Report and Recommendation of the President to the Board of Directors

Transcription

1 Report and Recommendation of the President to the Board of Directors Project Number: September 2017 Proposed Loan People s Republic of China: Shandong Spring City Green Modern Trolley Bus Demonstration Project Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB s Public Communications Policy 2011.

2 CURRENCY EQUIVALENTS (as of 1 August 2017) Currency unit yuan (CNY) CNY1.00 = $ $1.00 = CNY6.722 ABBREVIATIONS ADB Asian Development Bank BRT bus rapid transit JMG Jinan municipal government JPTC Jinan Public Transport Company km/h kilometers per hour PAM project administration manual PRC People s Republic of China TDM travel demand management NOTE In this report, "$" refers to United States dollars. Vice-President S. Groff, Operations 2 Director General A. Konishi, East Asia Department (EARD) I. Bhushan, EARD Director R. Guild, Transport and Communications Division, EARD Team leaders Team members Peer reviewer K. Guy, Transport Specialist, EARD W. Zhang, Senior Project Officer, EARD G. Cruz, Associate Operations Officer, EARD L. Cuevas-Arce, Senior Operations Assistant, EARD G. Gerilla-Teknomo, Senior Transport Sector Officer, EARD K. Kim, Senior Transport Specialist, EARD N. Kim, Senior Environment Specialist, EARD B. Konysbayev, Principal Counsel, Office of the General Counsel S. Kotagiri, Safeguards Specialist, EARD C. Roldan, Associate Project Analyst, EARD J. Sluijter, Transport Economist, EARD F. Wang, Senior Project Officer (Financial Management), EARD H. Xia, Associate Procurement Officer, EARD A. Heriawan, Transport Specialist, South Asia Department In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 CONTENTS PROJECT AT A GLANCE Page MAP I. THE PROPOSAL 1 II. THE PROJECT 1 A. Rationale 1 B. Impact and Outcome 3 C. Outputs 3 D. Summary Cost Estimates and Financing Plan 3 E. Implementation Arrangements 5 III. DUE DILIGENCE 6 A. Technical 6 B. Economic and Financial 6 C. Governance 7 D. Poverty, Social, and Gender 7 E. Safeguards 8 F. Summary of Risk Assessment and Risk Management Plan 10 IV. ASSURANCES 10 V. RECOMMENDATION 10 APPENDIXES 1. Design and Monitoring Framework List of Linked Documents 14

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9 I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed loan to the People s Republic of China (PRC) for the Shandong Spring City Green Modern Trolley Bus Demonstration Project Jinan, the capital of Shandong province, is one of the most congested and the ninth most polluted city in the PRC. The project is intended to improve accessibility and environmental quality, mitigate health impacts, and reduce the time and cost of travel for users through creation of a high-quality, zero-emissions bus rapid transit (BRT) network, complemented by policy measures to reduce demand for travel by private vehicles. Building the infrastructure for integrated BRT routes and providing modern electric trolley buses will reduce pollution and traffic congestion, increase public transport ridership, and improve the overall energy efficiency of the city s transport system. The project will demonstrate how a large city developed with policies oriented towards private vehicles can be converted to a city oriented towards public transport, and will change the direction of urban transport development to one that is more sustainable. II. THE PROJECT A. Rationale 3. Strategic context. Cities in the PRC have achieved remarkable rates of urbanization, and urban transport has been vital to this development. However, rapid urbanization has also induced new challenges including growing traffic congestion, worsening air quality that threatens public health, increasing greenhouse gas emissions that contribute to climate change, and more road crashes. These challenges have serious implications for urban transport policy, but cities in the PRC still have many unexploited opportunities to reduce the negative impacts of these challenges. Developing high-quality urban public transport in PRC cities is a trigger to change urban transport development directions from options that favor private vehicles to more sustainable urban transport and nonmotorized options supported by integrated multimodal passenger transport facilities and travel demand management (TDM) measures. 4. Urban transport in Jinan. As of 2016 Jinan had a population of 7.07 million and a fleet of 1.74 million private vehicles that is growing by 20% per year. 2 The city has grown physically by a factor of four from 2006 to 2016 with a high spatial concentration of traffic in the city center and growing travel demand from new outlying districts to the east and west. As in many PRC cities, traffic congestion and air pollution have worsened as urban development has progressed. Jinan overtook Beijing as the most congested city in the PRC in the first quarter of 2016 and is the ninth of the 10 most air polluted cities in the PRC overall, with transport contributing 15% of the most harmful atmospheric particulate matter that has a diameter less than 2.5 micrometers The Jinan municipal government (JMG) owns the Jinan Public Transport Company (JPTC), which operates 5,345 buses serving 2.1 million passengers per day. Although the city is trying to retain its 18% public transport mode share with seven BRT routes, conventional bus services, and four trolley bus lines, the share is declining and the quality of the current system is not capable of reversing the trend. The city is developing three underground metro lines, but none can serve the urban center because of restrictions to protect the city s many natural artesian springs. 1 The design and monitoring framework is in Appendix 1. 2 Jinan Statistics Bureau and Jinan Municipal Police data. 3 Government of the PRC, Ministry of Environmental Protection Air Quality Report. Beijing.

10 2 6. Jinan is developing a low emission zone in the densest part of the city, roughly bounded by the moat and springs that historically protected the old city center, where centers of retail and other businesses, cultural and natural heritage, leisure, and government are situated closely together. The low emission zone will be supported by TDM measures including restrictions on private vehicles, parking management, and improved nonmotorized transport. These measures combined will encourage the use of public transport and serve as a demonstration for the rest of the metropolitan area for solving the city s accessibility and environmental problems. 7. A modern BRT system can greatly increase efficiency and level of service through dedicated lanes, signal prioritization, and reduced delays through external fare payment and passing lanes at median stations. Trolley bus systems are a sustainable option for urban public transport because of their energy efficiency and environmental and financial advantages compared to conventional buses and rail-based public transport. A trolley bus system integrated with the BRT routes can provide high capacity and zero emission public transport for the central area where the underground metro cannot be built, and thus increase mode share. When the speed and convenience of public transport are improved, and public transport is integrated with other modes, passenger demand can be expected to increase. 8. Urban transport strategy needed for Jinan. As Jinan has grown and established major new residential and business districts to the east and west, travel demand has increased dramatically. However, the public transport system has not kept up with demand and mode share is decreasing, from 22.75% in 2011 to 18.4% in 2013, while ownership of private vehicles and electric bikes is increasing. Because of increasing congestion, average speeds though the central city have declined to 20.0 kilometers per hour (km/h) for cars and 13.8 km/h for buses. The JMG s top urban transport priorities are the improvement of public transport quality, integration with other modes, and supportive TDM to reduce congestion and achieve environmental sustainability. 9. The overall public transport policy is intended to ensure a fully integrated design and operation plan, including complementary TDM. By controlling parking through reformed policies, improving enforcement, and increasing the rates for the most desirable areas in the central city, the use of private vehicles is expected to decrease and the mode share for public transport to increase. A cobenefit of better parking management will be an improved environment for nonmotorized transport, as illegally parked cars often block cycle lanes and footpaths. Introducing high-level technology for dispatching and efficiency management, real-time reporting from the vehicles, and real-time passenger information systems will attract passengers to public transport. 10. Value added by ADB assistance. The Sustainable Transport Initiative Operational Plan of the Asian Development Bank (ADB) prioritizes urban transport as one of its four priority pillars, with a target of 30% of transport operations by ADB identified public sector champions in Jinan who supported a major new initiative to increase public transport as the best solution to worsening congestion and pollution, and partnered with the Cities Development Initiative for Asia to design the network according to international best practices, including adoption of high-level technology for vehicles. In parallel, ADB is also implementing technical assistance financed by the Global Environment Facility to develop guidance for vehicle selection and energy efficiency. 5 Through policy dialogue, partnerships, and expert analysis during project preparation, ADB has helped the JMG find the most efficient solution to increasing public transportation for the largest 4 ADB Sustainable Transport Initiative Operational Plan. Manila. 5 ADB Technical Assistance to the People s Republic of China for Improving Clean Bus Operations and Management. Manila.

11 3 number of people in Jinan. 6 The project will serve as a demonstration that BRT and electric trolley buses are viable options to encourage mode shift, reduce congestion, and improve air quality. 11. Link to country partnership and government strategy. The proposed project is aligned with the Government of the PRC s Thirteenth Five-Year Plan 7 for clean and low-carbon development, and with the ADB country partnership strategy, priorities of environmental sustainability and inclusive and green cities development. 8 The proposed project will combat urban air pollution by promoting green transportation. It will also support ADB s strategic priorities relevant to upper middle-income countries of mitigating climate change and promoting environmental sustainability. 9 B. Impact and Outcome 12. The project is aligned with the following impact: priority development of public transportation through bus rapid transit and nonmotorized transport to improve accessibility and service for passengers and vulnerable groups. 10 The project will have the following outcome: traffic congestion and air pollution in Jinan reduced. C. Outputs 13. Output 1: Zero-emission bus rapid transit network constructed. This output will establish km of prioritized high-quality BRT lanes served by electric trolley buses over 39 routes, 93 new and 65 upgraded median stations with real-time passenger information systems, eight upgraded and eight new bus depots, and 36 new traction substations and power lines. The existing control center will be upgraded in tandem with advanced information technology on board the buses to provide real-time monitoring and dispatching to increase overall operational efficiency. Upgraded intersection designs will facilitate better nonmotorized transport. 14. Output 2: Modern trolley bus and service standards implemented. Updated and improved trolley bus standards and service standards will be developed. The project will provide 735 modern trolley buses equipped with advanced power storage technology and information technology systems for driving assistance and vehicle and power monitoring. 15. Output 3: Travel demand management measures for Jinan prepared. New TDM measures will target the mode shift from private vehicles to public transport. Measures include integration of different modes including bicycles and electric bikes, bus services, urban rail and railway stations, parking management, and a low-emission zone in the urban center. Capacity building for their implementation will be conducted. D. Summary Cost Estimates and Financing Plan 16. The project is estimated to cost $422 million for civil works, equipment, and consulting services, inclusive of taxes and duties, physical and price contingencies, and financial charges 6 ADB provided project preparatory technical assistance for the Shandong Spring City Green Modern Trolley Bus Demonstration Project, in partnership with the Cities Development Initiative for Asia. 7 Government of the PRC The Thirteenth Five-Year Plan for National Economic and Social Development. Beijing. 8 ADB Transforming Partnership: People's Republic of China and Asian Development Bank. Manila. 9 ADB Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific. Manila. 10 Government of the PRC, Jinan Municipal Government Urban Public Transport Master Plan. Jinan.

12 4 during implementation (Table 1). Detailed cost estimates by expenditure category and by financier are included in the project administration manual (PAM). 11 Table 1: Summary Cost Estimates ($ million) Item Amount a A. Base Cost b 1. Zero emissions bus rapid transit network Modern trolley bus and service standards Travel demand management measures Subtotal (A) B. Contingencies c C. Financial Charges During Implementation d Total (A+B+C) Note: Numbers may not sum precisely because of rounding. a Includes taxes and duties of $46.46 million to be financed from government resources and the Asian Development Bank (ADB) loan resources. Such amount does not represent an excessive share of the project cost. The government will finance taxes and duties of $29.81 million in cash from government resources. b In April 2017 prices. c Physical contingencies computed at 5% of base cost. Price contingencies computed at average of 1.5% on foreign exchange costs and 2.3% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. d Includes interest and commitment charges. Interest during construction for the OCR loan has been computed at the 5-year US dollar fixed swap rate plus an effective contractual spread of 0.5% and maturity premium of 0.1%. Commitment charges for the OCR loan are 0.15% per year to be charged on the undisbursed loan amount. Sources: Asian Development Bank and government estimates. 17. The government has requested a regular loan of $150 million from ADB s ordinary capital resources to help finance the project. The loan will have a 25-year term, including a grace period of 6 years; an annual interest rate determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility; a commitment charge of 0.15% per year; and such other terms and conditions set forth in the draft loan and project agreements. Based on the straight-line repayment method, the average maturity is years, and the maturity premium payable to ADB is 0.10%. The financing charges will not be capitalized. 18. The summary financing plan is in Table 2. ADB will finance the expenditures in relation to civil works, equipment, and consulting services. The loan will finance 35.5% of the project cost. The government will finance the remaining 64.5% through counterpart funds provided by the JMG. Table 2: Summary Financing Plan Amount ($ million) Share of Total (%) Source Asian Development Bank Ordinary capital resources (regular loan) Government Total Source: Asian Development Bank estimates. 19. The Government of the PRC is the borrower of the loan and will relend the loan to the JMG on the same terms and conditions as those of the ADB loan. The JMG will assume the foreign exchange and interest variation risks of the ADB loan, including contingencies. The Government of the PRC and the JMG have assured ADB that counterpart funding will be provided 11 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

13 5 in a timely manner, including any additional counterpart funding required for any shortfall of funds or cost overruns. The indicative flow of funds and the relending arrangements are specified in the PAM (footnote 11). 20. Climate mitigation is estimated to cost $316 million and climate adaptation is estimated to cost $5 million. 12 ADB will finance 34% of mitigation costs and 63% of adaptation costs. Details are in the PAM (footnote 11). E. Implementation Arrangements 21. The executing agency will be the JMG, which will be responsible for overall project implementation. The JMG has set up the project leading group and will establish the Jinan project management office to coordinate and supervise project preparation, recruit a procurement agency, and be responsible for supervising procurement and implementation. The implementation arrangements are summarized in Table 3 and described in detail in the PAM (footnote 11). Table 3: Implementation Arrangements Aspects Arrangements Implementation period January 2018 December 2022 Estimated completion date 31 December 2022 Estimated loan closing date 30 June 2023 Management (i) Oversight body Jinan Municipal Government Project Leading Group (ii) Executing agency Jinan Municipal Government (iii) Implementing agency Jinan Public Transport Company Procurement International competitive 3 packages $76.52 million bidding National competitive 2 packages (goods) $ million bidding 5 packages (works) Consulting services QCBS TBD $1.50 million QCBS TBD $0.25 million CQS TBD $1.25 million Retroactive financing and/or advance contracting Advance contracting will apply to (i) bus depots (seven lots with ADB financing of $9.03 million), (ii) public transport stations package A (four lots with ADB financing of $10.39 million), (iii) Jingqi Road corridor (one lot with ADB financing of $30.08 million), and (iv) consulting services for implementation and TDM ($1.75 million). Retroactive financing will finance up to $30 million of eligible expenditure (20% of the ADB loan) incurred prior to loan effectiveness but not earlier than 12 months Disbursement before the loan agreement is signed. The loan proceeds will be disbursed following ADB's Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between the government and ADB. ADB = Asian Development Bank, CQS = consultants qualifications selection, QCBS = quality- and cost-based selection, TBD = to be determined, TDM = travel demand management. Sources: Asian Development Bank and government estimates. 22. The implementing agency will be the JPTC, responsible for project construction, operations management, finance and accounting, and maintenance of infrastructure assets. The JPTC does not have previous ADB or World Bank project experience, and the staff are not familiar 12 Adaptation finance estimated at 5% of the base cost of stations, depots, and corridors for climate proofing. The remainder of ADB financing is for mode shift to clean public transport and is counted as mitigation finance.

14 6 with ADB procurement policies and procedures. The JPTC will engage project implementation consultants to support it during implementation and strengthen its financial management capacity by providing training, particularly on ADB guidelines and procedural requirements for safeguards monitoring and financial management, reporting, and disbursement. 23. The project will be implemented over a 5-year period from January 2018 to December All procurement to be financed under the ADB loan will be carried out in accordance with ADB s Procurement Guidelines (2015, as amended from time to time). All consultant services will be recruited in accordance with ADB s Guidelines on the Use of Consultants (2013, as amended from time to time). Consulting services will be required for supervising construction and installing trolley bus infrastructure. Advanced contracting and retroactive financing, which was initiated in 2017, will be used for recruitment of project implementation consultants. III. DUE DILIGENCE A. Technical 24. A technical feasibility study was conducted on high-quality BRT routes including exclusive lanes and median stations, trolley bus infrastructure types and adoption of advanced technologies, life cycle costs and technical capacity of the operation of the trolley bus system, and the overall system integration and TDM Network modeling showed that establishment of the planned BRT network, serviced by electric trolley buses, would achieve significant traffic and environmental benefits. Ridership on the BRT routes due to the expanded network, higher quality vehicles and stations, and increased speeds would increase from 618,000 to 800,000 person-trips per day, or over one-third of all public transport usage. Mode share for public transport would increase from 18% in 2016 to 25% in 2022 as 6% of private car users switch to public transport, and average BRT speeds through the central city would increase from 13.8 km/h to 19.0 km/h. B. Economic and Financial 26. Economic and financial viability of the trolley bus system, incremental benefits of the BRT network, and advanced trolley bus technologies were assessed in accordance with ADB s guidelines. 14 The project is economically viable with an estimated economic internal rate of return of 28.8%. Economic benefits of the project include lower vehicle operating costs, time savings, reduced carbon dioxide emissions, and avoided health impacts. A sensitivity analysis of potential cost overruns and benefit reductions demonstrates that the project s economic viability is robust. The impact of TDM measures was not included in the estimate but would further increase these benefits and increase the project s viability. The total cost of the proposed project would have to be more than 51% higher than estimated for the economic internal rate of return to fall below the threshold level of 9%. The project s economic internal rate of return is less sensitive to passenger traffic projections. Time savings would have to decrease by about 58% to make the project economically nonviable. Vehicle operating cost savings could fall by 91% and the project would still be economically viable Sector Assessment: Urban Transport (accessible from the list of linked documents in Appendix 2). 14 ADB Guidelines for the Economic Analysis of Projects. Manila; ADB Financial Due Diligence: a Methodology Note. Manila. 15 Economic Analysis (accessible from the list of linked documents in Appendix 2).

15 7 27. A financial analysis has been undertaken for a revenue-generating project to determine if the financial internal rate of return is greater than the weighted average cost of capital to determine the financial viability of the project. Weighted average cost of capital is calculated based on percentage of debt and equity to total investment cost. The financial internal rate of return for the project, computed after tax, is 3.38%, which compares favorably with the estimated 2.10% weighted average cost of capital. The sensitivity of the financial internal rate of return to adverse changes in the underlying assumptions was also assessed and the project is considered financially viable. Sensitivity testing shows these results to be relatively less sensitive to increased capital costs but more sensitive to increased operating costs and decreased revenues. 28. As the implementing agency, the JPTC will be responsible for operating the project, providing counterpart funding, and servicing domestic debt. The JPTC is a large-scale stateowned public service enterprise with social obligations to keep fares low. Consequently, its revenues do not cover operating costs in most years and it is reliant on government subsidies provided by the JMG in lieu of increases in fares. However, the JMG s projected fiscal sources during the project implementation period and the debt service period are stable and sufficient to cover total project financial obligations, and the project itself will improve the financial performance of the JPTC as ridership increases. The JMG and JPTC will conduct a review of fares and recommend necessary adjustments to ensure sustainability of the BRT and trolley bus system. C. Governance 29. Financial management. The financial management policy and capacity of both the JMG and JPTC to implement the project were assessed in accordance with ADB s guidelines. 16 The financial management assessment concluded that capacity is adequate and financial management risk is moderate before mitigation measures, because the funds-flow arrangements, staffing, accounting and financial reporting systems, financial information systems, and internal and external auditing arrangements of JMG and JPTC are acceptable. The JPTC has no prior experience in implementing ADB projects or ADB procurement, disbursement, and financial management procedures. The JPTC will strengthen its capacity by undertaking training on ADB guidelines and procedural requirements for financial management, including reporting and disbursement. Detailed requirements on financial management are in the PAM (footnote 11). 30. Procurement and anticorruption. An assessment of project procurement risk subject to procurement capacity of the implementing agency was conducted in accordance with ADB s guidelines. 17 It is concluded that procurement risk of the project as moderate before mitigation measures. All procurement to be financed under the ADB loan will be carried out in accordance with ADB Procurement Guidelines (2015, as amended from time to time). ADB s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the government and the JMG. The specific policy requirements and supplementary measures are described in the PAM (footnote 11). The relevant sections of ADB s Anticorruption Policy will be included in all procurement documents and contracts. D. Poverty, Social, and Gender 31. A social, poverty, and gender assessment was undertaken in accordance with ADB guidelines to assess the transport and economic development needs of affected people; make the project more pro-poor, socially inclusive, and sustainable; and formulate measures related to 16 ADB Guidelines for the Financial Management and Analysis of Projects. Manila. 17 ADB Guide on Assessing Procurement Risks and Determining Project Procurement Classification. Manila.

16 8 participation, gender, vulnerable groups, safety, accessibility, and other social risks. The transport needs of the population along the proposed BRT corridor include mitigating traffic congestion and improving traffic efficiency and safety, reducing travel time, and improving public transit facilities. The BRT network will directly benefit 804,000 passengers daily in the first year of full operations. It will directly or indirectly benefit about 1.7 million residents in five administrative districts around the BRT network. The project will directly create 1,500 job opportunities during the construction period and 2,218 during the operation period. Indirectly, the project will promote business, employment, and real estate development along the network. Additional direct social benefits of the project will be improved quality of public transport service and customer satisfaction, and capacity building of the executing and implementing agencies and design institutes in social aspects. Bus fares are CNY1.0 for buses without air conditioning and CNY2.0 for buses with air conditioning. Fare concessions are provided to students, the elderly, and the disabled. The average monthly cost of public transport is 1.0% of average monthly income, which is affordable, and 82.2% expressed their satisfaction with current fares. If fares are to be adjusted, the JMG and JPTC will hold a public hearing for comments from residents. The JPTC will ensure that contractors disseminate information on HIV/AIDS and other communicable diseases in construction sites for all new employees at the time of mobilization. The local center for disease control will disseminate similar information to local communities in the project area. 32. To maximize positive gender impacts, the project is designed for effective gender mainstreaming. Women have transport needs arising from their various social roles, mobility patterns, and responsibilities that often combine household work with travel to employment, markets, and social service centers such as schools and hospitals. Survey results show that about 50.0% of women use public transport as their main mode of transportation, while 16.1% rely on walking, 13.0% on private car, and 10.0% on motorcycle. Women also have personal concerns about road safety. These considerations have important implications for the physical design and operation of public transport systems, so the project incorporates distinct gender-sensitive design features to enhance women s inclusion and participation and ensure that women benefit from a BRT system that is safe, fast, and convenient. Other measures include the following targets for women s participation: (i) 20% of project generated unskilled jobs; (ii) 25% of BRT drivers, 45% of administration staff, and 85% of ticketing staff; (iii) at least 40% participation in road safety awareness raising activities, participation in travel modal shift activities awareness measures, and public consultation; and (iv) gender-sensitive institutional strengthening and capacity building. 18 E. Safeguards 33. In compliance with ADB s Safeguard Policy Statement (2009), the project s safeguard categories are as follows Environment (category B). The project is classified category B for environment. The initial environmental examination complies with ADB s policies and requirements, including ADB s Safeguard Policy Statement (2009), and identifies potential adverse impacts. The examination concludes that those impacts can be mitigated through the implementation of the environmental management plan, which specifies mitigation measures, monitoring requirements, and institutional responsibilities for ensuring proper environmental management throughout the project s construction and operation. Meaningful public consultation was done in accordance with ADB s Safeguard Policy Statement and environment safeguard documents were disclosed to the affected people. Potential environmental complaints or disputes will be handled in accordance 18 Gender Action Plan (accessible from the list of linked documents in Appendix 2). 19 ADB. Safeguard Categories.

17 9 with the grievance redress mechanism established for the project. The JMG and JPTC will manage the identified environmental risks and have agreed to appropriate loan covenants and training. The initial environmental examination was posted on the ADB website on 7 June Environmental benefits and risks. The project will result in significant long-term reductions in transport sector emissions and greenhouse gases, and increased benefits for human health and well-being compared to the without-project scenario because of zero-emission electric buses, reduced numbers of commuters in private cars, and improved traffic flow. By 2043, total emission reductions related to urban transportation are predicted to be as follows: carbon monoxide 53,554 tons, nitrogen oxides 5,830 tons, hydrocarbon 3,157 tons, particulate matter 169 tons, and carbon dioxide 5.2 million tons. A climate risk assessment concludes that climate risk is high, and the most significant risk to the project areas and their vicinities relates to flood. Since the last flood event in 2015, the JMG has made significant efforts to improve drainage systems in various parts of Jinan for better flood control. Engineering designs have been modified for elevated trolley bus stations and bus depots with sufficient drainage, accounting for $3.15 million of ADB financing for adaptation. As an urban mass transit project targeting mode shift, $ million of ADB financing is counted as mitigation finance. 36. Involuntary resettlement (category B). The project is category B for involuntary resettlement. A total of 24.6 mu of rural collective land will be acquired for the construction of the Hanyu depot, affecting four households with 13 persons. 20 Nine bus depots will be built or upgraded on the existing depots owned by the JPTC and will not involve any resettlement, while mu of state-owned land requires land use certificates with payment for six bus depots. A total of 4.3 mu of land will be occupied permanently for 36 traction substations within the existing landscaped area or vacant state-owned land and will not involve any resettlement. The temporary land occupation area of the project will be within the permanent land acquisition or occupation area. A draft resettlement plan was prepared in accordance with ADB's Safeguard Policy Statement. This will be finalized in line with the detailed engineering design and submitted to ADB for approval prior to the award of civil works contracts. The total cost of land acquisition and resettlement is CNY5.79 million, or 0.2% of the total project cost. The executing agency has assured ADB that adequate counterpart funding will be made available for land acquisition and resettlement, in line with the annual funding requirements stipulated in the resettlement plan. A consultant will be engaged to support the executing agency in effectively implementing the resettlement plan. The project management office staff will coordinate internal supervision and reporting of resettlement plan implementation with relevant local government agencies. The executing agency will engage an external institute for semiannual monitoring and reporting. Public consultations were undertaken during project preparation and will continue throughout the project cycle as per the public consultation schedule prepared under the resettlement plan. The draft and final resettlement plans will be uploaded on the ADB website and disclosed to affected people. A grievance redress mechanism has been established to address affected people s concerns Indigenous peoples (category C). There are no ethnic minority communities that will be adversely affected by the project. The project is category C for indigenous peoples. 20 A mu is a Chinese unit of measurement (1 mu = square meters). 21 Resettlement Plan (accessible from the list of linked documents in Appendix 2).

18 10 F. Summary of Risk Assessment and Risk Management Plan 38. The overall risk is assessed to be low. The unified benefits and impacts are expected to outweigh the costs of mitigation. Significant risks and mitigating measures are summarized in Table 4 and described in detail in the risk assessment and risk management plan. 22 The project design and implementation measures are considered adequate to address the identified risks. Risks Ridership may be lower than forecast, resulting in decreased benefits and revenues Procurement and implementation capacity may cause delays Lack of familiarity with ADB safeguards requirements may cause delays Table 4: Summary of Risks and Mitigating Measures Mitigation Measures ADB = Asian Development Bank, BRT = bus rapid transit. Source: Asian Development Bank estimates. Projections are conservative and rely on about one-third of public transport demand on the highest density corridors. Expansion of BRT routes and trolley buses is planned in phases that can be adjusted. Training will be provided on ADB financial management and procurement requirements. Prior review will be applied to procurement. Implementation support consultants and a procurement agency will be engaged. Training on ADB safeguard requirements will be provided for implementing and executing agencies. ADB and external consultants will monitor progress and compliance. IV. ASSURANCES 39. The Government of the PRC and the JMG have assured ADB that implementation of the project shall conform to all applicable ADB policies, including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, and disbursement as described in detail in the PAM (footnote 11) and loan documents. 40. The Government of the PRC and the JMG have agreed with ADB on certain covenants for the project, which are set forth in the draft loan agreement and project agreement. V. RECOMMENDATION 41. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the loan of $150 million to the People s Republic of China for the Shandong Spring City Green Modern Trolley Bus Demonstration Project, from ADB s ordinary capital resources, in regular terms, with interest to be determined in accordance with ADB s London interbank offered rate (LIBOR)-based lending facility; for a term of 25 years, including a grace period of 6 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan and project agreements presented to the Board. 29 September 2017 Takehiko Nakao President 22 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

19 Appendix 1 11 DESIGN AND MONITORING FRAMEWORK Impact the Project is aligned with: Priority development of public transportation through bus rapid transit and nonmotorized transport to improve accessibility and service for passengers and vulnerable groups (Jinan Urban Public Transport Master Plan 2016). a Performance Indicators Results Chain with Targets and Baselines Outcome By 2024 Data Sources and Reporting Risks Traffic congestion and air pollution in Jinan reduced. a. Public transport mode share increased to 25% in the city center area (2016 baseline: 18%) b. 39 BRT routes in the city center serviced by zero tail-pipe emission urban public transport (2016 baseline: none) a. JMG latest citizen travel survey report b. Daily national air quality index monitoring data Urban growth may be higher than forecast and put greater pressure on the transport system. Ridership may be lower than forecast. c. Public transport average speed in the city center increased to 19 km per hour (2016 baseline: 14 km per hour) c. Monthly trolley bus management center report by JPTC d. BRT system daily ridership increases to at least 800,000 per day (2016 baseline = 618,000) d. JPTC monitoring report Outputs By Zero-emission bus rapid transit network constructed 1a. BRT trolley bus network of km developed (2016 baseline: 0 km) 1b. Universal access facilities for vulnerable users including elderly, disabled, women, and children provided at at least 93 new stations (2016 baseline: none) 1c. At least 10% local women to be employed in unskilled construction jobs (2016 baseline: 5%) 1d. Localized emissions of PM2.5 reduced by 26 tons per year (2016 baseline = 0) 1a. JPTC annual report 1b. JPTC monitoring report 1c. JPTC project progress or monitoring report 1d. JPTC monitoring report Changes in government management may delay project implementation. Government s policy on financial support to JPTC may change. Low familiarity with ADB requirements may lead to implementation delays.

20 12 Appendix 1 Results Chain 2. Modern trolley bus and service standards implemented Performance Indicators with Targets and Baselines 2a. 735 modern trolley buses purchased by 2020 (2016 baseline: 0) 2b. Energy efficiency of public transport improved to use 40% less energy than current clean energy and new energy buses (2016 baseline: 0%) Data Sources and Reporting 2a. JPTC annual report 2b. JPTC annual report Risks 2c. Ensure at least 25% female drivers for BRT routes, 45% for administration, and 85% for station staff (2016 baseline female staff: 22.3% drivers, 41.5% administration, and 82.3% station staff) 2c. JPTC project progress or monitoring reports 3. TDM measures for Jinan prepared 3a. Priority TDM measures for parking management and zero-emission zone designed by 2019 (2016 baseline: none) 3a. JMG Urban Transport Policy Statement 3b. Data (disaggregated by sex, age, and concession category) collected for monitoring and evaluation (2016 baseline: none) 3b. JMG project monitoring report 3c. Promote women s role in travel mode shift with at least 40% local women to participate in awarenessraising activities (2016 baseline: none) 3d. Key executing and implementing agency staff trained on gender action plan implementation (2016 baseline: none) 3c. JMG project monitoring reports 3d. JMG project monitoring reports Key Activities with Milestones 1. Construct zero-emission bus rapid transit network 1.1 Land acquisition and resettlement activities implementation (Q and Q4 2019). 1.2 Complete trolley bus infrastructure preliminary design by June Commence bidding for procurement of works on June Recruit supervision consultants by June Complete trolley bus network by December 2022.

21 Appendix Implement modern trolley bus and service standards 2.1 Prepare modern trolley bus and service standards by December Commence bidding for procurement of modern trolley buses by December Complete procurement modern trolley bus by June Achieve full operation of modern trolley bus network by December Prepare travel demand management measures for Jinan 3.1 Prepare TDM for government endorsement by March Conduct training and capacity building on TDM by June Inputs ADB: $ million (loan) JMG: $ million Assumptions for Partner Financing Not applicable. ADB = Asian Development Bank, BRT = bus rapid transit, JMG = Jinan municipal government, JPTC = Jinan Public Transport Company, km = kilometer, TDM = travel demand management. a Government of the PRC, Jinan Municipal Government Jinan Urban Public Transport Master Plan. Jinan. b Activities include campaigns, media releases, posters, leaflets, and roadshows in public spaces. Source: Asian Development Bank.

22 14 Appendix 2 LIST OF LINKED DOCUMENTS 1. Loan Agreement 2. Project Agreement 3. Sector Assessment (Summary): Urban Transport 4. Project Administration Manual 5. Contribution to the ADB Results Framework 6. Development Coordination 7. Financial Analysis 8. Economic Analysis 9. Country Economic Indicators 10. Summary Poverty Reduction and Social Strategy 11. Gender Action Plan 12. Initial Environmental Examination 13. Resettlement Plan 14. Risk Assessment and Risk Management Plan Supplementary Documents 15. Financial Management Assessment 16. Procurement Capacity Assessment