China, People's Republic of : MFF-Gansu Heihe Rural Hydropower Development Investment Program - Project 2: Dagushan Hydropower Project

Energy / Large hydropower generation

PRC's sustained economic growth and low per capita energy consumption are increasing the demand for electricity, which has outpaced economic growth in the last 3 years. The result is power shortages in many parts of PRC. The power shortages have affected the rural population disproportionately. With coal-fired power plants supplying about 81% of the country's electricity, the electricity sector is a major air polluter. More than 60% of the cities do not meet air quality standards. Acid rain falls on one third of the country. The Government is committed to minimize emissions and improve air quality. In 2006, it enacted the Renewable Energy Law, which is expected to lead to about 120 gigawatts (GW) of additional clean and renewable energy in the country by 2020. Small and medium hydropower development is an integral part of the renewable energy program and is expected to provide 80 GW of the additional capacity by 2020.

In Gansu, about 81% of the electricity was produced by coal-fired power plants in 2005. Thirteen of Gansu's 14 cities do not meet air quality standards; its capital, Lanzhou, has the worst air pollution index of 47 major cities. Some parts of Gansu, such as the Hexi corridor, have faced chronic power shortages due to limited local generation capacity and large distances from nearby power plants. Heihe river, flowing in the remote mountainous areas of Zhangye, a predominantly rural area located in the middle of the Hexi corridor, presents an excellent source of clean and renewable energy closer to the power-deficient area in Gansu. ZCG and GPG are committed to utilize this clean energy source to provide benefits to Zhangye and the Hexi corridor in an environmentally sustainable manner.

ADB has an ongoing successful engagement with one of the seven HPPs of the scheme. ADB has approved a project loan in 2003 to support construction of the 102 MW Xiaogushan HPP, which was completed in July 2006, 1 year ahead of schedule. Project implementation is rated as highly satisfactory _and has complied with all loan covenants. The Project Implementing Agency, Zhangye City Government, and Gansu Provincial Government are fully familiar with ADB's requirements and have the required institutional capacity to implement the Investment Program. ADB is also supporting the development of clean and renewable energy in Gansu since 2001. The enactment of the Renewable Energy Law, and Gansu Provincial Government and Zhangye City Government's commitment to utilize clean and renewable energy in Zhangye have created the enabling conditions for accelerated hydropower development on Heihe river. ADB's previous engagement in the scheme has strengthened the rationale for the Investment Program. Considering the discrete components of the scheme, sequential construction, and staggered financing needs, the MFF is the most appropriate financing tool for the Investment Program.

Procurement Method to be used when the value ($) is

QCBS Larger than 200,000

CQS Below 200,000

LCS Below 100,000