Environmental and Social Safeguards Compliance Audit (and Corrective Action Plan) March 2013

PRC: Municipal Water Distribution Infrastructure

Development Project

Xinyu Water Affairs Group Limited

Prepared by China Water Affairs Group Limited for the Asian Development Bank (ADB) This report has been submitted to ADB by China Water Affairs Group Limited and is made publicly available in accordance with ADB’s public communications policy (2005). It does not necessarily reflect the views of ADB.

Construction Project of Xinyu Water Affairs Group Limited

February 2013

ENVIRONMENTAL AND SOCIAL SAFEGUARDS

COMPLIANCE AUDIT

(AND CORRECTIVE ACTION PLAN)

China Water Affairs Group Limited

ESMS AUDIT REPORT

Document Number: ESMS/XINYU/BP-AP/V1.0/201302XX

Topic: Environmental and Social Safeguards Compliance Audit

(And Corrective Action Plan)

Written and Prepared by ESMS Supervisor: Wen, Wei

Verified and Approved by ESMS Manager: Tao, Hua

Approved by Executive General Manager: Liu, Yong

ESMS Committee Representative: Chan, Jacky

Contact Persons/ ESMS Manager:

Mr. Tao, Hua

Email: taohua@chinawatergroup.com.cn

Fax: +86 010 6369-4800 (Office)

Tel: +86 010 6369-4855 (Office)

CONTENTS

I. INTRODUCTION

A. Project Overviews ...................................................................................................... 1

B. The Ojectives and Scope of the Report ...................................................................... 4

C. Methodology: ............................................................................................................. 5

II. AUDIT FINDINGS

A. Past and Present Related Safeguards Issues

i. Environment ....................................................................................................... 7

ii. Involuntary Resettlements ................................................................................ 10

iii. Indigenious Peoples .......................................................................................... 12

B. Other Social Matters

i. Sustainable Development ................................................................................. 12

ii. Gender and Employment .................................................................................. 13

iii. Labor and Community Health and Safty .......................................................... 13

III. CONCLUSION

A. Conclusion ............................................................................................................... 15

IV. ANNESES.........................................................................................................................16

Annex 1

Annex 2

Annex 3

Annex 4

Annex 5

Annex 6

Annex 7

ABBREVIATIONS

ADB Asian Development Bank

AP Affected peoples by the Project

CAP Corrective Action Plan

CWA China Water Affairs Group Limited

DRC Development and Reform Commission (Government Authority)

EIA Environmental Impact Assessment

EPB Environment Protection Bureau (Government Authority)

IPS Intermediate Pressure Station

IR Involuntary Resettlement

LA Land Acquisition

LAA Land Acquisition Agreement

LRB Land Resource Bureau (Government Authority)

Mu Area unit, also called Chinese Acre, 1mu is approximate equivalent to 666.67m2

PRC People’s Republic of China

RMB The lawful currency of the PRC with unit Yuan

RWEP raw water extraction point

SOE State Owned Enterprise

SPS ADB’s Safeguards Policy Statement (2009)

SR ADB’s Safeguard Requirements (ADB SPS 2009)

tpd tons per day (equivalent to m3/day)

1

I. INTRODUCTION

A. Construction Project Overview

Xinyu Water Affairs Group Ltd. (hereinafter referred to as “Xinyu Water Affairs”) is one of

the subsidiaries of China Water Affairs Group Limited with 60% shareholding, and it has

been acquired by CWA since 2006 and is being collectively controlled by CWA. Xinyu City

(Figure-1) is located in the middle and west of Jiangxi Province, 160km away from Nanchang,

Jiangxi provincial capital. Upon approval of ADB, proceeds of the Facility will be

participate in the construction of the new water plant – Xinyu Fairy Lake Water Plant,

the fifty water plant in city of Xinyu; and it will solely provide tap water service to the

Fairy Lake District developed in recent year.

Figure 1 Project Company in Jiangxi Province on the map of China

i. Existing Urban Water Supply System/Facility in Xinyu:

1. Abandoned Water Plants:

Four(4) water plants were constructed in Xinyu City successively, among which, the No.1 WP

(located at south of Xinyu City, capacity of 32k tpd) and No.2 WP (located at north of Xinyu

City, capacity of 30k tpd) were abandoned in 2005 and 2009 respectively due to various

reasons such as, facility ageing issue, lack of treatment and distribution capacity and most

important, the deterioration of water quality of Kongmujiang River, the raw water source that

being polluted by illegal discharge from local industries and agriculture activities over last

2

twenty years.

2. Existing Water Plants in Use:

Therefore, the entire urban water supply in Xinyu is currently provided by the No.3 Water

Plant and No.4 Water Plant, which its Phase II construction just completed last December.

Total

a. No. 3 Water Plant, built in 1998, is located at Chengxi District in Xinyu, with distribution

capacity of 100k tpd. Because of superior quality of raw water resource from Baiyun

Reservoir, traditional purification process is being adopted in Luxi Water Plant as shown in

Figure-2. Area of 64mu is occupied, including administration building and 100k tpd water

treatment facility.

b. No.4 Water Plant, with its Phase II just build up last year, it has a total distribution

capacity of 150k tpd. Because of superior quality of raw water resource from Fairy Lake,

traditional purification process is being adopted in Xinyu Water Plant as shown in Figure-2.

Area of 129mu is occupied, including administration building and 150k tpd water treatment

facility.

Figure 2 - Water Purification Process

3. Raw Water Resources / Surface Water for Existing Water Plants:

a. No.3 Water Plant - The raw water is extracted from Fairy Lake (Annex 3), an artificial

which lake operated by local government authority; the RWEP is 14km from the No.3 Water

Plant. The Lake is used for irrigating local agriculture activities, providing raw water to No.3

water plant and nearby industrial users. As one of the four biggest artificial lakes in Jiangxi

Province, Fairy Lake has a water storage capacity over 340,000,000m3, a

catchment area

around 3,900km2, and constant flow-in rate at 111.6m

3/s. According to the water quality tests,

it confirmed the Category II standard of “Environmental Quality Standard for Surface

Water” 1

(GB3838-2002) throughout the year of 2012 (Annex 1).

b. No.4 Water Plant – The raw water is extracted from Baiyun Reservoir that operated by

locater government authority. The reservoir is located approximate at Guanchaohupo Village,

4 km away from No.3 Water Plant; it covers surface area over 325 km2 and total storage

capacity over 8,790,000 m3. According to the water quality tests, it confirmed the Category II

standard of “Environmental Quality Standard for Surface Water” (GB3838-2002) throughout

the year of 2012. (Refers to ADB A-Loan ESMS reports for details) (Annex 1)

1 “Environmental Quality Standard for Surface Water” (GB3838-2002) is available from

http://www.shuigongye.com/standard/200811/2008110513293700001.html

3

4. Existing Pipeline Breakdown:

Table 1- Details of Existing Pipeline Network of Xinyu City

No. Diameter

(mm)

inclusive

Length

(km)

Material Remarks

1 DN600 and

up

93.35 PE, Ductile

Iron

Including approximate length of

conveyance pipeline 14km to No.3 Water

Plant and 4km to No.4 Water Plant raw

2 DN300 –

DN600

(incl.)

66.46 Concrete,

Steel, PVC

Water distribution pipeline (Underground)

3 DN200 –

DN300

(incl.)

115.59 Ductile Iron,

Steel, PE,

PVC

Water distribution pipeline (Underground)

4 DN100 –

DN200

(incl.)

186.18 Ductile Iron,

Steel, PE,

PVC

Water distribution pipeline (Underground)

5.

4

iii. Project Construction Break Down:

According to the design of the Fairy Lake Water Plant prepared in 2012, a 90,000tpd Water

Plant will be constructed, but built in two phases - 60,000tpd in Phase I, and the other

30,000tpd in Phase II. The Phase II construction is not expected to commence until 2015,

depending on the pace of water demands increase in Fairy Lake District.

1. Water Treatment Plant: The site (for both Phase I & II) occupies 69mu land is located at

south to Fairy Lake Avenue and east to Qixian Avenue, at the boundary of Banbei Village and

Wumukeng Village in Fairy Lake District, Xinyu City. The new plant will adopt the same

treatment process as No.3 Water Plant (shown in Figure 2), because of superior quality of the

raw water resource from the Fairly Lake. The Phase I mainly consists of constructing

administration building and 60,000tpd water treatment facilities including flocculation,

sedimentation tanks, granular/sand filtration tank, clear-well storage tank, chemical

preparation/storage room, and high pressure distribution pump house. Land for Phase II will

be reserved within the boundary for future construction.

2. Raw Water Extraction: Sharing the same RWEPs with the No.3 Water Plant, Fairy Lake

Water Plant extracts raw water from adjacent Fairy Lake, where the water quality certified to

be Category II in 2012, by the standards of “Environmental Quality Standard for Surface

Water” (GB3838-2002). An anticipated volume 168,000m3daily raw water extraction is

expected after Phase I of Fairy Water Plant operation kicks in.

Figure 3 – Fairy Lake Water Plant Simulation Plan

(4) Project Accomplishment: the construction started in late December 2012, and as at

February 2013, approximate 5% of the project has been completed: mostly the land leveling

inside water plant; also, the alignment of water conveyance pipeline and distribution pipeline

has been determined and the exaction and installation in ongoing. It is expected that the

construction can be completed in early 2014 and full operation of the Fairy Lake Water Plant

in the same year.

B. Objectives and Scope of the Report

The proposed project involves existing urban water supply facilities and facilities for which

construction is ongoing will form part of the future Project proposed for ADB financing; the

use of land or sites have been acquired prior to ADB consideration of the Project. This report

is being prepared to comply with the 2009 ADB Safeguards Policy Statement (SPS)

Safeguards Requirements 4 covering Special Requirements for Different Finance Modalities

5

(SPS, SR 4, para 12)2. The audit aims to identify past or present concerns related to impacts

on involuntary resettlement (physical or economic displacement) and ethnic minorities or

Indigenous Peoples; determine whether actions were in accordance with ADB’s SR 1, SR 2

and SR3 principles and requirements and prepare a corrective action plan (CAP) containing

necessary remedial actions, the budget for such actions, and the time frame for resolution of

noncompliance.

C. Methodology

The ESMS audit team, taking into account of the actual conditions of the project, adopted

different methodologies for project audit, including the specific methodologies as follows:

1. Field investigation and verification. We organized six (6) experts in the field of corporate

operation and management, engineering technology, financial management and EIA to carry

out complete audit of the project.

2. Review of documents. The documents reviewed include project feasibility study report,

EIA and the document, contracts and agreements of local government in respect of land

acquisition, relocation and resettlement. These documents are:

(a) “Feasibility Study Report for Xinyu City Fairy Lake Water Plant” prepared by Jiangxi

Zhengjie Investing Co., Ltd.;

(b) “EIA” prepared by Xinyu City Environment Protection Engineering, Design and

Research Institute;

(c) “Adjustment to Collectively Owned Land Acquisition Compensation Standard, New

and Hi-Tech District, Xinyu City”;

(d) “Approval of Adjustment to Charges for Reinstating Cut Urban Road in Xinyu City”;

(e) “Subsidies Policy for Extraordinarily Poor Households with Lowest Livelihood

Safeguard among Urban Residents, Xinyu City”;

(f) Agreement of land acquisition, transfer contracts and Land Certificate relevant to the

project;

(g) “Notification of Implementation Solution to Adjustment to Land Acquisition

Compensation Standard, New and Hi-tech District, Xinyu City”;

(h) Various document, notification and notices issued by the local government in relation

with the project;

(i) “Recommendation for Site Selection of Construction Project” issued by Xinyu City

Planning Authority;

3. The investigation was conducted in the forms of meetings and interviews. The involved

persons (Annex 6) were called to meetings to have review of the production and operation of

the existing facilities, have knowledge of the existing environment impact of production and

operation activities of the company, the involuntary resettlement and indigenous people as

well as mitigation or preventative measures against the potential impacts.

4. Review of various system document. The document and management systems issued by

2 The Safeguards Policy Statement is available from http://www.adb.org/Documents/Policies/Safeguards/default.asp

6

the Project Company, contractor(s), investigation unit, design party and the supervisor was

reviewed to examine the arrangement of all involved parties for environmental care,

involuntary resettlement and indigenous people as well other social impact.

5. Collection of recommendation from local governmental authorities. The local authorities

including environment protection bureau, construction bureau, development and reform

commission, state land resources bureau and relevant villagers committee were interviewed to

verify the impact of the project on environment and the society.

7

II. AUDIT FINDINGS

A. Past and Present Related Safeguards Issues

i. Environment

1. It is confirmed that the project facility of Fairy Lake water Plant does/will not cross or

traverse environmentally sensitive areas, as no such protected areas, wet land, mangrove,

estuarine, and buffer zone in this area. It is also confirmed that the project facility will not

encroach on historical or cultural areas, disfiguration of landscape by embankments, cuts, and

quarries, as no such areas existed nearby the construction site. The site location of the Fairy

Lake Water Plant is situated in south to Fairy Lake Avenue and east to Qixian Avenue - the

surrounding of the plant is all mountainous land and roadways. There is neither residence,

school, hospital nor any public facilities within 2 km around plant (Annex 2 for details).

2. The EIA of Fairy Lake Water Plant project was prepared by Xinyu City Environment

Protection Engineering, Design and Research Institute contracted with Xinyu Water Affairs in

strict accordance with the relevant provisions of the “Environment Protection Law of the

People’s Republic of China”, “Environment Protection Management Regulation of

Infrastructure Project Construction", "Environment Impact Assessment Law of the People’s

Republic of China" and other related laws and regulations. The EMP from the EIA primarily

focuses on the following fields: (i) impacts on acoustic environment and mitigation measure

regarding noise control, (ii) impacts from wastewater discharging and mitigation measure

regarding wastewater treatment; (iii) impacts from solid waste/sludge and mitigation measure

regarding sludge treatment; (iv) chlorine and mitigation/ contingency plan for chlorine

incident; and (v) vegetation recovery. As for the audit, the team focused on whether Fairy

Lake Water Plant has followed such regulations during construction and future operation, and

whether any prior incidents occurred in such fields and possible resolution if there are any.

(i) Impacts on Acoustic Environment and Mitigation Measures of Noise Control:

During construction period - the noise is mainly caused by various constructional machines

and transportations. To mitigate the impacts, light duty low-noise equipment is used on site to

reduce noise. In addition, all construction is scheduled between 8:00 and 20:00 to minimize

the noise to surrounding neighbors. As mentioned previously, no residential and public

facilities are situated within 1km of the site boundaries. It is confirmed that all mitigation

measures have implemented, the noise level has been well controlled under benchmarks

specified in “Noise Limits for Construction Site” (GB12523-90); therefore no acoustic

impacts caused by the construction.

Table 2 - Summary of Noise Findings (unit: dB)

Orientation

(at each boundaries of

the Water Plant)

Day-time

standard

(GB12523-90)

Day-time

Real-time

Data (avg.)

Night-time

standard

(GB12523-90)

Night-time

Real-time Data

(avg.)

8

East 60 56 50 45

South 60 55 50 45

West 60 48 50 43

North 60 45 50 44

During operation period - noise will be contributed by the operating equipment on site, mostly

from the high wattage distribution pumps and sludge dehydrating devices. To mitigate the

impacts, all noise producing equipment have to be capped indoor and installed with sound

attenuating enclosures. Acoustic survey will be conducted and monitored by government

authorities, checking against with “Urban Area Ambient Noise Standard” (GB12348-2008).

Given the relatively remote location, Fairly Water Plant can easily control the noise level

under national benchmarks with implementation of up-mentioned measures.

(ii) Impacts from Wastewater Discharge and Mitigation Measures of Wastewater Treatment

During construction period – wastewater mainly composed of domestic wastewater and these

from cleaning process of vehicle and constructional equipment. According to EMP, a

temporary sediment tank to be provided, so that the wastewater can be collected and then

discharged into urban sewage network after the sedimentation of silt. It is confirmed that

temporary sediment tank is in place, only treated wastewater being disposed of into city

sewage collection network. No impact caused by the construction.

During operation period – wastewater treatment compartment is proposed for wastewater and

sludge deep treatment; such facility includes sludge gathering tank, concentration tank,

dewatering tank, and storage tank. As shown in figure 4, treated waste water will be remix

with raw water and re-enter the purification process; the dewater sludge pie will be

collectively gather by environment hygiene department for treatment and landfill (refer

“Impacts from solid waste” for details).

Figure 4 – Wastewater/ Sludge Treatment Process

(iii) Solid Waste/ Sludge Handling

9

During the construction - the earth excavation is used in road subgrade, vegetation and site

land grading; no excavated material is delivered outside the plant.

During the operation period - The sludge pie from wastewater treatment process to be

transported by the environment hygiene department to landfill site for harmless disposal. The

sludge produced from Fairy Lake Water Plant each month is expected approximately 40 ton.

Xinyu Waste landfill Site, located at the joint of Shushan town and Liangshan Town, ouccpies

over 560mu land, with total handling capacity of 3,500,000m3; it has served 8 years out of 20

years’ service span.

(iv) Chlorine and Mitigation Measure/Contingency Plan:

Chlorine is used by the water plant as disinfectant for water disinfection purpose. The

procurement of chlorine have to be carried out in strict compliance with the safety authorities

of Xinyu city and following strict application procedure set forth by the local authority. The

supplier of chlorine is to be Jiangxi Selon Industrial Stock Co., Ltd. with National Industrial

Product Manufacturing License and Business License and qualified for production of chlorine.

The shipment and logistics have to be handled by qualified transportation company, Jiujiang

Qianjin Automobile Transportation Co. Ltd. Duchang Branch, which is licensed with all

certificates and competences required for transportation of chlorine.

The operating manual has been followed and practiced by Xinyu Water Affairs (in the existing

No.3 and No. 4 water plants), including handling of chlorine and necessary chlorine leakage

detectors, alarm and collection/disposal devices, infrared sensor alarm and self-absorbing

devices. The company is also prepared liquid chlorine leakage contingency plan (Annex 7)

and first aid routine to be practiced regularly. It has been confirmed that all existing chlorine

mitigation measures of existing No.3 and N0. 4 Water Plants will be applied to Fairy lake

Water plant; and no chlorine incidents ever occurred in operation history of No.3 and N0. 4

water plants in Xinyu.

(v) Green Coverage:

According to the WP’s Landscape Design, the overall green (vegetation) coverage of 30% is

required; however, It was confirmed by ESMS audit team that the landscape work will not be

started until main structure of water plant is completed.

3. Grievance Redress Mechanism: the same as existing water plants in Xinyu, Customer

Service Centre to be established for collecting and handling grievances from water end-users.

General issues raised have to be resolved within 1-3 business days, 7 business days maximum

for special cases. Besides, involved parties could also fill requests to administrative office of

Xinyu Water Affairs; even to CWA onshore headquarter asking for directly assistants. ESMS

officers in positions are in charge of environmental related issues and conduct investigation

accordingly.

10

ii. Involuntary Resettlement (“I.R.”)

1. Status of Prior Land Acquisitions:

(i) Raw Water Intake Pump House: The intake point of the Fairy Lake Water Plant is shared

with the existing No.3 Water Plant in Fairy Lake (see Annex 3 for the intake point

surrounding). The intake facilities will be reconstructed to suit the increased volume; no

additional land will be acquired. The land occupied was allocated by Xinyu City State Land

Resources Bureau in 1997. The land has been used by the intake point for 15 years and Land

Certificate has already obtained (Annex 4).

(ii) Fairy Lake Water Treatment Plant: The project site is located in Fairy Lake District,

Xinyu City, south to Fairy Lake Avenue and east to Qixian Road, covering an area of 69mu. It

owned by Xinyu City Fairy Lake Administrative Commission, and then transferred to Xinyu

Water Affairs for construction of LA water plant. Fairy Lake Administrative Committee and

Xinyu Water Affairs signed land acquisition agreement in 2012 (Annex 5), stating that Fairy

Lake Administrative Committee to provide Xinyu Water Affairs the land at the rate of RMB

90,000/mu. It was confirmed that all required payments had been made to Fairy Lake

Administrative Committee after the signing of the Agreements. It confirmed that no people

getting forest products from the project area, and land related was mountainous area that has

not been developed prior to the acquisition. Therefore, we could confirm that no Involuntary

Resettlement and related compensation involved.

(iii) Pipeline Construction: raw water conveyance pipeline of Fairy Lake Water Plant will be

constructed on the alignment designated by the city’s planning department and laid at one side

of the city road where being considered Right of Ways dedicated for urban utility

infrastructure developing. Given the remote area, neither permanent nor temporary land

compensations were involved, therefore, no resettlement cases raised.

11

Table 3 – Summary of Land Acquisition

No. Land Usage Location Date of signing the L.A.

agreement

Type of

Land

Area

(m2)

Remarks

1 Raw Water Intake Pump

House Fairy Lake November 2009

Industrial

Land 230

RWEP is shared with No.3 Water Plant,

Land Certificate obtained (Annex 4)

2 Water Treatment Plant Fairy Lake Ave./

Qixian Ave. west December 2012

Industrial

Land 46,002.3

Area including administration building

Land Certification in processing

3 Access Road n/a n/a n/a 0 Construction site is beside Fairy lake Ave.,

no access road needed

4 Raw Water Conveyance

Pipeline

3.5 km along Fairy

Lake Ave. n/a ROW 2,600

3.525km DN800 ductile iron pipe

ROW section dedicated for utility

construction

5 Tap Water Distribution

Pipeline Fairy lake District n/a ROW 8,430

ROW section dedicated for utility

construction

12

3. Public Participation and Information Disclosure: During the promotion of Fairy Lake

Water Plant project, Xinyu Water Affairs disclosed project information to the general public

through news media and internet, positively solicited recommendations from all walks of life,

appropriately consulted the issue of temporary land acquisition in course of construction and

guaranteed the openness and transparency of project construction.

4. Consultation and Grievance Redress Mechanism: A Fairy Lake Water Plant construction

office was by Xinyu Water Affairs to receive and directly handle complaints arising from the

construction, ensuring the safeguard of legal rights of the affected person(s). Meanwhile, the

general public may appeal to the governmental public voice system or lodge a suit with the

same level people’s court to protect his or her legitimate right in accordance with the relevant

provisions of “Civil Procedure Law of the P.R.C.”. It has been confirmed during the

investigation that no complaint has been received since the commencement of the

construction of Fairy Lake Water Plant.

iii. The Indigenous Peoples (IP)

As few as 0.15% of ethnic minorities are registered in the City of Xinyu, all of them have

adopted the lifestyle of the Han’s, so that they do not self-identify themselves as a distinct

culture group. The project construction and land acquisition have no involvement of ethnic

minorities, also, the Project Company has no involvement of any ethnic minorities in

particular, therefore, it can be concluded that no IP safeguard issue associated with the

Project.

B. Other Social Matters

i. Sustainable Development

1. Water Tariff: water tariff in Xinyu city is RMB1.35/m3 in 2010 and the average per capita

monthly water consumption in Xinyu City is around 10.2m3. It indicates a monthly

expenditure per capita of RMB13.77 spent in accessing tap water, which accounts for merely

0.83% of monthly disposable income of RMB 1,652/month in Xinyu City towns in 2010.

Therefore, the adjustment to water tariff has very limited influence over residents’ daily life.

2. Tariff Hike Mechanism and Water Preferential Policy to the Vulnerable: The request of

water tariff hike will be reviewed jointly by the government, the water supply company and

consumer representatives at public hearings and finally decided by the government. However,

the tariff hike by the water supply company must take into account of the affordability and

living standard of vulnerable groups like poor population, low income households and female

groups. The company would also respect the favorable subsidies policy and publicize the

subsidies and tariff adjustment measures and reduce any adverse impact of tariff hike on the

poor community, low income female and their fostering persons. The current subsidies policy

of Xinyu City states that: for the extremely poor households or individuals (identified by the

city’s civil affairs department in line with relevant standard), the first 5 tons of consumed

water is free of charge; the water consumed above 5 tons is charged 20% less than normal

13

tariff.

3. Eco-friendly Water Consumption Habit: Xinyu Water Affairs has been promoting the

idea of water saving in campaigns through a variety media channels like local newspaper and

magazines, radio and TV every year. A 7-24 customer service hotline has been set up to

receive and handle customers’ water consumption problems and for prompt solution of

customer’s water use problem. Every year, the company has also organized regular publicity

weeks in communities to promote service for community, safety and water saving,

communicating with customers face to face, promoting water consumption knowledge and

improving water using efficiency.

ii£Gender and Employment

1. Xinyu City Water Affairs Co., Ltd. is the Project Company of Fairy Lake Water Plant.

Currently it employs 127 female staff, accounting for 46.18% of the total 275 staff. The

company applies the equal gender principle to new employees’ recruitment and selection of

managerial staff and adopts post salary system; the equal post equal pay and more labor more

pay principle.

Table 4 - Summary of Gender Distribution (disaggregated by job categories)

Job Category Number of

Staff

Female

Number

(Percentage)

Male

Number

(Percentage)

Remarks

Managerial 37 12 (32%) 25 (68%) Senior Management, Middle

level Management

Administrative 21 14(67%) 7 (33%) Administration, Accounting,

Human Resource, Customer

Service, Secretary

Technical 220 114(52%) 106(48%) Electrical, Mechanical,

Chemical, Technician and I.T.

Supports

Total 278 140 (50.35%) 138 (49.64%) --

2. Protection of Female’s Rights: Xinyu Water Affairs always pays adequate attention to the

rights of female staff by maintaining their beneficiary policies in post arrangement, leaves and

allowance. For instance, they are entitled to four (4) months maternity leave with 100% wage

and welfares like the staff on duty. The company organizes female employees for

gynecological checkup regularly each year.

iii. Labor and Community Health and Safety

1. Social Benefit: In full compliance with national policies, regulations and laws, such as

“the Labor Contract Law” (2008), “Trade union Law” (1992), “Labor Law” (1995), “the

Production Safety Law (2002), and “the Provisions on Collective Contracts” (2004), Xinyu

14

Water Affairs provides its employees with pension premium, unemployment insurance,

industrial injury insurance, medical insurance and maternity insurance in the proportion

specified by the national policies, laws and regulations.

2. Recruitment Policy: Except those highly skilled technical staff and college graduates,

Xinyu Water Affairs employees most staff from the local. The company and its subsidiaries

process new employees’ admission procedure and provide insurances for them in line with the

requirement of the labor and social safeguard authorities. Xinyu Water Affairs strictly follows

labor law for recruitment of new employees. The company strictly regulates working hours

not exceeding 40 hours and uninterrupted working not over 8 hours. Once overtime is

necessary or the working hours have to be extended, prior consent must be obtained from the

employees, economic compensation paid and leave given at alternative time. The contractor(s)

of Xinyu Water Affairs recruited workers from the official labor market after going through

the legitimate procedures. Most of the employed are local residents.

3. Trainings: Xinyu Water Affairs carries out collective training to the newly recruited

employees. Every year, the company formulates program for training of electricians,

locksmith, pump operators and others and carries out regular training, enhancing the

cultivation of backup technical talents.

6. Other Safeguards: The Company has managed the transportation, storage and use of

disinfecting goods strictly in accordance with the requirement of local public security bureau

and safety supervisory bureau. All operators of disinfectant are organized to regularly attend

the training organized by the safety supervisory bureau. No staff are allowed to handle the

material without the “Permit to Handle Dangerous and Chemical Goods” issued by the safety

supervisory bureau to those who pass the exam.

7. “Contingency Plans for Failure of Water Supply” was prepared. The contingency plans are

applicable to emergency solution and procedure for water supply situations such as urban

water resources pollution, inadequate water resource and extreme weather condition. The

plans were prepared to identify the responsible department to handle the accident, the

responsible individuals and treatment measures and to protect the safety and health of the

general public and water supply safety of the town.

8. No major public safety accident causing industrial injuries and deaths nor emergencies like

pollution of water resources or inadequate water resource occurred in the recent five years.

No public safety accident occurred since the commencement of construction of Fairy Lake

Water Plant.

15

III. CONCLUSION

A. Conclusion

1. The business nature of Xinyu Water Affairs considered the urban municipal and public

sector, so public interest has always maintained as priority of the Company. Owing to the

special industrial nature, the project company pays very much attention on environmental and

social influence and adopts effective measure to mitigate or eliminate the extent of adverse

impact during the production and management.

2. For Environmental - No complaints or grievances associated with environment impact

were received in recent years. We shall conclude that the Project Company has implemented

the necessary mitigating measures and monitoring programs and there are no outstanding

issues on non-compliance, so that no corrective action is needed.

2. For the prior acquisition of the project land - the interests of the original land owner,

Fairy Lake Administrative Committee, had been fully compensated followed by the signing of

the Agreements last year. It is confirmed that there were no cultivation land affected; no

access of forest resources being restricted; and no economic displacement and resettlement

occurred due to Fairly Lake Water Plant Construction. We shall conclude that the prior land

acquisition work was performed in line with the SPS SR2 principals and requirements and

there are no outstanding issues or complaints or grievances related to L.A. and I.R., so that no

corrective action is needed.

3. To maintain a sustainable development, the Company has always to keep social matters on

the top of the management list. Not only to consider the vulnerable from the society, but also

to its own employees. According to the audit, water preferential policy has already in place, as

well as necessary employee benefits, including special cares to the women. The company

always intents to recruit locally, and provides necessary follow-up trainings. We can conclude

that no outstanding issues or complaints were recorded related to the social matters, and no

corrective action is needed.

16

IV. ANNEXES

Annex 1:

Test Report

Report No. 1212688

Title of Sample: source water

Source of Samples: Intake of 3rd

Water Plant

Production Unit: Xinyu Water Affairs Group Co., Ltd.

Trustor Unit: Xinyu Water Affairs Group Co., Ltd.

Category of Test: sampling inspection

Xinyu Monitoring and Measuring Station, Jiangxi Provincial Urban Water Supply Water Quality

Monitoring and Measuring Network

Date of Report: December 26th

, 2012

Xinyu Monitoring and Measuring Station, Jiangxi Provincial Urban Water Supply Water

Quality Monitoring and Measuring Network

Test Report

Sample Title source water Sample(s) submitted by Xinyu Water Affairs

Trustor and contact //

Status of sample liquid, plastic bottle,

disinfected glass bottle

packed

Sample number: 1212688

Place of sampling Intake of 3rd

Water

Plant

Sample taken by: Chen Xiaoling, Hu

Feiyan

Sampling condition weather: fine, temp.:

11襖 Date of sample delivery December 11th, 2012 Testing date December 11

th -25

th,

2012

Tested items 29 items

Reference value

standard

“Environmental Quality Standard of Surface Water (GB3838-2002)”.

Testing standard

references

“Water Quality-Water Temperature Measurement (GB13195-91)”

“Water Quality-Ph Measurement (GB6920-86)”

“Water Quality-Dissolved Oxygen Measurement (GB7489-87)”

17

“Water Quality-Testing of Permanganate Indices (GB11829-89)”

“Water Quality-Testing of Chemical Oxygen Demand (GB1914-89)”

“Water Quality-Testing of 5-day BOD (GB7488-87)”

“Water Quality-Testing of Ammonia Nitrogen (HJ535-2009)”

“Water Quality-Testing of Total Phosphorus (GB11893-89)”

“Water Quality-Testing of Total Nitrogen (GB11894-89)”

“Water Quality-Testing of Copper, Zinc, Lead and Cadmium

(GB7475-1987)”

“Water Quality-Testing of inorganic anions (HJ/T 84-2001)”

“Water Quality-Testing of Selenium (GB/T15505-1995)”

“Water and Wastewater Monitoring Analysis Method (4th

Edition)”

“Water Quality-Testing of Hexavalent Chromium (GB7467-87)”

“Water Quality-Testing of Cyanide (HJ484-2009)”

“Water Quality-Testing of Volatile Phenol (HJ503-2009)”

“Water Quality-Testing of Petroleum, Animal Fat and Vegetation Oil (GB

T16488-1996)”

“Water Quality-Testing of Anion Surfactant (GB7494-1987)”

“Water Quality-Testing of Sulphide (GB/T17133-1996)”

Main testing apparatus

and instrument

Ultraviolet spectrophotometer, atomic absorption (graphite oven)

spectrometer, acidometer, turbidimeter, atomic fluorescence

spectrophotometer, ion chromatograph, inductively coupled plasma emission

spectrometer.

Xinyu Monitoring and Measuring Station, Jiangxi Provincial Urban Water Supply Water

Quality Monitoring and Measuring Network

Test Report

Report No. 1212688

Description of

Tested Item

Test

Result

(mg/L)

II/III Reference

Value (mg/L)

Description of

Tested Item

Test

Result

(mg/L)

II/III Reference

Value (mg/L)

Water temp. (襖) 0.2 in case of artificial temperature, the

limit is:

Average maximum

weekly temp. rise

≤1襖; Average maximum

weekly temp. drop

≤2襖

Cadmium

18

Soluble oxygen 8.42 ≥6 ≥5 Lead

19

5. Any doubt toward of the report should be submitted to the testing agency within 15 of receiving

the same. Any questions submitted beyond the time are not entertained.

__________________________________________________________________________

Address: Inside 3rd Water Plant, Qingping Road, Xinyu. Post Code: 338000

Tel: 0790-6330304 Fax: 0790-6330304

__________________________________________________________________________

Xinyu Monitoring and Measuring Station, Jiangxi Provincial Urban Water Supply Water

Quality Monitoring and Measuring Network

Test Report

Sample Title source water Sample(s) submitted by Xinyu Water Affairs

Trustor and contact //

Status of sample liquid, plastic bottle,

disinfected glass bottle

packed

Sample number: 1212689

Place of sampling Intake of 4th Water

Plant

Sample taken by: Chen Xiaoling, Hu

Feiyan

Sampling condition weather: fine, temp.:

11襖 Date of sample delivery December 11th, 2012 Testing date December 11

th -25

th,

2012

Tested items 29 items

Reference value

standard

“Environmental Quality Standard of Surface Water (GB3838-2002)”.

Testing standard

references

“Water Quality-Water Temperature Measurement (GB13195-91)”

“Water Quality-Ph Measurement (GB6920-86)”

“Water Quality-Dissolved Oxygen Measurement (GB7489-87)”

“Water Quality-Testing of Permanganate Indices (GB11829-89)”

“Water Quality-Testing of Chemical Oxygen Demand (GB1914-89)”

“Water Quality-Testing of 5-day BOD (GB7488-87)”

“Water Quality-Testing of Ammonia Nitrogen (HJ535-2009)”

“Water Quality-Testing of Total Phosphorus (GB11893-89)”

“Water Quality-Testing of Total Nitrogen (GB11894-89)”

“Water Quality-Testing of Copper, Zinc, Lead and Cadmium

(GB7475-1987)”

“Water Quality-Testing of inorganic anions (HJ/T 84-2001)”

“Water Quality-Testing of Selenium (GB/T15505-1995)”

20

“Water and Wastewater Monitoring Analysis Method (4th

Edition)”

“Water Quality-Testing of Hexavalent Chromium (GB7467-87)”

“Water Quality-Testing of Cyanide (HJ484-2009)”

“Water Quality-Testing of Volatile Phenol (HJ503-2009)”

“Water Quality-Testing of Petroleum, Animal Fat and Vegetation Oil (GB

T16488-1996)”

“Water Quality-Testing of Anion Surfactant (GB7494-1987)”

“Water Quality-Testing of Sulphide (GB/T17133-1996)”

Main testing apparatus

and instrument

Ultraviolet spectrophotometer, atomic absorption (graphite oven)

spectrometer, acidometer, turbidimeter, atomic fluorescence

spectrophotometer, ion chromatograph, inductively coupled plasma emission

spectrometer.

Xinyu Monitoring and Measuring Station, Jiangxi Provincial Urban Water Supply Water

Quality Monitoring and Measuring Network

Test Report

Report No. 1212689

Description of

Tested Item

Test

Result

(mg/L)

II/III Reference

Value (mg/L)

Description of

Tested Item

Test

Result

(mg/L)

II/III Reference

Value (mg/L)

Water temp. (襖) 0.2 in case of artificial temperature, the

limit is:

Average maximum

weekly temp. rise

≤1襖; Average maximum

weekly temp. drop

≤2襖

Cadmium

21

Nitrogen surfactant

Total Phosphorus

(lake, reservoir)

0.19 ≤0.025 ≤0.05 Sulphide

22

Annex 2: Plant Surrounding

23

Annex 3: Water Intake Point Surrounding

24

25

Annex 4:

Land Use Right Registration Xian Guo Yong (2007) No. 04001

Land User Xinyu Water Affairs Group Co., Ltd. Endorsement

The original state land use permit Yu Fu Guo Yong (2000) Zi No. 04006

was cancelled and void.

Land Location Old wharf, Fairy Lake

Land Register No. 89 Land Dwg No.

Use Purpose Industrial Land Classification

Use Right Type Transferred Expiry Date December 31st, 2056

Subject Use Right

Land Area

5,820.00m2

including Separate area

Shared area m2

In accordance with “The Constitution of People’s Republic of China”, “Land Administration

Law of the PRC” and “The Law of P.R. China on Urban Real Estate Administration” and in

order to protect the legitimate rights and interests of the land user, the user’s application for

the subject land registration was reviewed and found real and true, therefore, the land use right

permit was issued to this effect.

Issuing Authority: (stamped)

Special Stamped for Land, Xinyu City People’s Government

January 5th

, 2007

Registration Authority Certificate Supervising Authority

Xinyu City Special Stamped for Land Certificate

Administration, Ministry of State Land

Resources, P.R.C

January 5th

, 2007 No. 003563686

26

Annex 5: Land Acquisition Agreement

Contract of Fairy Lake Water Plant Project

Party A: Xinyu City Fairy Lake Scenic Resort Administrative Committee

Party B: Xinyu Water Affairs Group Co., Ltd.

Whereas,

Party A agrees Party B to invest and construct Fairy Lake Water Plant in Fairy Lake District

after amicable negotiation in the principle of equality and mutual benefit and in compliance

with the law, regulation and statutory rules of the P.R.C. Now, in order to define the rights and

obligations of the two parties, the agreement is signed and followed as follows:

1. Scope of the Project and Investment Scale

Total water supply of Fairy Lake Water Plant is designed 90,000 tons/day, total investment is

approximately RMB70 million. The short term phase (up to 2020) water supply capacity is

designed 60,000 tons/day and long term phase (up to 2030) 90,000 tons/day.

2. Project Location

The project is located within Xinyu City Fairy Lake Scenic Resort (south to Fairy Lake

Avenue and east to Qixian Road). The exact location is given in “Project Planning Red Line

Enclosure Sketch”. Party A provides Party B 60mu (Chinese acre) land, the exact area of

which is measured at the field.

3. Nature of Land and Transfer Price

The project land is designated for industrial use, the duration of which is defined in line with

the statutory rules. The actual land area is 40mu and the transaction price is based on delisting

price.

4. Rights and Obligations

(1) Party A undertakes to assist Party B to complete all works related with procurement of

existing buildings and facilities, relocation and land acquisition, lay pipeline up to red line for

water and power supply used for construction within the project area. All costs should be

borne by Party B. The project land should be leveled by Party B and at his cost.

(2) Party A should assist Party B in making coordination with surrounding relations of the site

and eliminate disturbing factors hindering the construction and ensure the smooth progress of

the works throughout the development of the project.

(3) The planning and construction of Party B should comply with the requirement of general

planning of Party A. The construction of the project should be carried out by qualified

contractor (s). Party A should provide Party B his planning and design requirement and

accordingly, Party B should provide Party A the general plan of the project and construction

drawings and apply for and obtain all approval procedures from relevant authorities.

27

(4) The construction of Party B should be subject to the supervision and checkup of Party A

for quality, progress and safety production. In case of any defect, Party B should correct it in

course of construction. Party A should supervise Party B to adhere to standard and civilized

construction, safety production, prevent pollution and noise disturbance, and avoid safety

accident. Party B should be held responsibility for any accident occurring at site.

(5) Party A has the right to supervise the intensity and amount of investment. In the event of

absence of investment or failure to complete the project investment within the construction

period, Party A has the right to terminate the contract.

5. Construction Period

(1) Party A undertakes that, after signing this contract, the application for the use right of the

land under the contract is submitted and approved as soon as possible from the competent

authorities and is transferred at the delisting price and ensures that Party B obtains that land in

legal and smooth way.

(2) The main works of the project should be completed before December 31st, 2014 and the

whole of the project put into operation by the end of December 2015.

6. Investment Earnest Money

Party B should pay Party A investment earnest money of RMB 1,000,000 within one month of

signing of the contract. The earnest money will be refunded by Party A in one installment to

party B within one month of the commencement of the works.

7. Breach of Contract

(1) Both parties should be obliged to respect the contract after signing the same and undertake

their respective responsibilities and obligations. In the event of any violation of the contract

by either party, the party should be held responsible for economic loss of the other party.

(2) Except under special circumstance, should Party B fails to commence the construction of

main works, Party A should have the right to transfer the land under the contractor to any third

party.

8. Governing Law

Both parties agree that the signing, validity, explanation, performance of the contract and

settlement of any dispute under the contract should be governed by and under the jurisdiction

of the laws of the P.R.C.

9. Settlement of Dispute

Any dispute arising from the execution of the Contract should be settled through amicable

negotiation. In case of failure of reaching agreement, the dispute may be lodged with the

People’s Court.

10. Signing and Taking effect

All dates contained in the contact are Gregorian calendar dates. The contract takes effect only

with the stamped and authorized signatures of both parties.

28

11. Copies of Contract

The contract is made in quadruplicate, two for each party, all having equal legal validity.

12. Any Other Issues

Any other issues not specified in the Contract should be agreed with signed supplementary

contract. Written supplementary contract and this contract should have same legal effect.

Party A: Xinyu City Fairy Lake Scenic Party B: Xinyu Water Affairs Group Co., Ltd.

Resort Administrative Committee (stamped (stamped)

Representative or authorized representative Representative or authorized representative

December 19th, 2012

Supplementary Agreement

Party A: Xinyu City Fairy Lake Scenic Resort Administrative Committee

Party B: Xinyu Water Affairs Group Co., Ltd.

Whereas,

Both parties signed a Contract of Fairy Lake Water Plant Project (Contract No.

hereinafter referred to as the “Original Contract” on. Now the two parties agree on the land

transfer price and make a supplementary agreement to the original contract as follows:

1. Party A should provide Party B the land at the rate of RMB 90,000/mu and Party B should

pay the land price as per delisting price after consultation of the two parties. The land

price part above RMB90, 000 will be provided to Party B as reward in full amount within

7 days subject to the deduction of 10 funds, land cost, tax and fees.

2. In the event of China’s land policy change at the time of land listing for transfer of use

right, the land supply price will be adjusted with reference to the adjusted datum land

price. Party B should pay the land use price at the delisting price and the part of price

above the adjusted land supply price should be treated as described in the above

paragraph.

3. The land acquired on Party B’s behalf is approximately 15mu (Chinese acre) and the area

of road shared by Party B is referenced in the red line enclosed area specified by the

planning authority. The land use unit rate is RMB 80,000/mu and permitted use period is

as same as actual land use period.

4. This supplementary agreement is a part of the original contract, both having equal legal

effect.

5. Any issues beyond this agreement should be negotiated by the two parties and further

supplementary agreement may be signed.

29

Party A: Xinyu City Fairy Lake Scenic Party B: Xinyu Water Affairs Group Co., Ltd.

Resort Administrative Committee (stamped) (stamped)

Representative or authorized representative Representative or authorized representative

December 19th, 2012

30

Annex 6: People involved with ESMS interviews

暗吹 乖雛 鋤拐

1 Zhang, Langping 霰開柤魁腓塑噴依洵擄乘絶科噴柤洵擄ぎぎ懜

2 Jian, Bin 霰開柤魁腓塑噴依洵擄乘絶科噴柤ゑ32ぎ姿ぎ懜

3 Li, Jianguo 霰開柤ソ観帋が鏨妁艟┆璽ш犧(ソ箕昫翁ぎ)挨黄

4 Wan, Xingping 霰開柤浸鎬乘俒e̊弜喩塑ソ箕観茫ぎ

5 Ye, Xingzhi 霰開柤浸鎬乘｠科浸广ぎ

6 Zhang, Pinghua 霰開柤迫隼俒e̊帋隼般咲49ぎ

7 Hao, Zhiguo 霰開柤迫隼俒e̊帋ㇷ災ぎ

8 Tang, Yuanzhong 霰開柤迫隼俒e̊帋援麟╉再帋

9 Gong, Siquan 霰開t璽朮ゆ旡ム瞟甌32

10 Dong, Xiaojun 霰開t璽轄t梧垂疽朮ゆ柎

11 Luo, Xu 霰開t璽疽甌32辞32(再ゑt𠂢朮凱)

12 Fang, Xuequan 霰開┐#tё│睊梧垂(旡ム靨朮鋤拐)纑員懜

13 Bai, Shu 霰開┐#tё│睊梧垂疽甌32

14 Qian, Xinghai 霰開┐#tё│睊梧垂疽甌32辞32′旡ム靨朮麯丏曳″

31

Annex 7 – Contingency Plan of Chorine

1. Dangerous nature of Chorine

2. Chorine transportation requirement

3. Mitigation Measures for leakage incidents

4. First Aid

5. In case of fire

Table 3 – Summary of Land Acquisition