Projects

Project Information

Shanxi Environment Improvement Project

Country and Location

People's Republic of China (PRC)

Borrower

People's Republic of China

Date of Approval

7 December 1999

Project Description

The Project will finance measures to address air pollution problems in the Taiyuan, Datong, and Yangquan cities in Shanxi Province, covering a combined population of 6.8 million. The Project will support institutional reforms for sustainable environmental management and continued progress toward market-based energy pricing, while financing investments for improving air quality and energy efficiency. Air pollution will be reduced by the (i) replacement of inefficient polluting boilers and domestic stoves by modern, efficient district heating systems fitted with pollution control devices; (ii) substitution of town gas for coal burning by end users; and (iii) reduction of greenhouse gas emissions by recovering and utilizing coalbed methane gas to replace coal burning.

Loan Amount

$102 million from ADB's ordinary capital resources.

Loan Terms

The interest on the loan will be determined in accordance with the ADB's pool based variable lending rate system for US dollar loans. The loan will have an amortization period of 20 years, including a grace period of 4 years.

Total Cost

$183 million equivalent

Foreign Exchange Cost: $102 million
Local Currency Cost: $ 81 million equivalent

Period of Utilization

Until 30 June 2004

Executing Agency

The Shanxi Provincial Government (SPG) will be the Executing Agency providing overall supervision of subproject implementation and coordination of policy and institutional measures to support the Project. Each subproject enterprise will be the Implementing Agency for its respective component.

Project Benefits and Beneficiaries

The Project will play a key role in implementing SPG's environmental protection plan by promoting cost-effective and self-financing air pollution abatement investments. It will reduce coal use in Taiyuan, Datong, and Yangquan by 837,000 tons annually; improve energy efficiency; and reduce outdoor and indoor air pollution. All three subprojects are financially sound and economically viable, with financial internal rates of return ranging from 8.7 percent to 10.3 percent, and economic internal rates of return from 14.1 percent to 26.6 percent.

Procurement

The equipment, materials and services financed from the proceeds of ADB loan will be procured through international competitive bidding or international shopping in accordance with ADB's Guidelines for Procurement. Procurement for ADB-financed civil works contracts above $1 million and supply contracts above $0.5 million will be undertaken through international competitive bidding. Civil works below $1 million equivalent will be carried out under local competitive bidding procedures acceptable to ADB. Items financed with local currency funds by the enterprises will be procured following the Government's procurement procedures acceptable to ADB.

Technical Assistance

Advisory technical assistance (TA) for $700,000 will assist the SPG to develop an air pollution permit trading system and modify the existing pollution levy system to ensure sustainability of environmental improvement measures. The TA will be financed from ADB-funded TA Program. About 12 person-months of international and 12 person-months of domestic consulting services will be required. The consultants will be engaged in accordance with ADB's Guidelines on the Use of Consultants and other arrangements satisfactory to ADB on the engagement of domestic consultants.

Estimated Date of Completion

31 December 2003