ICRR 10612
                                                                                                Report Number : ICRR10612
                   ICR Review
                   Operations Evaluation Department


1. Project Data :                                       Date Posted : 06/29/2000
             PROJ ID : P003503 OEDID:
                                  OEDID : L3462                            Appraisal                        Actual
        Project Name : Zouxian Thermal                        US$M )
                                               Project Costs (US$M)                  795.0                           816.2
                        Power
              Country : China                   Loan /Credit (US$M)
                                                Loan/         US$M )                 310.0                           302.8
  Sector, Major Sect .: Thermal, Electric                     US$M )
                                                Cofinancing (US$M)                     0.9                             1.3
                        Power & Other
                        Energy
          L/C Number : L3462
                                                                 FY )
                                                Board Approval (FY)                                                    92
    Partners involved : Japan                           Closing Date           06/30/1999                      06/30/1999

Prepared by :            Reviewed by :           Group Manager :            Group :
Alain A. Barbu           Andres Liebenthal       Ridley Nelson              OEDST

2. Project Objectives and Components
 a. Objectives
 (i) help alleviate power shortages in Shandong province;
 (ii) support China's policy to develop mine -mouth coal-fired power plants;
 (iii) introduce modern technology in plant design and construction for 600MW units;
 (iv) strengthen the provincial power utility's (SPEPB) capacity in plant operation, environmental planning and
 financial management; and
 (v) restructure SPEPB's power tariffs
 b. Components
 (i) expansion of the Zouxian coal -fired plant by 2 X 600MW (to a total capacity of 2,400MW);
 (ii) construction of associated 500 and 220kv transmission lines and substations;
 (iii) consulting services for: (a) project engineering and procurement; (b) a study of air pollution control for coastal
 coal-fired plants; (c) tariff study and implementation of tariff action plan; and (d) an environmental monitoring
 program; and
 (iv) training of SPEPB staff.
 c. Comments on Project Cost, Financing and Dates
 Project was completed on schedule and at an overall cost of US$ 816 million, only 2.7% above appraisal estimate.
Bank loan was originally on-lent to SPEPB but was transferred in 1997 to SIPDC, a newly created SPEPB limited
liability subsidiary which took ownership of several power plants, incl . Zouxian.

3. Achievement of Relevant Objectives :
Physical objectives have been fully achieved and /or exceeded: plant was completed generally within schedule and
cost estimates and its operating record has been excellent . The project contributed to the Government's efforts to
build more coal-fired thermal plants at mine-mouth. Furthermore, the project contributed to accelerate the
mainstreaming within China of modern technology and know -how in the local manufacturing, construction and
operation of 600 MW coal-fired units. Environmental objectives have been generally achieved with the units meeting
Chinese and Bank guidelines (with some minor exceptions with regard to ash disposal and noise levels ). SPEPB
and SIPDC's finances have remained generally healthy during the project period -- and SIPDC was finally successful
in its 1999 IPO on the Hong-Kong market. And the project's capacity-building components have helped the
companies improved their overall efficiency . Finally, some improvements have been made in tariff structure with the
introduction of time-of-day pricing (1996) and tariff unification throughout the province (1999).

4. Significant Outcomes /Impacts :
see section 3 above.

5. Significant Shortcomings (including non -compliance with safeguard policies ):
The project's only shortcoming relates to the persistence of some deficiencies in the tariff structure (disproportionate
weights of capacity and energy charges and the continued subsidization of some consumer categories ).
6. Ratings :               ICR                     OED Review                 Reason for Disagreement /Comments
              Outcome :    Satisfactory            Satisfactory
    Institutional Dev .:   Substantial             Substantial
        Sustainability :   Likely                  Likely
   Bank Performance :      Satisfactory            Satisfactory
      Borrower Perf .:     Satisfactory            Satisfactory
       Quality of ICR :                            Satisfactory

7. Lessons of Broad Applicability :
(i) strong ownership by Borrower/executing agency is key to project success; (ii) procurement packaging should be
geared to minimize potential interface problems among contractors; (iii) tariff issues in China need to be thoroughly
addressed during project preparation and supervision .

8. Audit Recommended?            Yes      No

9. Comments on Quality of ICR :
The ICR is of good quality. In particular, it includes specific indicators for future project operation and a good
contribution from the Borrower.