IFC requires that this document is made available through the World Bank InfoShop and to the locally affected community no less than 30 days prior to project consideration by the IFC Board of Directors. The Summary of Project Information (SPI) also provides details of where the ERS has been made available to the locally affected community. The SPI must be sent to World Bank InfoShop no less than 30 days prior to project consideration by the IFC Board of Directors.

This is a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects because a limited number of specific environmental and social impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of appraising technical, environmental and social information submitted by the company and a site visit by IFC staff. GDIH’s three main business sectors are electric power, energy logistics and infrastructure. GDIH is the largest electric power generating company in Guangzhou City. In order to continue to provide reliable supply of electricity, the company is expanding its power generation business by developing a new LNG-fired combined cycle power plant project and investing in several large-scale coal-fired power plant projects. Some of their power plants and power projects under development are within the Pearl River Delta region where improvement of ambient air quality has been a challenging task by Provincial and Municipal environmental regulators. GDIH is also promoting energy logistics (coal loading / unloading dock, coal storage yard, oil loading / unloading jetty, oil storage capacity) in the Pearl River Delta. GDIH’s infrastructure business includes investment in highway network in the Pearl River Delta and development of natural gas distribution network in Guangzhou Nansha Development Zone. The appraisal by IFC included: - GDIH’s environmental and social management system - Environmental and social performance of GDIH’s major existing and new investments in the electric power, energy logistics and infrastucture - Environmental benefit of FGD installment - Air quality issue of the Pearl River Delta region - Greenhouse gas emissions and energy efficiency related to GDIH’s electric power business. - Health and safety risks associated with coal mines - Environmental and Social Action Plan (ESAP) by GDIH

The company has presented plans to address these issues and to work towards the goal that the environmental and social performance of GDIH and its investments in the electric power, energy logistics and infrastructure sectors, comply with the environmental and social requirements - the host country laws and regulations and the World Bank/IFC environment and social policies and the environmental, health and safety guidelines. The information about how these potential issues will be addressed by the company is summarized in the paragraphs that follow. - GDIH’s environmental and social management system: GDIH’s three main business units of electric power, energy logistics and infrastructure are managed by experienced executives supervising invested subsidiaries of each sector. GDIH does not have a centralized environmental or social unit horizontally managing corporate wide environmental or social performance. Each business unit is responsible to manage investment performance including environmental and social performance. GDIH’s top management has clearly an awareness of and commitment to environmental and social responsibility. GDIH is going to designate an executive director responsible for corporate-wide environmental and social management of their investment and will strengthen corporate environmental and social management system and capacity. - Environmental and social performance of GDIH’s major existing and new investments in the electric power, energy logistics and infrastructure sectors: Pearl River Power Plant (coal-fired, 4 unit x 300MW, started operation in 1993 and 1997, located at Guangzhou Nansha): GDIH holds 50% in the first 2 units and 75% for the second 2 units. The plant is ISO 9001 certified for quality control, ISO 14001 certified for environmental management, and OHSAS 18001 certified for heath and safety program. The plant keeps good levels of house keeping, maintenance and overall environmental and operational performance. The plant will be retrofitted with FGD with 90% sulfur dioxide removal efficiency by 2007. Upon completion of the FGD retrofit, air emissions of the plant will be substantially compliant with World Bank Group guidelines. Land acquisition for the plant was completed some 15 years ago and there are no outstanding issues. GDIH is considering to strengthen environmental monitoring program of the plant including for ash disposal site, and to evaluate feasibility of further reduction of NOx emissions considering that the plant is located within Pearl River Delta region with degraded air quality for NO2. Shajiao B Power Plant (coal-fired, 2 unit x 350MW, started operation in 1987, located at Dongguan, Guangdong): GDIH purchased a 35.23% share of Shajiao B in 2002. The plant is located together with two additional plants (Shajiao A – 1,200MW, and Shajiao C – 1,980MW) with total generating capacity of 3,880MW, all coal-fired. The entire Shajiao A, B, C Power Plant complex is one of the largest coal-fired power plants in China. In response to the central government’s requirement, a post-Environmental Impact Assessment (EIA) was conducted in 2000 to review the actual performance of the three plants. The post-EIA identified areas of concern and made recommendations for improvement. GDIH is working with Shajiao B Power Plant to continue to improve performance. Shajiao B is being retrofitted with FGD in 2005 and upon its completion, air emissions of the plant will be compliant with the World Bank Group guidelines. Pearl River Power Plant LNG CCGT Project (LNG-fired, 2 units x 390MW, planned start of operation 2006 – 2007, located at Guangzhou Nahsha): GDIH has a 70% share of the project. This project will be developed next to the existing coal-fired Pearl River Power Plant. Gas will be supplied via a 215km trunk pipeline from the LNG import terminal on the Dapeng Peninsula. The guarantee about NOx emission in the CCGT purchase contract is no more than 25 ppm at 15% O2, in compliance with the World Bank Group guideline of 61 ppm (125 mg/Nm3 at 15%O2). GDIH is considering to conduct cumulative impact assessment of Pearl River Power Plant, LNG CCGT Project, and GDIH Oil Storage Facility). Guangdong Shanwei Power Plant Project (coal-fired, 8 units x 600MW, planned start of operation for initial 2 units 2006-2007, located in Shanwei City, Guangdong Province): GDIH owns 25% of the project. The project is being developed in two phases (Phase I 4 units x 600MW, and Phase II 4 units x 600MW). The Phase I plant is designed to adopt supercritical steam technology, more energy efficient than conventional subcritical steam technology. In addition to FGD, Electrostatic Precipitator, Low NOx burners, and 240m stacks, the project will also have an indoor coal storage facility to minimize fugitive dust and to protect coal pile from typhoons. The Environmental Impact Review Report concluded that proposed once-through cooling system will have limited impacts on marine environment. The plant is under construction on land largely reclaimed from the sea. The project covers a total area of 230 ha, relocated 10 to 20 households, affected some 200-300 people who lost some portion of their cultivated land. Ash from the project is planned to be comprehensively reused. However, a backup ash disposal site will be developed at an inland location about 6km from the plant. This may need to relocate about 60 family grave plots. GDIH is working with other Shanwei Power Plant Project sponsors to improve environmental and social performance targeting to - minimize risks, - achieve compliance with the World Bank Group policies and guidelines and - enhance sustainability. Guizhou Pannan Power Plant Project (coal-fired, six units x 600MW, planned start of operation for initial four units 2006-2009, located in Panxian County, Guizhou Province): The project is being developed as a mine mouth power plant. GDIH has 16.5% ownership of the project. Phase I, now under construction, is to develop four 600MW units, with Phase II having two additional 600MW units. The 70 ha project site is next to Xiangshui town. Coal will be transferred from the Xiangshui coal mine via a conveyer belt and from other surrounding mines within 50km by trucks. Cooling system will be closed wet cooling towers. Water will be supplied from Xiangshui reservoir. Generated electricity will be evacuated through a 70km 500kV transmission line to the main grid in Guizhou. The project is planned to use 0.71% sulfur content coal and a site for FGD is prepared. The project has a plan to install FGD. The first two units are planned to use subcritical steam technology, but not more energy efficient supercritical steam technology. Land acquisition for the project required relocating approximately 800 households. It was reported that compensation was based on depreciation value and not a full replacement cost. Several minority ethnics reside in the area 200m from the project construction boundary. Over 1,000 households permanently lost their agricultural land with livelihood restoration yet to be established. Employment and business opportunities are being created through the construction and forthcoming operation of the plant and these will provide some employment opportunities to the project affected population. GDIH is closely monitoring the livelihood restoration status. A 63 ha bowl-shaped valley (Zhaluji Ash Disposal Site) was identified as a back-up ash disposal site to the comprehensive ash utilization plan. This may involve a relocation of 10-15 households. GDIH is working with other Pannan Power Plant Project sponsors to improve environmental and social performance targeting to - minimize risks, - achieve compliance with the World Bank Group policies and guidelines and - enhance sustainability. Pearl River Coal Pier and Coal Storage Facility (started operation in 1993, located at Guangzhou Nansha): Through 100% owned subsidiary, GDIH owns coal loading and unloading pier, coal storage yard and other coal handling facilities next to the Pearl River Power Plant. Coal handling facilities are equipped with dust covers and the storage yard has runoff collection and treatment. Water sprays are used for dust control at the coal pile. No major corrective actions were identified by IFC. Oil Storage Tank and Oil Pier Facility (started operation in 2003, located in Guangzhou Nansha): GDIH developed this project in joint venture with BP Global Investment Co., Ltd (BP) and GDIH owns 60%. The project involves operation of 363,000 m3 of oil storage capacity and 50,000 ton oil pier, developed on a 40ha site on the west of GDIH’s Pearl River Power Plant. The project was designed in accordance with BP standards. Tanks for storage of more volatile products (e.g., gasoline) are equipped with floating roof tanks. All tanks are enclosed within containment berms and contaminated water (runoff, sewage, ship’s ballast) is treated in an onsite wastewater treatment plant. The Emergency Response Plan is in place. The project design was reviewed by BP with respect to Hazard and Operability. The project is in accordance with good international practice. Guangzhou Northern No. 2 Ring Expressway (started operation in 2002, located in Guangzhou): GDIH holds 20% of the Guagzhou Northern No. 2 Ring Expressway, which is a 42.5 km in length with six lanes for two directions. The project significantly improved the highway system of Guangzhou. Land acquisition was completed in 1999. No major corrective actions were identified by IFC. Gas Pipeline Network (planned start of supply in 2006, Guangzhou Nansha): The project company, which is 55% owned by GDIH, has been awarded the exclusive license for the 330 km zone in Nansha to supply gas from Guangdong LNG project to residential, commercial and industrial users. GDIH is considering to develop a formal and proactive corporate social responsibility program to incorporate social services that are typically provided by gas utilities. - Environmental benefit of FGD installment: The current SO2 emissions performance at Pearl River Pear Plant is in the range of 780 mg/Nm3 – 820 mg/Nm3. FGD is expected to remove 90% of sulfur dioxide to achieve at least 160 mg/Nm3. Installment of FGD will help GDIH to fully comply with the Guangdong Provincial requirement to retrofit FGD by 2007. This provincial requirement is more strict than the latest Chinese emission standards of GB13223-2003 (1,200 mg/Nm3 to be achieved by 2010 at existing coal-fired power plants of which environmental impact reports were approved prior to December 31, 1996) or the 1998 World Bank Group guideline of 2,000 mg/Nm3 (6%O2). Reduction of SO2 emissions from Pearl River Power Plant will contribute to the overall air quality mitigation program at Pearl River Delta region. The SO2 discharge fee has been increasing from 0.2 Yuan / kg to 0.4 Yuan / kg in 2004 and 0.6 Yuan / kg in 2005 in Guangdong Province. Installment of FGD will also help reduce the total amount of SO2 discharge fee charged to the company. - Air quality issue for Pearl River Delta region: Three of GDIH’s invested power plant projects (Shajiao B Power Plant, Pearl River Power Plant, Pearl River LNG CCGT Project) are located within the Pearl River Delta region where air pollution has been a problem due to urbanization and industrial activities of the region. To tackle this, various regulatory programs have been implemented including a joint study released in 2002 by the Hong Kong Special Administrative Region (HKSAR) Government and the Guangdong Provincial Government, aiming to significantly reduce air emissions by 2010, or the “Blue Sky” project announced in 2000 by the Guangdong Provincial Government stipulating a provincial SO2 emission limit from the power industry through 2010. No new coal-fired or oil-fired power plants are allowed within the Pearl River Delta region. Retrofitting FGD at GDIH is in response to these Guangdong Provincial programs. As the leading energy company in Guangdong, GDIH is committed to keeping abreast of good international practice to continue to have more robust corporate environmental management strategy. - Greenhouse gas emissions and energy efficiency related to GDIH’s electric power business: GDIH’s existing coal-fired power plants are well maintained showing steady improvement since their investment. Some of the GDIH’s new project such as Guangdong Shanwei Power Project is designed to use supercritical steam technology, which is more energy efficient (e.g. 41% net efficiency) than conventional subcritical steam technology (e.g. 35% net efficiency), contributing to improvement of greenhouse gas emissions performance (e.g. subcritical steam – 970 gCO2/kWh , supercritical steam – 830 gCO2/kWh). Development of Pearl River LNG-fired Combined Cycle Power Project, will also contribute to reducing the average greenhouse gas emission per unit of electricity generated. - Environmental, health and safety risks associated with coal mines: GDIH directly controls procurement of coal for Pearl River Power Plant through its 100% owned subsidiary. The subsidiary’s ISO 9000 quality system has specific criteria for environmental and social performance of coal suppliers. In order to reduce coal mine associated risks, GDIH will visit and review the main coal suppliers periodically. - Environmental and Social Action Plan (ESAP) by GDIH: In order to address the above environmental and social opportunities for performance improvement and risk minimization to promote sustainable business operations, GDIH has agreed to implement the attached ESAP. IFC will monitor GDIH’s implementation of the ESAP.

- Environmental and Social Action Plan (ESAP) by Guangzhou Development Industry (Holdings) Co., Ltd. (GDIH)

Accordingly, IFC concludes that the proposed project will meet the applicable World Bank/IFC environment and social policies and the environmental, health and safety guidelines upon successful implementation of the agreed mitigation measures.

IFC will evaluate the project's compliance with the applicable environmental and social requirements during the lifetime of the project by reviewing the annual monitoring reports (AMRs) prepared for the project covering: - the status of implementation of any measures contained in the Environmental and Social Action Plan (ESAP) and - ongoing performance of project-specific environmental, health and safety and social activities. Periodic site supervision visits will also be conducted.