4%

For the purpose of appraisal, economic returns are based on projected economic (border) prices of outputs and fertilizersinputs,3 and a labor shadow wage of Y 10/day. Given recent trends in China, local market prices for grains are higherthan projected world prices. Fertilizer prices are subsidized by about 20 percent. The prevailing financial wage rate inthe project area in 1996 was Y 6.5/day. These economic values produced the "economic returns" shown in Table A4.6,as well as the economic returns per m of water of Table A4.3 above. The former figures are the annual average benefitsfrom the project. Intermediate years between 2000 and 2010 have been interpolated, and benefits beyond 2010 areassumed to remain unchanged. The present value of irrigation benefits is Y 12,089 million, which is 30 percent of totalproject benefits.

Municipal, Industrial, and Extrabasin Demands. M&I demands have been projected by RPDI to be 0.65 billion m3 in2000 in Henan and 0.90 in Shandong, increasing to 0.96 and 1.30 respectively in 2010. Supplying these demands isgiven the highest priority both by water sector decisionmakers, and by the LRM. Next in priority comes transfers to theHebei-Beijing-Tianjin (B-T) corridor, and to the industrial city Qingdao in eastern Shandong. B-T diversions are about0.5 billion m at present, scheduled to increase to 1.0 in 2000, and 1.5 in 2010. Qingdao diversions will be 0.5 in 2000,and 1.0 by 2010.

Without Xiaolangdi, these diversions are not always possible because of low river flows. In the 2000 simulations, anaverage of 81 million mi3 of shortages were reported, which dropped to only 5 with the project. This increase in

3reliability is valued at Y 3/mi, a rate estimated for similar Yellow River diversions to the urban household consumersbenefiting from Wanjiazhai Water Transfer project. In 2010, the desired extrabasin transfers are much larger, and theincrease in reliability more important. The discounted values of the increased reliability amounts to Y 1,717 million, or 4percent of total benefits.

3Based on World Bank commodity price projections of February 1997. See the Working Paper.



TABLE A4.6: CHANGES IN IRRIGATION INTENSITY DUE TO XIAOLANGDI(Average values from 70-year simulation)

2000

Average Number of Irrigations Average Yield (tons/ha)Wheat Corn Cotton Paddy Wheat Corn Cotton Paddy

Without project 4.29 1.24 2.40 4.00 5.34 4.31 0.69 6.59With project 3.53 1.90 3.56 4.00 5.00 5.27 0.92 6.59change -0.76 0.66 1.16 0.00 -0.35 0.96 0.23 0.00

Percent change -17.7% 53.2% 48.3% 0.0% -6.5% 22.3% 32.6% 0.0%

Lower Reach Crop Production ('000 tons) Crop Economic ValueWheat Corn Cotton Paddy Grains (Y million)

Without project 8,192 5,556 252 1,258 15,006 25,427With project 7,653 6,781 604 1,258 15,692 30,795change (539) 1,225 352 - 686 5,368

Percent change -6.6% 22.0% 139.7% 0.0% 4.6% 21.1%

Irrigation Benefits Municipal & Industrial(Y million) Benefits (Y million)

Farm Economic Shortages EconomicIncomes Returns (millionm3) Loss

Without project 30,917 22,603 81 243With project 34,902 24,696 5 15change 3,985 2,093 -76 -228 (positive benefit)% change 12.9% 9.3% -93.8% -93.8%

2010

Average Number of Irrigations Average Yield (tons/ha)Wheat Corn Cotton Paddy Wheat Corn Cotton Paddy

Without project 3.59 1.03 2.13 4.92 4.92 3.93 0.57 6.59With project 2.32 1.84 3.46 4,17 4.17 5.06 0.90 6.59change -1.27 0.81 1.33 -0.75 -0.75 1.13 0.33 0.00% change -35.4% 78.6% 62.4% -15.2% -15.2% 28.6% 57.9% 0.0%

Lower Reach Crop Production ('000 tons) Crop Economic ValueWheat Corn Cotton Paddy Grains (Y million)

Without project 8,316 5,585 239 1,398 15,299 25,869With project 7,037 7,188 609 1,398 15,623 30,763change (1,279) 1,603 370 - 324 4,894

Percent change -15.4% 28.7% 154.8% 0.0% 2.1% 18.9%

Irrigation Benefits Municipal & Industrial(Y million) Benefits (Y million)

Farm Economic Shortages EconomicIncomes Returns (million 3) Loss

Without project 32,043 23,586 124 372With project 36,158 25,594 11 33change 4,115 2,008 -113 -339 (positive benefit)

Percent change 12.8% 8.5% -91.1% -91.1%



Estuarial Flows. To maintain the environmental integrity of the estuary, facilitate fish spawning, and supply water tothe oilfields near the mouth, it is desirable to maintain a 50 m 3/s flow in the far lower reach, Lijin-sea. At present,under low runoff conditions, this is not possible. The river is observed to be dry in the far lower reach one to threemonths of the year, usually in the late spring. The LRM attempts to maintain this flow in all scenarios. In the withoutXiaolangdi cases, the probability that any given month is dry is 7.6 percent under 2000 conditions, and 7.3 percent under2010 conditions. Because the LRM optimizes reservoir operations, these probabilities are undoubtedly much higher thanin reality. With Xiaolangdi, the probabilities of running dry at the mouth fall to nearly zero: out of 840 monthssimulated, only four months were dry in 2000, and three in 2010. Whether this performance can be duplicated in practicewill depend on the quality of flow forecasting and reservoir operating procedures.

Dry Year Results. The economic benefits from irrigation and M&I water supply presented above are averages over the70-year simulations. How do the results vary under dry conditions, i.e., P75 runoff? The water years 1940-41 and1987-88 approximate P75 conditions, with average annual runoff to the lower reach of 20.01 billion m (average runoff is32.62)? The numbers are shown in Table A4.7.

TABLE A4.7: ECONOMIC BENEFITS UNDER AVERAGE AND DRY CONDITIONS(Y million)

2000 2000 2010 2010Irrigation M&I Irrigation M&I

Average Runoff (32.2) 2,093 228 2,008 339P75 Runoff (20.0) 4,459 579 3,847 876change 2,366 351 1,839 537

Percent change 113% 154% 92% 158%

In the dry years, the economic performance of Xiaolangdi is significantly enhanced. This result is particularly importantto farmers, who typically suffer the most when river flows are insufficient to provide adequate supplies of irrigationwater.

C. Economic Costs

The economic costs of the project were derived from the financial costs (Annex 3) by adjusting for taxes, credits, andinterest during construction, and shadow-pricing foreign exchange at Y 8.3 = $1. Costs incurred during phase I of theProject (through 1996) were inflated to 1997 levels to account for forgone opportunity cost of capital (12 percent). Totaleconomic costs excluding O&M costs total Y 24,807 million. These include the resettlement costs of Y 6,718 million.Discounted to 1997, total costs are Y 21,728 including O&M economic costs are estimated to be Y 227 million per year,beginning in 2002. The economic cost stream is shown in Table A4.8.

D. Economic Performance

Based on the assumptions contained in these cost and benefit streams, and a 50-year period of analysis, the EIRR of theproject is estimated at 20.8 percent. Its net present value discounted at 12 percent (to 1997) is Y 18,775 million. Thebenefit-cost ratio is 1.86. The economic cash-flow that produced these results is shown in Table A4.9.



TABLE A4.8: ECONOMIC CASH-FLOW MODEL

(Y million)IRR= 20.8% B/C= 1.86

M&I Irrigation Sediment Flood Control Power Total Total NetBenefits Benefits Benefits Benefits Benefits Benefits Costs Benefits

%of total 4% 30% 7% 18% 41% 100%NPV@ 12%Y 1,717 12,089 2,817 7,345 16,536 40,504 21,728 18,775NPV@ 12% $ 207 1,456 339 885 1,992 4,880 2,618 2,262

1997 - - - - - - 15,683 (15,683)1998 - - - 732 - 732 3,953 (3,221)1999 - - - 759 1,183 1,942 2,477 (535)2000 228 2,093 508 818 1,913 5,560 1,654 3,9052001 239 2,085 508 840 2,200 5,871 854 5,0182002 250 2,076 508 863 2,660 6,356 639 5,7172003 261 2,068 508 886 2,660 6,382 227 6,1562004 272 2,059 508 910 2,660 6,409 227 6,1822005 284 2,051 508 935 2,660 6,436 227 6,2102006 295 2,042 508 960 2,660 6,464 227 6,2382007 306 2,034 508 987 2,660 6,493 227 6,2672008 317 2,025 508 1,014 2,660 6,523 227 6,2972009 328 2,017 508 1,042 2,660 6,554 227 6,3272010 339 2,008 508 1,071 3,017 6,942 227 6,7152011 339 2,008 508 1,100 3,017 6,972 227 6,7452012 339 2,008 508 1,131 3,017 7,002 227 6,7762013 339 2,008 508 1,162 3,040 7,057 227 6,8312014 339 2,008 508 1,195 3,040 7,090 227 6,8632015 339 2,008 508 1,228 3,040 7,123 227 6,8972016 339 2,008 508 1,263 3,040 7,158 227 6,9312017 339 2,008 508 1,299 3,040 7,193 227 6,9672018 339 2,008 508 1,335 3,040 7,230 227 7,0042019 339 2,008 508 1,373 3,040 7,268 227 7,0412020 339 2,008 197 1,412 3,040 6,996 227 6,7702021 339 2,008 197 1,453 3,040 7,037 227 6,8102022 339 2,008 197 1,494 3,040 7,078 227 6,8522023 339 2,008 197 1,537 3,040 7,121 227 6,8952024 339 2,008 197 1,581 3,040 7,165 227 6,9392025 339 2,008 197 1,627 3,040 7,211 227 6,9842026 339 2,008 197 1,674 3,040 7,258 227 7,0312027 339 2,008 197 1,722 3,049 7,316 227 7,0892028 339 2,008 197 1,773 3,049 7,366 227 7,1392029 339 2,008 197 1,824 3,049 7,418 227 7,1912030 339 2,008 197 1,877 3,049 7,471 227 7,2442031 339 2,008 197 1,932 3,049 7,526 227 7,2992032 339 2,008 197 1,989 3,049 7,583 227 7,3562033 339 2,008 197 2,048 3,049 7,641 227 7,4152034 339 2,008 197 2,108 3,049 7,702 227 7,4752035 339 2,008 197 2,171 3,049 7,764 227 7,5382036 339 2,008 197 2,235 3,049 7,828 227 7,6022037 339 2,008 197 2,301 3,049 7,895 227 7,6682038 339 2,008 197 2,370 3,049 7,964 227 7,7372039 339 2,008 197 2,441 3,049 8,034 227 7,808

2040+ 339 2,008 197 2,514 3,049 8,107 227 7,881



TABLE A4.9: SENSITIVITY ANALYSIS

Discounted Discounted Benefits/ SwitchingItem Risk benefits costs costs EIRR value

(Y million) (Y million) (%) (%)

Base case 40,504 21,778 1.86 20.8LowinflowsforPower P90 33,221 21,778 1.53 17.8 n.a.Crop yields -20% 38,086 21,778 1.75 19.7 100Delays in construction l1 n.a. 37,280 21,778 1.72 18.6 n.a.Delays in construction 11 Lb n.a. 33,918 21,778 1.56 16.8 n.aCostoverrun/c +10% 40,504 22,419 1.81 20.3 >100Cost overrun +20% 40,504 23,110 1.75 19.7 >100

/a All project benefits delayed one year; cost schedule maintained.Lb Power benefits delayed one year; cost schedule maintained./c Phase II (post- 1996) construction costs only.

E. Risks and Sensitivity Analysis

The major economic risks associated with the project are related to: (a) construction risk; (b) cost overruns;(c) inappropriate reservoir operation and management; (d) disastrous flooding or hyper-concentrated flows; (e) delays incommissioning of power units; (f) inadequate dike and offtake maintenance programs, resulting in failure to achieve thecrop yields assumed for 2000; and (g) delays in resettlement, thereby delaying project implementation. Constructionrisks are within reasonable limits and would be manageable with continuous supervision by foreign and Chineseconsultants and international panels who have been retained for the construction phase. Cost overruns have beenminimized by incorporating actual bids for the three major civil works lots, accounting for over 65 percent of the costestimate. Chinese water resource engineers and managers have had considerable experience with the survey, design,construction, operation and management of large reservoirs on the Yellow River, subject to heavy flooding and hyper-concentrated flows. In all aspects of the appraised work, the tremendous care and caution of Chinese water resourceengineers and managers with respect to flood and sediment control is pronounced. The likelihood of egregious errors inreservoir operation and management or dike or offtake operation and management in the face of large flooding and/orhyper-concentrated flows is minimal. The operation of the reservoir will drastically lessen the possibility of disastrousflooding.

Several of these risks were tested and the results reported in Table A4.9. Should inflows to the reservoir be unusuallylow (P90, meaning that 90 percent of years would have a greater inflow) for an extended period after commissioning,power benefits would be about 42 percent lower, and the EIRR would drop to 17.8 percent.

Should crop yields fall short of expectations by 20 percent (or economic values of crop output be lower by a similarpercentage), total benefits would be 6 percent lower, and the EIRR would drop to 19.7 percent.

Delays in construction (which would not affect costs) of one year implies that all benefits would be delayed one year. Inthis case, discounted benefits would fall by 8 percent, and the EIRR to 18.6 percent. A two-year delay in benefits wouldstill produce a 16.8 percent EIRR.

Cost overruns of 10 percent (on post-1996 incurred costs, not including O&M costs), would result in only a drop in theEIRR to 20.3 percent, and even a 20 percent cost overrun would still yield 19.7 percent.

To minimize such potential risks associated with the execution of the project and its associated resettlement program,assurances were obtained from GOC under the Xiaolangdi Resettlement Project that it would ensure an adequate and



timely flow of funds, and establish and maintain effective project implementation management and detailed independentmonitoring.

Employment and Incomes. Construction of project works will generate 320,000 person-years of employment duringthe seven-year project period. Of this, 300,000 person-years will be employed directly or indirectly on the actual damworks in Henan, and 20,000 person-years on intake structures and silt basin construction for Yellow River diversions inHenan and Shandong. Specialized labor needs during project construction include: 10,000 person-years for equipmentoperation, management and maintenance. After the project is completed, 1,600 person-years of employment will benewly created for operation and maintenance of hydraulic structures, Xiaolangdi's power generation, and basinwideYellow River water resource coordination and management.

Project investments would increase labor productivity and incomes of project area farmers, people with incomes only 61percent of the national rural average and only 58 percent of the provincial rural averages in Henan and Shandong. Atpresent, there are 2.7 million farm households in the project-affected areas in Henan, and 5.0 million in Shandong.Average farm family income from agriculture in Henan is Y 4,050, and in Shandong, Y 5,535. The larger and moretimely diversions for irrigations will increase these incomes by an average of Y 413 (10.2 percent) in Henan and Y 791(14.3 percent) in Shandong. The project should also increase agricultural employment as more intensive irrigation isassociated with higher farm labor demand.


Annex 6: Financial Analysis and Assumptions

ANNEX 5: FINANCIAL ANALYSIS AND ASSUMPTIONS

A. Financial Management Policy Applied in the Financial Projections

A fully integrated financial planning model was developed to project operating and financial activity of YRWHDC in itscontinued efforts to develop and operate the Xiaolangdi Multipurpose Dam Project presently scheduled for operation inthe year 2000. The model accepts as inputs engineering assumptions on project costing, construction scheduling andother important aspects of the development of the Xiaolangdi Dam, which was initiated in 1993. In addition, otherassumptions regarding the projected operations and maintenance of the dam were considered as inputs to the revenueprojections. Operating and cost data were estimated for operating the entire facility and for providing the variousservices in power generation, water resource supply and flood and sediment control to downstream communities. Otherinputs to the model include assumptions for debt and equity financing and financial management policies.

The model was programmed to simulate the financial and commercial activities of YRWHDC, according to acceptablefinancial management and accounting principles. Such principles were drawn largely by current accounting andreporting practices of the Corporation, as outlined in the Rules for Accounting for Construction Activities and forOngoing Corporate Enterprises. In addition, the model incorporates generally accepted standards for the financialmanagement of a commercial entity. As such, the total funds available through internal and external financing sourcesare allocated based on specific priorities as would typically be done by the chief financial officer of the Corporationassuming a reasonable degree of management decision making autonomy. Requirements for working capital, obligationsto debt service are fulfilled first in order to finance ongoing operations and to fulfill credit commitments to third parties,including the Bank. New investment requirements are satisfied from the remaining internally generated funds and theestimated debt and equity financing secured by the project financing scheme. Specifically, external sources of funds,including both borrowings and equity contributions, are drawn as independent variables in order to bridge whateverfinancing gap may result between the estimated capital expenditures and remaining cash available after meeting debtservice and working capital obligations. As such, the model does not draw excess funds than what is absolutely desiredto meet the needs of the project while still maintaining adequate levels for working capital. This is particularly importantduring the early and more critical period of the project's life when the inefficient use of funds will have a significanteffect on the project's rates of return. As such, the efficiency of the modeling exercise allows the projected flows tomaximize returns under realistic expectations (base case assumptions), a policy which would be necessarily expected byany developer undertaking the project.

Annual cash surpluses are initially reinvested in short-term deposits earning a minimal yield. Cash deficits that mayresult in any given year during the projected period would be financed first by the liquidation of excess short-termdeposits or other current assets, while still maintaining an appropriate level of current assets to meet ongoing workingcapital requirements. Unidentified debt financing is not considered an option for meeting shortfalls in cash during thelatter years of the projection period. Therefore, new equity contributions are regarded as the only final source offinancing year-end shortfalls of cash in any post construction projection period. However, since these additional equitycontributions may also not necessarily be identified or assumed at the outset of this assessment, other assumptions, suchas expanding the revenue base, are revised first in order to derive a workable solution. If, on the other hand, there is noway to achieve this and still retain the integrity of the proposed project, it would therefore be necessary to assumecontributions of additional equity that would necessarily be agreed with the Government.

B. Significant Accounting Principles & Practices

The projections incorporate a number of accounting principles which are important for the interpretation of YRWHDC'sprojected financial operations and statements. These include:* Accrual Accounting. Revenues and expenses are accounted on the accrual basis for which collections and payments

are governed by acceptable financial management parameters based on experiences of other similar operators inChina.

* Construction Period. Construction is accounted as work in process until completed and made operational. Duringthis period, interest charges on both foreign and domestic borrowing are capitalized as are any other pre-operatingexpenses and income, particularly losses arising from the revaluation of foreign denominated loans and interest

Project Appralsal Document Page 73Country: China Project Title: Xiaolangdi Multipurpose Project: Stage il


earned from short-term deposits available to the project for meeting ongoing construction requirements. Fixed assetsare then depreciated once they are placed in service. Once operational status is achieved, the fixed assets, capitalizedinterest and other pre-operating expenses are amortized over a specified period based on the life of the project.Given the large gestation construction period of the Xiaolangdi Dam close attention was given to capturing allimportant cost elements.

* Foreign Exchange Losses. YRWHDC will assume the exchange risks on foreign loans arising from the potentialdepreciation of the local currency vis-a-vis the US$ and other foreign currencies. Since, YRWHDC will not earnforeign exchange in its operations, special attention was given to the estimation of its projected foreign exchangeexposure. Losses arising from foreign loan reevaluations were estimated based on the estimated devaluation of theYuan given the differential in the domestic and foreign inflation rates applied in the projections and recorded in theincome statement in the projected year they are realized. Losses realized during the construction period arecapitalized in accordance with the accounting rules for Construction activities in China and amortized over aspecified period during operations, but not shorter than 5 years. For an organization that is not experienced indealing with long term foreign exchange transactions, it is particularly important to note that the foreign exchangecharges taken on the income statement are non cash items, the related payments of which for both interest chargesand principal are made when they are due. While no provisions have been made for this, it is prudent forinexperienced enterprises such as YRWHDC to actually fund part of the realized foreign exchange losses when thecharge is actually taken so as not to overestimate the financial capacity of the enterprise. The treatment of theestimated foreign exchange losses by the model does however provide a reasonable estimation of the debt servicerequirements arising from foreign loans.

* Fixed Asset Revaluation. Presently the accounting rules in China do not allow for the revaluation of fixed assets thatwere originally recorded at cost on the books. As such, the projections do not simulate a formal revaluation of assets.However, given the importance of gauging total projected returns on an appropriate fixed asset base, the model doesinclude an off-the-books adjustment for fixed assets by applying the projected local inflation index to the fixed assetbase of the Corporation.

* Contributions to Welfare and Enterprise Funds. YRWHDC is expected to make contributions to two social fundsout of retained earnings. Such contributions would normally be held in a restricted trust account specificallyearmarked for the purpose intended. However, the projections do not reflect the establishment of such a restrictedaccount as one has not yet been established by the Corporation. Rather, the funds related to the enterprise's PublicWelfare and Enterprise Funds are included in the short-term deposits accounts along with other excess funds retainedby YRWHDC.

C. Assumptions to the Financial Projections

General Projection Parameters:

* Projection Period. The total project period is approximately 15 years, starting with the opening period at year-end1996 through 2010 after operating activity has been stabilized.

* Currency. Yuan in Millions. Foreign component construction costs were estimated and inputted in US dollarequivalents.

* Exchange Rate. Construction and operating activity for 1997 and thereafter were estimated based on the currentexchange rate of 8.30 Yuan to US$1.00.

* Price and Cost Escalation Rates. Projected revenues and costs were adjusted for inflation at the following rates:(a) local currency at 6.2 percent in 1997, 5.8 percent in 1998, and 5.5 percent in 1999-2010; and (b) foreign currencyat 1.7 percent in 1997, 2.2 percent in 1998, 2.5 percent in 1999-2000, and 2.4 percent in 2001-2010. Average yearinflation factors were applied to all expense and cost data while year-end factors were applied to balance sheet itemswhere applicable.

* Income and Other Taxes. YRWHDC is subject to a corporate income tax rate of 33 percent as well as a value addedtax on power revenue of 17 percent. Water resource and flood and sediment control fees are presently exempt fromvalue added taxes. Losses can be carried forward to offset income in subsequent years. In addition, the Corporationwill be subject to an urban consumption tax and an education tax of 5 percent and 3 percent of the value added tax,



respectively bringing the total effective tax rate on income between 42 percent and 58 percent over the projectionperiod.

* Depreciation. The Dam and related works comprise essentially the bulk of the fixed asset base of YRWHDC, asingle depreciation rate of 2.0 percent, equivalent to 50 years was applied for projection purposes.

Revenue Assumptions:

* Power Rates. YRWHDC has entered into an agreement with Henan Electric Power Bureau for the sale of powergenerated by the plant. Installed capacity is approximately 1,800 MW with expected revenue output of 2,270 GWhin 2,000, 3,679 GWh in 2001, and 4,231 GWh in 2002-2010. While the actual tariff charge has not been firmed up,the current tariff rate of 52 fen ($0.063 equivalent) was applied as a constant price rate and inflated over the projectedperiod. This resulted in an effective tariff of 63 fen in 2,000 to Y 1.08 in 2010.

* Water Rates. The YRWHDC and YRCC have agreed on applying a unified water resource tariff to all existing andfuture customers within the Henan and Shandong Provinces. It was further agreed that a surcharge would be leviedby the YRWHDC aimed at recovering the cost associated with the investment and operation of the dam for watersupply while it was understood that full cost recovery would be attained gradually over a 10-year operating period.

* Flood & Sediment Control Services. A tariff of 0.65 fen/m3 would be charged beginning in 2004 on the watercharges for flood and sediment control services supplied by YRWHDC.

Operating Expenses. Operating Expenses assumptions in constant terms are based on operating experiences of otherdams in China and are summarized as follows:

* Material Expenses. Based on 1.4 Y per kW installed by the power plant.* Wages. Estimated total personnel of 1,600 times an average wage rate of 6,000 Y per year.* Other Direct Expenses. Based on 14 percent of total estimated annual wage expense.* Works Maintenance. Based on I percent of total fixed assets placed in service adjusted for inflation.* Reservoir Maintenance. Based on 0.003 Y of kWh generated by the power plant.* Overhead. Based on 40 percent of total annual wage expense.* Sales and Miscellaneous Taxes. (a) Value Added Tax at 17 percent of Power Sales: (b) City Maintenance and

Construction and Tax at 5 percent of annual value added tax expense; (c) Education Fee at 3 percent of annual valueadded tax expense.

d Administrative Expenses. Based on 150 percent of total annual wage expense.

Sources of Financing. Approximately 40 percent of the estimated investment program will be financed from a numberof foreign and local sources. The following summarizes the amounts financed and the respective terms and conditions onforeign and domestic borrowings:

* IBRD I Loan. A loan of $460 million has been made available by the Bank, of which $325 million has beendisbursed. The loan is made available at a variable rate (currently projected at 7.5 percent per year and a 20-yearmaturity period and 7-year grace on principal repayments. Principal repayments will be made on a semiannual basisbut are shown annually for projection purposes.

* IBRD II Loan (Proposed Loan). A loan of $430 million is being proposed for the completion of the project at avariable interest rate of 7.5 percent per year with a 20-year maturity and 5-year grace on principal repayments.Principal repayments will be made on a semiannual basis.

* IDA I Loan. Approximately $110 million has been committed under IDA terms for the resettlement component ofthe project. The first drawdown of the loan was in 1995, and approximately $55 million has been disbursed. Theloan is made available on IDA terms at an interest rate of 0.75 percent, a commitment fee of 0.50 percent, a maturityperiod of 35 years with the grace period of 10 years. The annual amortization is approximately $4 million.

* Export Credit. A total of $155 million in export credits has been allocated to the project. This loan is estimated tocarry an interest rate of 6.7 percent and the principal will mature in 15 years with the grace period of 7 years. Theannual amortization is estimated at $19 million.

Project Appraisal Document Page 75Countfy: China Project Title: Xiaolangdl Multipurpose Project: Stage ll


* Development Bank. The Development Bank loan is Y 2,523 million and was fully disbursed by year-end 1996. Theloan carries an interest rate is 12.42 percent with a maturity period of 16 years and a grace period of 7 years. Theannual amortization is approximately Y 280 million, with the first payment due in 2001.

* Construction Bank. This is a loan for $200 million with an interest rate of 12.42 percent. The payment for the fullloan will be in the year 2000.

* Line of Credit. It is assumed that YRWHDC management will establish a revolving line of credit in order to financeongoing cash and working capital requirements. This credit line is short-term in nature, will be repaid on a revolvingbasis, and will carry an interest rate of 13 percent per year on any outstanding balances.

Financial Management Parameters.

It is anticipated that YRWHDC will manage working capital under different principles during the preoperating periodand after operations commence. In summary, working capital requirements for the preoperating period will be largelydriven by the annual construction program, while for the operating period, it will be more responsive to the businesscycle and the operating characteristics of YRWHDC.

* Cash Position. Cash balances are differentiated between cash on hand and cash held in interest bearing time depositsfor which a separate balance sheet account has been established. Cash on hand balances for the preoperating periodare estimated at approximately 1 percent of total annual construction. After the project becomes operational in 2000,the cash position is estimated at two weeks of operating expenses. Excess cash balances are transferred to timedeposits earning a minimal yield.

* Accounts Receivable. Receivables are estimated at 6 percent of annual construction during the preoperating periodand relate to commitments made by lenders and sponsors but not paid. After the year 2000, the accounts receivableare estimated at approximately I month of annual power revenues.

* Accounts Receivable-Other. These are based on water and flood control revenues and relate to only the operationalperiod. Although there is no precedence for such receivables, it is estimated that they will average approximately 45days of annual water resource and flood control revenues.

* Bad Debt Write-Off It is estimated that bad debt write-offs will be approximately 10 percent of outstanding waterand flood control receivables.

* Interest on Short-Term Deposits. Time deposits presently earn a minimal yield of 1.3 percent and will be projectedto remain at this amount.

* Inventories of Spare and Materials. Inventories during the preoperating period are estimated at 2 percent of theannual investment program. During operations, stocks of spares inventories are estimated to equal approximatelyone month of direct operating expenses.

* Prepaid Expenses. Prepaid expenses are estimated at 3 percent of the annual investment during the constructionperiod and 0.5 months of operating expenses when the project becomes operational.

* Short-Term Loans. Short-term loans are drawn to finance minor construction works, inventories and spares and areestimated at 12 percent of the annual investment during the preoperating period. For the first two years after theproject is operational, approximately 50 percent of inventories will be financed through short-term loans andthereafter about 35 percent. Working capital loans will carry an interest rate of 13 percent annually.

* Accounts Payable. Accounts payable go from 30 percent of the annual investment in 1997, to 25 percent in 1998 andfinally to 20 percent in 1999. Thereafter, at the startup of operations, they will be equal to one month of directoperating expenses.

* Enterprise Fund Contribution. Contributions to the Enterprise Fund are estimated at 10 percent of net income aftertaxes and commence in 2000.

* Welfare Fund Contribution. Contributions to the Welfare Fund are estimated at 5 percent of net income after taxesand commence in 2000.

.6 0 6 66 *3 *C 05

RMB Yuan (Mlttion)

PROJECilON PARAMETERS

Cunrency RMB Yuan U9

Prices/Costs: CurrentOpening Exchanige Rate: 8.30Local Infltiton Rate: 82% 5.8% 5.5% 5.5% 5.5% 5.5% 5 5% 5.5% 5.5% 5.5% 5.5 5,5 5.% 5Local tottlMion Factor 1.06 1.12 1 19 1 25 1 32 1.39 1.47 1.55 1.63 1.72 i.82 1.92 2.02 2.14oForeig Inlaion Rate: 1.7% 2 2% 2.5% 2.5% 2.4% 2 4% 2A4% 2.4% 2.4% 2.4% 2 4% 2 4% 2.4% 2.4%Foreign kiflation Factor: 1.02 10Z4 1.07 1.09 1.12 1.15 Il1l 1.20 1.23 1.26 1.29 1 32 1.35 1.38

OPERATING INDICATORS

Poww SanesIGWHl) - - - 2,270 3.672 4.223 5.105 5,105 5,105 5.105 5.105 5.105 5,105 5,789tsvtlation A4usted Price (fervKi-t) 54 57 60 63 67 70 74 78 83 87 92 97 103 108In US$ Equivaent S 0.063 $ 0~064 $ 0.066 S 0.068 S 0.069 S 0.071 $ 0.073 $ 0.074 $ 0.076 S 0.078 $ 0.080 S 0.082 S 0,084 S 0.086

Water Sales (mtdn m,31 9.000 9.200 9,400 14.500 14,500 14.500 14,500 14,500 14,500 15.000 15.000 15.000 15.000 15,000WNater Supply Twil byBura'eus (feni/n23) 0.75 0.94 1.36 2 23 3 18 4.53 6.16 8.24 11.05 14.68 19 67 26 38 35 38 46.44Stxdwge for XielanVdi 0% 0% 0% 50% 50%/ 50% 50% 50% 50% 50% 50% 50% 50% 50%Iritlation A*aed Sur'cfsarg(fanhn3) - - - 1.12 1.59 2 27 3.08 4 12 5.52 7.34 9 84 13.19 17 69 23.22In US$Eqtivaten S - S - 0.0012 S 0.0016 5 0.0023 S 0.00303 S 00039 5 0.0051 S 0.0065 S 0 0085 S 0.0111 S 0.0,144 0.0184

Flood & Sedment Control ServicesSeaveChareon TotlltWaterDiversion - I 1 1.28 1.59 3,36 5.32 7 48 9.86 12.48 In US$ Equtv.ent $ $ S $ $ - S - 0 0009 $0.0009 0,0012$ 0.00151 0.0030$ 0.0046 $0.0063 $0.00805 0.0099

OPERATING RESULTS

Operating Reverejs- 1,438 2,453 2.977 3.796 4,005 4.226 4,458 4.703 4,962 5,235 6,263Opwrating Expenses - . - 226 375 455 578 610 64 684 728 774 825 988-Not rincomi - - (312) 1 3 592 770 1,043 1.363 1,911 2,532 3.271 4.159 5,598 Cas fo Operations - - 907 1,775 2,376 2.766 2,961 3,183 3,625 4,134 4,756 5,522 6,849 Opwrating Ratio 16% 15% 15% 15% 15% 15% 15% 15% 16% 16% 16%TotaltAssets 15.988 22,411 27.126 29,864 30.877 31,610 31,781 31,979 32,406 33.332 34,828 37.008 40,022 44,696V,kwkft Capial (756) (746) (261) 781 958 1,331 2.131 2,958 4.013 5.567 7.689 10.497 14,136 19.434Working Capiet (Days) 1.242 920 1,054 1.328 1,744 2,236 2.930 3,804 4,880 6,168 7,081

FINANCIAL RATIOS

Ace Racervable (Days) 30 34 37 36 38 40 45 so 56 63 66Currenvt Ratio 0.62 0.62 0.78 40~89 1,46 1.93 2.28 2.90 3.78 5.04 6 71 8.82 11.45 146.29 Debt,/Equity Ratio 1 12 0.79 0.74 0.74 0,69 0.62 0.55 0 48 0.41 0.33 0.26 0,19 0,14 0.12 ~Debt Service Coverage 0,20 -0 22 -0.59 0 36 1.51 1.32 1.36 1 37 1.47 1.70 2 00 2.36 2 83 4 200Self Finacirg Ratio -6.2% -11,2% -21.2% -22.0% 40.9% 57.1% 1Return on Revenues -21.7% 0.5% 19.9% 20 3% 26.0% 32.3% 42 9% 5398% 65 9% 79.5% 89.4%Rettwm on Assets 00% 0.0% 0.0% -1.0% 0.0% 1 9% 2.4% 3.3% 4.2% 5 7% 7.3% 8 8% 10.4% 12.5%Return on Revatued Assets 0,0% 0.0% 0.0% -0 8% 0 0% 1.4% 1.7% 2.2% 2.7% 3.6% 4 4% 5 3% 6 3% 7.6%Retum nonEquity 0.0% 0.0% 0.0%/ -1.8% 0.1% 3.1% 3.9% 5.0% 6.1% 7.9% 9 5% 10 9% 12.2% 14.1%

2.PROJECTED RATES OF RETURN a

Return on tnvestment (After Tax) 9.37%Return on Investment (Pro Tas) 11.31%

Return on Equity (After Tax) 11.44%

0Payback Year 2009Payback Period 11.18 years

Devetped By AB.i9tt

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Xiaolangdi Multipurpose Dam Project, Phase 11_~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ i

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Return on Total Investment cAct RR (After Tax) 3937%Cash Flrow -13772 -5335 -3745 -1875 647 1655 2766 2961 3183 3625 4134 4756 5522 31977 -

Cumulative -13772 -19107 -22852 -24728 -24081 -22426 -19661 -16700 -13517 -9692 -5758 -1002 4519 36496

Payback Year 0 0 0 0 0 0 0 0 0 0 0 0 2009 0

Number of Years 0 0 0 0 0 0 0 0 0 0 0 0 -11 0

Return on Equity InvestmentAfter TaxAct IRR (After Tax) 11 44%

Cash Flow (icludmng taxes) (6,573) (4,800) (3,500) (2.912) (687) (8) 770 1,043 1,363 1,911 2,532 3,271 4,159 45,343

Power UnhtAct IRR Pre-Tax 19 71%Act IRR After Tax 16.32%Allocated Capital Costs 5,096 1,974 1.386 1,029 418 267 - - - - - - - -

Pro Tax Operating Cash Flow -5096 -1974 -1386 -25 1419 1983 2922 3073 3232 3399 3575 3759 3953 14082

AfterTaxOperatingCashFlow -5096 -1974 -1386 -25 1419 1983 2543 2560 2561 2458 2328 2148 1904 11325

Warer Supply UnitAct IRR 8.33%Allocated Capital Costs 3,994 1.547 1,086 807 327 209 - - - - - - - -

Pre-TaxOperatingCashFlow -3994 -1547 -1086 -748 -214 -15 298 436 623 905 1257 1736 2383 10468

Flood ControlAct IRR | 236%1Allocated Capital Costs 4.269 1,654 1,161 862 350 224 - - - - - - - -

Pre-Tax Operating Cash Flow -4269 -1654 -1161 -1023 -532 -301 -88 -56 -32 218 487 784 1113 9266

Co nsolidabtd Pre-TaxAct IRR 11.31%Pre-Tax Operating Cash Flow -13359 -5175 -3633 -1795 673 1668 3132 3453 3823 4522 5319 6279 7449 33816

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RMB Yuan (Millions)

OPERATING REVENUESPower Sales - - 1,438 0 2,4534 2,976 6 3,796 5 4,005 3 4,225 6 4.458 0 4,703 2 4,961 9 5.234 B 6,263.3

0Water Supply Revenue - - - 162.0 230.7 3285 446.3 5977 801.0 1,1007 1,475.4 1,9784 2,653.9 3,48289 0Flood Control Charges - - 1278 1348 1860 2308 5038 7973 1,1215 1,479.0 1,8725 3TotalOperating Revenues - - - 1,6000 26840 3,433.0 4,377.5 4,789a0 5257.4 6.0625 6.9759 6,0618 9,3676 1t,616.7

OPERATING EXPENSESMaterial Expense - - 10 2 2 3.4 36 3.8 4 0 4.2 4 5 4 7 5.0 5.2Vvages - - - 11.7 12.3 13.0 13.7 14.5 15.3 16.1 17.0 17.9 18.9 20.0Otler Direct Expens -e 1 6 1 7 1 8 19 2.0 2 1 2.3 2 4 2 5 2.7 2 8VVorksMaintenance - - 4427 506.1 570.1 621.2 676.5 736.4 801.3 8714 9471 1,028.7 1,116 8Reservoir Maintenance - - 83 142 17.2 21 9 23.2 24.4 25.8 27.2 287 30.3 36.2Ovrhead - 47 4.9 5.2 55 5.8 6.1 6.4 6.8 7.2 76 80TotatDirectOperatingExpenses - - - 4700 5414 610.7 667.8 725.8 7884 856.1 929.2 1,008.1 1,093.1 1,189.0

Sales Mlsce8aneous Taxes - - - 2089 356.5 432.5 5516 582.0 614.0 647.7 683.4 721.0 760.6 910.1AdministratkveExpense - 17.5 18.5 19.5 20.6 21.7 22.9 24.2 255 2689 28.4 30.0Bad Debt Expense - - 2.9 54 67 91 12.0 18. 26.5 36.1 48.1Othr Operatn Expenses - - - 226.5 375.0 454 9 577.6 610 4 646.0 683 9 727.7 774 4 825.1 988.1

NETOPERATING PROFIT - - - 903 1,768 2,367 3,132 3.453 3,823 4,522 5,319 6,279 7,449 9,442

Depredation 593 619 635 635 635 635 635 635 635 635 635FXLosss- - - 128 315 337 331 321 304 284 262 239 214 188Interest&FwnanceFees - - _ 498 829 812 1,030 961 880 794 704 611 513 428Inrerest&OtherCharges - - 1,219 1.763 1.784 1,996 1,918 1,820 1,713 1,602 1,485 1,363 1,251

Intereston Shot-Tern Deposits - - - 3 8 9 13 21 31 44 62 87 121 165

INCOME BEFORE TAXES - - - (312) 13 592 1,149 1,557 2,035 2,853 3,779 4,882 6.208 8,355Incone Taxes - - - - 0 379 514 671 941 1,247 1,611 2,049 2,757

NETPROFITI(LOSS) - (312) 13 592 770 1,043 1,363 1.911 2,532 3,271 4,159 5,598

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Xiaolangdi Multipurpose Dam Project, Phase T°s

RMB Yuan (Millions) 0

ASSETSFIXED ASSETS _Plant in Service 968 2 086 3,346 29,666 31,073 32.067 32.067 32,067 32,067 32,067 32,067 32,067 32,067 32,067

0Less Acc Depreciation 10 10 10 603 1,222 1,857 2.493 3,128 3,763 4,398 5,034 5,669 6,304 6.940 rNet Fixed Assets 957 2,076 3,336 29,063 29.851 30210 29,575 28,940 28.304 27 669 27.034 26.398 25,763 25,128Work in Process 13.772 19.107 22,852 - - - - - . . - 0

TOTALFIXEDASSETS 14,729 21,183 26.188 29,063 29,851 30.210 29.575 28,940 28.304 27669 27.034 26,398 25.763 25,128 -

CURRENT ASSETSCash 38 43 30 9 16 19 24 25 27 28 30 32 34 41Short-Term Deposis 717 625 514 623 716 1,009 1.719 2,503 3,510 4 975 6,999 9,687 13,182 18,243Prepaid Expenses 144 160 112 9 16 19 24 25 27 28 30 32 34 41

Accounts Receivable (Net) 288 320 225 120 233 302 384 425 472 560 657 774 917 1,143Inventories 72 80 56 39 45 51 56 60 66 71 77 84 91 99

TOTALCURRENTASSETS 1,259 1.228 937 801 1,026 1,400 2,206 3.040 4,102 5T663 7,794 10,610 14,259 19.568TOTAL ASSETS 15,988 22.411 27,126 29,864 30,877 31.610 31,781 31,979 32.406 33,332 34.828 37,008 40,022 44,696

LIABILITIES & NET WORTH

EQUITYGovemmentContributions 6,584 11,393 14,901 17.504 18,204 18,804 18,804 18,804 18,804 18,804 18,804 18.804 18,804 18,804PublicWellare Fund - - - - 0 15 34 60 95 142 206 287 391 531Enterprise Beneft Fund - - - 1 30 69 121 189 285 411 575 783 1,063Subtotal 6,584 11,393 14,901 17,504 18,205 18,850 18.908 18,986 19.088 198231 19,421 19,667 19,978 20,398Net Income Before - - - (312) (300) 248 960 1,924 3.185 4,953 7,295 10.321 14,168 19,346

Retained Eamings - - - (312) (300) 248 960 1,924 3,185 4.953 7,295 10,321 14,168 19,346

TOTALNETWORTH 6.584 11,393 14,901 17,193 17,905 19,098 19.867 20,910 22,273 24,185 26,717 29.987 34,147 39,745

BORROWINGSFXLong-Temm Loans 4,665 6.321 8,303 10,128 10,661 10,482 10.157 9,586 8,923 8,210 7.446 6,627 5,752 4,817Local Currency Long-Term Loans 2,723 2,723 2,723 2,523 2,243 1.962 1.682 1,402 1.121 841 561 280 0 0

Less Current Portion of LTD - - - - 637 656 892 967 996 1.027 1.058 1,090 1,123 -

TOTAL BORROWINGS 7.388 9,044 11,026 12,651 12,267 11.788 10,946 10,020 9.048 8,025 6.949 5,818 4.630 4.817

CURRENT LIABILITIESAccounts Payable 1,440 1,334 749 - 45 51 56 60 66 71 77 84 91 99 -

Notes Payable 576 640 449 20 23 18 19 21 23 25 27 29 32 35 .Current Portion of Debt - - - - 637 656 892 967 996 1.027 1,058 1,090 1,123 -

TOTAL CURRENT LIABILITIES 2,016 1 974 1.199 20 705 725 967 1,049 1.085 1,123 1 162 1,203 1,246 134 -I

TOTALLIABS.&NETWORTH 15.988 22.411 27,126 29.864 30,877 31,610 31,781 31,979 32.406 33.332 34828 37,008 40,022 44,696x

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INTERNAL CASH GENERATIONNet Income Before lnt 186 842 1.404 1,799 2.004 2.244 2,706 3,236 3.881 4.672 6.026 reAdd: FXLosses - . 128 315 337 331 321 304 284 262 239 214 188 oAdd. Depreciation Expense - 593 619 635 635 635 635 635 635 635 635 635OperatIn CashFlow 907 1.775 2,376 2,766 2.961 3.183 3,625 4,134 4,756 5,522 6,849Adid: Beg Cash Position 22 38 43 30 9 16 19 24 25 27 28 30 32 34Vrking Cap Increase/(Decrease) (62) 162 418 524 80 72 88 43 48 90 99 119 144 233

CASH BEFORE DEBT SERVICE 84 (124) (375) 412 1,704 2.319 2,698 2,942 3,160 3.562 4,064 4,667 5,410 6,650DEBT SERVICE

InterestCharges - - 498 829 812 1,030 961 880 794 704 611 513 428Repayment ofShort-Term Loans 428 576 640 449 20 23 18 19 21 23 25 27 29 32Principal Repayments - - 200 280 917 936 1,173 1.247 1.277 1,307 1,338 1,370 1,123Totalebt Service 428 576 640 1.147 1,129 1,752 1,984 2,153 2,149 2,094 2,036 1,976 1,912 1.582CASH AFTER DEBTSERVICE (344) (700) (1,015) (735) 576 568 714 789 1,011 1,468 2,027 2,691 3.498 5.068CAPITAL INVESTMENT REQUIREMENTS

Investment Projects 4,799 5.335 3,745 2,782 1.129 721 - - - - - - -Interest During Construction 758 916 1,042 557 279 273Annual Capital Investment 5,557 6,251 4.787 3,339 1,407 994Add: Cash Ending Balance 38 43 30 9 16 19 24 25 27 28 30 32 34 41FINANCING REQUIREMENTS 5.940 6,993 5,833 4.083 847 446 (690) (763) (984) (1,440) (1,997) (2,659) (3,463) (5,027)

FUNDS FROM LOANSFX Long-Term Loons 1.870 1.452 1,764 1,569 218 121 - - -Local Currency Long-Term Loans - - - -ShortTermLonans 576 640 449 20 23 18 19 21 23 25 27 29 32 35Interest Eaned During Construction 11 9 8 3 - .

FundsFrom Loans&OtherSources 2,457 2.101 2,222 1.592 240 138 19 21 23 25 27 29 32 35Governmont Contributions 3 300 4,800 3.500 2,600 700 600TOTAL CASH SURPLUSI(DEFICIT) (183) (92) (111) 109 93 293 710 785 1,007 1,465 2.024 2.688 3,495 5,061

Purchase of Short-Term Deposits - - - 109 93 293 710 785 1,007 1,465 2,024 2,688 3,495 5,061If Cash Deficit,

Sale ol Short-Term Deposit 183 92 111 0 0 0 0 0 0 0 0 0 0 0Additional Equity Contributions Needed 0 0 0 0 0 0 0 0 0 0 0 0 0 0 'rTotalCashRalsed 183 92 111i-_

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0RMB Yuan (Millions) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0

POWER UNIT 3Power Sales - - 16438 0 2.453 4 2,976 6 3,796.5 4,005 3 4.225 6 4,458 0 4,703 2 4,961.9 5,234.8 6,263 3 0

Operating ExpensesMaterals Cost - - 1.0 2 2 3.4 3 6 3.8 4 0 4.2 4 5 4.7 5.0 5.2Wages - - - 6 4 6.7 7.1 7.5 7.9 8.3 8.8 9.3 9.8 10.3 10 9OtherDirecdCosts - - - 0.9 0.9 1.0 1.0 1.1 1 2 1.2 1.3 1.4 1.4 1.5Wabts Maintenance - - 195.7 223 7 252.0 274.5 299.0 325.5 354.2 385.1 418.6 454.7 493.6Reservoir Maintenance - - - 8.3 14 2 17.2 21.9 23.2 24.4 25.8 27.2 28.7 30.3 36.2Overhead - - - 25 2.7 2 8 3.0 3 2 3.3 3 5 3 7 3.9 4.1 4.3Saies&Misceilaneous - - 2089 356.5 432.5 5516 5820 614.0 647.7 6834 721.0 760.6 910.1AdministrativeExpenses - - - 9.5 10.1 10.6 11.2 11.8 125 13.2 139 14.6 154 16.3Bad Debt Expense - - - - - - - - - -Total DirectExpenses - - 433.3 616.9 726.6 874.4 931.9 993.2 1,058.6 1,128.3 1,202.6 1,281.8 1,478.1

Direct Contribution Margin - - - 1,004.7 1,836.5 2,250.0 2,922.0 3,073.4 3,232.4 3,399.4 3,574.9 3,759.2 3,952.9 4,785.2

Depreciation Expense - - 1541 160.9 165 2 165.2 165 2 165 2 165 2 165 2 165.2 165.2 165.2FX Loans Losses - - - 33.3 81.9 87.5 86.1 83 5 79.0 73.8 68.2 62.2 55.7 48.8InterestCharges - - - 129.4 215.5 211.1 2677 249.9 228.9 206.5 1832 158.8 133.3 1113OtherAllocated Expenses -' 316.8 458.3 463.8 519.0 498.6 473.1 445.6 416.5 386.2 354.3 326.3

Totai Direc & indirec Expenses - - - 750.1 1,075.2 1,190.4 1,393 4 1,430 5 1,466 3 1,504.1 1,544.8 1,588.8 1,6361 1,803.4Income Contribution Before Taxes - - - 687.9 1,378.2 1,786.2 2,403.1 2,574.8 2,759.3 2,953.9 3,158.3 3,373.1 3,598.7 4,459.9

Retun on Assets Atocated 0% 0% 0% 6% 12% 15% 20% 22% 23% 24% 25% 25% 24% 27%RetumnonAssetsAllocated(Revalued) 0.0% 0.0% 00% 5.0% 9.2% 11.1% 142% 14.5% 14.8% 15.0% 15.0% 14.9% 146% 16.5%Debt Servke Coverage on Allocated - - - 0.57 2.72 2.31 2.98 2 95 3 21 3 57 3.96 4.39 4.85 7.40

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RMB Yuan (Millions) 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010WATER SUPPLY UNIT 'WaterSupplyRevenue - . 162.0 230,7 328.5 446.3 597.7 801.0 1,100.7 1,475.4 1,978.4 2,653.9 3,482.9Operating Expenses eMaterials Cost - - - - - - - - -Wages - - 2 1 2,2 2.3 2.5 2.6 2.7 2.9 3.0 3.2 3.4 3.6Other Direct Costs - 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4 0.4 0.5 0.5WorksMaintenance - - 96.5 110.3 124.3 135.4 147.5 160.5 174.7 190.0 206.5 224.3 243.5Reservoir Maintenance - - - - - - - - -Overhead - - 0.8 0.9 0.9 1.0 1.0 1.1 1.2 1.2 1.3 1.4 1.4Sales & Miscellaneous - - - - - - -Administrative Expenses - 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.6 4.8 5.1 5.4BadDebtExpense - - - - 2.9 5.4 6.7 9.1 12.0 18.9 26.5 36.1 48.1Total DirectExpenses . 102.9 117.0 134.2 148.3 162.1 176.0 195.4 218.1 242.7 270.7 302.4Dtrect ContrIbutIon Margin , - - 59.1 113.6 194.3 298.0 435.7 623.0 905.2 1,257.3 1,735.6 2,383.2 3,180.5Oepreciatton Expense - - - 171.9 179.4 184.2 184.2 184.2 184.2 184.2 184.2 184.2 184.2 184.2FX Loans Losses - - - 37 2 91.4 97.6 96.0 93.2 88.1 82.3 76.1 69.4 62.2 54.5Interest Charges - - - 144.3 240.3 235.5 298.6 278.7 255.3 230.3 204.3 177.1 148.7 124.1Other Allocated Expenses 3- - s3.4 511.1 517.3 578.9 556.1 527.7 496.9 464.6 430.7 395.1 362.8Total Direct & Indired Expenses - 456.2 628.2 651.5 727.2 718.2 705.7 692.3 682.7 673.5 665.8 665.2Income Contribution Before Taxes - - - (294.3) (397.5) (323.0) (280.9) (120.4) 95.3 408.3 792.7 1,304.9 1,988.1 2,817.7

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RMB Yuan (Millions) 1 997 199 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 0FLOOD & SEDIMENT CONTROL UNIT F&S ControServtce Revenue - - - - 127.63 134.6 1B6.0 230.0 503.6 797.3 1,121.5 1,479.0 1,872.5

Operating ExpensesMatetlals Cost - -- - - ------

tVBgeS- 3.2 3.4 3.6 3.8 4.0 4.2 4.5 4.7 5.0 5.2 5.5Oter DIrect Costs - - - 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.7 0.7 0.7 0.8WVorkcs Maintenance - - 150.5 172A1 193.8 211.2 230.0 250.4 272.4 296.3 322.0 349.8 379.7Reservoir Maitnenance - - - - - - ----

Oveet~ed -1.3 1.4 1.4 1.5 1.6 1.7 1.8 1.9 2.0 2.1 2.2Sales & MIscellaneous - - - - . - ..----

Administrative Exp01enss- 4.9 5.1 5.4 5.7 6.0 6.3 6.7 7.1 7.5 7.9 8.3Bad Debt Expense - - - - - - - - - . - --

DImect OperaUng Expenses . - - 160.4 182.5 204.8 222.8 242.2 263.3 286.0 310.6 337.1 365.7 396.5

Direct Contribution Margin - -(160.4) (182.5) (77.0) (88.0) (56.2) (32.4) 217.8 486.7 784.4 1,113.3 1,475.9

DepredatIon Expense - - - 266 7 278.4 265.9 285.9 285.9 285.9 285 9 285.9 285.9 285.9 285.9FX Loans Loswss - - 57.7 141.8 151.4 1 49.0 144.5 136.6 127.7 118.0 107.6 96.5 84.5Interest Charges . . 223.9 372.9 365.4 463.4 432.5 396.2 357 4 317.0 274.6 230.8 192.6Other Allocated Expenses . 58.3 763.1 802.7 888.2 862.8 818.6 771.1 720.9 668.3 613.1 563.0

Total Direct& Indirect Expenses . - 708.7 975.6 1,007.5 1.121.0 1.105.1 1,082.1 1,057.1 1,031.5 1,005 5 978.8 959 5Income Contrbution B3efore Taxes IT (06.7) (975.6) (879.7) (966.2) (919.2) (851.3) (553.3) (234.2) 1 16.1 500.2 912.9Consoidated Income (All UnIts) . . . (315.1) 8.1 583.5 1,136.0 1,838.2 2,003.3 2,808.0 3,716.8 4,794.1 6,088.9 8,190.5Otherlnconce . 3.2 7.8 9.0 12.6 21.5 31.3 43.9 62.2 87.5 121.1 164.8Consolidated Income - - - (311.8) 12.9 592.5 1.148.6 1,556.7 2,034.6 2,852.9 3,779.0 4,881.6 6,208.0 8.3F553-Income Tax . 0.3 379.0 513.7 671 4 941.4 1,247.1 1.610.9 2,048.6 2,757.2Not Income (Loss) . . (311.8) 12.9 592.1 769.5 1,043.0 1,363.2 1,911.4 2,531.9 3,270.6 4,159.4 8,598.0Accumuolaied Incomne(Loss) . (31 1.8) (298.9) 293 5 1.442 1 2,998.8 5,033.4 7,88663 11,665.3 16.546.8 22,754.8 31,110.1IncomneBefore all Taxes . (102 9) 369.4 1,025.0 1,700.2 2,138 7 2,648.6 3,500.6 4,462.3 5,602.5 6,968.6 9,265.3Total Taxes . - 208.9 356.5 432.8 930.7 1,095.7 1.285 4 1,589.2 1,930.4 2,331.9 2.809 2 3.667 3Effective Tax Rate . 203% 97% 42% 55% 51% 49% 45% 43% 42% 40% 40%1 -0

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POWER PRODUCTIONInstalld Capaciy (INW) - * - 600 1,200 1,800 I,800 1,800 1,800 1.80D 1.808 00 00 f,00, 1,800Estimated Annual Output (GVH). . . 2,275 3,679 4.231 Si 5,115 5,115 5,115 5,115 5,115S,1 5,115: S,801Less: Pbnt Service

0.20% 0.20% 0.20% 0.20% 0.20S 0.20% 0.20% 0.20% 0.20S 0.20S 0,20%Dowrntrne 0 0 0 5 7 a 1 0 1 0 1 0 1 0 1 0 1 0 t0 1 2NetPower Salu(GYM) - - - 2,270 3.672 4.223 5,105 5,105 5,105 5,105 5,105 5,105 5,105 5,789Prire /f - KtNH 52 52 52 52 52 52 : 52 52 S2 52 52 52 52 52Not PolwerSales(inYuonMM) - 1,18t 1.909 2,196 2,654 2,654 2,654 2,654 2,654 2,654 2,f;54 3,010WATER SUPPLY 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 zoos 2010Witer Con Haiena * Shandons ProvihcIrigtion fJ,5C0 8 ,600 8,7W1,00 11,500 11,500 11,5C0 11,500 : 11,500 12.000 12,000 12,000 12.000 IM0 12,000Mat.6 Soo Soo 700 3,000 3,000 3,000 3,000 3,000 3,000 3,0C0 3,000 3,000: 3 00tt 300DTotal Water Supply (minm3) 9,000 9,200 9,400 14.500 14,500 14.500 14,500 14,500 14,500 15,000 15.000 15,0D0 1S.000 15,000Proected Real Ts111 Rate

TarillftW3) tig-OM 0.60 0.60 0.60 0.60 0.60 0.60 060 0,60 0:60 0.60 OM 0.60 0.6006 0RealRate hcr" 15% 15S 35% 35# 35S 35% 2J% i ::25X 25% 25SA 25% 25# 25# 20%Grow,thFactor I is 1.32 1,79 2.41 3.25 4,39 5.49 6.86 S.58 10 72 13.41 16.76 20.ff 25.14Real TwniRates 0.69 0.79 107 1.45 1.95 2 64 3 29 4.12 515S 6 43 8 04 1005 12.57 is508No netim iaWder Safe$ ln YanM) 59 68 93 166 225 303 379 474 592 772 965 1,206 1,508 1,810

TO(tofta 1.001 : 1.00 tMe 1;00 1.0e:: 1.00 S . n . ::100 1 ,00 1.00 1 .C0 I 1.00 tC0 1.00ReaRda k Ir : 35%4 35S 35#% 3S% 3SS 35i# 35# :Ri?t0: 30%:E ,2, 3 O 30% 30# 30S: 30SGrowthFator 1.35 1.82 2 46 3 32 4,48 6.05 8,17 10,62 13.81 17.95 23 34 30.34 39.45 51.28Retarl fl Rates 1 35 1U8 2 46 3 32 4 48 6 05 8 17 11062 13.81 17 95 23 34 30D34 39.45 51.28Nelmat"ler Sam(inYuanl MM) 7 11_ 1 7 t00 135 182 245 319 414 539 700 910 1,183 1,538Combhwd WihtmSa (inYuan MM) 65 79 110 266 359 485 624 792 1,006 1,311 1,665 2,117 2,691 3,348Surcha For Xbowd 0 50% 50% 50# 50YW . %C 50# 50# Sm W 50% 50% WEdrRXiob W* r Reeu 'Wwg 133.0 179.5 242.3 312.0 398.2 503.2 655.4 032 7 1.058.4 1,345.7 1.674,1 ,FL.OW & wSIDOMO CONTROL

__ _ iS-wpOnvWter sawitlbSm3) 0.55 Q-&:,5 : 0.8fi 1.00 2.00 3.00 4CO S .OO) 6.00

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Project Appraisal Document Page 85Country: China Project Title: Xlaolangdl Multpurpose Project: Stage ll

Annex 7: Procurement and Disbursement Arrangements

ANNEx 7: PROCUREMENT AND DISBURSEMENT ARRANGEMENTS

Procurement

The procurement methods applicable to the various expenditure categories are summarized in Table A6. 1.

TABLE A7.1: PROJECT COSTS BY PROCUREMENT ARRANGEMENTS(in US$ million equivalent)

Procurement MethodInternational Nationalcompetitive competitive Consulting Phase II

bidding bidding Other La services NBF Lb Total Phase I (this project)

Civil WorksDam and appurtenances 1,150.4 - - - - 1,150.4 565.6 584.8

(818.1) (818.1) (412.1) (406.0)Site preparation/local works - - - - 369.9 369.9 297.3 72.6

GoodsMechanic plant/gates, etc. - - 12.91 - 240.2 253.1 78.8 174.3

(3.0) (3.0) (1.6) (1.4)Electric plant - - - - 209.6 209.6 47.7 161.9Hydrology and computers - - 4.4 - 2.6 7.0 - 7.0

(3.3) (3.3) (3.3)Vehicles 3.1 - - - - 3.1 3.1

(0.9) (0.9) (0.9)Office/design equipment - - 0.8 - 1.5 2.3 2.3 -

(0.7) (0.7) (0.7)Services

Contract management - - - - 196.0 196.0 144.0 52.0Consultancy services (dam) - - - 25.6 4.3 29.9 8.5 21.4

(23.3) (23.3) (8.5) (14.7)Consultancy services (other) - - - 2.4 4.6 7.0 1.1 5.9

(1.2) (1.2) (1.2)

Training/Institutional Support - - 9.8 0.8 - 10.5 6.1 4.4(6.1) 0.4 (6.5) (4.9) (2.5)

Environmental Monitoring - - - 8.2 1.9 10.1 4.5 5.6(3.0) (3.0) (2.1) (0.9)

Total 1,153.5 - 27.9 36.9 1,030.5 2,248.8 1,158.9 1,089.9(819.1) (13.1) (27.9) (860.0) (430.0) (430.0)

La Other procurement methods include those under shopping (national and international), consultant services (recruited in accordance with theBank's Guidelines) and training.

Lb NBF = Not Bank-financed.

Note: Figures in parentheses are the amounts to be financed by the Bank, including contingencies, and excluding taxes and duties. Totals may notadd up due to rounding.

Procedures. Procurement will follow World Bank's guidelines on procurement of goods, works and services-Guidelines: Procurement under IBRD Loans and IDA Credits, January 1995 revised January and August 1996(Procurement Guidelines) and Guidelines: Selection and Employment of Consultants by World Bank Borrowers, January



1997 (Consultant Guidelines}-in all respects. Preference for domestically manufactured goods will apply in accordancewith the World Bank Guidelines.

National Competitive Bidding procedures will include: (a) explicit statement to bidders of the evaluation and awardcriteria; (b) local advertising with public bid opening; (c) award to lowest evaluated bidder; and (d) foreign bidderswould not be precluded from participating in NCB.

TABLE A7.2: THRESHOLDS FOR PROCUREMENT METHODS AND PRIOR REVIEW

(in US$ equivalent)

Expenditure Contract Value Procurement Contracts Subject toCategory (Threshold) Method Prior Review

1. Works 5.0 million > ICB All<5.0 million ICB No prior review

2. Goods 0.4 million > ICB All >0.4 million<0.4 million Shopping

3. Services First 0.I million> QCBS/QBS/Single Source All > 0.1 millionIndividual 0.05 million Individual All Ž0.5 million

4. Miscellaneous

TABLE A7.3: CONSULTANT SERVICES(in US$ million equivalent)

QCBS QBS La INDV Lb Single Source /c Total

1. Construction supervision - - - 9.3 9.32. Claim Specialist - 3.1 - - 3.13. Dam Safety Panel - - 1.2 - 1.24. Disputes Review Board - - 1.1 - 1 .15. Panels

Sediment/flood/ice/drought - - 1.2 - 1.2Lower reach study panel - - 0.4 - 0.4Environment - - 0.2 - 0.2

Total - 3.1 3.9 9.3 16.5

L QBS is adopted because of the specialized nature of work which needs highly skilled people and is critical toimplementation.

/b Individual Specialist./c Sole source is adopted for consultant services for construction supervision and for dam safety panel and for

environmental panel in interest of economy and efficiency. The construction supervision consultants were awardedunder competition procedures for the designs in 1991, continuity of consultants must be maintained sinceconstruction contracts with the same contractors are continued until 2000 and continuity of consultants is critical tothe success of the project.

Project Appraisal Document Page 87Country: China Project Title: Xlaolangdl Multipurpose Project: Stage ll


National Shopping: Will be accomplished by comparison from quotations from a minimum of three qualified suppliers.

Prior review is also requiredfor:* prior review of works and goods are indicated in Table A7.2. The prior review thresholds result in over 85 percent of

the value of the contracts funded by the Bank.

Documents* For ICB: World Bank Standard Bidding Documents* For Consultants: Bank's standard contracts; samples for Letters of Invitation (LOI) and Supplementary Information

to Bidders* Other documents include: Bank's standard bid evaluation form and standard general and specific procurement

notices.

Disbursement

The Bank loan would be disbursed against: (a) 100 percent of foreign expenditures for the ICB civil works; (b) 100percent of foreign expenditures and 100 percent of local expenditures (ex-factory cost) for goods and 75 percent of localexpenditures for other goods procured locally; and (c) 100 percent for consulting services, studies and training. Forexpenditures relating to training, contracts for works costing less than $5 million equivalent, contracts for goods costingless than $400,000 equivalent, contracts for services of firms each costing less than US$200,000 equivalent, andcontracts for services of individuals costing less than $50,000 equivalent, reimbursements would be made on the basis ofStatements of Expenditures (SOEs). Documentation supporting the SOEs would be retained by YRWHDC and madeavailable for review by Bank supervision missions. To facilitate disbursements, a Special Account in US dollars, with anauthorized allocation of US$2 million, will be established in a bank and on terms and conditions satisfactory to the Bank.Applications for replenishment would be submitted monthly or when the amounts withdrawn are equal to 50 percent ofthe authorized allocation, whichever occurs sooner. Retroactive financing in an aggregate amount of US$5 millionwould be provided under the loan to cover payments made after March 15, 1997 for expenditures on civil works ongoingunder the first loan.

The disbursement period covers the second phase of the construction period. Because of the phased financingarrangements for this project, it is not possible to compare its disbursement with that of other projects, except to someextent for that of the Shuikou Hydroelectric Project. The disbursement schedule is based on the detailed projectimplementation program. The loan closure is delayed to correspond to the date of completion of the project, toDecember 31, 2003.

Use of statements of expenses (SOEs): see above.

Special account: US$2 million.

Retroactivefinancing: US$5 million.


Annex 7: Procurement and Disbumement Arrangements

TABLE A7.3: ALLOCATION OF LOAN PROCEEDS

Expenditure Category Amount in US$ million Financing Percentage

Works 406.00/a 100% of foreign expenditures

GoodsMechanical gate bearings 1.45 100% of foreign expenditures, 100% of localHydrology and computers 3.30 expenditures (ex-factory cost), and 75% of local

expenditures for other items procured locally

Consultant Services 100%Construction supervision 9.30Claims management 3.10Dam Safety Panel 1.20Disputes Review Board 1.10Sediment/flood/ice/drought

Review panel 1.20Lower reach study panel 0.40

Training and Institutional Support 100%YRWHDC 0.50Institutional support 1.00Sediment/flood/ice/drought 0.55

Environmental Monitoring 0.90 100%

Total 430.00

/a Disbursements will be US$206 million and DEM 346.5 million.

Project Appribsal Document Page 89Country: China Project Tile: Xiaolangdl Multipurpose Project: Stage II

Annex 7: Procurement and Disburmement Arrangements

P.R.ChInaXaoandl Mutipurpos Dan Pjet: Stge II

Poocuranwit Anangemwft(US$ MWicn)

Procurement Mtthodintonal Lb_tedCompetitive Intenationd tntemational Local Dirct Consulting

hlddkig Wddtng Shopplng Shopping Contracting Services N.B.F. Total

A. Clt WoafsMajor Civil Works /s 584.85 - - - - - - 584.85

(406.00) (406.00)Minor Cvil oa - - - - -- 72.57 72.57

S. Mechanic WorksMechanic PlentGaws etc 3.65 - - - 166.28 169.93

(1.45) (1.45)lns_abion of Medtc PlFGe - 4 34 4.34

C. Electri WorksEedlc b lnt *- - - -- 158.95 158 95

Instalaion of ElecbticPtant - - - - - - 3.01 3.01

0. AdmlnistetiorlEnglneettnrOfficeDasngn Equlpnent

Vehicles c

Foreign Consuawtcy Servi Id - - - - 17.08 4.31 21.39(14.69) (14.69)

Local Consutm SrA -- - - -

Conbac Management Site Supervisn h -to - - - 51.98 51.98

Training I -- - - 1.42 - 1.42(0.50) (0.50)

E.lnstitutionalSupport * - - * 1.39 0.76 - 2.15(1.00) (0.40) (1 40)

F. Envirnwnt Monidoringfaage-nl - - - - 4.96 0.61 5.57(0.90) (0.90)

G. SedinFent-Plood4ce MnagewmntHydrology/Coniputeni Equip - - 2.64 1.76 - - 2.56 6.96

(1.98) (1.32) (3 30)Foraign Consuts - - - 1.32 - 1.32

(1.22) (1.22)Local Consult - - - - 4.60 4.60

Foeign Tra . 0.62 - - 0.62(0.55) (0.55)

Local Trinit n - - - ooe - 0.06

Forign Study Tours - - - * 0.18 018

Total 584.85 3.65 2.64 1.76 3.67 24.12 469.21 1,089.91(406.00 (1.45) (1.98) (1.32) (2.05) (17.20) - (430.00)

Note: Figunes in p_mn em twe rpedveunaulinancod by The ntenntia Bank of Reconstruion & Developnent\s the mpr dvi wast Is dided Wte I blobb udling sfe ppaon I nd WM d. dn by na\c udiing vehcls for RP&DI. CoenWd_l according to Ne pcposal then Mle cna

to Including VW reonien of odcmt iy incuding overees & local tging\g Induding procienInt Of hdVint end crCI uUion Of hinitasu

Project Appraisal Document Page 90Country: China Project Title: Xlaolangdl Multpurpose Project. Stage ll


PR ChinaXiaolangdi Multipurpose Dam Project Stage I Procurement MethodProcuremnt Arrangements internatiomal Limtted(USS Miliion) Competitive Inte rnational intematlonal Direct Consulting

Bidding Bidding Shopping Contntcting Services N.B.F. Total

A. Civil WortMajor Civiv Works /a 565.55 - 565.55

(412.1,t) (412.14)

Minor Civil Wo'ks lb - 297.2l 29? 2S

B. Mechanic WorksMechanic Plant/Gates etc - 9.26 - 69.53 78.80

(1,55) (1.55)Instalaiotn of Mechanic PlanuGates

C. Electric WorksElectic Plant - - - - - 47.62 47S62

Instalaition of Electric Plant - 0.05 0.05

0. AdministrationlEnginearingOffice/Design Equipment - - 2.25 - - - 2.25

(0.67) (0.67)Vehices Ic 3.08 - - - - 3.08

(0.93) (0.93)Foreign Consultancy Services /d - - - 8.54 - 8.54

(7.68) (7.68)Local Consuitancy Services

Contract Management /Ste Supervision/ - -to 143.98 143.98

Treainhg/t - - - 2.92 - - 2.92(1.75) (1.75)

E. Institutional SuppoMt - - - 3.21 - - 3.21(3.21) (3.21)

F. Environment Mnitonngltanagementg 1g - - 321 1.33 4.54(2.07) (2.07)

G. Sediment-Flood.Ice ManagementHydnttogy/Computers Equip -

Foreign Consultants

Local Consult 1.04

Foreign Training

Locai Trading

Foreign Study Tours-

Total 568.64 9.26 2.25 6.13 12.78 559.79 1.158.86(413.06) (1.55) (0.67) (4.97) (9.75) (430.00)

Note: Figures in Parenthese are tne respective amounts financed by The International Bank of Reconstruction & Developmentla the major civil works aS divd into three t.lb including site preparation anK works "one by loca contamomrsIc inctudhg vehictes for RP&DI. Consultantd according to the proposal trom the consutnt\e tckidnmg the recrutment of lowrl onsutantV inciuding overseas & lKal training'S ricluding procurement of mnstrnment and construction of intrastructure

Project Appraisal Document Page 91Country: China Project Title: Xiaolangdl Multipurpose Project: Stage ii

Annex 8: Improving Project Environmental Management

ANNEX 8: IMPROVING PROJECT ENVIRONMENTAL MANAGEMENT

1. Introduction

The Xiaolangdi Project EIA prepared in 1992 presents an Environmental Management Plan (EMP) for ensuring thatimplementation of the Xiaolangdi Project will be environmentally sound, including specific Environmental ProtectionMeasures (EPMs) and environmental monitoring programs. Responsibility for carrying out the EMP was assigned to theProject's Environmental Monitoring Office (EMO), called the Engineering Resources Division (ERD) of theResettlement Office (RO) of YRWHDC, when the RO was established in 1994. The ERD has carried out its operationsby establishing its own ERD organization and staff, and by use of four subcontractors (environment consultants),(a) Reconnaissance, Planning and Design Institute of YRCC (RPDI), (b) Yellow River Water Resources ProtectionBureau (YRWRPB), (c) Yellow River Central Hospital (YRCH), and (d) Henan and Shanxi Provincial ArcheologicalInstitutes (HSAIs).

The ERD, together with the subcontractors, have prepared reports every six months in time for critical review of these bythe Expert Panel on Environment and Resettlement (EPER, also established in 1994). The EPER's reports every sixmonths have assessed the performance of the ERD and its subcontractors including recommendations for neededimprovements. At this time (February 1997), five of these EPER reports have been prepared, and the next meeting of theExpert Panel is scheduled for April 1997.

The entire work of the EMP and Expert Panel has focused on the construction phase of the Xiaolangdi Project, withseveral main activities to ensure that: (a) the work of the construction contractors is duly complying with EPMs specifiedin the Project EIA completed in 1992 (EIA/92), (b) the towns/homes/facilities being built by the Xiaolangdi ProjectResettlement Program (administered by the RO) are duly complying with EPMs specified in EIA/92, (c) the program forconstruction of the dam and of resettlement facilities is duly complying with the specified EPMs as related to protectionagainst communicable disease hazards generated by the project, to protect and preserve precious archeological relics, toprotect water quality in the Yellow River system from hazards of pollution and changes in hydrology due to theXiaolangdi Project, and to protect and enhance precious ecovalues in the overall Environmental Study Area (ESA)affected by the Xiaolangdi Project.

2. Key Study Findings

Overall Environmental Performance of EMO

In general, the overall performance of the EMO is satisfactory, but there need to be some changes made to greatlyenhance their work. The following summarizes the situation for the Xiaolangdi Project in terms of environmentalperformance over the period 1992 to February 1997 (date of EIA/97) for all the Significant Environmental Issues (SEIs):

* Relative Workload for EMO: For some SELs, the primary work is to be done by the EMO including EMOsubcontractors, whereas for other SEIs (for example, Earthquake Stability) the primary work is done by otheragencies from which EMO obtains the needed information every six months.

* Performance Adequacy, 1992-February 1997: This is based on (a) reports made available by EMO to the ExpertPanel and evaluation of these by the EPER, (b) other information obtained by the. EIA/97 team during the presentstudy.

* Needs for Improvements:* The main need is for EMO and EMO subcontractors to pay strict attention to performance on all EPMs

specified in the EIA (and incorporated into the Govemment/Bank loan agreements), and to report upon thisperformance in detail every six months (in April and October), with the April report prepared to be a strictEnvironmental Audit for the preceding year.



* The needed improvements will be achieved by (a) establishing an effective Environmental Panel,(b) restructuring the EMO into two EMOs or sub-EMOs, one for Environment and one for RS, (c) requiringthe EMOs to follow up on all Panel recommendations, (d) requiring periodic diligent reporting by the EMOsand EMO subcontractors, in time for critical review by the Environmental Panel every six months, and(e) furnishing appropriate technical training to all EMP participants.

* Projected Adequacy of Performance: With the changes to the EMO under "Needs for Improvements," theenvironmental performance of the Xiaolangdi Project should be satisfactory for each SEI and overall, with nosignificant net losses in environmental values but with very large gains.

* Project Risks: In general, all project risks are being adequately managed.

Environmental Monitoring

Background The purpose of Environmental Monitoring is to ensure that the EPMs specified in the EIA will actually becarried out including EPMs applicable to (a) final design; (b) construction, and (c) O&M. The EMO is responsible formanagement of the overall monitoring program, including surveillance of monitoring done by various components of theproject that have their own monitoring tasks, for example, dam safety instrumentation/monitoring, resettlementsupervision/monitoring, and disease control supervision. Overall responsibility of environmental monitoring is with theEMO, with assistance from EMO's various subcontractors and with cooperation from various other agencies.

The Xiaolangdi Project is a very large-scale and very complex project, and incorporation of environmental monitoringinto the project is a formidable job, primarily because such incorporation is a relatively new practice in China, as is thecase for virtually all developing countries.

The overall monitoring program being conducted by EMO now includes two components, one for Dam Construction andthe other for the Resettlement Program. These are discussed below.

It is important to recognize that the basic environmental monitoring at the construction camps is to be done by theconstruction contractors, not by the environmental consultant inspectors, nor by other ERD subcontractors includingYRWRDB and YRCH. The role of the environmental consultant inspectors and other ERD subcontractors is to "monitorthe monitoring" by the construction contractors, and for this purpose each construction contractor must submit a detailedmonthly report on its environmental monitoring work.

Dam Construction Monitoring. EMO is its own agency with its own authorities including environmental monitoring, butEMO's environmental supervision is also a part of overall project management. For initiating the monitoring workrelating to dam construction, the work of EMO functions through the Safety Department of the General SupervisionOffice of the Xiaolangdi Engineering Consulting Company (XECC). Hence, dam construction environmentalsupervision is carried out in collaboration with the engineering supervision. Individual environmental supervisionengineers, called "Environmental Construction Inspectors" (ECIs) are made available by RPDI in the construction areas.Their responsibilities include: (a) monitoring of construction contractor's activities: to ensure the constructioncontractor will comply with all requirements for EPMs during construction; (b) keeping daily and weekly records andproviding regular monthly reports on the environmental consultant inspector's work; (c) preparing drafts of notices toconstruction contractors when these are needed to improve construction contractor performance, to be given to EMO forappropriate action including delivery to the construction contractor through the Engineer Supervisor/Safety Department.

Considerable improvements are needed in the system for environmental monitoring of the construction contractors.These include (a) recognition that the role of the environmental consultant inspectors is "monitoring of the monitoring,"(b) recognition by XECC that responsibility for environmental supervision of construction contractors is with RO/ERD,not with the Engineer Supervisor/Safety Department, and (c) requirement for each construction contractor to submitdetailed monthly environmental monitoring reports.

Project Appraisal Document Page 93Country: China Project Tltle: Xlaolangdi Multipurpose Project: Stage 11


Resettlement Monitoring. EPMs are incorporated in the entire resettlement planning and implementation process, withattention given to (a) availability of land resources, (b) house construction and household amenities, (c) RS villageinfrastructure including water supply, power, waste management, roads, schools, and clinics, (d) improvement ofinfrastructure in host areas to take care of additional needs for RS, (e) provision of EIAs for all RS-sponsored projectsincluding irrigation and industrial projects (including provisions for pollution control), and (f) various otherenvironmental needs.

The present review shows that much more attention must be given to the problem of RS environmental monitoring,including appointment of an Environmental Chief (working-level chief) by each RS village who will do the basic RSvillage monitoring with monthly reports. The funding for the Environmental Monitoring Chief should be furnished byRO/ERO.

Other Environmental Monitoring. In addition to the environmental monitoring described above, the overallenvironmental monitoring program includes attention to all other SEIs. These include archeological relics, earthquakestability, public health, riverine water quality, reservoir area clearing, precious ecovalues, flood control, and publicparticipation.

Needed Improvements. To date, ERO has not got around to giving sufficient attention to the environmental monitoringneeds described above, and it is timely now for ERO to begin doing this job.

Environmental Management

Environmental Management Related to Project Stages. The job of the EMO/ERD is to carry out the EMP as specified inthe EIA, to ensure that all EPMs and environmental monitoring will actually be carried out in the subsequent stages ofproject implementation. The following summarizes the Environmental Management program up to 2001:* For the Remaining Construction Period (1997 to 2001)

* Continuing monitoring surveillance of major SEIs:Dam construction.RS design/construction/operation.Archeological relics management.Earthquake stability evaluations.Flood forecasting/warning/presentation system.

* Evaluation of needs for reservoir area clearing: Special study for 1997.* Continuing monitoring/surveillance of other SEls.* Special environmental enhancement studies, 1997-99.* Planning by ERD for EMO functions following completion of construction of the dam and RS facilities.

* For Operation of Project Components (1997 to 2001): Continuing monitoring surveillance of completed RS villages.

Assignments to ERD and ERD Subcontractors. Review shows that EMO capabilities, including capabilities of RPDIstaff who worked on EIA/92 and are now in the ERD/RPD1 subcontractor group, are progressively increasing in terms ofskills needed for the EMO job, but that (a) considerable continuing training of these staff is highly desirable tosupplement the very limited training furnished every six months by the EPER, and (b) the ERD needs to develop/usemechanics for making more effective use of other agencies having pertinent specialty expertise, for example, on the issueof wildlife. It should be recognized that ERD/RPDI environmental staff are mainly generalists and when they areconfronted with problems required specialized expertise, they should bring this expertise into the picture.

The ERD-cum-Subcontractors' performance needs improvement in a number of ways, as follows:* The performance of the RPDI team on dam construction should be much improved, assuming that each of the three

major construction contractors will prepare a detailed monthly report to ERD.



* The role of the RPDI team, now limited mostly to the dam construction area, should be expanded to give "equalattention" to the Resettlement Program.

* The work of the ERD staff and of all subcontractors should be progressively improved much faster through provisionof the extra training noted above. This will include training of ERD staff in how to make effective use of theexpertise of other agencies as needed, including local environmental protection bureaus at the county level (forexample, on precious ecoresource issues).

* The work of the YRWRPB as now practiced for the RS program, because it is limited to visits once every sixmonths, is of little value. Also, it needs improvement for the dam construction program. The YRWRPB work forthe RS villages covers only water supply mineral quality, which is only one of the various parameters of concern, andeven for this visits made only every six months are hardly worthwhile. The work of environmental management ofthe RS villages should be assigned totally to RPDI. The YRWRPB work should be limited to water qualitymonitoring of streams in ESA, and noise/dust/air pollution monitoring in dam construction area, to be done everythree months, for monitoring of the monitoring done by the construction contractors.

ERD Reporting. ERD reporting has been geared to match the needs of the Expert Panel, with reports produced every sixmonths, one month ahead of Panel Meetings. However, these have given only limited attention to the recommendationsmade by the EPER.

Follow-Up Special Studies. The EIA/92 report recommended that some additional follow-up studies be undertaken inorder to obtain optional enhancement benefits from the Xiaolangdi project. None of these has been needed for the damconstruction stage operation but they should be carried out before dam construction has been completed. Therecommended studies include those for (a) wetlands preservation, (b) optional water balance, (c) reservoir fisheries,(d) forestry rehabilitation in the area around the reservoir, (e) use of the reservoir area as a regional recreational park, and(f) enhancement of downstream agriculture. The TORs for the recommended studies are given in EIA/97 Annex 6including tasks, skills, timeframes, and costs. All of the studies are to be done in this phase of the project by selectedChinese experts in the specialties concerned, and all of the recommended plans should be prepared at the feasibility level.

Training of EMP Participants. It is now realized that a tailored training program is needed for Xiaolangdi for the staff ofERD and of ERD's subcontractors, and the proposed program is as follows.* Tailored classroom training (combined with field observations) of selected staff of ERD and of ERD's subcontractors

(RPDI, YRWRPB, YRCH), in environmental technology for EIA for major dam/reservoir projects, with sessions of10 calendar days every three months for a period of two years, with instruction by distinguished ChineseEnvironmental Technologists.

* Field observation training in environmental monitoring for selected ERD and other YR agency staff, say for 10persons, for a period of one month with a selected appropriate agency in a foreign developed country.

Expert Panel Operations. With respect to Panel membership, it would be very helpful if an additional member beappointed to the Panel, who should be a distinguished Chinese Environmental Engineer, who could serve as the EPER'sChinese counterpart. An alternative is to reestablish the panel system to be two panels, one for Environmental and onefor RS.

With respect to the Panel's field trips, the procedure used to date has been to "piggyback" the environmental field tripsonto the RS field trips, but this has not permitted sufficient time for the needed field environmental work. Hence, it isrecommended that in the future the environmental and RS visits be separately arranged.



3. Conclusions and Recommendations

Overall Conclusion

Given the improvements listed above, it can be expected that the Xiaolangdi Project's status in terms of environmentalprotection will be upgraded from its present level of "fair performance" to excellent performance. Much progress inperformance has been achieved since EIA/92, but it must be remembered that the Xiaolangdi Project is a large andcomplex project and that the conceptlprogram for ensuring that the project is environmentally sound is very complex andpioneering for a major water resource development project in China. Hence, despite the progress made to date, muchmore needs to be made and, based on the "lessons learned" over the period 1992-97, the entire Xiaolangdi Project EMPshould be restructured and improved.

Responsibility for Environmental Management

The environmental management job is now assigned to RO, which has a suboffice called the Environmental ResourcesDivision (ERD), which is the EMO for carrying out the EMP. The work of the EMO has been reviewed every sixmonths by the EPER and the reports of the EPER are in effect "Environmental Audits" of the work of RO/ERD onenvironment. These audits show that the EMO has been able to function with only partial effectiveness, primarilybecause the resettlement job itself is huge and requires the RO's attention to such a degree that insufficient attention isavailable for EMO. For this reason, the work of the EMO subcontractors has been only partially effective forenvironmental control of dam construction, less for environmental control of resettlement, and lacking in othercomponents including attention to disease control, archeological relics, and precious ecoresources. The alternatives forcorrecting this problem are either (a) strengthening RO/EMO, or (b) establishing an EMO/Dam to be managed by theDam Engineering Office, and leaving with RO the EMO/Resettlement.

Expert Panel Restructuring

The present situation of the EPER can be considerably improved by (a) strengthening the existing Panel by adding someChinese Environmental Technologists, and (b) reestablishing the Panel structure into two panels, one on " EnvironmentalManagement" and one on "Resettlement Management." The Environmental Management Panel would be concernedwith both the EMO/Dam and the EMO/RS (see Annex 2).

Environmental Auditing

As noted above, the reports of the EPER have amounted to Environmental Auditing, but have not been officiallyrecognized as such, hence many of the findings and recommendations of the EPER have not been fully implemented. Itis recommended that the Panel visits continue to be made every six months, and that the Panel reports made in April eachyear be classified as official Environmental Audits. There should also be understanding that Panel's recommendationson environment, made every six months, will be acted upon by the EMOs and duly reported upon in their 6-monthreports. The Panel's meetings should be extended to a period of three weeks each, to enable comprehensive reviews andcritiquing together with training.

Environmental Management for Dam Project

Improvements Measures. The program for Environmental Management for Dam Project should include all SEIs exceptthose relating to RS, including dam construction, control of diseases affected by building and operating the dam, relicscontrol, and riverine water quality monitoring. With the proposed new EMO/Dam setup, it should be readily possible tocarry out the recommended needed improvements in EMO operations related to the dam. These will includeimprovements in (a) performance of the Environmental Construction Inspectors (under RPDI control), (b) control of theconstruction contractors through the requirement that each construction contractor submit a detailed monthly report on

Project Appraisal Document Page "Country: China Project Title: Xiaolangdi Multipurpose Project: Stage 11


the construction contractor's environmental management operations, (c) the system for preparation of competent"notices" to the construction contractors on particular problems and transmittal of these to the construction contractorwithout interference by XECC's Engineer Supervisor/Safety Department, (d) performance of the other EMOsubcontractors, (e) provision of continuing periodic expert assistance to the EMO/Dam and EMO/RS, and (f) provisionsfor training of EMO staff in environmental management technology.

Project Appraisal Document Page 97Country: China Project Ttle: Xblobngdi Multipurpose Project Stage 11

Annex 9: Resettlement Progress Report

ANNEX 9: RESETTLEMENT PROGRESS REPORT

1. Inundation Impact as Updated in 1994

Xiaolangdi Dam construction affected 40 villages in 10 townships. The total amount of land acquired is 35,503 mu,including 21,300 mu of cultivated land. The total number of people affected is 10,574 and the total house areademolished is 302,100 m2 .

The reservoir would affect 174 villages in 29 townships in eight counties of Henan and Shanxi Province. The census andinventory in the reservoir area was conducted in 1986 and partly updated in 1991. Due to the rapid economic growth inthe reservoir areas, a full census and inventory was conducted from April to December 1994 at the request of localgovernments. As compared with 1991, the total population in the reservoir area increased by 16.93 percent, house andcaves increased by 62.07 percent while factories and mines increased by 212 percent with a 91.54 percent increase ofemployees.

Table 1: Inundation Impacts As Updated in 1994

No. Impact Unit QuantityI Population to be inundated 188,1381.1 Rural population losing land and house No. 164,3341.2 Rural population losing access to road No. 5,3061.3 Urban losing house No. 9,5991.4 Employees in enterprises No. 4,9481.5 government employees No. 3,9512 Land to be inundated mu 416,8232.1 Cultivated land mu 200,7452.2 Forest land mu 32,8872.3 Other land mu 183,1913 House and caves m2 7,430,0004 Factories No. 2475 Mines No. 5406 Road km 1,0227 Transmission line km 9178 Communication line km 778

II. Resettlement Policy Framework

Resettlement Polices. The Chinese resettlement policies stipulate the following guiding principles for large water projects:(a) restoring and improving current income levels of resettlers; (b) ensuring adequate household grain production;(c) increasing net income per unit of land; (d) increasing household income through nonfarm jobs; (e) transferring peoplefrom agricultural to nonagricultural registration; (f) minimizing social stress; and (g) ensuring acceptable living standards.

Compensation Principles. In accordance with above policies, the following compensation principles have been adheredto in Xiaolangdi resettlement planning and implementation:

* Land. Compensation is paid to reflect the loss of use of the land rather than loss of title. The methodology stipulatedin the Land Administration Law is adopted for compensation estimation. Land compensation should be used torestore and improve the living standard of the relocatees and host population.



* House and caves. Compensation should be paid at replacement costs. The replacement costs should be evaluatedand determined by technical experts.

* Industries and mines. Compensation should be paid at replacement cost for equipment, structures and otherfacilities.

* Infrastructure. Compensation is paid at reconstruction cost to restore its original function. The cost should beestimated according to the reconstruction technical design.

Resettlement principles. In line with the above policies, the following principles are adopted in resettlement planning,design and implementation:

* The population subject to resettlement should not only maintain its current standard of living but it should also directlyshare in project benefits.

* The resettlement transition period should be minimized and adequate support for both social and economic developmentshould be provided during the transition period.

• Resettlement should achieve the complete social and economic re-establishment of those dislocated, on a viableproductive basis, through the creation of project-funded new industrial, service sector and agricultural employmentactivities.

* Insofar as changes of occupation are necessary, the replacement opportunities should properly recognize the social,communal, cultural, educational, and vocational profile of those affected, and any changes in economic activities shouldbe introduced on a voluntary basis.Resettlement of the agricultural population should be land-based wherever possible.Land sharing with host villages should be based on the principle of mutual acceptance and should be planned so as toprovide higher incomes (from all sources) for relocatees and hosts.

* The resettlement plans should have popular acceptance and the affected population should be consulted.* Resettlement distances should be minimized and opportunities for resettling entire communities and natural groups

should be provided.Houses and community facilities at new town and village sites should be constructed to higher standards.The resettlement plans for towns, villages and enterprises should minimize the loss of existing agricultural lands.

* The resettlement plans should have adequate institutional arrangements to ensure effective and timely implementationand adequate monitoring and evaluation arrangements.

* The financial resources to canry out the relocation and development proposals should be available when and whererequired. Development plans should be prepared in concert with relocation plans.

* The impact of resettlement on the natural and socioeconomic host environment should be considered acceptable.Only those enterprises that will be economically viable should be considered for relocation and the compensation for theassets of the nonviable enterprises should be used to create new employment opportunities.

* Inundated items of infrastructure such as roads, bridges, etc., should be replaced so that the previous level of service ismaintained or improved.

* If sharing farmlands does not result in achieving target incomes, some of the labor force should be offerednonagricultural employment opportunities.

* Family members of the employees of affected state enterprises and institutions can go into nonagricultural sectors on avoluntary basis. The units of local governments, once compensated, shall be responsible for such employmentarrangements.

III. Resettlement Design Optimization

The preliminary technical design for Xiaolangdi Resettlement Project was conducted between 1986 and 1991 whenMWR and SPC reviewed and cleared the technical designs. The World Bank appraised the project in 1993. Rapideconomic growth in the reservoir area since 1991 has significantly increased the inundation impacts. Meanwhile, thedamsite resettlement has yielded valuable experiences for Xiaolangdi Resettlement. The technical designs have been



under continuous consultation with local governments and the affected communities for improvement. With the aboveconsiderations, the resettlement technical design has been modified for optimization.

Resettlement Schedule. Resettlement is planned to be carried out in four stages. Phase I is resettlement at the dam site.It occurred between 1992 and 1994. Phase 11 is in the area below EL 180 and is planned to be implemented from 1994 to1997. The key date during the dam construction is the completion of the cofferdam and river closure in the fall of 1997when the reservoir will begin to fill to EL 180. The number of people to be resettled in Phase II is 25,026 rural peopleand 2,600 state workers. Phase III is in the area between Elevation 180-265 and will mostly take place from 1997 to2000. The population to be resettled in Phase III is 131,235 rural people and 3,900 state workers. The Xiaolangdireservoir will be operated to full supply level at 265 m for approximately 10-15 years to allow for sediment deposition.Phase IV is resettlement between Elevation 265-275 and will mostly take place from 2010 to 2012. In the post-deposition period, the reservoir will be raised to EL 275, requiring the resettlement of another 24,777 rural people and500 state workers by 2011. Overall, 198,712 people will require relocation and rehabilitation on account of the creationof the Xiaolangdi Reservoir. Table 2 shows the actual movement of people up to December 31, 1996 and the plannedmovement starting from 1997 to 2001. It will be noticed since whole villages are being moved, some people in PhasesIII and IV are grouped with people in Phase II to ensure that there is no social disruption of villages. For example, PhaseII requires 25,026 people to be moved, but a total of 45,500 are being moved because 17,000 people in Phase III and 900in Phase IV have been grouped together with Phase II to preserve the integrity of the villages as people are moved.Similarly, in Phase III, 800 people have been included from Phase IV.

Table 2: Estimates of Population to Be Relocated

Reservoir Current (Total Population to Be Moved by Year Unit: 1,000) Total tolevel Population be Moved

92 93 94 95 96 97 98 99 20 10 11

Damnsite 10,197 6.6 2.3 1.0 10,574IX0 M 24,200 25.0 25,026265 M 123,619 17.0 20.6 28.9 31.6 33.1 131,235275 M 20,671 0.9 0.1 0.7 11.0 12.1 24,777State 7,101 2.6 3.9 0.5 7,101workers

Total 185,788 6.6 2.3 1.0 45.5 20.6 29.0 31.6 37.7 11.0 12.6 198,712

Reservoir Resettlement below EL 180. The directly inundated population in Phase II is 25,026 in Jiyuan, Xinan andMengjin Counties. The planned population for resettlement is adjusted to include those who will be inundated in Phase111, but will lose access to communication and power supply during Phase 11. The total number of people for resettlementin Phase 11 is now adjusted to 46,133 in 27 villages, including 42,425 rural and 3,708 urban population. They will beresettled in Xinan, Jiyuan, Mengjin, Wenxian, Mengxian, Yuanyang County and Yima City. According to the 1994inventory, there are 234 industries and mines to be inundated in Phase II. After extensive market surveys and discussionswith the affected enterprises, it is agreed that 13 enterprises will be relocated, 157 enterprises will transfer into otherproductive operations or be combined through technical innovations and 64 enterprises will drop out of production withcompensation.

Reservoir Resettlement at EL 180-265 & EL 265-275. The total population that needs to be resettled during Phase III andIV is 142,005, including 118,985 in Phase III and 23,020 in Phase IV. Eleven towns and 553 factories and mines will beinundated and need relocation. The resettlement technical designs are being optimized as detailed implementationdesigns for Phase III and Phase IV. They are expected to be completed at the end of April 1997 and submitted to MWRand SPC for review in July 1997.



Henan will need to resettle 91,331 rural population during Phase III and IV, including 6,500 in Mengjin County, 12,816in Mianchi County, 862 in Shanxian County, 53,148 in Xinan County and 18,005 in Jiyuan County. Mengjin, Mianchiand Shanxian Counties will resettle the resettlers within their counties. Land carrying capacity analysis indicates thatXinan County is only able to resettle 11,360 people within Xinan and 35,961 people will have to be resettled inWenmengtan, Zhongmou, Kaifeng and Yuangyang County. Jiyuan will resettle 10,754 people within the county and7,251 in Wenmengtan.

Xiaolangdi Reservoir would affect three counties in Shanxi, i.e. Pinglu, Xiaxian and Yuanqu. Pinglu and Xiaxian haverelatively small impacts and the affected population will be resettled within their counties. Yuanqu County will resettleits 34,701 rural population in 58 resettlement sites.

Cost Estimate. The World Bank appraised project cost at 5.1 billion yuan in 1993. With the latest inventory, priceescalation and optimization of resettlement designs, RPDI reestimated the resettlement cost of Xiaolangdi ResettlementProject. Unit price analysis was conducted according to typical designs to determine unit price. All compensation rateswere reestimated and revised, including land, houses, structures. The appraisal mission of Xiaolangdi MultipurposeDam Stage II Project reviewed the resettlement cost. The total cost amounts to 8,645 million yuan, including 7,839million yuan for the reservoir resettlement, 612 million yuan for Wenmengtan Scheme and 193 million yuan for HouheScheme. The total baseline cost is 6,109 million yuan with a physical contingency of 609 million yuan and a pricecontingency of 1,927 million yuan.

IV. Implementation Status

Organizational Establishment. A complete institutional set-up has been established for the implementation andmanagement of Xiaolangdi Resettlement Project. The Ministry of Water Resources is the leading body in guiding theproject implementation while YRWHDCRO assumes the full responsibility of the project implementation. A contractsystem has been adopted between the two provinces and MWR for the project implementation. The resettlementinstitutional setup consists of leading groups and resettlement offices at different levels of government.

Leading Groups. Both the central and local governments have set up leading groups for Xiaolangdi ResettlementProject. The leading groups are the decision making bodies at different levels of the governments dealing with majorissues in policy, financing, land, provincial coordination. The Central Leading Group is headed by a Deputy Director ofSPC and has, as its members, a Vice Minister of MWR and the vice governors of both Henan and Shanxi Provinces.Henan and Shanxi have both set up provincial resettlement leading groups. The leading groups are headed by vicegovernors and the directors of relevant departments and resettlement bureaus are the group members. All affected countygovernments have set up leading groups for the project.

Resettlement Management Offices. Resettlement offices have been set up under all leading groups to coordinate andimplement the project. The resettlement office in MWR is responsible for overall resettlement planning andimplementation coordination. The Resettlement Office of Xiaolangdi Project has been responsible for resettlementplanning, financial management, internal monitoring and supervision. Provincial and municipal resettlement officeshave been responsible for resettlement planning, management, supervision and implementation. County resettlementoffices have been working under the county leading groups with township governments and village committees toimplement the resettlement plan.

Institutional Capacity Buildup-Staffing. Xiaolangdi Resettlement Project has been adequately staffed with anemployment of 430 people in both Henan and Shanxi Provinces. Most of the resettlement officers have received higheducation and have had working experience in rural development, particularly in the water sector.

Training. YRWHDCRO has drawn up a detailed training program for resettlement staff. The training program coversresettlement planning, project management, financial management, project monitoring and information system

Project Appraisal Document Page 101Country: China Project Title: Xlaolangdi Multipurpose Project: Stage II


management etc. Training will be conducted through seminars and study tours. YRWHDCRO has issued its "TrainingManagement Methodology for Xiaolangdi Resettlement Project." A training officer has been appointed to take fullcharge of training programs. By the end of 1996, YRWHDCRO and the resettlement offices at different levels hadorganized 18 training seminars for 1,328 people.

Development of Management Regulations. To strengthen resettlement management, MWR, YRWHDCRO and theprovinces have formulated the following regulations for resettlement management:

* Planning And Design Guidelines For Xiaolangdi Resettlement* Xiaolangdi Resettlement Project Implementation Management Methodology* Resettlement Planning And Management Methodology* Resettlement Management Methodology for Industries And Mines* Resettlement Inspection And Acceptance Methodology* Financial Disbursement Regulation

Resettlement Phase I: Damsite Resettlement-Physical Relocation. Damsite construction affected 10,574 people in 12villages, of whom 6,911 needed to be resettled. Resettlement preparation started in 1992 and completed in 1994. Twelveresettlement villages have been established with complete community amenities of water supply, power supply', roads,communication and broadcasting. 2,315 households have moved into new houses with a total area of 296,000 m .

Livelihood Development. 8,500 mu of cultivated land have been allocated to the resettlers and the objective of one mu ofcultivated land per capita has been achieved. Seventeen enterprises have employed 963 resettlers and the affectedvillages have set up 31 rural enterprises and 408 resettlers have been employed.

Income Evaluation. YRWHDCRO and independent monitors conducted an income survey among 82 resettlerhouseholds in the damsite area in 1995. The survey indicates that significant changes have taken place in the incomestreams of the resettler households and their per capita income has increased significantly. On-farm income has droppedfrom 48.4 percent of their total income before resettlement to 15.3 percent after resettlement while off-farm incomeincreased from 39.4 percent to 68.4 percent. Households with per capita income below 300 Y dropped from 42.7 percentbefore resettlement to 23.3 percent after resettlement. Households with per capita income between 800-1000 yuanincreased from 3.7 percent to 12.2 percent while households with per capita income above 1,000 Y increased from 9.8percent to 32.9 percent.

Public Assessment of Resettlement. The independent monitor conducted post-resettlement surveys among resettlers ofdifferent ages at the damsite for their opinions on various aspects of resettlement including new houses, surroundings,relations with hosting communities, safety, health etc. The surveys indicate high levels of satisfaction.

Resettlement Phase Il: Reservoir Resettlement below EL 180. Phase 11 resettlement experienced some delays duringstart-up stage because of the management institutional readjustment. Phase 11 resettlement actually started in 1994 whenYRWHDCRO was established for the project implementation management.

Residential Site Development. It is planned to establish 34 resettlement villages for 42,425 resettlers in Jiyuan, Xinanand Mengjin counties. The total planned area for the resettlement villages is 6,000 mu and has been fully allocated. Outof the 6,000 mu, 5953 mu had been leveled by the end of 1996. 11,268 households have finished their house

2construction with a total area of 1,011,000 m . The completion rate is 88 percent. The new houses are either self-constructed or contracted to construction teams by the resettlers. All new houses are of brick and cement type with betterquality. By the end of 1996, 16,580 people in 4,478 households had moved into their new houses. Please note in Table 3that although 88 percent of households have completed houses, only 40 percent have moved. The rest have moved inpart so that families can continue to work in the old villages as well as start farming in the new village. This is tomaximize their incomes in the transition period and to prevent any chance of decline in original incomes as they move.

Project Appraisal Document Page 102Country: China Project Title: Xiaolangdl Multipurpose Project: Stage If


Table 3: House Construction & Relocation Progress as of October 31, 1996

House Construction (household) Whole Households RelocatedCounty Total In Construction Completed Plan Relocated Percent

Jiyuan 3,362 321 3,041 3,747 1,555 41Mengjin 1,415 41 1,374 1,568 951 61Xinan 2,048 440 1,608 2,187 925 42Yima 1,734 0 1,734 1,734 0 0Mengzhou 1,895 623 1,272 2,221 802 36Wenxian 569 379 190 1,181 0 0Yuanyang 245 0 245 233 245 105

Total 11,268 1,804Lg 9,464 12,871 4,478 35

/a All housing will be completed by December 1996.

Table 4: Main Village Infrastructure Provided as of October 31, 1996

County Electric Wells Water Towers (m3) High-voltage Lines km Road Outside Village kmPlan Comp. Percent Plan Comp. Percent Plan Comp. Percent Plan Comp. Percent

Jiyuan 20 14 70 855 170 20 38 14 37 32 19 60Mengjin 7 5 70 309 750 243 21 17 81 20 17 85Xinan 9 8 90 405 1,500 370 36 39 108 14 14 100Yima 3 1 33 222 250 113 5 5 100 3 2 66Mengzhou 6 6 100 438 310 71 13 14 108 6 5 83Wenxian 3 1 33 224 78 35 11 5 45 6 2 33Yuanyang I 1 100 52 60 115 2 2 100 4 6 150

Total 49 36 73 2505 3,118 190 127 97 76 85 65 76

Land allocation and on-farm development. It is planned to allocate 38,781 mu of cultivated land for the resettlers, ofwhich 31,766 mu would be irrigated. 34,467 mu of land had already been allocated to the resettlers by the end of 1996,including 26,654 mu of irrigated land. Extensive on-farm development works are underway to provide the outstandingirrigated land to the resettlers.

Table 5: Cultivated land Allocation For Resettlement by October 31, 1996

County Resettlement Land Allocation Including: irrigatedHousehold Labor Plan Progress Percent Plan Progress Percent

Jiyuan 3,747 6,055 12,121 11,193 89 12,121 11,193 89Mengjin 1,568 2,324 6,148 5,336 88 2,192 1,187 55Xinan 2,187 3,068 6,222 6,375 102 3,223 2,906 90Mengxian 2,221 3,275 8,264 8,651 105 8,264 8,651 105Wenxian 1,181 1,705 4,960 1,713 35 4,960 1,678 34Yuanyang 233 390 916 1,198 130 856 1,038 121Yima 1,734 2,531 150 0 0 150 0 0

Total 12,871 19,348 38,781 34,467 89 31,766 26,654 84

After land acquisition for the resettlers, all hosting villages have redistributed their remaining farm land among thevillagers. In the meantime, they have either used the land compensation on on-farm development to raise productivity ofthe remaining land or have started off-farm and side-line economic activities to restore income losses due to land


Annex 9: Resettlement Progres Report

acquisition. By the end of 1996, 28 township and village enterprises have been established including seven in Jiyuan,twelve in Mengjin, five in Xinan and four in Yima.

Resettlement of Industries and Mines. After extensive market surveys and discussions with the affected enterprises, it isagreed that 13 enterprises will be relocated, 157 enterprises will transfer into other productive operations or be combinedthrough technical innovations and 64 enterprises will drop out of production with compensation. Now 14 newenterprises have been established and 14 are still under reconstruction. Most of the 64 enterprises to be canceled aresmall private mines. It is planned that they will fully utilize their compensation to tap the resources in the resettlementarea or develop sideline economic activities.

Resettlement of Industrial Population. The total number of employees in the inundated enterprises is 13,684, including815 urban registered and 12,234 rural registered. The 815 urban employees are regular workers in the enterprises andthey will be employed in the relocated or new enterprises. The 12,869 rural registered employees are mostly daily wagelaborers. All the daily wage laborers will receive a compensation equal to 3-6 month salary.

Wenmengtan Development. It is proposed to resettle 46,172 people from Xinan and Jiyuan counties in the downstreamWenmengtan region. To increase the farmland available and to reduce the risk of flood damage, river training works willbe carried out. The scheme would protect 200,000 mu of flood-prone farmland and create 81,000 mu cultivated landthrough warping and soil improvement to 46,172 resettlers from Xinan and Jiyuan County under the project. HenanRiver Bureau has been contracted to undertake the river training works and land development in Wenmengtan. Thebureau has set up Wenmengtan Project Office and has organized 18 construction companies with 1,224 staff. Rivertraining works started in 1992 and are well underway.

Houhe Irrigation Scheme. This scheme is proposed as a compensation measure for Gucheng Town in Yuanqu county,where most of the irrigated land would be inundated. The scheme would irrigate an area of 75,000 mu and includecompletion of construction of the Houhe Dam and the irrigation schemes. Shanxi Province has set up the HouheReservoir Project Office with the full responsibility to manage the construction works of both the dam and the irrigationworks.

A local hydropower bureau contractor was awarded the contract for Houhe Dam construction. Civil works have alreadystarted and are scheduled to be completed by June 1999. Yuncheng Prefecture Survey and Design Institute completed thetechnical design optimization for Houhe Irrigation District in October 1996. MWR reviewed and cleared the optimizeddesign in December 1996.

Resettlement Phase III & IV. Reservoir Resettlement EL 180-275. Phase II resettlement has already started in ShanxiProvince. Implementation progress includes acquisition of 18,100 mu of cultivated land, construction of four pumpstations to irrigate 720 mu of land, establishment of nine enterprises, house construction of 456 households and roadconstruction of 41.4 km. Land acquisition is over for the relocation of Gucheng Town. Its infrastructure construction isbasically complete for roads, water and power supply. 16,100 m2 of houses have been constructed for institutions inGucheng Town.

Financial Disbursement & Financing. The World Bank Credit is US$110 million and the rest of the cost is financed bythe Government. By the end of 1996, the World Bank had disbursed US$46.69 million while the local funds disbursedamounted to 1,921 million yuan.

Project Appraisal Document Page 104Country: China Project Title: Xlaolangdl Multipurpose Project: Stage II


Table 6: Financial Disbursement as of December 1996(unit: million)

Year 1992 1993 1994 1995 1996 Total

Credit disbursement (US$) 6.55 20.60 19.54 46.69Local funds disbursement (Yuan)

Planned by YRWHDCRO 33.00 100.00 250.00 710.00 828.00 1921.00Of which:Henan Province 26.39 79.42 200.03 515.00 464.00 1284.83Shanxi Province 6.62 15.15 22.05 36.00 97.00 176.82Wenmengtan 23.08 140.10 122.30 286.20Houhe 1.60 3.00 22.00 26.60Special items above county 3.00 10.00 13.00Others 5.43 2.52 12.90 112.70 134.00

Subtotal of local 33.00 100.00 250.00 710.00 828.00 1921.00

Preferential Policy. Both Henan and Shanxi Province stipulated their preferential policies for the resettlers underXiaolangdi Project in 1993. The preferential policies include priority in employment, tax exemptions, registrationtransfer, training, material supply. Henan Province instructed all provincial and municipal government departments inMay 1996 to support the eight resettlement counties in their sectoral operations, investment proposals review, investmentand technical guidance. These departments proposed specific support programs. Some of them have already beencompleted.

Consultation & Participation. Public participation and consultation is a continuous process for Xiaolangdi ResettlementProject since a very early stage. All relevant departments, institutions and the affected population, including therelocatees and host population have participated actively in the resettlement planning, designing and implementationactivities. Resettlement principles, policies and strategies were formulated in close consultation with the affectedpopulation. The affected communities provided important input in the inventory of physical losses, optimizing andfinalizing resettlement designs for implementation. Every affected family participated in the 1994 census and inventoryupdating and signed off at the household inventory record. Resettlement planning was conducted by the design institutesbased on the resource carrying capacity and local development plans. Resettlement designs were finalized after thoroughconsultation and consent of local government and the affected population.

Vulnerable Groups Women participated in the resettlement planning and design. They have enjoyed equal opportunitiesin agriculture land allocation and employment. They have played an important role in house economy development andresettlement. Old people and children have been given particular support and care during resettlement. Old people livingwith their children are usually taken care of by their children. Those old people living alone are mostly taken care of bythe village committees. Village committees organized support to help them during relocation, and have usually providedfor their living. They could choose to live either in the village or in the Home For the Old at the expense of the villagers.Some villages provide pension for the old people. All resettlement villages have built up their own primary schools andhigh school students attend local schools. Schooling was not interrupted during relocation. Some villages have even setup kindergartens.

There are some disabled or impoverished resettler families. The disabled are all taken care of by the villages as with theold. The impoverished families are provided support under the project in kind, subsidies and training on a case-by-casebasis to help them get out of poverty.

Grievances Redress. The grievance redress mechanism has been established as planned and the resettlement offices atevery administration level have been functioning well as the main redress body. The grievances filed so far are largely oftwo categories i.e. compensation and resettlement. The former includes properties missed during the inventorying and



disputed ownership. The latter covers resettlement site selection, house construction, land allocation, transfer ofteachers. Most of the grievances are redressed in a timely fashion.

Resettlement Monitoring & Supervision. Internal monitoring. YRWHDCRO has been conducting regular monitoring ofresettlement progress in both Henan and Shanxi Provinces. Both provincial and county resettlement offices haveappointed monitoring staff and set up the monitoring and reporting system. YRWHDCRO started in late 1994 tocomputerize the monitoring system. YRWHDCRO has completed the development of its Resettlement InformationManagement System. Five subsystems have already been put into operation including the Basic and Geographic System,Resettlement Planning System, Resettlement Management System, Socioeconomic Monitoring System andAdministrative Management System. YRWHDCRO is now planning to conduct systematic training and computerize itsresettlement monitoring system.

External Monitoring. YRWHDCRO has engaged the Resettlement Monitoring Institute of North China HydroelectricUniversity to conduct independent monitoring and evaluation of Xiaolangdi Resettlement. The institute has beenconducting semi-annual monitoring since 1993 and has submitted six monitoring and evaluation reports. The institutehas employed tracking and random sampling monitoring methodologies in resettlement monitoring. The institute madeextensive household interviews and group discussions. The institute has covered resettlement physical progress and thesocioeconomic conditions of both the resettler and hosting communities. The institute has focused on resettlement sitedevelopment, physical progress of resettlement, compensation payment, livelihood development ( land adjustment anddevelopment, farm yields, industrial development, education, public health and incomes in new host areas), participationand consultation, preferential policies, resettlement of the vulnerable groups and functioning of resettlementorganizations and living standard monitoring and evaluation. External monitoring has provided valuable input tooptimize resettlement design and resettlement.

Supervision. The Resettlement Bureau of Yellow River Conservancy Commission (YRCCRO) has been contracted asthe supervising engineer to supervise the resettlement implementation of the project. YRCCRO has started, sinceSeptember 1996, monthly supervision of resettlement implementation, focusing on the physical progress, engineeringquality, financial expenditure and disbursement. This is the first case of using supervising engineers for resettlement inChina.

International Panel. An international panel of resettlement and environment experts was organized in July 1994 forXiaolangdi Resettlement Project. The panel has met every six months to review and evaluate the project progress andadvise on resolving any issues that may arise during the implementation of the project. The panel's main findings havebeen the following: (a) The planning and design of the resettlement programs has been undertaken very well;(b) Consultation process with resettlers has been followed satisfactorily; (c) Compensation amounts paid to resettlershave been adequate for almost 99 percent of the people although there are odd families where the compensation amountsdo not meet their needs. The village councils and County Resettlement Offices have made up the deficit for these poorfamilies; (d) The housing and infrastructure construction have generally been excellent and ahead of schedule; (e) Thetransfer of people to the new locations is also smoothly undertaken so that there has been no major loss of income;(f) Land development for farms has been slow and needs to be speeded up. However, resettlers' incomes have not beenaffected due to other sources of employment, e.g., in the dam construction; (g) resettler incomes have generally increasedenormously due to employment generated in the construction sites and in industry; (h) environmental monitoring andimplementation of the environmental management plan within new villages can be improved for sanitation (solid wasteand drainage within villages) and some public health problems within villages. It has been recommended that twoEnvironmental Management Offices be set up one for the Resettlement project and another for the Dam Project. In thisway more focused attention can be paid to the resettlement; and (i) although resettler grievances have been adequatelyaddressed, there does not seem to be proper documentation of all grievances and the redress actions taken. The panel hasrecommended a system to record all grievances and actions taken to resolve them.


Annex 10: Construction Schedule

ANNEX 10: CONSTRUCTION SCHEDULE

Status of Main Civil Works Contracts for Lots 1, 2, and 3

The Bank's mission in October/November 1996 reviewed the construction for the three lots by YRWHDC. The missionshave had detailed discussions with XECC (the "Engineer") and with CIPM (the foreign consultant) who is advisingXECC. A great part of the review centered on the work of the lot 2 contractor, China-Germany International Contractors(CGIC) and the cash flow problems of all three contractors. There was considerable discussion of how to improve thesupervision capability of XECC and the role of the owner at the site. The status of the different contracts is discussedbelow and is shown in Table 1.

TABLE 1: PROGRESS IN CIVIL WORKS, NOVEMBER 1996

Item Actual completion Scheduled work % of total works % of time used Remarks

Lot I -DamUnclassified Excav. 4.95 mil m3 4.95 mil m3 100% 100% on scheduleRight Bank Fill. 6.2 mil. m3 6.0 mil m3 44% 50% on scheduleConcreting 47,000 m3 40,000 m3 117% 75% ahead of scheduleCon. Grouting 17,000 holes 17,000 holes 71% 25% ahead of scheduleLeft Bank Excav 1.2 mil m3 1.20 mil m3 85% 33% behind schedule

Lot 2 Intake/TunnelsIntake Excav. /a 4.60 mil m3 4.60 mil m3 100% 100% on scheduleIntake Tendons /a 420 nos. 420 nos. 100% 100% on scheduleDiv.T. Phase 1 Excav /a 3.4 km 3.40 km 100% 100% on-scheduleDiv.T. Phase 2/3 Excav /a 3.4 km 3.40 km 100% 100% on scheduleDiv.T. Phase 4 Excav/a 3.4 km 3.40 km 100.% 100% on scheduleDiv.T. Lining La 2.0 km 2.25 km 34% 45% behind schedulePlunge Pool Excav. 5.00 mil m3 4.9 mil m3 95% 78% ahead of schedulePlunge Pool Concrete 0.1 mil m3 0.15 mil m3 25% 33% 2 mo. behind schedule

Lot 3 -Powerhouse/tunnelsPower Tunnel Excav 0.11 mil m3 0.11 milm3 100% 85% on scheduleTransformer Chamber 25,000 m3 25,000 m3 63% 80% ahead of schedulePower Tunnels Conc 85,000 m3 85,000 m3 77% 85% on schedulePowerhouse Excav. 150,000 m3 150,000 m3 55% 58% ahead of schedulePowerhouse Tendons 320 nos. 320 nos. 100% 100% on schedule

/a All these events are on the critical path.

The overall progress and implementation status of the three lots until November 1996, as indicated in the monthlyprogress report, is as follows:

(a) Lot I completion is 47 percent in terms of costs.(b) Lot 2 completion is 48 percent in terms of costs.(c) Lot 3 completion is 44 percent in terms of costs.

The progress so far is on schedule and should be able to meet the diversion schedule.

Project Appraisal Document Page 107Country: China Project Title: Xlaolangdl Multipurpose Project: Stage II


The schedule summarized in the table is generally satisfactory for all three Lots. The Lot 1 contractor has completedall the unclassified and rock excavation and about two thirds of the concrete placement on the right bank and theconsolidation grouting. The contractor has placed 7.2 million m3 of the fill on the right bank, which is about 16 percentmore than required. The contractor has started to work on the left bank excavation of 1.28 million m3 and is well aheadof schedule. The major problem encountered by the contractor was the consolidation grouting, which has been resolved.There are some other issues. The first one is that the zone 3 material for the transition zone is too coarse and isincompatible with the coarse filter. The second issue is the cutoff wall needs for the left bank, which needs to be definedmore carefully through more subsurface investigations. Presently, the subsurface rock overhang needs to be definedmore carefully so that the contractor can proceed with the cutoff wall construction. About 125 foreign workers and 1,357local workers are at the site. The quality of works performed is outstanding, and the relationship with the client isexcellent.

All of the Lot 2 contractor's tasks still fall on the critical path. YRWHDC and CGIC agree that the river diversionmilestone date will remain as October 30, 1997. The intake and tunnel excavation are completed and concretingschedule for the tunnels and intake are all falling on schedule, and the performance in late 1996 had considerablyimproved since May 1996. The rate of concreting work of the tunnels, intake and plunge pool had already reached80,000 m 3/month in October 1996 and 100,000 m 3/month in November. These rates are close to the peak rates that needto be accomplished in 1997 to achieve the closure targets to complete the construction for the intake, plunge pool andtunnels. The schedule is dependent on the completion of the mid-gate chamber, which is very large and complicated.

General quality control for shotcrete, concreting work and other works meet all the specified requirements as indicatedfrom most of the tests by the contractor.

The Lot 3 contractor is on schedule in the construction of all the works and has made up for all lost time. The mainissues raised on this contract are related to the divider wall in the outlet draft channels in the afterbay. The divider wall isextremely unstable and saving the wall by anchors is delaying the concreting of the afterbay channels. The missionsuggested that the present rock divider wall be removed and replaced by a concrete wall, which would save a lot of time.XECC/RPDI will review the designs and ensure that a decision is made on the proposed designs so that the contractor'swork will not be delayed.

Project Costs

The costs of the major civil works, which accounts for about 60 percent of the total costs, have been reestimated in theprogress reports as given in Table 2 below, which indicates that the costs of these works have not changed very muchfrom the appraisal estimates. The total price and physical contingencies have changed slightly but have not exceeded thecosts estimated during the appraisal. These costs do not include the duties, which could add another 10 to 15 percentadditional costs. The overall costs of the project do not seem to have changed very much compared with the originalcontract prices.

Schedule of Project

A detailed schedule of the construction works has been agreed with the contractors. The schedule by Lots are attached inFigure 10.2.

Disbursements

Disbursements were lagging behind schedule because of slow startup of the Lot 2, which had problems with unexpectedgeology and due to poor performance of local contractors. However, this contractor is performing quite well and has theproject implementation well in hand. The disbursement have picked up and 70 percent of the loan has been disbursed up

Prolect Appramsal Document Page 108Country: China Project Tile: Xlaolangdl Multipurpose Project: Stage II


until March 1997. From the present projections, most of the first loan will be fully disbursed by mid-October 1997 (seeFigure 10.1).

TABLE 2: REVISED COST ESTIMATES OF CIVIL WORKS CONTRACTS

Main Dam Lot I Intake etc. Lot 2 Power Facil. Lot 3 Total Costs-All LotsDescription Local Foreign Local Foreign Local Foreign Local Foreign Total

(Y mil) (US$ mil) (Y mil) (DM mil) (Y mit) (USS mil) (Y mil) (US$ mil) (US$ mil Equiv)

Base Cost 465.6 188.7 1025.3 523.7 279.9 80.8 1,770.8 576.1 885.8Daywork 37.9 4.1 51.1 12.3 11.6 3.0 100.7 14.4 32.0Variation 0.2 0.1 17.1 5.9 17.3 6.0 9.0Other Variation 7.1 1.2 43.1 11.9 50.3 8.2 17.0Price Esc 258.0 31.0 315.0 50.0 108.0 9.0 681.0 69.3 188.4

Total 768.8 225.1 358.1 61.9 416.6 98.7 2,620.1 674.0 1,132.2

Original Award 560.4 215.9 1089.7 506.0 315.8 84.2 1,965.8 596.3 940.1Increase 33.3% 13.0% 20.4%SAR Est. 2,401.4 780.0 1,200.0

FIGURE 10.1: LOAN DISBURSEMENTS: ACTUAL VS. SAR ESTIMATES

500

450

400--

350 -

c 300 Fr = Serbesi.2 ~~~~~~~~~~~~~~~~~~Serles2

E 250 - - -_--- Series3

°200 - . , Serles4

150

100

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e 0

XIAOLANGDI CIVIL WORKS SCI IEDUl E

1994 1995 1996 1997 1 99 1999 2000 2001 2002 2003 2004 oD Task Natne _ [ _ _ _ _ _ " I " I I I I I I - I - 1- 0

1 LOT I -MAIN DAM _ c

2 CAMPS AND OFFICES

6 PLANTS AND EQUIPMENT

11 MO6ILIZATION AND DEMOBILIZATION

14_ RIGHT BANK EXCAVATION AND FOUNDATI

21 UPSTREAM AND DOWNSTREAM COFFERDA __

26 RiVERBED ._ _ - _

34 LEFT BANK -EXCAVATION AND FOUNDATI _ =

38 MAIN DAM- FILL _ _ u

47 LOT 2 - INTAKE. TUNNELS AND SPILLWAY _ _

48 CAMPS _

53 SITE INSTALLATIONS

57 PLANT AND EQUIPMENT >

64 MOBILIZATION AND DEMOBILIZATION _ _ _

67 iNTAKE - RIVER TRAINING STRUCTURES _=

71 INTAKE - EXCAVATION AND ROCK SUPPOR _

73 INTAKE TOWERS- GROUTIRNG _ _

76 INTAKE TOWERS - GENERAL WORKS

80 INTAKE TOWERS. GANTRY CRANES _

82 INTAKE TOWER -IRRIGATION _ m

85 INTAKE TOWERS- FREE FLOW * _ - -

92 INTAKE TOWERS - POWER . m_ -99 INTAKE TOWERS - ORIFICE . = 0 i

106 INTAKE -ACCESS ROADS AND BRIDGES X

109 DIVERSION TUNNEL NO. 1 _ 0

116 DIVERSION TUNNEL NO. 2 m _ > to

123 DIVERSION TUNNEL NO. 3 __ ______._ _ ._ Xe

130 DIVERSION TOWERS AND OTHER WORKS O *

00137 MIDGATEF CHAMBERS _ _ .____.____ _.___ ___

P.ge I

0*

0-C.-.

~~~~~~~~~~~~~~~~~~~~~~~~o 0-

XIAOLANGD1l CIVIL WORKS SCIIEDULE : .. 199-I t995 i99fi t997 1998 1999 2090 2991 2002 2003 2004 I11) Task Namel I,. 1, g|'. | t"|' I |', " | |'. 1' I, '. I|I 'I I| " " |' " "|"|''II I " I | I. | I t ie|| 1|. |I '8 ' - I , l 0141 CONVElRSION OF DI VERSION TO1 OlIFICE I .

145 INTAKE - IUNNELS FROM UPSTREAM SLOP

150 SEDIMENI TUNNELS _

17 SEDIMENT GATE CliAMBERS _ i -

16;2 - FREE FLOW TUJNNELS - - I -

173 SERVICE SPILLWAY - - . - -

i80 O -6TtiER TUNNELS AND SIIAFTS m_185 TUNNEL OUTLETS

190 PLUNGE POOLS -GENERAL m_194 PLUNGE POOL - CONCRETE I 9 -

200 PUMP CHAMBER AND SHAFTS * 8

202 OTHiER DOWNSTREAM WORKS _ ml

207 LOT 3 - POWER FACILITIES m _

208 CAMPS AND OFFICES

212 EQUIPMENT AND PLANT

215 MOFiLIZATION AND DEMOBILIZATION _ 9

218i POWER TUNNELS - -22? POWERIIOtISE _ - , -230 BUSTUNNELS _ so

234 ACCESS TUNNELS & SI4AFTS - POWERIIOU m_24-6 TRANSFORMER CIIAMBER (TC) __

249 DRAFT TUBE GATE CHiAMBER (DGTC) I mI254 ACCESS TUNNELS AND SHAFTS - TC AND D

264 TAILRACE TUNNELS - m X27t DRAFT TUBE TtJNNEl.S _

284 TAILllACE CIIANNELS AND OtlTI.ET m. . .t

290 OTHER TUNNELS AND SIIAFTS _ _

0u

~~~~~~~~~~.._ ___ .__ ..__ __ . --- - ------- .- __ _- .__--- _- --- ----- __ _ 00 ___._

Page 2 2 'a

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Annex 11: Terms of Reference for XlaolangdUSanmenxia Dams Inspection Panel

ANNEX 11: TERMS OF REFERENCE FOR XIAOLANGDI/SANMENXIA DAMS INSPECTION PANEL

General

The Panel of Experts will be. appointed by YRWHDC and Sanmenxia Dam Bureau, to undertake periodic,comprehensive and independent review to evaluate features and actions pertaining to the safety of the dam andappurtenant structures. The Panel is guided by the dam safety assurance objectives of the cognizant authority and byrelated legislation, regulations, standards and criteria.

Organization and Membership

The Panel shall contain four permanent members with wide, specialized experience in the following fields:* Flood Hydrology* Geotechnique* Earth Dams and Appurtenant Hydraulic Structure Design* Concrete Dam and Hydraulic Structure Design* Hydraulics Specialist* Sedimentology* Instrumentation* Construction

Large Hydroturbines and associated mechanical structures• Large Electrical Generators and associated works (switchyards)

At appropriate times, the Panel will be enlarged as necessary by the addition of specialists in other fields, such ashydrology, sedimentology, hydraulic turbines and in any other area, where the Chairman of the Panel, in consultationwith YRWHDC and Sanmenxia Dam Bureau, considers it advisable.

A Chairman will be appointed by YRWHDC and to coordinate communications, to call and chair its meetings, to ensurethe membership's activity and to provide balance to its reviews and recommendations.

The composition of the Panel, and the areas of expertise that it covers may be varied during the course of constructionand operation of the Dam as considered appropriate by YRWHDC and Sanmenxia Dam Bureau in consultation with theChairman.

Meetings and Schedules

The Panel will convene at regular intervals to review the status of work in progress. For the Xiaolangdi and SanmenxiaDams, the frequency of meetings and their timing will be adjusted to conform with the schedule of works in progress, butthe time between meetings shall not normally exceed 12 months during construction and initial period of operation (forthe first five years) and not exceed 36 months after the first five years. At each meeting the scheduled dates for the nextmeeting and tentative timing for the subsequent meeting will normally be fixed, to enable Panel members to arrange theirindividual schedules.

The Panel will prepare and submit written proceedings of the meetings, including recommendations, within three weeksof the meetings, and in case of emergency will prepare technical memoranda or aide memoirs during the meetings. Apreliminary report will be prepared before the adjoumment of each meeting. All reports will be submitted to YRWHDC,Sanmenxia Dam Bureau and to the World Bank.

Project Appraisal Document Page 112Country: China Project Title: Xiaolangdl Multipurpose Project: Stage ii

Annex 11: Terms of Reference for XiaolangdUSanmenxia Dams Inspection Panel

Scope of Reviews

The subjects on which the Panel is expected to comment are listed below. The Panel should also comment on any othermatter which it perceives to be important to the successful completion and operation of the project.* Assessment on hydrometerological data and changed runoff conditions and the adequacy of the flood forecasting

system.* The sufficiency of the geological investigations and the interpretation thereof, the engineering implications with

respect to foundation design, stability of natural and excavated slopes at dam site and reservoir area.* Estimates of salutation progress and efficacy of sediment flushing facilities.* Adequacy of the design of earthfill dam, hydraulic structures and hydropower facilities.

Appropriateness of construction planning, quality assurance procedures and construction supervision.* Adequacy of siltation monitoring program.* Effectiveness of instrumentation system, including the efficiency of different instruments, data collecting and

processing system.* Suitability of the plan for initial reservoir filling.* Efficiency of flood forecasting and warning system.

Appropriateness of Operation and Maintenance Plan.* Availability and workability of Emergency Preparedness Plan.


Annex 12: Guidelines for Emergency Preparedness Plan

ANNEX 12: GUIDELINES FOR EMERGENCY PREPAREDNESS PLAN

A detailed Emergency Preparedness Plan (EPP) should be established for each dam within the drainage area or operatingsystem as a whole. If there is more than one system operating within the same drainage area, the EPP should becoordinated by a joint committee on emergency operation composed of representatives of all operating organizations.The EPP should be approved by the Government Agency.

The EPP should be reviewed at regular intervals for the need of updating and adaptation to alterations of the physical andsocial environment, if necessary. Appropriate intervals for the review may be periods of five to ten years dependingupon the progress of regional development.

The EPP should deal with, but not be limited to, the following aspects:. hydrographic observation and flood warning scheme;* drawdown and flood control operation of reservoir;* emergency emptying of the reservoir;* inundation maps for flows up to the design flood, and for catastrophic conditions caused by dam failure;* evacuation of flood-threatened areas;. rescue operations and other emergency provisions;

e equipment, material and support available for emergency relief;. coordination of emergency relief actions with third parties (for instance: civil defense, police, hospitals, etc.);. emergency standby of public utilities;. emergency operation of power plant, water supply scheme associated with the dam;* emergency warning;* emergency communication;* emergency transportation;e emergency access to the damsite;e emergency decision-making process and procedures.

The EPP may be done for several types and modes of emergency but should include the analysis of the most severepossibility; that is, the instantaneous failure of the dam. The possible effect of the failure of upstream dams should alsobe taken into account.

The EPP should cope with emergency precautions and possible emergency repair measures at the dam site and withwarning and emergency relief action downstream of the dam.

Flood warning and emergency warning systems should be checked for reliability and efficiency before the beginning ofeach flood season.

The EPP should include instructions to be followed by the local operating staff in the event of loss of communicationswith the leading control agency.

In case of imminent danger or of a major accident, corrective action must be taken immediately and independently ofnormal administrative procedures. Enough authority should be vested in the operator's top level technical personnel toorder emergency preventive or repair measures without asking for special authorization from management.

Clear and easily understandable emergency instructions should be issued to all operating units. These emergencyinstructions, which must include a definition of the supervising units authorized or obliged to issue orders underemergency conditions, should be easily accessible. The need for updating should be checked periodically and alwaysafter institutional, operational and administrative changes.

10. Operating staff should be trained and periodically retrained in emergency operations.

Project Appmisal Document Page 114Country: China Project Title: Xiaolangdl Multipurpose Project: Stage II

Annex 13: Guidelines for Dam Operation and Maintenance

ANNEX 13: GUIDELINES FOR DAM OPERATION AND MAINTENANCE

The operation of a dam and reservoir needs to be understood in the context of the multiple users who are involved,contractual agreements therewith, and best efforts possible to optimize benefits for all.

For each dam and reservoir, a reservoir capacity allocation scheme should be prepared. The scheme should usuallyinclude the following items:* Reservoir capacity allocation for different uses at several elevations and a reference to the use allocations made in

planning and designing the project.* Flood regulation criteria and flood discharges.* Sediment regulating rules and siltation.* Water supply for irrigation.* Water supply for municipal and industrial uses.* Hydropower generating operation.

To ensure the operational safety, the performance of the dam and appurtenant structures should be carefully monitored.The monitoring should include, but not be limited to, the following items:* Instrumentation system, including the surface and embedded devices, should be monitored at regular intervals. The

accuracy of data obtained from the readings should be checked annually for two or three years after commissioningof the dam and later at longer intervals. The actual loads and loading combinations acting upon the structure shouldbe compared with those of the original design. At the same time, the original design criteria and safety strategyshould be reviewed with emphasis on the compatibility with current technology.

* Visual examination of structures should be carried out at regular intervals.* The exposed surfaces of a concrete dam and appurtenant concrete structures should be visually examined for cracks,

spelling, leaching, leakage, indication of deterioration or chemical reactions and damage from erosion or cavitation,etc. Earth rockfill embankments should be examined for cracks, leakage, saturated areas, springs, sinkholes,evidence of piping, erosion, frost heave, crest alignment, bulging or depression of slopes and berms, animal burrows,and the deterioration of riprap or other slope protection materials.

* If the visual examination reveals evidence of material deterioration or unsafe structural behavior, or yields doubtsabout the structural and/or operational safety, a more in-depth investigation by core drilling, excavation ofobservation pits and/or other appropriate methods should be initiated immediately.

* Underwater examination should be made periodically for those parts which are permanently submerged, such aslower part of the upstream slope or face of a dam and stilling basins. The examination can be implemented bysounding and/or by underwater television camera.

* Drainage systems and uplift pressure relief devices should be examined for possible obstruction, deterioration ordamage by chemical reactions or bacterial growth. Sources of seepage should be pinpointed and flow rate andquality (clear or muddy water) should be investigated for comparison with previous observations and the results ofpermeability computations. Any anomalous changes in seepage volume shall be investigated immediately.

* All mechanical and associated electrical equipment of the dam should be examined for proper functioning andadequate maintenance. Besides the accuracy of operating performance, inspection should extend to lubrication andthe functional integrity of the equipment. Corroded, damaged or worn parts shall be replaced. An adequate stock ofspare parts must be maintained throughout the dam's service life.

The service and emergency power sources and transmission should be examined with special attention to the powersupply under regionwide natural catastrophic conditions.

Siltation of the reservoir should be annually monitored by sounding.

Critical areas of the reservoir rim should be inspected annually for five years and later at least every three years forlandslides and the indication of the development of problems that might affect the safety of the dam or reservoir.


Annex 13: Guidelines for Dam Operation and Maintenance

The whole reservoir and its surroundings should remain under permanent surveillance with respect to possible healthproblems. If foci of waterborne or water-related diseases should develop, they must be brought under specializedmedical control immediately. Though pollution is normally not a direct consequence of reservoir or dam operation, theoperation unit should make every possible effort to detect sources of pollution in order to enable the public health andother government authorities to enforce pollution control.

The adequacy and proper functioning of monitoring instruments and devices should be checked at least every two years.The accuracy and correct functioning of the hydrographic observation system, inclusive of telemetering and transmissiondevices, should be checked before the beginning of every flood season.

The sequence and frequency of the reading of monitoring instruments and observation devices should follow the specificinstructions given by the designer during initial stage of operation, and later on can be revised according to the variationtendency derived from accumulated data of previous years for different instruments and devices.

The readings of monitoring system should be processed and interpreted without delay. Data and information should becarefully identified and filed for appraisal and reference during the periodic inspections. Any substantial deviation fromprevious observations or the anticipated behavior of the structure shall be brought immediately to the attention of theinspection team.

An inspection schedule should be established jointly by the operator and the inspection team. This schedule should beset up in accordance with the convenience and requirements of operation. It would be advantageous to schedule theprincipal inspection activities to coincide with major maintenance operations to facilitate the inspection of equipment andthe dewatering of water conduits, pump pits, etc.

A description of the methods and procedures employed for inspection and the findings and resulting recommendationsshould be summarized in the inspection report. Detected irregularities should be mapped for future reference andcomparison. If any remedial actions are deemed necessary, they should be proposed by clear recommendations. Thereport should be prepared immediately after finishing the inspection and issued without delay.

Project Appraisal Document Page 11SCountry: China Project Title: Xiaolangdi Multipurpose Project: Stage n

Annex 14: Principles for Efficient Water Delivery for the Lower Yellow River

ANNEX 14: PRINCIPLES FOR EFFICIENT WATER DELIVERY FOR THE LOWER YELLOW RIVER

Contracts will be signed between YRCC's River Bureau's and the relevant Irrigation districts at each diversion point onthe Lower Yellow River. Contracts will also be signed with all irrigation areas within the dikes.

The contracts will contain the timing and quantity of water to be delivered. It will be the responsibility of YRCC's RiverBureaus to ensure that there is no siltation of the entrances to the diversion points.

Measuring devices with continuous recording instruments will be installed at each diversion point to ensure that waterdelivered will be accurately measured.

Communications by computer data connections will transmit the water data diverted each week to YRCC's headquartersfor computation of charges.

Charges will be imposed on all water diverted from the river based on the following principles:* All charges will be on a volumetric basis. Municipal and Industrial (M&I) water will be charged much higher rates

from than for irrigation water; and water charges will recover all operation and maintenance costs and capital costsallocated for irrigation and M&I.

* Charges will be based on the scarcity of water according to the seasons: dry-season water will be charged muchhigher than wet-season water; and discounts will be provided when water has very high silt content/

e Penalties will be imposed for late payment by irrigation districts.

Cost recovery would cover among others flood and sediment control.

A system of rationing should be agreed between YRCC and Irrigation districts for water delivery during periods ofdrought.

A monitoring system will be established to indicate water deliveries and charges collected on a real-time basis tomeasure efficiency of delivery.


Annex 15: Documents In the Project File

ANNEX 15: DOCUMENTS IN THE PROJECT FILE

A. Reports and Studies Related to the Project

1. China: Xiaolangdi Multipurpose Project-Staff Appraisal Report No. 12329-CHA, March 25, 1994, WorldBank Internal Document.

2. Xiaolangdi Multipurpose Project: Stage II-Environmental Assessment Update (EIA/1997 Update).Prepared by Yellow River Reconnaissance, Planning and Design Institute, February 1997 (submitted to theWorld Bank Board as SecM97-179 on March 11, 1997).

3. Report on the Revised Resettlement Plan and Implementation Progress, by Yellow River Water andHydropower Development Corporation and the Reconnaissance, Planning and Design Institute, YRCC,February 1997.

4. Xiaolangdi Resettlement Project-Implementation Progress Report, by Resettlement Office, Yellow RiverWater and Hydropower Development Corporation, Zhengzhou, Henan, March 1997.

5. Xiaolangdi Multipurpose Dam Project-Progress Report July 1996, prepared by Canadian InternationalProject Managers Ltd. (LIPM) and Xiaolangdi Engineering Consulting Company (XECC), July 1996.

6. Xiaolangdi Multipurpose Dam Project-Progress Report October 1996, prepared by Canadian InternationalProject Managers Ltd. (LIPM) and Xiaolangdi Engineering Consulting Company (XECC), October 1996.

7. Xiaolangdi Multipurpose Dam Project-Progress Report December 1996, prepared by CanadianInternational Project Managers Ltd. (LIPM) and Xiaolangdi Engineering Consulting Company (XECC),December 1996.

8. Xiaolangdi Multipurpose Project-Report to the World Bank to support application for Phase II loan,prepared by YRWHDC, November 1996.

B. Working Papers

1. Xiaolangdi Multipurpose Project-Working Paper-Lower Reach Model by G Kutcher, April 21, 1997.2. Financial Analysis tables by A. Baietti, March 15, 1997.


Annex 16: Project Processing Budget and Schedule

ANNEX 16: PROJECT PROCESSING BUDGET AND SCHEDULE

A. Project Budget (US$'000) Planned Actual(At final PCD stage)

B. Project Schedule Planned Actual(At final PCD stage)

Time taken to prepare the project (months)First Bank mission (identification) 11/07/96 11/07/96Appraisal mission departure 03/10/97Negotiations 05/05/97Planned Date of Effectiveness 10/31/97

Prepared by: Yellow River Water Hydropower Development Corporation with the assistance of the World Bank and Canada Intemational Project ManagementConsultants

Preparation assistance:

Bank staff who worked on the project included: Daniel Gunaratnam (Task Manager), Barry Trembath (dam engineer), Robert Crooks (environment specialist),Harvey Ludwig (senior environmental specialist, consultant), Zhang Chaohua (resettlement specialist, consultant), Gary Kutcher (economist modeler, consultant), LiQun (economist, consultant), Aldo Baietti (financial analyst), Francisco Piccoli (engineering cost estimator, consultant), Zhang Weizhen (groundwater specialist,consultant), Jiang Ping (irrigation specialist, consultant), Jiang Liping (water resource specialist, consultant), Wang Xiaolan (assistant financial analyst) and MeredithDearbom (document processing)

Project Appraisal Document Page 119Country: China Project Tite: Xiaolangdl MuhMpurpose Project: Stage 11

Annex 17: Statement of Loans and Credits

ANNEX 17: STATEMENT OF LOANS AND CREDITS(As of March 31, 1997)

Loan/ Amount (US$ million)Credit (net of cancellations)

Number FY Borrower Purpose Bank IDA Undisb.(a)52 loans and 51 credits have been disbursed 5,702.8 3,822.8

of which SECAL:2967/1932 88 PRC Rural Sector Adj. 200.0 93.2 -

Active Loans1885 88 PRC Northern Irrigation - 103.0 1.02968 88 PRC Railway IV 200.0 - 2.81997 89 PRC Shaanxi Prov. Agriculture - 106.0 0.12009 89 PRC Integrated Reg. Health - 52.0 0.63022 89 PRC Tianjin Light Industry 154.0 - 4.4

3073/2025 89 PRC Shandong Prov. Highway 60.0 (50.0)(b) 6.72145 90 PRC National Afforestation - 300.0 6.82159 90 PRC Hebei Agricultural Dev. - 150.0 4.02172 91 PRC Mid-Yangtze Agricultural Dev. - 64.0 1.4

3265/2182 91 PRC Rural Credit IV 75.0 200.0 0.13274/2186 91 PRC Rural Indust Tech (SPARK) 50.0 64.3 2.13286/2201 91 PRC Medium-Sized Cities Dev. 79.4 89.0 3.5

2210 91 PRC Key Studies Development - 131.2 7.82219 91 PRC Liaoning Urban Infrastructure - 77.8 4.82242 91 PRC Henan Agricul. Dev. - 110.0 10.8

3337/2256 91 PRC Irrig. Agricul. Intensif. 147.1 187.9 6.02294 92 PRC Tarim Basin - 125.0 1.12296 92 PRC Shanghai Metro Transport - 60.0 7.83406 92 PRC Railways V 330.0 - 33.7

3412/2305 92 PRC Daguangba Multipurpose 30.0 37.0 4.62307 92 PRC Guangdong ADP - 162.0 57.0

3415/2312 92 PRC Beijing Environment 45.0 80.0 37.72317 92 PRC Infectious and Endemic Disease Cont. - 129.6 71.53433 92 PRC Yanshi Thermal Power 180.0 - 1.32336 92 PRC Rural Water Supply and Sanitation - 110.0 20.32339 92 PRC Educ. Development in Poor Provs. - 130.0 9.53443 92 PRC Regional Cement Industry 82.7 - 4.13462 92 PRC Zouxian Thermal Power 310.0 - 27.23471 92 PRC Zhejiang Provincial Highway 220.0 - 70.12387 92 PRC Tianjin Urban Devt. & Envir. - 100.0 462391 92 PRC Ship Waste Disposal - 15.0 6.32411 93 PRC Sichuan Agricultural Devt. - 147.0 41.53515 93 PRC Shuikou Hydroelectric 11 100.0 - 43.92423 93 PRC Financial Sector TA - 60.0 43.33530 93 PRC Guangdong Provincial Transport 240.0 - 33.13531 93 PRC Henan Provincial Transport 120.0 - 19.92447 93 PRC Ref. Inst'l and Preinvest. - 50.0 26.33552 93 PRC Shanghai Port Rest. and Devt. 124.3 - 10.72457 93 PRC Changchun Water Supply & Env. - 120.0 69.82462 93 PRC Agriculture Support Services - 115.0 21.2

3560/2463 93 PRC Taihu Basin Flood Control 100.0 100.0 93.82471 93 PRC Effective Teaching Services - 100.0 53.53572 93 PRC Tianjin Industry II 134.0 - 90.13581 93 PRC Railway VI 420.0 - 178.23582 93 PRC South Jiangsu Envir. Prot. 250.0 - 50.22475 93 PRC Zhejiang Multicities Devt. - 110.0 64.93606 93 PRC Tianhuangping Hydroelectric 300.0 - 156.6

3624/2518 93 PRC Grain Distribution 325.0 165.0 435.02522 93 PRC Environmental Tech. Assist. - 50.0 24.12539 94 PRC Rural Health Workers Devt. - 110.0 63.03652 94 PRC Shanghai Metro Transport II 150.0 - 15.63681 94 PRC Fujian Provincial Highways 140.0 - 85.63687 94 PRC Telecommunications 250.0 - 145.02563 94 PRC Second Red Soils Area Devt. - 150.0 54.9

Project Appraisal Document Page 120Country: China Project Title: Xiaolangdi Multipurpose Project Stage II


Project Appraisal Document Page 121Country: China Project Title: XioalngdiMultipurpose Project: Stage ol

Annex 17: Statement of Loans and Credita

Loanl Amount (USS million)Credit (net of cancellations)

Number FY Borrower Purpose Bank IDA Undisb.(a)2571 94 PRC Songliao Plain Agric. Devt. - 205.0 92.83711 94 PRC Shanghai Enviromment 160.0 - 111.03716 94 PRC Sichuan Gas Devt & Conservatn. 255.0 - 176.13718 94 PRC Yangzhou Thermal Power 350.0 - 201.8B103 94 PRC Yangzhou Thermal Power 57.2 - 56.13727 94 PRC Xiaolangdi Multipurpose 460.0 - 134.72605 94 PRC Xiaolangdi Resettlement - 110.0 59.32616 94 PRC Loess Plateau Watershed Devt. - 150.0 67.12623 94 PRC Forest Resource Devt. & Prot. - 200.0 132.43748 94 PRC National Highway 380.0 - 207.4

3773/2642 95 PRC Ent. Housing/Soc Sec Reform 275.0 75.0 287.03781 95 PRC Liaoning Environment 110.0 - 84.03787 95 PRC Xinjiang Prov. Highways 150.0 - 101.42651 95 PRC Basic Ed for Poor/Minorities - 100.0 46.03788 95 PRC Shenyang Industrial Reform 175.0 - 145.82654 95 PRC Economic Law Reform - 10.0 7.82655 95 PRC Comp Maternal/Child Health - 90.0 46.73846 95 PRC Zhejiang Power Development 400.0 - 361.4B105 95 PRC Zhejiang Power Development 64.3 - 61.53847 95 PRC Technology Development 200.0 - 195.03848 95 PRC Sichuan Power Transmission 270.0 - 262.3

3873/2709 95 PRC Fiscal TA 25.0 25.0 43.23874/2710 95 PRC Yangtze Basin Water Res Devt 100.0 110.0 98.2

3897 95 PRC Railway VII 400.0 - 400.03906/2744 95 PRC Southwest Poverty Reduction 47.5 200.0 173.2

3910 95 PRC Inland Waterways 210.0 - 184.43914/2756 95 PRC Iodine Deficiency Dis. Control 7.0 20.0 21.8

3929 96 PRC Shanghai-Zhejiang Highway 260.0 - 193.83933 96 PRC Ertan II Hydroelectric 400.0 - 137.7B106 96 PRC Ertan II Hydroelectric 50.0 - 48.32794 96 PRC Disease Prevention - 100.0 87.2

3966/2799 96 PRC Hubei Urban Environment 125.0 25.0 142.2396712800 96 PRC Labor Market Development 10.0 20.0 26.6

3980 96 PRC Henan (Qinbei) Thermal (c) 440.0 - 440.03986 96 PRC Second Shaanxi Prov. Highways 210.0 - 200.03987 96 PRC Second Shanghai Sewerage 250.0 - 248.02831 96 PRC Third Basic Education - 100.0 73.22834 96 PRC Shanxi Poverty Alleviation - 100.0 78.64001 96 PRC Animal Feed 150.0 - 150.04027 96 PRC Second Henan Prov. Highway 210.0 - 210.0

4028/2870 96 PRC Gansu Hexi Corridor 60.0 90.0 137.44044/2886 96 PRC Seeds Sector Commercialization 80.0 20.0 96.7

4045 96 PRC Chongqing Inrd. Pollution Control 170.0 - 170.04055/2892 96 PRC Yunnan Enviromment 125.0 25.0 149.04063/2898 97 PRC Vocational Education Reform 10.0 20.0 19.1

4099 97 PRC Second Xinjiang Highway (c) 300.0 - 300.04124 97 PRC Second National Highway (c) 400.0 - 400.0

Total 8,913.6 9,452.517,090.8

of which has been repaid 1,711.1 53.8

Total now held by Bank and IDA (a) 15,379.7 8,859.8Amount sold: Of which repaid - -

Total Undisbursed 7,549.3 1,903.2 9,452.5

(a) As credits are denominated in SDRs (since IDA Replenishment VI), undisbursed SDR credit balances are converted to dollars atthe current exchange rate between the dollar and the SDR. In some cases, therefore, the undisbursed balance and total credit amountheld indicate a dollar amount greater than the original principal credit amount expressed in dollars.(b) Fully disbursed.(c) Not yet effective.

Project Appraisal Document Page 122Country: China Project Title: Xiaolangdl Multipurpose Project Stage 11


B. STATEMENTOF IFC's COMMITTED AND DISBURSED PORTFOLIO(As of March 31, 1997, in US$ million)

Committed DisbursedFY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic

1985 Guangzhou Auto 1.88 3.23 0.00 0.00 1.88 3.23 0.00 0.001987 China Bicycles 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001988 Crown Elec 2.09 0.00 0.00 0.00 2.09 0.00 0.00 0.001992 China Bicycles 8.50 2.44 0.00 0.00 8.50 2.44 0.00 0.001992 Guangzhou Auto 0.00 1.32 0.00 0.00 0.00 1.32 0.00 0.001993 Shenzhen PCCP 3.76 .99 0.00 0.00 3.76 .99 0.00 0.001993 Yantai Cement 17.69 1.95 0.00 9.44 17.69 1.95 0.00 9.441994 China Bicycles 0.00 .95 0.00 0.00 0.00 .95 0.00 0.001994 China Walden JV 0.00 7.50 0.00 0.00 0.00 3.79 0.00 0.001994 Dalian Glass 20.50 2.40 0.00 40.50 20.50 2.40 0.00 40.501994 Dynamic Fund 0.00 12.35 0.00 0.00 0.00 9.46 0.00 0.001994 China Walden Mgt 0.00 .01 0.00 0.00 0.00 .01 0.00 0.001994 Plant. Timber 10.00 1.00 0.00 20.00 10.00 1.00 0.00 20.001995 Dupont Suzhou 24.92 3.85 0.00 52.00 11.34 3.85 0.00 23.121995 Nantong Wanfu 5.63 2.41 0.00 0.00 0.00 0.00 0.00 0.001995 Newbridge Inv. 0.00 10.00 0.00 0.00 0.00 5.04 0.00 0.001995 Suzhou PVC 0.00 2.48 0.00 0.00 0.00 2.48 0.00 0.001996 Beijing Hormel 5.00 .50 0.00 5.50 1.00 .50 0.00 0.001996 Fairyoung Ports 0.00 4.98 0.00 0.00 0.00 4.98 0.00 0.001996 Jingyang 40.00 0.00 0.00 100.00 18.57 0.00 0.00 46.431996 Nanjing Kumho 16.00 3.81 0.00 45.50 7.59 3.81 0.00 21.571996 Weihai Weidongri 4.32 0.00 0.00 0.00 0.00 0.00 0.00 0.00

PendingCommitments

1996 * CALTEX OCEAN 31.33 0.00 0.00 66.001996 * NANJING HUINING 4.00 0.00 0.00 0.001997 * NINGBO 0.00 2.00 0.00 0.001996 * SHANDONG SAND 17.00 0.00 0.00 25.001995 * SUZHOU PVC 14.10 0.00 0.00 15.801996 * TIANJIN 9.10 0.00 0.00 9.101996 * TIANJIN KUMHO 23.50 0.00 3.00 47.001996 * XIAMEN XIAN 10.00 0.00 0.00 0.00


Annex 18: Country at a Glance

ANNEX 18: COUNTRY AT A GLANCE

POVERTY and SOCIAL East Low-China Asia Income Development dlamond'

Population mid-1995 (millions) 1,211.2 1,709 3,188GNP per capita 1995 (USS) 620 830 460 Life expectancyGNP 1995 (billions USS) 751.0 1,418 1,466

Average annual growth, 1990-95

Population (%) 1.2 1.3 1.8Labor force (%) 1.1 1.4 1.8 GNP Gross

Most recent estimate (latest year available since 1989) capita enrolimen

Poverty: headcount index (% of population) 11Urban population (% of total population) 30 31 29Life expectancy at birth (years) 69 68 63Infant mortality (per 1,000 live births) 29 36 58Child malnutrition (% of children under5) 17 17 38 Access to safe waterAccess to safe water (% of population) 83 77 75Illiteracy (% of population age 15+) 19 17 34Gross primary enrollment (% of school-age population) 118 117 105 | - China Low-income group

Male 1 20 120 112Female 116 116 98

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1975 1985 1994 1995 rEconomic ratlos

GDP (billions USS) 160.3 304.9 540.9 697.6Gross domestic investment/GDP 30.3 37.8 39.9 40.5 IExports of goods and non-factor services/GDP 5.2 9.9 22.0 21.0 Openness of economyGross domestic savings/GDP 30.6 33.7 41.2 42.0Gross national savings/GDP 30.6 34.0 41.2 40.5

Current account balance/GDP -0.2 -3.9 1.3 0.2Interest payments/GDP . 0.2 0.7 0.7 Savings InvestmentTotal debt/GDP .. 5.5 18.6 16.9Total debt service/exports 8.3 8.9 9.9Present value of debt/GDP .. 15.8Present value of debt/exports .. ,, 68.5

I Indebtedness1975.84 1986-95 1994 1995 1996.04

(average annual growth)GDP 7.7 9.6 12.6 10.5 8.5 -China -Low-income groupGNP per capita 7.1 8.0 11.3 7.9 7.6 -Exports of goods and nfs 17.9 13.3 28.1 9.6 8.5 |

STRUCTURE of the ECONOM1975 1985 1994 1995 Growth rates of output and Investment I%(

(% of GDP)Agriculture 32.0 28.4 20.3 20.6 25 TIndustry 42.8 43.1 48.0 48.4 20

Manufacturing 31.6 35.4 37.6 37.6 1 Services 25.2 28.5 31.7 31.1 1 2

IPrivate consumption 61.9 53.1 45.9 45.7 o9 91 92 93 94 95General government consumption 7.6 13.2 12.8 12.2 Ol GDPImports of goods and non-factor services 5.0 14.0 20.6 19.4 G

1975-84 1985-95 1994 1995 Growth rates of exports and Imports I%)(average annual growth)Agriculture 5.1 4.2 4.0 5.0 40Industry 10.0 12.8 18.4 14.1 30

Manufacturing 13.1 12.3 18.4 13.3 20Services 8.8 9.4 9.3 7.9 1

Private consumption 7.3 8.3 9.7 6.3 oGeneral government consumption 8.5 9.5 7.8 .. -10 92 9Gross domestic investment 8.9 9.7 10.5 19.1 -20Imports of goods and non-factor services 21.1 9.0 9.3 5.0 Exports +ImportsGross national product 8.5 9.5 12.6 9.0

Note: 1995 data are preliminary estimates.The diamonds show four key Indicators In the country (in bold) compared with its income-group average. l data are missing, the diamond will

be incomplete.


Annex 18: Country at a Glance

China

PRICES and GOVERNMENT FINANCE

Domestic prices 1975 1985 1994 1995 Inflation (%)(9 change) 2zConsumer prices 0.2 9.3 24.1 17.1 20Implicit GDP deflator -0.9 10.1 19.5 13.1 1S

Government finance 5(% of GDP) oCurrent revenue .. 25.5 12.0 11.6 9 91 92 93 94 95Current budget oalance .. 6.7 0.4 0.4Overall surplusideficit .. -0.5 -1.6 -1.6 GDPdef CPI

TRADE

(millions US$) 198S 1994 1995 Export and Import levels (mill. US$)Total exports (fob) .. 27,350 121,006 148,770 soooo

Food .. 3,803 10,015 9,954 140X00

Fuel .. 7,132 4,069 5,335 120,000Manufactures .. 13,522 101,298 127,283 !00.000

Total imports (cif) .. 42,252 115,614 132,078 N,000

Food 1,881 5,014 9,126 6000Fuel and energy .. 172 4,035 5,127 40:Capital goods e g 18,694 55,624 57,481 0

Export prce index (1987=100) 92 123 133 r9 90 91 92 93 94 95

Import price index (1987=100) ,. 78 122 132 ci Exports [s ImportsTerms of trade (1987=100) .. 118 101 101

BALANCE of PAYMENTS

(millions US$) 1975 1985 1994 1995 Current account balance to GDP ratlo (%)Exports of goods and non-factor services 7,828 28,163 118,811 142,000 4,

Importsof goods and non-factorservices 8,097 41,149 111,472 127,600 3

Resource balance -269 -12,986 7,339 14,400

Netfactorincome 0 932 -1,018 -14,300Netcurrenttransfers 0 171 836 724 1 , L

Current account balance, 02 94 9before official transfers -269 -11,883 7,157 824 .1. 9 90 91 92 9 94 95

Financing items (net) .. 9,443 23,370 21,376 -2 t

Changes in net reserves .. 2,440 -30,527 -22,200 |3 t

Memo:Reserves including gold (mill. US$) .. 13,214 53,560 75,760Conversion rate (local'USS) 1.9 2.9 8.6 8.4

EXTERNAL DEBT and RESOURCE FLOWS1975 1985 1994 1995

(millions US$) CompositIon of total debt, 1995 (mill. USS)

Total debt outstanding and disbursed 0 16,696 100,457 118,090IBRD 0 498 5,933 7,209IDA 0 431 6,097 7,038 A: 7209

G: 22325 13 7038Total debt service 0 2,478 11,135 15,0652

IBRD 0 26 679 810 0. 20S5

IDA 0 4 50 63E: 19980

Composition of net resource flowsOfficial grants 0 117 337 326Official creditors 0 1,117 3,121 7,203Private creditors 0 2,867 6,690 5,683Foreign direct investment 0 1,659 33,787 38,000Portfolio equity 0 0 3,915 2,807 F: 59483

Worid Bank programCommitments 0 1,092 4,020 2,850 A - IBRD E - BilateralDisbursements 0 565 2,063 2,269 8 - IDA D - Other muftilateral F - PrivatePrincipal repayments 0 0 324 364 C - IMF G - Short-termNet flows 0 565 1,739 1,905 1Interest payments 0 29 405 509Net transfers 0 536 1,334 1,396

International Economics Department 12/6/96Nntp The rlnltAr Pqtimaep fnr China'q r.NP nPr ranita i; takAn frnm tha Wnrld nlavAtnnmAnt inrfiratnrm anti is a nrpliminarv finiirp hCPd4w nn an

MAP SECTION

I nternatiorial Boundaries CHINA

_ Province Boundaries hina XIAOLANGDI MULTIPURPOSE PROJECT

Mongolia* / EXISTING & PROPOSED DAM/HYDROPOWER PLANTS IN BASIN

Inner Mongolia Plain

Y~~~~~~~~~~~~~~~~~~~~~~~li inte> r1 RasQ n 1A rio A INingxia Fen Plain

The to nis, cot |

on th.a -op do n0/

Impy' on tha part af7h. Wad b'nk tmp,

ony j0dQ,tt on, the kgol

otatas af any teR Aor!.

o-ccptanfao of s-ch*

ta.a,daris ai5.

S - -1/t 6, ;, ,, - ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~R.

Y * /- ~~~~~~~~~~~~~~~~~~~~~1. Tianqiao 9. Liuiiaxia

10\ A .NWei Plain 2. Wanjiazhai 10. BapanxiaA A A M r D sFlooded Areas and Dams 3. Qikou 11. Longangxia

Beiiiati Flood Detention Basin Lakes 4. Longmen 12. Laxiwa

fF o Xiaolangdi 13. LijiaxiaDongping Lake Flood Diversion Area Catchment Area 6. Sanmenxia 14. Daxia

>~~~~~~~~~~~~ --- ,re 7. Sanshungong 15. Qingtongxia pp , ' Area Flooded if Dykes Break Existing Dam/Power Plant 7Km 8. Yanguoxia 16. Daliushu

Yellow River Floodplain A Planned Dam/Power Plant l10 200 400

International Boundaries

Province Boundaries China China: Xiaolangdi Multipurpose Project

Mongolia Flooded Areas and Population Affected

-. -\ OfAMrea 0 Atm Mi.Flooded Areas/PopulationArea Flooded if Dykes Break

- (100 Million People)hK~~~~ Beijinti Flood Detention Basin

LJ(1.3 Million People)

--- . s;' R-- , >. Zengzou Kifon .o thr rnLdDongping Lake Flood Diversion Areaii ~~~~~~~~~~~~~~~~(0.4 Million People)

SK1 Floodplain (Yellow River)____________ _________ (14 Million M People)

(Note: Total affected populationis 103 million.)

Persons/Km

X iaol~angdi_Darni Jia < 100

100- 200

vi: 200 -400

400 - 660

§\ - -~~~~~~~~~~~~~~~~~~~~~ ~~600 - 800

------ ~~~~~~~~~~~~~~~~~~~~~~~~~800

> ~~~~~~~~Zhengzhou Kaifonig County BoundariesIZ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~s Ss,'-1 A G-os,

( ~~ -~~ Luoyang Km tc. yweon;Local Rivers

~~~~~ ~ ~ 0100 200 octefst j

- International Boundaries

Province Boundaries ina Chlina: Xiaolangdi Multipurpose Project~CMongoliahina Agricultural Net Income and Flooded Areas

1::: X S z - - _ \- The boundaries,corsdenominations and any

F teinformation hsownon this map do notimply, on the part ofThe World Bank Group,any judgment on the le alestatus ot any territory,or any endorsementor accep at s -chboundaries.

P~~~~~~~~~~~~~~Ae o nf M . . >ap U

Flooded Areas/Population

Area Flooded if Dykes Break(100 Million People)

Beijinti Flood Detention Basin(1.3 Million People)

Dongping Lake Flood Diversion Area(0.4 Million People)

Floodplain (Yellow River)FXiaolangdl Dam] ~~~~~~~~~~~~~~~~~~~~~~~(1.4 Millon People)

(Note: Total affected populationis 103 million.)

RMB Per Capita

< 100

100 - 200

200 - 400

400 - 600

600 8000 100 200 14~~~~~~~

IMAGING

Report No.: 16274 CHAType: PAD