Ex-ante Evaluation
1. Name of the ProjectCountry: The People’s Republic of China
Project: Xinjiang Environmental Improvement Project II(Loan Agreement: December 21, 2007; Loan Amount: 3,802 million yen; Borrower: The
Government of the People’s Republic of China)
2. Necessity and Relevance of JBIC’s Assistance
In China, the sewage treatment rate in urban areas has remained at 56% (2006), while in rural areas
sewerage facilities have not spread very much. Consequently, the water pollution of rivers andfreshwater lakes has become a serious problem. Additionally, since clean water sources areconcentrated in the southwestern part of China, there are regional factors that cause water shortages.
Also, there are many cities beset with the problem of having their water supplied from deteriorating
sources and leaking water pipe networks. Furthermore, since China relies on coal for around 69% of
its domestic energy consumption (2005), acid rain caused by sulfur oxide (SOx), soot, dust and otherparticles are having a serious impact on the health of local residents and the ecosystem. Given thissituation, in the 11th Five-Year Plan (2006–2010), the government of China is promoting measures
to prevent water pollution, measures to protect sources of drinking water in cities with priority, andmeasures to abate air pollution.
The Xinjiang Uygur Autonomous Region, located in China’s western border region, is regarded as apivotal region for the development of the western part of China. Altay and Atushi, two cities inXinjiang where the project is to be implemented, hold a special position for the development of theAutonomous Region. In these urban areas, urbanization and sizable population growth have boosted
demand for water and heating. However, development of water supply and sewerage systems andcentralized heat supply system is far from adequate. Thus, there is an urgent need to address theenvironmental problems such as water and air pollution.
Given this situation the Xinjiang Uygur Autonomous Regional Government formulated the 11th
Five-Year Plan for People’s Lives and Social Development in the Xinjiang Uygur AutonomousRegion (2006–2010), and is committed to improving the water quality and atmospheric environment.
Additionally, in FY2006, the Xinjiang Environmental Improvement Project I was authorized, thus
paving the way for the development of sewerage and water supply systems and centralized heat
supply system in the four regional cities (Hami, Turpan, Wusu and Kuitun) in the Xinjiang Uygur
Autonomous Region.
This project addresses environmental conservation, one of the priority areas designated in the
Economic Cooperation Program for China prepared by the government of Japan and JBIC’s
Medium-Term Strategy for Overseas Economic Cooperation Operations. Thus, JBIC’s support forthis project is highly necessary and relevant.
3. Project Objectives
The project aims to increase sewage treatment and water supply capacities and reduce the amount ofwater and air pollutants by developing sewerage and water supply systems and installing centralizedheat supply facilities in Altay and Atushi in the Xinjiang Uygur Autonomous Region, and thereby
help improve the environment of the cities as well as the living conditions of the populations.
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4. Project Description(1) Target Area
Altay City and Atushi City in the Xinjiang Uygur Autonomous Region(2) Project Outline
The project involves the construction and renovation of sewerage and water supply facilities and heat
supply facilities in the aforesaid two cities, as well as the procurement of related materials andequipment. It also involves the construction of urban gas supply facilities in Altay City and theprocurement of related materials and equipment In addition, a training program will be conducted inJapan as part of the project.
(a) Development of sewage treatment facilities (Altay City and Atushi City): New constructionof a sewage treatment plant, new construction and renovation of sewage pipes and drains,
new construction of a treated water lake, expansion of a existing sewage treatment plant(b) Development of water supply facilities (Altay City and Atushi City): New construction of
intake facilities, construction of water supply aqueducts, new construction of a purification
plant, new construction and renovation of distribution pipes and drains(c) Development of centralized heat supply facilities (Altay City): Construction of heat supply
facilities, installation of heat supply pipes, construction of heat-exchange stations(d) Development of natural gas heat supply facilities (Atushi City): Construction of heat supply
facilities, installation of heat supply pipes, installation of medium pressure natural gas pipes(e) Development of urban gas supply facilities (Altay City): Construction of LNG gasification
facilities, installation of gas supply pipes(f) Training: Training in Japan concerning water supply and sewerage systems as well as heat
supply and urban gas supply systems(3) Total Project Cost / Loan Amount
6,158 million yen (Yen Loan Amount: 3,802 million yen)
(4) Schedule
January 2008–June 2013 (66 months). Project completion is defined as the end of warranty period.
(5) Implementation Structure(a) Borrower: The Government of the People’s Republic of China(b) Executing Agency: Xinjiang Uygur Autonomous Regional People’s Government(c) Operation and Maintenance System:
Name of city
Subproject
Operation and maintenance system
Sewage Disposal Plant of Altay City
Altay City
Development of sewage treatment
facilities
Altay Water Supply Company
Development of water supply facilities
Altay Industry Central Heating Limited
Development of centralized heat supply
Company
facilities
Huali Fuel Gas Investment Limited
Development of urban gas supply-2-

Atushi City

facilities
Development of sewage treatment
facilities and water supply facilities
Development of natural gas heat supply
facilities

Company
Atushi Water Supply and Drainage
Company
Atushi Heating Company(6) Environmental and Social Consideration(a) Environmental Effects / Land Acquisition and Resident Relocation(i) Category: B(ii) Reason for Categorization
This project is classified as Category B according to the “Japan Bank for International
Cooperation Guidelines for Confirmation of Environmental and Social Considerations”(dated April 2002), as this project does not correspond to sectors or regions described in thesaid guidelines as being sensitive to negative impact, and as it is not deemed to have asignificant harmful impact on the environment.
(iii) Environmental Permit
The Environmental Impact Assessment (EIA) reports related to the project was approved by
the Environmental Protection Bureau of Xinjiang Uygur Autonomous Region between
December 2006 and August 2007.
(iv) Anti-Pollution Measures
Wastewater from sewerage facilities will be treated and released into rivers, wastelands andthe like in a state and manner that meets the wastewater standards established in China, withsome wastewater planned to be used as irrigation in afforestation programs. Thus, nosignificant adverse impact is foreseen. Additionally, although some of the sludge generated insewage treatment plants will be used as fertilizer for afforestation, highly contaminatedsludge will be appropriately disposed of in existing disposal areas. Furthermore, regarding airpollution, wastewater and other issues that may come up after the start of the heat supply
project, domestic environmental standards are expected to be met by implementing measures
such as the installation of dust collectors, desulfurizers and wastewater treatment equipment.
(v) Natural Environment
The project site is not located in or around sensitive areas, such as national parks, and soadverse impact on the natural environment is assumed to be minimal.
(vi) Social Environment
In the project, the right to use about 148 ha of state-owned land has already been acquired inaccordance with the domestic procedures of China. The project does not involve resident
relocation.
(vii) Other/Monitoring
In the project, the environmental observation stations set up in each city will monitor thenoise, water quality, air pollution, wastewater, and so on.
(b) Promotion of Poverty Reduction
The poor make up 14.6% of the population in Altay City and 15.1% in Atushi City. The
poverty rate in both cities exceeds the national average of 2.8%. To help the poor, both cities-3-introduced a lower fee for heat supply, water supply and sewerage, and it will continue to be
applied to this project as well.
(c) Promotion of Social Development (e.g. Gender Perspective, Measure for Infectious Diseases
including AIDS, Participatory Development, Consideration for the Handicapped, etc.)
None(7) Other Important Issues
With the completion of the project, reduction in CO2 emission equivalent to approximately 110,000
tons/year can be expected.
5. Outcome Targets(1) Evaluation Indicators (Operation and Effect Indicator)(a) Development of sewage treatment facilities
TargetBaseline
Indicator(2013, at project(2006 actual)completion)
Population treated (10,000 persons)
9.7
193
Amount of wastewater treated (10,000 m /day)
2.3
5.5
Percentage of wastewater treatment (%)
7098
Effluent quality (BOD concentration: mg/L)
70–90
40–80
Effluent quality (COD concentration: mg/L)
80–15080–150(b) Development of water supply facilities
Baseline(2006 actual)

Indicator
Percentage of population served (%)
Population served (10,000 persons)Amount of water supply (10,000 m3/day)

85
6.7
2.1Target(2013, at projectcompletion)
100
10.7
4.1

(c) Development of heat supply facilities and urban gas supply facilities
Baseline(2006 actual)

Indicator
SO2 emission reduction volume (tons/year)
NOx emission reduction volume (tons/year)
TSP emission reduction volume (tons/year)
Coal use reduction volume (tons/year)––––(2) Number of Beneficiaries(a) Development of sewage treatment facilities: Approximately 92,000(b) Development of water supply facilities: Approximately 40,000-4-Target(2013, at projectcompletion)
4808453,530
49,050(c) Development of centralized heat supply facilities: Approximately 92,000(d) Development of urban gas supply facilities: Approximately 55,000(3) Internal Rate of Return (Financial Internal Rate of Return)
Based on the following conditions, the financial internal rates of return (FIRR) of the project are as
follows:
Name of city
SubprojectInternal rate of return
Altay City
Sewage treatment facilities
4.5%
Water supply facilities
6.1%
Centralized heat supply facilities
6.2%
Urban gas supply facilities
4.4%
Atushi City
Sewage treatment facilities
10.4%
Water supply facilities
9.4%
Natural gas heat supply facilities
8.9%[FIRR](a) Cost: Project cost, operation and maintenance expenses(b) Benefit: Income from fees(c) Project Life: 20 years
6. External Risk Factors
・ Delays in construction due to site changes caused by changes in road maintenance areas,development areas, etc. in urban planning・ Impact on operation and maintenance due to limitation of domestic funds or shortages incollected fees due to changes in the policies relating to the fee sharing principle
・ Risk of fluctuation in the price of coal, the fuel for centralized heat supply facilities.
・ Risk of fluctuation in the price of natural gas, the fuel for heat supply and urban gas supply
facilities.
7. Lessons Learned from Findings of Similar Projects Undertaken in the Past
From the ex-post evaluation of ODA loans granted in the past, it has been learnt that it is important toset an appropriate fee system that considers operation and maintenance costs, investment costs,
payment ability of beneficiaries, and the outlook for budgetary supplements in order to ensure thesustainability of the project’s effects. Based on this lesson, appropriate fee system and technicalstandards will be confirmed to be established through interim monitoring and supervision, etc.
8. Plans for Future Evaluation(1) Indicators for Future Evaluation(a) Development of sewage treatment facilities: Population treated (10,000 persons), amount ofwastewater treated (10,000 m3/day), percentage of wastewater treatment (%), effluent quality(BOD concentration: mg/L), effluent quality (COD concentration: mg/L), financial internalrate of return (%)(b) Development of water supply facilities: Percentage of population served (%), population
served (10,000 persons), amount of water supply (10,000 m3/day), financial internal rate of-5-

return (%)(c) Development of heat supply facilities and urban gas supply facilities: SO2 emission reduction
volume (tons/year), NOx emission reduction volume (tons/year), TSP emission reduction
volume (tons/year), financial internal rate of return (%)(2) Timing of Future Evaluation
At project completion-6-