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PRE-FEASIBILITY STUDY OF INTEGRATED SOLID WASTE

MANAGEMENT PROJECT

YONGZHOU, PRC

FINAL REPORT

Submitted to: Cities Development Initiative for Asia Yongzhou Municipal Government Submitted by: AECOM Asia Company Limited AECOM Grand Central Plaza, Tower 2 138 Shatin Rural Committee Road, Shatin, Hong Kong Tel: +852 3922 9000 Fax: +852 3922 9797

PRE-FEASIBILITY STUDY OF INTEGRATED SOLID

WASTE MANAGEMENT PROJECT

YONGZHOU, PRC

FINAL REPORT

AECOM Asia Company Limited

March 2014

CP - 1

Pre-Feasibility Study of Integrated Solid Waste

Management Project in Yongzhou

ACKNOWLEDGEMENT

During the project implementation, the AECOM consulting team was greatly supported by

Yongzhou Municipal Government, Yongzhou Project Steering Committee, CDIA, Yongzhou

DRC, Urban Administration Bureau, Environmental Protection Bureau, and other relevant

government departments as well as Yongzhou City Construction Investment and

Development Co. Ltd. We sincerely appreciate the support and assistance of the above

agencies and people.

Particularly, we want to thank Mr. Adolf, Ms. Chloe Chen, and Ms. Reese Zou of CDIA;

Yongzhou Project Management Offices, Mr. Tang Wenqiang, Hu Benguo and Hu Wei from

the Center of Solid Waste and Water Supply (Yongzhou Urban Administration Bureau); Mr.

Hu Jianhui, Yu Xinxing, Ms. Li Xiaoping, and Ms. Wang Yang from Yongzhou City

Construction Investment and Development Co. Ltd. We also appreciate the logistical support

to the team provided by the Yongzhou City Project Management Office.

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Contents

PROJECT PROPOSAL ............................................................................................ 1

1. FOREWORD ................................................................................................... 12

2. PROJECT BACKGROUND ............................................................................. 13

2.1 Development Planning of Municipal Solid Waste Management in

Yongzhou ................................................................................................. 13

2.2 Project Components ................................................................................. 15

2.2.1 Solid Waste Collection and Transferring System ............................... 15

2.2.2 Abandoned Uncontrolled Landfill Pollution Control Project ................ 15

2.2.3 Kitchen Waste Treatment Project ...................................................... 16

2.2.4 Solid Waste Incineration Project ........................................................ 16

3. TECHNICAL ROUTE FOR INTEGRATED TREATMENT OF DOMESTIC

SOLID WASTE ................................................................................................ 18

3.1 Service Scope and Capacity ..................................................................... 18

3.1.1 Planned Service Area ........................................................................ 18

3.1.2 Service Population ............................................................................ 18

3.1.3 Forecast of Solid Waste Generation .................................................. 18

3.2 Collection and Transfer System ................................................................ 19

3.3 Closure of Abandoned Uncontrolled Landfills ............................................ 20

3.3.1 Uncontrolled Landfill Management Technology ................................. 20

3.3.2 Uncontrolled Landfill Management Solutions for Yongzhou ............... 21

3.4 Kitchen Waste Treatment .......................................................................... 22

3.4.1 Analysis of Kitchen Waste Treatment Proposal of Yongzhou ............ 22

3.5 Municipal Wastewater Sludge Treatment .................................................. 23

3.6 Municipal Domestic Solid Waste Incineration Project ................................ 24

3.7 Analysis of Integrated Management of Municipal Solid Wastes................. 26

3.7.1 Components of Integrated Treatment Project .................................... 26

3.7.2 Integrated Management Options ....................................................... 26

3.7.3 Centralized Treatment (Construct New Incinerator) Option Analysis . 27

3.7.4 Social and Environmental Risks and Recommendations ................... 29

4. PROJECT COST ESTIMATE AND ECONOMIC ANALYSIS .......................... 31

4.1 Project Components and Cost Estimate .................................................... 31

4.1.1 Domestic Solid Waste Collection and Transfer System ..................... 31

4.1.2 Closure of Abandoned Landfills ......................................................... 32

4.1.3 Kitchen Waste Treatment and Disposal ............................................. 32

4.1.4 Municipal WWTP Sludge Treatment and Disposal ............................ 32

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4.1.5 Domestic Solid Waste Incineration Treatment and Disposal .............. 33

4.1.6 Summary of Capital Investment and Operation Cost of Integrated

Solid Waste Management Facilities ................................................... 35

4.2 Initial Financing Plan ................................................................................. 36

4.2.1 Financing Plan and Operation Management ...................................... 36

4.2.2 Feasibility of Commercialization ........................................................ 39

4.2.3 The Project's Ability to Repay ............................................................ 40

5. Project Implementation Plan ......................................................................... 43

5.1 Project Structure ....................................................................................... 43

5.2 Legal Framework ...................................................................................... 43

5.3 Risks of BOT Projects and Their Control ................................................... 44

5.4 Project Preparation Works ........................................................................ 45

5.4.1 Organization Activities ....................................................................... 45

5.4.2 Procedure of Project Execution ......................................................... 46

5.4.3 Project Preparation and Tendering Schedule .................................... 46

6. ENVIRONMENTAL IMPACT ASSESSMENT .................................................. 47

6.1 Background and Needs ............................................................................ 47

6.2 Solid Waste Management Technologies Routes and Possible

Environmental Impact ............................................................................... 47

6.3 Environmental Impact Mitigation Measures Already Planned and

Proposed .................................................................................................. 47

6.4 Monitoring Plans and Requirements ......................................................... 47

6.5 Management Improvement ....................................................................... 48

7. PROJECT SOCIAL IMPACT ASSESSMENT ................................................. 52

7.1 Social Impact Analysis .............................................................................. 52

7.2 Stakeholder Analysis ................................................................................ 53

8. RECOMMENDATIONS TO THE NEXT FEASIBILITY STUDY ........................ 54

8.1 Technical Aspect ...................................................................................... 54

8.2 Social & Environmental Aspects ............................................................... 54

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List of Figures

Figure 2.1: Location of Tantang Landfill .............................................................................. 16

Figure 3.1: Service Scope of Domestic Solid Waste Treatment .......................................... 18

Figure 3.2: Flowchart of the Solid Waste Collection and Transportation System in

Yongzhou ............................................................................................................................ 20

Figure 3.3: Flowchart of Anaerobic Digestion Technology for Treatment of Kitchen

Waste ................................................................................................................................. 23

Figure 3.4: Overall Plan of Centralized Incineration Treatment ........................................... 28

Figure 3.5: Technical Flowchart of Centralized Treatment .................................................. 29

Figure 4.1: PPP Private Enterprise Partnership Financing Plan (PPP, BOT+Contract

Operation) ........................................................................................................................... 37

List of Tables

Table 3.1: Generation of Solid Waste in Yongzhou (tons/day) ............................................ 19

Table 3.2: Comparison of Original Site Closure and Relocation of Landfills ........................ 21

Table 3.3: Comparison of the Advantages and Disadvantages of the Various Sludge

Treatment Technologies ..................................................................................................... 24

Table 3.4: Solid Waste Incineration Technology Comparison .............................................. 25

Table 3.5: Comparison of Integrated Domestic Solid Wastes Treatment Options ................ 27

Table 4.1: Comparison of Original Site Closure and Relocation .......................................... 32

Table 4.2: Investment and Economic Comparisons of Sludge Drying Processes ................ 33

Table 4.3: Summary of Production and Operation Cost ...................................................... 34

Table 4.4: Summary of the estimated Capital Investment of the New Facilities ................... 35

Table 4.5: Summary of Operation Cost of Integrated Treatment Facilities ........................... 35

Table 4.9: PPP (BOT + Contract Operation) Financial Indicator .......................................... 38

Table 5.1: Project Preparation and Tendering Schedule ..................................................... 46

Table 6.1: Solid Waste Management Sub-Projects and Possible Negative Environmental

Impacts ............................................................................................................................... 49

Table 6.2: Positive Environmental Benefits of Solid Waste Technology Solution ................. 50

Table 6.3: Environmental Mitigation Measures and Proposed Measures ............................ 51

Table 7.1: Social Impact Analysis Matrix ............................................................................. 52

Table 7.2: Key Stakeholder Analysis Matrix ........................................................................ 53

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Appendix

Appendix 1: Socio-Economic Analysis

Appendix 2: Status of Domestic Solid Waste Treatment in Yongzhou

Appendix 3: The Volume of Solid Waste Generation and Solid Waste Composition

Appendix 4: Municipal Solid Waste Collection, Transfer Center and Affecting Factors

Appendix 5: Comparison and Cost Estimation of Different Landfill Closure Options

Appendix 6: Kitchen Waste Treatment Technology and Current Practices

Appendix 7: Project Examples of Different Anaerobic Digestion Technology

Appendix 8: Sludge Treatment Technologies

Appendix 9: Municipal Domestic Solid Waste Incineration Technology

Appendix 10: Analysis of Integrated Management of Municipal Solid Waste

Appendix 11: Economic Comparison of the Two Options for Solid Waste Incinerator and

Cement Kiln Treatment

Appendix 12: Economic Comparison of the Centralized and the Decentralized Disposal

Appendix 13: Financial Estimation for the Two PPP Programs

Appendix 14: Environmental Impact Assessment

Appendix 15: Advices to Environmental Impact Assessment

Appendix 16: Social Impact Assessment

Appendix 17: Social Field Investigation

Appendix 18: Capacity Building and Training

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Abbreviations Full Name

ADB Asian Development Bank

AP Affected Person

BOD Biological Oxygen Demand

BOT Build-Operate-Transfer

CB Construction Bureau

CDIA Cities Development Initiatives for Asia

CNY Chinese Yuan

COD Chemical Oxygen Demand

DG District Level Government

DFR Draft Final Report

DRC Development and Reform Commission

EIA Environmental Impact Assessment

EMAB Ethnic Minority Affairs Bureau

EMDF Ethnic Minorities Development Framework

EMDP Ethnic Minorities Development Plan

EMP Environmental Management Plan

EPB Environmental Protection Bureau

ESD Environmental Sanitation Department (a sub-unit of MMB)

ESMS Environmental Social Management System

ESRP Environment and Social Review Procedure

FA Financial Analysis

FAO Financial Assessment Opinion

FB Finance Bureau

FCUP Foreign Capital Utilization Plan

FI Financial Intermediaries

FIA Financial Impact Assessment

FSR Feasibility Study Report

FYP Five-Year Plan

GHG Greenhouse Gas

IFC International Finance Corporation

IP Indigenous People

IRR Internal Rate of Return

LA Land Acquisition

LDI Local Design Institute

LFF Loan fact-finding

MG Municipal Government

MMB City Management Bureau/Municipal Administration Bureau

MOH Ministry of Health

MOHURD Ministry of Housing and Urban-Rural Development

MOEP Ministry of Environmental Protection

MOF Ministry of Finance

MRM Management Review Meeting

MSW Municipal Solid Waste

MWR Ministry of Water Resources

NBS National Bureau of Statistics

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Abbreviations Full Name

NDRC National Development and Reform Commission

O&M Operation and Maintenance

PAM Project Administration Manual

PAH Project Affected Households

PAP Project Affected Persons

PIU Project Implementation Unit

PMO Project Management Office

PPP Public-Private Partnership

PPTA Program Preparatory Technical Assistance

PRC People’s Republic of China

PSP Private Sector Participation

RP Resettlement Plan

RRP Report and Recommendation of the President

SIA Social Impact Assessment

TA Technical Assistance

TSS Total Suspended Solid

TOR Terms of Reference

TOT Transfer-Operate-Transfer

UPB Urban Planning Bureau

WCB Water Conservancy Bureau.

WA Water Authority

WSC Water Supply Company

WWTP Wastewater Treatment Plants

YCCID Yongzhou City Construction, Investment and Development

Co. Ltd.

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PROJECT PROPOSAL

1. Project Background

On May 8, 2013, an agreement was officially signed between Cities Development Initiative

for Asia (CDIA) and AECOM Asia Co., Ltd. Under the agreement, AECOM is to provide

technical services for the Preliminary Feasibility Study of Hunan Yongzhou Integrated Solid

Waste Management Project. This assignment is financed by CDIA with the implementation

period of 7 months. According to the “Regulations for Protection of Xiang River in Hunan

Province” and the “12th Five-year Plan for Construction of Facilities for Proper Treatment of

Domestic Wastes in Hunan Province”, the Integrated Solid Waste Management Project in

Yongzhou has been included in the list of priority projects to be implemented by the

Yongzhou Municipal Government. The project aims to achieve integrated collection,

treatment and disposal of municipal solid waste in Yongzhou to achieve the objectives of

recycling, reduction and proper treatment of municipal solid waste, and enhancing the

sustainable development of Yongzhou City.

2. Project Scope

2.1 Current Facilities

Yongzhou has one existing solid waste treatment plant (i.e. Tantang Landfill), 32 garbage

transfer stations (including 20 in Lengshuitan District and 12 in Lingling District), and 21

garbage transportation trucks. The daily garbage transportation, treatment, and disposal

capacity is 600 tons / day, which is projected to expand to 1,000 tons/day by 2015 and 1,200

tons/day by 2020. The municipal solid waste collection, transportation, and treatment in

Yongzhou is mainly operated and managed by the Municipal Administration and Law

Enforcement Bureau of YMG (also known as the YZ City Solid Waste Center). The current

practice is that the municipal solid waste is collected and transported in carts or trucks to the

garbage transfer stations and then compressed, transported by container trucks or garbage

compression trucks to Tantang Landfill for disposal. Tantang landfill is a properly designed /

operated sanitary landfill without recycling facilities. Other than the current Tantang Landfill,

Yongzhou has two abandoned uncontrolled landfills: Shanglingqiao Landfill in Lengshuitan

District (closed in 2008) and Zhugemiao Landfill in Zhugemiao (closed in 2010).

The current practices of Yongzhou solid waste treatment have the following major issues:

Solid waste collection service coverage areas is not complete within existing urban

districts, causing water and ground pollution; the collection, transfer and transfer

station system is outdated, without leachate, odor collection and treatment facilities;

and the unsorted solid waste causes low levels of resource recovery.

The two abandoned uncontrolled landfills without proper capping, gas emission

collection, and leachate treatment system, causes serious pollution to the

surrounding environment with adverse impact to groundwater and Xiang River/Xiao

River water quality.

Yongzhou urban areas now produce 70 tons of kitchen waste per day (45 tons for

Lengshuitan District, 25 tons for Lingling District). Kitchen waste recycling is not well

managed as large amounts of kitchen waste flow to illegal sales channel, causing

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serious threats on food safety.

2.2 Project Components

This project proposal is designed based on the projected population and solid waste

generation for Year 2020. The Project will serve an urban population of 1,000,000 in the

urban center of Yongzhou (including 574,000 in Lengshuitan District, 306,000 in Lingling

District and 120,000 in the Middle New Eco-city) and a rural population of approximately

200,000 in the surrounding towns and townships within 30km from the urban area. Based on

government policies and the current status of solid waste treatment in Yongzhou, the

Integrated Solid Waste Management Project includes the following components:

Solid Waste Collection, Sorting and Transferring System: The system will have a

total capacity of 1,200 tons/day, including 570 tons/day from Lengshuitan District,

310 tons/day from Lingling District,120 tons/day from Middle New Eco-city, and 200

tons/day from the surrounding towns and townships.

Uncontrolled Abandoned Landfill Closures: Proper closures of the Shanglingqiao

Landfill in Lengshuitan District (800,000 m3 of domestic solid waste) and the

Zhugemiao Landfill in Lingling District (500,000 m3).

Kitchen Waste Collection and Treatment: The Project will have a total treatment

capacity of 120 tons/day, including 100 tons/day of kitchen refuse and 20 tons/day of

gutter oil.

Municipal Wastewater Sludge Treatment: Facility with capacity of 90 tons per day

(80% water content) to receive and treat sludge from the 6 municipal wastewater

treatment plants in the urban area.

Solid Waste Incineration Project: The Project will include a 700 tons/day municipal

solid waste incinerator facility with presorting, energy recovery, and minimization

system to be constructed in the existing Tantang landfill site area. The expected

ultimate capacity is 1050 tons/day to be implemented in two phases with phase one

capacity of 700 tons/day.

3. Technical Solutions

The municipal solid waste is collected and transported in carts and garbage trucks to the

garbage transfer stations and then compressed and transported in container trucks and

garbage compression trucks to Tantang Landfill for disposal. The two abandoned

uncontrolled landfills will be properly treated with in-situ site closure method. These will be

managed by Yongzhou government. While the existing solid waste is all collected and

disposed in Tantang landfill with proper leachate treatment facilities, the Project Proposal

takes into consideration minimizing adverse environmental impacts, effective transportation

routes, maximizing the use of existing landfill assets, and consolidating solid waste treatment

and disposal activities. The recommended solution is a centralized treatment system to be

adopted in this integrated solid waste management scheme, in which all the domestic solid

wastes, kitchen wastes, and municipal sludge of the urban areas are collected,transported,

and treated at Tantang Landfill for recycle, reduction, and resource recovery. All the

treatment facilities will be located at the existing Tantang landfill site area. This centralized

scheme including an incineration plant and solid waste sorting facilities to be built in Tantang

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so that all the domestic solid wastes transported to Tantang are sorted into combustibles

and non-combustibles. The combustibles are incinerated in the incinerator with green power

generation while the non-combustibles are disposed in the landfill; the kitchen wastes are

treated with anaerobic fermentation process with the residual used as fertilizers and biogas

generated from fermentation for power generation; the residual heat produced from

anaerobic fermentation as well as from the incineration facility will be used for thermal drying

of municipal sludge.

This scheme requires the construction of the following treatment facilities during Phase 1:

Current solid waste collection and transportation system need to be upgraded and

new facilities and services will be provided; the total investment is approximately

CNY100 millions (financed by Yongzhou government special fund);

One incineration plant with a capacity of 700 tons/day (2 units x 350 tons per day per

unit) and a capital cost of approximately CNY286 millions to be constructed at

Tantang;

One kitchen waste treatment plant with a capacity of 100 tons/day and a capital cost

of approximately CNY65 millions to be constructed at Tantang;

Thermal drying municipal sludge pretreatment system with a capacity of 90 tons/day

(with a water content of 80%) and a capital cost of approximately CNY30 millions;

An integrated / centralized treatment is preferred not only because of its lower operation

costs, but also for its advantages in comprehensive management. With the relevant

treatment facilities all located at Tantang Landfill, environmental impacts will be minimized

and energy / heat generated from kitchen waste and incineration plant can be fully utilized.

This fully manifests the advantages of beneficial reuse and treatment, as well as integrated

practices. . The proposed Tantang Centralized Treatment facility is expected to become an

eco-park with iconic demonstrative effects on the application of integrated solid waste

treatment approaches in China.

4. Estimated Capex, Opex and Project Financing

The centralized treatment approach includes the construction of a solid waste incineration

plant with a treatment capacity of 1,050 tons/day at Tantang Landfill with 25 to 30 years’

service duration. Based on the increasing solid waste production trend, the plant will be

constructed in two phases, with Phase I involving a treatment capacity of 700 tons/day, and

scheduled to operate and generate power in 2016. Financial analysis is evaluated based on

a treatment capacity of 700 tons/day (operating at 600 tons/day during initial stage). The

system will be designed with redundancies to accommodate future economic growth and

urbanization needs. Phase II is proposed with additional 350 tons/day (by adding the 3rd

train) in the future.

4.1 Capital cost

The estimated unit capital costs of sludge drying, incineration, and kitchen waste treatment

facilities to be constructed under this Project are CNY 330,000/ton, CNY 400,000/ton, and

CNY 650,000/ton respectively, excluding relevant project preparation fees, land acquisition,

site utilities and Environmental Impact Assessment preparatory fees.

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4.2 Operating cost

The estimated unit operating costs for sludge drying, solid waste incineration, and kitchen

waste treatment facilities are estimated at CNY 90/ton, CNY 111.6/ton, and CNY 178/ton

respectively. The average operating cost is about CNY 37/ton, which includes the projected

revenue of electricity sales from solid waste incineration. Further verification on above

estimate is to be conducted during next project Feasibility phase based on the system

design, equipment procured and associated operation, maintenance and system repair

needs.

4.3 Operating income

Income from solid waste incineration facility mainly includes electricity sales and solid waste

tipping / treatment fees. According to the incineration projects implemented in the cities with

similar level, the reasonable market range for solid waste treatment fees is between

CNY100/ton to CNY120/ton can be adopted and considered (assume CNY100/ton in

financial calculation).

5. Key Financial Indicators

5.1 Financial indicators

The key financial indicators of the Project include rate of return of internal investment (also

known as internal rate of return, IRR) and period of recovery of dynamic investment and net

present value (NPV). The initial result of internal rate of return (IRR) of the Project is 10.8%.

The financial data and key indicators are shown in the Tables 1 and 2.

5.2 Input-Output Analysis

According to the Yongzhou government policy and preliminary financial analysis of the PPP

scheme, with the total capital investment of CNY 381 million (50% capital investment and 50%

from bank loans with interest of 8%), Tantang Landfill contract operation plus BOT of new

facilities (BOT+O&M) can generate a higher IRR of 10.8% by taking account of the factors of

- future increase of treatment tariff, an assumed annual growth of 3%, an average yearly

price inflation of 3%, and the three-year tax exemption and three-year half reduction of

corporate income tax.

Table 1: PPP Financial Data

Key Assumption

Contract Period 25

WACC 10.0%

Capital Investment CNY381,000,000

Laon CNY190,500,000 (50%)

Bank Interest Rate 8% pa

Growth Rate of MSW 3%/year

Taxation First 3 years 0%

Year 4 to 6 12.50%

Remaining Year 25%

Profit and loss:

Income:

Treatment fee Revenue Treatment Initial Daily treatment

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amount (t/d)

treatment fee (CNY/t)

fee (CNY/d)

Tantang Landfill 600 100 60,000

Kitchen waste 100 200 20,000

Municipal sludge 90 200 18,000

MSW Incinerator 600 100 60,000

Total

158,000

Other Revenue

Treatment amount

(t/d) CNY/kWh

Daily power sale income

(CNY/d)

MSW incineration power generation

600 0.65 87,360

Expenditure:

Treatment amount

(t/d)

Operation cost

(CNY/t)

Daily expenditure

(CNY/d)

Tantang Landfill+leachate treatment

600 52 31,200


Sludge 90 90 8,100

MSW incinerator 600 111.6 66,960

Total

124,060

Note:

1. The ratio of capital investment bank loan: it is depends on the financial capability of the borrower, the

normal range is 70%-30%. In normal case, if the debt ratio is over 50%, then the bank may require to

set mortgage against the borrower’s assets and the right of fee collection of the project.

2. The interest rate: the current interest rate for infrastructure project is 6.5% to 8%pa.

Table 2: Key Financial Indicator Data (CNY)

含售电收入

Total Operating revenues 销售收入 3,948,233,815

Total costs (Opex) 运营费用 (2,359,071,455)

EBITDA 折旧摊销及息税前利润 1,589,162,360

EBIT 息税前利润 1,208,162,360

Net income 税后利润 838,397,736

Dividends 分配股利 763,301,912

CAPEX 资本支出 381,000,000

ROE 资本金回报率 11.3%

ROCE 已动用资本回报率 23.8%

IRR ( Free cash flow) 项目内部回报率 10.8%

NPV ( Free cash flow) at WACC

净现值 26,942,389

6. Project Execution

6.1 Operation and Management Structure: BOT + O&M

In order to achieve centralized treatment, it is necessary to integrate solid waste incineration,

kitchen waste treatment, municipal sludge treatment, and Tantang Landfill into an integrated

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treatment project. After detail discussions with Yongzhou government, this Project will be

operated and managed by means of PPP (public private partnership) scheme (contract O&M

of existing landfill facilities + BOT investment in new facilities), where Tantang Landfill is

operated and managed by a professional enterprise contracted by Yongzhou Municipality

while the enterprise provides cash to address the financial needs of all new facilities. By

such arrangements, the asset of Tantang Landfill is still remained to the government.

Figure 1: PPP Structure: BOT + O&M

As stipulated by the “Methods for Management of Concession Agreement of Municipal

Public Utilities” issued by the Ministry of Housing and Urban-Rural Development (MOHURD)

on March 19, 2004, solid waste treatment utilities may be operated under concession

agreements, typically for a period of 25 to 30 years.

This PPP scheme covers the proposed BOT arrangement of solid waste incineration, kitchen

waste treatment, municipal sludge treatment, and Contract Operation of Tantang Landfill.

The rights of construction and operation of the Project for a certain period of concession will

be given to an experienced investor (i.e. a project company), who is responsible for financing,

designing, procuring, constructing, and commissioning and operating all of the new

components of the Project within the period of BOT agreement. Upon the completion of the

new components, the Project will provide treatment and operation services to the

government according to the agreement while the government will pay solid waste treatment

/ tipping fees to the project company according to the agreement and assure that the

electricity generated from the solid waste incineration plant is purchased by the power

company. The investor to recover the project investment, operation and maintenance cost,

and obtain a reasonable return. Upon expiry of the BOT agreement, the investor will hand

over the ownership and right of operation of all invested project components to the

government.

6.2 Legal Framework

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Under the proposed BOT + O&M PPP scheme, the key legal documents involving the

Project will include, but not limited to, the following contracts and agreements, applicable

laws and standards, and the power generation preferential policies for the Project:

Delegated Management Agreement

BOT Contract Agreement

Concession Agreement of Landfill Contract Operation;

Contract of power purchase;

Agreement of grid connection and dispatching;

To assure the sustainability of the Project, the government shall take full account of the

following principles upon authorization of concession agreement:

“Take or Pay” Principle: This principle is an important means of credit security for

BOT and Contract O&M projects. During the operation period of this project, the

government or its authorized department to ensure solid wastes supply at the

minimum volume and receive solid waste treatment service, as well as pay solid

waste treatment / tipping fees to the investor (or Project Company) as stipulated in

the agreement. If the government or its authorized department fails to provide solid

wastes to the investor (or Project Company) at the agreed volume, the government

or its authorized department will still pay the agreed solid waste treatment fees.

Setting the “minimum (yearly) supply of solid waste” is a key approach to execute the

“Take or Pay” Principle.

Exclusivity: In order to abide by the “Take or Pay” Principle and “let all projects serve

their purposes”, the government usually develops a reasonable planning of solid

waste treatment facilities based on the actual circumstances to achieve the

exclusivity of solid waste incineration and treatment in a certain geographical area.

The exclusivity of BOT model is also reflected in the various rights of priority in

expansion of existing projects or construction of new treatment projects in the same

area.

Preferential policies: Solid waste incineration projects also receive a series of

preferential tax policies. For example, three-year exemption and three-year half

reduction of enterprise income tax are stipulated in the “Regulations of

Implementation of the ‘Enterprise Income Tax Law of the People’s Republic of

China’” (2007); domestic solid waste incineration projects are included in the

catalogue according to the “Notice on Publication of the Catalogue of Environmental

Protection, Energy and Water Saving Projects Enjoying Preferential Enterprise

Income Tax (Trial Version)” (Financial Tax [2009]166); solid waste incineration and

power generation projects also receive the preferential policies on exemption and

reduction of income tax and exemption of value-added tax according to the

stipulations of the “Notice on the Value-added Tax Policy for Comprehensive

Utilization of Resources and Other Products” (Financial Tax [2008]156).

Price adjustment formula: Since the power grid-connection price upon bid invitation is

an assumed parameter, the price adjustment formula for the solid waste treatment

fees should be linked with the actual grid-connection price. In addition, the operating

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costs should adjusted with the price index and adopt the progressive method instead

of a year-to-year adjustment.

Yongzhou has implemented the urban WWTPs adopting the BOT model, the government

has experiences in the implementation procedure and operation of the PPP model; therefore,

there will not be significant risks to the investors in terms of the adoption of this PPP scheme.

6.3 Risks of BOT Projects and Associated Project Control

(1) Risk Category

From the government’s perspective, the key risks to address are social and

environmental risks. The government will have to address increasing pressure in

terms of solid waste treatment needs if the selected investor does not have the

required capability to complete the project on time. Additionally, during the period of

operation and management, serious environmental pollution may result from failure

to follow the strict national environmental protection standards.

From the investor’s perspective, the key risks include technical risks (in terms of

construction and operation), solid waste supply risks (in terms of quantity and

quality), payment risks (concerning solid waste treatment fee and electricity fee), and

policy risks (e.g. more stringent national environmental protection standard and

changes of urban planning).

(2) Principle of Risk Sharing

The following principle of risk sharing will be adopted to enable the more competent party to

undertake the respective category of risks. For example:

The technical risks concerning the engineering design, operation, and maintenance

of the solid waste incineration plants and facilities should be undertaken by the

investors (or project companies) since they have more professional staff and

expertise than the government in addressing such risks;

The solid waste supply risks, payment risks, and policy risks should be undertaken

by the government or its authorized department who have certain abilities of

administrative coordination;

Unpredictable risks (e.g. force majeure) should be shared by the government and the

investor following the relevant stipulations of the Concession Agreement.

(3) Key Approaches of Risk Control

The following approaches and methods may be adopted for control of the above risks:

The project requirements that the government raises to the project investor including

the technical requirements of the incineration plant and the various treatment

facilities should be clearly specified in the bidding documents. In addition, the project

terms and conditions provided by the government should also be made available to

the investor for the purpose of risk appraisal and economic analysis;

The Concession Agreement should be included as part of the bidding documents to

clearly specify the responsibility, rights, and interests of the government and the

investor to avoid unnecessary disputes;

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Various performance assurance mechanisms should be established based on the

project requirements and its implementation stages, such as “bid security” for the

bidding period, “project completion security” for the construction period, “operation

security”, “payment security” for the operation period, and “hand-over security” for the

hand-over of the Project.

7. Project Preparation Works

7.1 Organization Activities

(1) The government authorizes the lead department to perform project planning based

on integrated approach and delegate the right of Concession Agreement on behalf

of the government;

(2) Surveys should be organized to identify the quality and quantity and future growth

of solid wastes;

(3) An experienced consultant should be recruited as the financial consultant and

investment / bidding agent of the Project;

(4) Market investigation should be conducted to identify potential investors and

technologies.

7.2 Procedure of Project Execution

(5) The government selects an investor for the Project through public bidding or by

other transparent means;

(6) The investor sets up a special project company based on the relevant

requirements of the bidding document;

(7) The government delegates an authorized representing department for the Project;

(8) The authorized government department signs and executes, on behalf of the

government, the Concession Agreement with the project company;

(9) The project company signs an agreement with YZ Government on solid waste

delivery with the solid waste suppliers;

(10) The project company signs an agreement of electricity sales with the electricity

authority;

(11) The project company signs agreements of project financing with the loan provider /

banks;

(12) The project company signs project implementation contracts with the design

institute, equipment suppliers, and construction and installation companies; in-

depth discussions will be conducted over the publications of project manager

associations.

7.3 Project Preparation and Tendering Schedule

The following table lists the time schedule during the project implementation period.

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Table 3: Project Preparation and Tendering Schedule

Implementation Stage

Implementation Actions Duration

Preparation Stage

The government delegates an authorized department and grant concessions for representing the government in the future;

Hire project consultants and tender agent;

Investigate potential investor and technology.

3-6 Months

Tender and financing Stage

Issue the tender notice;

Field investigation;

Evaluation of the bidders;

Contract negotiation;

Contract signing;

Establish special project company;

Financing from the financial institution.

6-8 Months

Design Stage Signing contract with design institutes,

equipment suppliers, engineering, installation companies, etc..

2-3 Months

8. Project Benefits

8.1 Benefits from Abandoned Uncontrolled Landfill Closure

(1) The landfill closure will reduce the surface water and groundwater contamination

caused by leachate. The annual reduction of COD, BOD5, ammonia, and SS amount

is projected to be 130 tons, 52 tons, 39 tons and 26 tons, respectively. The project

will improve the local agriculture and aquaculture production conditions. After

completion of the project, the nearby local farmers' income will increase by about 8%.

(2) The reduced landfill leachate contamination in surrounding soils will allow farmers

to grow high-value agricultural products.

(3) Annual emissions of landfill gases, H2S and NH3, to the atmospheric environment

will reduce by 0.527 tons and 2.722 tons, respectively.

(4) Improve the public health and sanitation conditions of surrounding communities.

Currently the residents living near the two landfills are mostly women, children,

and elderly (male labors are mostly migrant workers outside). The implementation

of this project will benefit the health conditions of the women, children, and elderly.

(5) The greening of landfill surface after closure will improve the ecological

environment in the surrounding areas.

8.2 Benefits from Kitchen Waste Treatment

(6) Reduce the illegal reuse of waste kitchen oil, improve public health. The timely

and effective recovery and management of kitchen waste can effectively control

mosquitoes breeds and rodent infestation, reducing disease transmission,

improving the health conditions.

(7) Fermentation of the kitchen waste will produce biogas, reducing the fossil fuel

usage. 1,058 tons of waste oil can be separated and recycled each year, while

reducing environmental pollution.

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(8) Individually sealed way of collection and transportation will improve the sanitation

conditions of the kitchen waste collection system and create a better health

conditions.

8.3 Benefits from Incineration Project

(9) Maximally reduce the solid waste quantity, which reduces the need for additional

landfill space and improves the conservation of land resources.

(10) Waste heat is fully utilized, which reduces the use of fossil fuels and carbon

emissions. (Carbon emissions of incineration process are 1/6 of that from landfill

disposal only).

(11) Solid Waste pathogens will be completely eliminated, reducing the negative

impact to environmental and public health.

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Management Project in Yongzhou Chapter 1 Foreword

1. FOREWORD

According to the “Regulations for Protection of Xiang River in Hunan Province” and the “12th

Five-year Plan for Construction of Facilities for Proper Treatment of Domestic Wastes in

Hunan Province”, the Integrated Solid Waste Management Project in Yongzhou has been

included in the list of priority projects to be implemented by the Yongzhou Municipal

Government. This Consulting Service Project will review and provide feasible integrated

solid waste management components for Yongzhou PMO and the relevant government

departments, improve the status of solid waste management, promote the livelihood of

residents and the urban environment of Yongzhou, and enhance the overall development of

the urban area of Yongzhou.

This report is the Final Report for the technical service that the AECOM Consultants

provided for the Preliminary Feasibility Study of Integrated Solid Waste Management Project

in Yongzhou, Hunan Province. In this report, AECOM Consultants analyzed and evaluated

the solid waste collection and transfer system of Yongzhou as well as the technologies for

closure of abandoned uncontrolled landfills, kitchen waste treatment and disposal,

incineration and power generation and cement kiln incineration, and provided technical

routes for integrated solid waste management in Yongzhou. Meanwhile, the consultants also

analyzed the economic, financial, environmental, and social impacts of these technical

routes and provided optimized technical, investment, and financing solutions of the Project.

All currency units mentioned in this report is CNY.

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Management Project in Yongzhou Chapter 2 Project Background

2. PROJECT BACKGROUND

On May 8, 2013, a service agreement was officially signed between Cities Development

Initiative for Asia (CDIA) and AECOM Asia Co., Ltd. Under the agreement, AECOM is to

provide technical services for the Preliminary Feasibility Study of Hunan Yongzhou

Integrated Solid Waste Management Project. Financed by CDIA, and with the

implementation period of 7 months, the project aims to achieve integrated collection and

treatment of municipal solid waste as well as rehabilitation and improvement of old landfill

sites in Yongzhou to help Yongzhou achieve the objectives of recycling, reduction, and

harmless treatment of municipal solid waste. Appendix 1 describes the details of the social

and economic analysis of Yongzhou City.

The municipal solid waste collection, transportation, and treatment in Yongzhou is mainly

operated and managed by the Municipal Administration and Law Enforcement Bureau of

YMG (also known as the Solid Waste Center). The current practice is that the municipal solid

waste is collected and transported in carts and garbage trucks to the garbage transfer

stations and then compressed and transported in container trucks and garbage compression

trucks to Tantang Landfill for disposal. This landfill is a sanitary landfill with proper treatment,

but no recycling facilities or reduction of solid wastes. Yongzhou has one existing solid waste

treatment plant (i.e. Tantang Landfill), 32 garbage transfer stations (including 20 in

Lengshuitan District and 12 in Lingling District), and 21 garbage transportation trucks. The

daily garbage transportation and treatment capacity is about 600 tons/day, which is

predicted to reach 1,000 tons/day by 2015 and 1,200 tons/day by 2020.

Apart from the Tantang Landfill, Yongzhou has two abandoned landfills: Shanglingqiao

Landfill in Lengshuitan District (closed in 2008) and Zhugemiao Landfill in Lingling District

(closed in 2010). Uncontrolled dumping of garbage at these two abandoned landfills affects

the surrounding resident’s living environments and caused serious air and water pollution to

the ground water and Xiang River due to the absence of a landfill gas migration control

system and leachate collection and treatment system.

In addition, the urban center of Yongzhou generates approximately 70 tons of kitchen waste

per day (including 45 tons from Lengshuitan District and 25 tons from Lingling District and

excluding household kitchen refuses). Without an effective kitchen waste recovery system,

the kitchen refuses remains uncontrolled and disorderly in Yongzhou, with massive volume

of kitchen refuse being collected by illegal channels and imposing a huge threat to the

environment.

2.1 Development Planning of Municipal Solid Waste Management in

Yongzhou

The key objectives proposed (for the period between 2011 and 2015) in the “12th National

Five-year Plan for Construction of Facilities for Proper Treatment of Domestic Wastes”

(State Council General Office Doc. No. [2012] 23) include:

All municipalities directly under the Central Government, the provincial capital cities,

and municipalities listed on the State Plan will achieve sanitary treatment of solid

waste; designated cities will achieve a treatment rate of more than 90% for municipal

solid waste; all counties will have the capacity for proper solid waste treatment and

14 | P a g e



the county towns will achieve a treatment rate of more than 70%; the nation as a

whole will achieve an increase of 580,000 tons/day in the capacity of solid waste

collection and treatment.

The treatment capacity of municipal solid waste incineration facilities will account for

more than 35% and 48% of the total solid waste treatment capacity respectively for

the nation as a whole and the eastern seaboard areas;

Targets for solid waste sorting include 50% of the regional cities adopting preliminary

kitchen waste sorting and collection and each province (District or municipality)

having one municipal solid waste sorting demonstration plant in place;

Improve the MSW treatment and management system.

Based on the “12th National Five-year Plan” described above, the “Recommendations of the

People’s Government of Hunan Province on Strengthening the Work of Municipal Solid

Waste Treatment” (Xiang Government Document No. [2012] 21) was issued, requiring that,

by 2015, urban areas above the level of county towns in the province achieve a treatment

rate of more than 90% and that designated cities achieve a treatment rate of 100% for

domestic solid waste. Additionally, pilot projects of domestic solid waste sorting will be

implemented in more than 10 cities and counties; 50% of the districts will achieve proper

sorting, collection, transportation, and treatment of kitchen waste; and up to 30% of the

municipal solid waste will be recycled for beneficial use in the designated cities. By 2030,

100% of the municipal solid waste in the entire province will achieve treatment, and proper

sorting, collection and disposal of domestic solid waste will be implemented gradually to

extend to remote small towns, villages and the rural areas. Based on the current situation of

Yongzhou, the solid waste treatment and disposal rates have well exceeded requirements,

but the requirements of domestic solid waste collection, kitchen waste treatment, and urban

and rural integration included in the Master Plan have yet to be implemented.

The “Pollution Control Plan for Unsafe Uncontrolled Solid Waste Landfills in Xiang River

Watershed” aims to gradually address the problem of solid waste and heavy metal pollution

of Xiang River basin caused by the uncontrolled solid waste landfills within the watershed to

make sure that the uncontrolled solid waste landfill has a proper treatment rate of up to 100%

and reduces heavy metal pollution by 50% by the end of the planning cycle (2011 to 2018).

In accordance with the “12th Five-Year Plan for Construction of Facilities for Proper

Treatment of Domestic Wastes in Hunan Province”, 26 closed uncontrolled landfills were

identified as major pollution sources of the main trunk of Xiang River (including 2 Nos. of

abandoned uncontrolled landfills in Yongzhou, namely Zhugemiao Landfill in Lingling and

Shanglingqiao Landfill), which will be restored in the period from 2011 to 2015; and 33 non-

standard active landfills with less degree of pollution to the Xiang River watershed will be

managed in the longer-term period from 2016 to 2018 (including the Jindong Management

Zone Domestic Waste Landfill in Yongzhou).

Moreover, as planned in the “Action Plan of Constructing Municipal Wastewater and Solid

Waste Treatment and Water Supply Facilities in Hunan Province” (based on Yongzhou

Government General Office Doc. No. [2012] 114), the key objectives of construction and

reconstruction of solid waste treatment facilities are to increase the domestic solid waste

treatment, transfer, and transportation capacity of the whole municipality (including the main

urban districts the county-level cities and the county towns and the key designated towns)

15 | P a g e



respectively by 680 tons/day, 1047 tons/day and 1720 tons/day and to achieve treatment

and disposal of 9.4 million tons of solid wastes between 2011 to 2015.

Meanwhile, the “Master Plan of Yongzhou Municipality (2001-2020)” also included a series

of environmental sanitation plans mainly including the provision of domestic solid waste

transfer stations, domestic solid waste treatment facilities, construction solid waste treatment

facilities, urban sanitation treatment facilities, urban public toilets, vehicle cleaning stations,

environmental sanitation parking lots, etc. These environmental sanitation plans will be

integrated with the kitchen waste management plan, non-standard landfill closure, and

domestic solid waste incineration plant to form a comprehensive plan for integrated solid

waste management in order to jointly improve the level of solid waste management and

facilitate urban environment and development in Yongzhou. This Integrated Solid Waste

Management Project in Yongzhou is an important project to assure that the ecological and

human living environments are properly protected through improvement during the economic

development of Yongzhou.

2.2 Project Components

According to the relevant government policies as well as the status of solid waste

management in Yongzhou (Appendix 2), the Integrated Solid Waste Management Project in

Yongzhou includes the following components:

Solid waste collection, sorting and transferring system;

Abandoned uncontrolled landfill pollution control project;

Kitchen waste treatment project;

Solid waste incineration project.

2.2.1 Solid Waste Collection and Transferring System

Yongzhou Municipality plans to construct a system for collection, sorting, and transfer of

domestic solid waste and extend its coverage to all towns and townships within a distance of

30 km from current city center boundary. This Project Component will be finalized after

completing the “Environmental Sanitation Special Plan in the Urban Center of Yongzhou”

(including the Planning for Urban and Rural Integration in Solid Waste Collection and

Treatment), the draft of which was finished in late 2013.

See Chapter 3 for detailed analysis of methods of domestic solid waste collection and

transportation.

2.2.2 Abandoned Uncontrolled Landfill Pollution Control Project

The draft FSR for the closure of the two abandoned uncontrolled landfills has been prepared.

The FSR recommends safe closure of these landfills and then reuse of the sites as

ecological land after landscaping. In the FSR, a landfill gas migration and emission control

system and a leachate treatment program were proposed. According to the FSR, the Project

will involve an estimated investment of CNY72 million. The consultants have analyzed the

landfill closure design. Technical features and solutions were reviewed and analyzed, and

economic viability of the different landfill closure alternatives were compared.

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Figure 2.1: Location of Tantang Landfill

2.2.3 Kitchen Waste Treatment Project

The draft FSR for the Kitchen Waste Centralized Treatment Project has been developed and

recommends the process of “collection with sorting + pretreatment + anaerobic digestion”.

The project site is proposed to be located within the existing Tantang Landfill. Grease oil

separated from the kitchen waste will be recycled and processed into biodiesel while the

waste will be fermented via anaerobic digestion to produce biogas used to heat the kitchen

waste treatment facility. The pretreated wastewater will be discharged into the leachate

equalization basin of Tantang Landfill and further treated by current leachate treatment

facilities in Tantang Landfill. This project will involve an estimated investment of CNY64

million.

According to the data collected and findings of site visits, the Kitchen Waste Centralized

Treatment Project will be included as one sub-component of the Integrated Solid Waste

Management Project of Yongzhou and have reviewed suitable kitchen waste treatment

methods, including environmental and social impacts assessment on the proposed scheme.

2.2.4 Solid Waste Incineration Project

Based on the “12th National Five-year Plan for Construction of Facilities for Proper Treatment

of Domestic Wastes”, the treatment capacity of municipal solid waste incineration facilities

will account for more than 35% of the total capacity for the nation as a whole. Yongzhou

Municipality plans to construct solid waste incineration treatment facilities to achieve the

proper treatment, reduction, and recycling of domestic solid wastes. This project component

is in the stage of planning review and proposal preparation.

The transportation

distance between

Zhugemiao and Tantang

is approximately 24 km.

The transportation

distance between

Shanglingqiao and

Tantang is approximately

18 km.

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For this solid waste incineration project component, the feasibility of different proposals were

analyzed and optimum proposal suitable to Yongzhou were provided based on the

composition of solid waste, current conditions, and financial and economic investment in

Yongzhou. The following related aspects have been investigated:

(1) The technical and financial advantages of the construction of new solid waste

incineration / power generation plant and the cement kiln incineration technology

alternative were analyzed and compared. The most suitable technical solution was

provided based on the results of analysis.

(2) Solid waste composition, heat value and relevant data, studies, and information of

solid waste in Yongzhou and other similar cities were collected to analyze the

economic feasibility of the incineration and power generation project.

(3) Studies were conducted to identify the local policies of solid waste treatment

subsidies in Yongzhou in order to determine the treatment capacity of the existing

cement plants (Yongzhou's current cement companies. or other enterprises).

18 | P a g e



Chapter 3 Technical Route for Integrated

Treatment of Domestic Solid Waste

3. TECHNICAL ROUTE FOR INTEGRATED TREATMENT OF

DOMESTIC SOLID WASTE

3.1 Service Scope and Capacity

3.1.1 Planned Service Area

The service area of this project includes the Lengshuitan District, the Middle New Eco-city

and Lingling District as well as the towns and townships within 30 km from the urban area

(including Shanglingqiao Town, Caishi Tang, Lanjiaoshan Town, Yitang Town, Zhushanqiao

Town, Gaoxishi Town administered by Lengshuitan District and Huangtianpu Town,

Fujiaqiao Town, Lingjiaotang Town, Youtingwei Tang, Jieluqiao Town and Shishanjiao

Township administered by Lingling District).

Figure 3.1: Service Scope of Domestic Solid Waste Treatment

3.1.2 Service Population

According to the “Master Urban Plan of Yongzhou (2001-2020)” (2010 Edition), it is

projected that, by 2015, the urban center of Yongzhou will have a population of 680,000

persons (including 390,700 for Lengshuitan District, 208,300 for Lingling District and 81,700

for the Middle New Town) while the surrounding towns and townships will have a population

of approximately 150,000. By 2020, the urban center of Yongzhou will have a population of

1,000,000 persons (including 574,000 for Lengshuitan District, 306,000 for Lingling District

and 120,000 for the Middle New Town) while the surrounding towns and townships will have

a population of approximately 200,000.

3.1.3 Forecast of Solid Waste Generation

Scope of the Integrated Solid Waste Management Planning of Yongzhou

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It is predicted that the urban area of Yongzhou and the surrounding towns and townships will

generate 680 tons and 150 tons of domestic solid waste per day respectively by 2015 and

1,000 tons and 200 tons per day by 2020. In this study, the scope of the project uses 2020

as the reference year.

Table 3.1: Generation of Solid Waste in Yongzhou (tons/day)

Area Lengshuitan

District

Lingling

District

Middle New

Town

Surrounding

towns and

townships

Total

Year 2015 390 210 80 150 830

Year 2020 570 310 120 200 1,200

This prediction of solid waste production in this study is based on the solid waste generated

from the 30 kilometers rural areas near the Yongzhou urban districts, therefore the collection

area and predicted solid waste amount is slightly different from the "Urban-Rural Plan of

Yongzhou Municipal Solid Waste Collection and Treatment (2013 - 2030) Draft", thus the

projected treatment facilities are also slightly different. However, the overall technology

routes and options will not be affected. Detailed analysis should be conducted in the next

feasibility study phase.

See Appendix 3 for the estimation of solid waste generation and the solid waste composition

in Yongzhou.

3.2 Collection and Transfer System

Based on the current situation of the domestic solid waste collection and transportation

system in Yongzhou, Yongzhou Municipality plans to construct a system for collection,

sorting, and compressed transfer stations of domestic solid wastes and extend its coverage

to all towns and townships within a distance of 30 km extended to current city boundary. The

process design of the domestic solid waste collection and transportation system of

Yongzhou is as follows:

Solid waste generated by pedestrians traveling along the arterial and secondary

urban roads are collected into the roadside garbage bins and then transported by the

street cleaners using man-powered carts to the solid waste transfer stations;

Domestic solid wastes generated in the commercial areas and residential areas in

the urban area are collected into the garbage bins and then transported by the

community street cleaners to the solid waste transfer stations;

Rural domestic solid wastes in towns and townships within a distance of 30 km from

the urban area will be collected and transported to the transfer stations in the towns

adopting a model of “household-sorting, village-collection, and town-transfer”.

Sorting of domestic solid wastes will be conducted prior to compression at the

transfer stations, with the reusable solid wastes classified for reuse (e.g. paper,

metal, glass, which will be transported to specialized recycle stations) and non-

reusable solid wastes compressed and transported by special trucks to the final

disposal sites.

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Figure 3.2: Flowchart of the Solid Waste Collection and Transportation System in

Yongzhou

Results from the site visit shows that the existing solid waste transfer stations in Yongzhou

only conduct simple compression and have no leachate collection facilities or odor treatment

facilities. Therefore, upgrading and reconstruction of the stations are needed. In addition, the

existing solid waste transfer stations are not fully covered and collection and transfer

facilities are needed in some urban and rural areas.

Based on the above analysis, Yongzhou needs to reconstruct the existing 33 transfer

stations and construct 18 new transfer stations (including 6 urban ones and 12 rural ones)

and provide ten 10-t solid waste collections and transfer vehicles. At the solid waste transfer

stations, simple sorting, collection, and compression will be carried out. The domestic solid

waste will be transported to the solid waste treatment and disposal center (Tantang

Incineration plant) for further sorting and final disposal. The new transfer stations to be

constructed may include green, environment-friendly, and odor free facilities and integrated

with the urban landscaping design. In addition, a service center will be set up to handle the

citizens’ inquiries, advice, requests and complaints about environmental sanitation affairs

and a complaint hotline will be provided. The total investment for these facilities is estimated

to be CNY100 million.

Appendix 4 describes the municipal solid waste collection and transportation system

evaluation, assessment and recommendations.

3.3 Closure of Abandoned Uncontrolled Landfills

3.3.1 Uncontrolled Landfill Management Technology

The closure of uncontrolled landfills aims to reduce environmental pollution and rectify

potential safety problems. Methods for uncontrolled landfill closure include original site

closure, relocation and comprehensive utilization (landfill mining).

Original site closure means that the environmental improvement actions are taken at

the original site of the landfill to engineer in-situ pollution control followed by

implementing ecological restoration. The reclaimed land is normally used for

construction of parks and other ecological purposes. The landfill gas and leachate

need long-term operation to assure the environmental conditions after the landfill

closure.

With the relocation method, the solid waste at the original site will be relocated to a

sanitary landfill for treatment. The reclaimed land will be reused for development of

commercial facilities or as municipal public utilities to realize the added value of land.

Small collection

truck

Solid waste transfer

vehicle

Solid

waste

Tre

atm

ent

Pla

nt

Solid

waste

Tra

nsfe

r

Sta

tion

Solid wastes generated

by pedestrians along

arterial and secondary

urban roads

Domestic solid wastes in

commercial and residential areas

Solid waste

collection bin

Garbage bin

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In the landfill mining or comprehensive utilization method, materials contained in the

landfills are sorted and recycled by means of excavation, screening, magnetic

selection and sorting while the usable soils and inert materials are backfilled. This

method involves relatively large investment despite the benefits of reclaimed land.

3.3.2 Uncontrolled Landfill Management Solutions for Yongzhou

Based on Yongzhou's current situation and initial cost considerations, and according to the

draft FSR for the Uncontrolled Landfill Closure and Management Project in Yongzhou, the

original (in-situe) site closure technology is selected and the landfill dam, seepage control

systems, leachate interception/collection/treatment system, landfill gas emission control

system, separate storm water and sewage drainage systems, closure and coverage systems

and groundwater cut-off piling and treatment facilities will be constructed. The total

investment is approximately CNY72 million.

Two options for the uncontrolled landfill management were analyzed: original site closure

and relocation method. The selection of methods mainly depends on the landfill capacity, the

master urban plan and the land use value and should also consider the actual situation of

the two existing abandoned landfills and the ease of implementation of the management

solutions. Table 3.2 is a comparison of the landfill management solutions.

Table 3.2: Comparison of Original Site Closure and Relocation of Landfills

Option Original Site Closure Relocation

Description Closure of landfill and utilization of final site

Excavation, transportation and hygiene landfill

Technical Evaluation

Conventional technology, practical and reliable

Simple technology, requiring a place to accept the solid waste

Construction Cycle

Short Moderate

Ultimate land use Vegetation and landscaping Clean land

Social, Economic and Environmental Benefits

Significant improvements of landfill environment and good social and environmental benefits

Relocation of solid waste and its pollution and risks of pollution in secondary transportation

Existing Problems

Risks of secondary pollution from the landfill, collection and treatment of biogas and leachate, long-term operation

Transportation and risks of secondary pollution, occupation of the capacity of Tantang Landfill

Compatibility with planning

Conservation or landscaping forests may be constructed based on the planning.

Land is reused and will not conflict with the planning.

Original site closure enjoys considerable advantages in initial investment and

comprehensive economic benefits, but has considerable pressure in terms of the reliability of

the treatment effect and risks of environmental pollution. In addition, the following technical

concerns remain:

The vertical seepage control technology has specific geotechnical requirements for

the landfill site, detailed hydrological and geological ground conditions with high

water impermeability and low water yield property on groundwater cut-off wall

installation must be carefully designed and constructed;

22 | P a g e





The groundwater within a certain range in the downstream may not be well protected;

The biogas collection and leachate treatment facility needs to operate for a long

period of time;

Proper and continuous collection and treatment of leachate is required (for

approximately 20 years or more);

Long term continuous operations are needed for the treatment facilities.

Further justification must be conducted on the basis of detailed hydro geological and

engineering geological surveys; detailed analysis and technical confirmation will be needed

for full cost and daily operation management and environmental monitoring under the project,

and the necessity of further impact mitigation mechanism need to be determined.

From the perspective of long-term environmental protection and Xiang River’s water quality,

the relocation technology is recommended provided that the municipal finance department is

able to provide adequate funding support. See Appendix 5 for a detailed comparison of the

technical and economic analysis for both original site closure and relocation options.

3.4 Kitchen Waste Treatment

3.4.1 Analysis of Kitchen Waste Treatment Proposal of Yongzhou

Anaerobic digestion is a proven and reliable technology for treatment of organic kitchen

waste and will be applied in this project with total investment of approximately CNY65 million.

As recommended in the FSR, this technology is suitable for Yongzhou, on this basis, and

from the perspective of integrated management, the reuse of the surplus residual heat

generated will be included in the integrated treatment system. Although kitchen waste in the

PRC has high moisture content, grease and salts, the project design and operation

experiences overseas reveal that the impacts caused by these factors may be adapted to

the situation in the PRC through adjustment of the proposed process design. Figure 3.3

shows the key process of kitchen waste collection, pre-treatment and anaerobic digestion

technology.

According to the Draft FSR for the Uncontrolled Landfill Closure and Management Project in

Yongzhou, the kitchen waste production capacity in Yongzhou is as follows:

• Short term (by 2015): The total treatment capacity will be 70 t/day, including 50 t/day

of swill and 20 t/day of swill oil.

• Long term (by 2020): The total treatment capacity will be 120 t/day, including 100

t/day of swill and 20 t/day of swill oil.

More treatment technologies for kitchen waste and the current treatment status are

described in Appendix 6; some project examples of different anaerobic digestion

technologies are listed in Appendix 7.

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Figure 3.3: Flowchart of Anaerobic Digestion Technology for Treatment of Kitchen

Waste

3.5 Municipal Wastewater Sludge Treatment

This project will incorporate the municipal sludge treatment project in the overall scope, and

use the thermal drying technology for the integrated treatment. The investment is about CNY

30 million. Based on the analysis in table 3.3 and appendix 8, thermal drying technology is

mature, can greatly reduce the water content and volume, its drying heat required can be

provided by the heat generation of biogas, so the co-processing with domestic waste and

kitchen waste is an ideal selection for Yongzhou.

According to data provided by Yongzhou Urban Management Bureau and the Master Plan of

Yongzhou, the scope of sludge treatment services covers 6 WWTPs, including Xiahexian

WWTP (existing), Xiangjiating WWTP (existing), Qiyang County WWTP (existing), Dong’an

County WWTP (existing) and Middle New Ecocity WWTP (planned) and Qiyang County

Jiangnan WWTP (planned). It is predicted that the design wastewater treatment capacity will

reach 300,000 CMD (cubic meter per day) and 540,000 CMD respectively by 2015 and 2020.

At present, Yongzhou generates 90 tons of municipal sludge each day (with a moisture

content of 80%), which is disposed at Tantang Landfill. Due to the large volume of sludge

and high moisture content, the safety of the landfill has been threatened and the government

needs to take new treatment and disposal options for replacement soon.

Kitchen waste

Hogwash oil

Fluid Measure

Storage Tank

Exhaust gas treatment

Squeezer

Bio-fuel

Hogwash oil treatment area

Storage Biodiesel

Swill

Fluid Measure

Separation and Storage

Steaming, Liquid-solid separation

Liquid-oil separation area

Gas Boiler

Exhaust gas treatment

Wastewater treatment

Storage (solid)

Anaerobic digestion/

landfill

Storage (Liquid)

Biodiesel Discharge

Wastewater / sludge

Recycle

Gas treatment

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Table 3.3: Comparison of the Advantages and Disadvantages of the Various Sludge

Treatment Technologies

Technology Key Advantages Key Disadvantages

Comprehensive

farmland

utilization

Improvement of soil structure,

provision of fertilization and trace

elements needed for plant growth,

increase of soil fertility and

facilitation of crop growth

Potential risk of heavy metal pollution and

soil hardening caused by high polymer

coagulant. Volume of fertilization

application is obviously different in the off

season and the peak season. The

channels of fertilizer distribution are

difficult to assure and the price advantages

are not significant. As a result, such

fertilizer is only applicable to low-grade

crops.

Incineration

and utilization

With the moisture content reduced

to 0%, the volume of sludge can be

rapidly and significantly reduced.

The incineration products can be

used as raw materials of new

products and for recovery of thermal

energy.

Complex and unstable, the operation

process will generate smoke, with a high

cost of capital construction and operation

that is 2 to 4 times higher than that of other

technologies.

Low

temperature

pyrogenic

decomposition

and utilization

Advanced treatment, reduction and

reuse are completely achieved and

oil and gas may be extracted

through dry distillation.

Both the process and the equipment need

further improvement and the technology as

a whole is still in a stage of

experimentation and discussion.

Thermal drying

The moisture content and volume

can be significantly reduced to

facilitate subsequent incineration or

landfill.

The technology is proven, but requires

huge consumption of energy and may

need access to an available thermal

source.

Utilization in

construction

materials

Reduced occupation of land and

consumption of natural resources,

facilitating recycling of resources

and producing significant social and

economic benefits

Strict requirements are raised on the

preliminary treatment processes such as

odor removal and disinfection and

sterilization due to close human contact.

Consideration is needed of brick making

technology and brick distribution channels.

Landfill

Proven technology, rich

experiences, non-standard operation

and management, cost-effective and

energy-saving, resulting in small

investment, big capacity and fast

effect

Large land occupation and stringent

requirements on sludge dewatering, landfill

impermeable layer and landfill operation

3.6 Municipal Domestic Solid Waste Incineration Project

As Yongzhou solid waste has the characteristics such as low sorting level, low thermal value,

high water / moisture content and high ash content. The mechanical grate incinerator

technology is relatively mature, reliable and operation is convenient; it is also adaptable to

different types of waste, easy to operate with mature air pollution control system, and is

economical, and there are already many domestic operation cases. Therefore, Yongzhou

25 | P a g e





government agreed to adopt the mechanical grate incineration technology, the investment is

approximately CNY240 million.

There are mainly four types of domestic solid waste incineration furnaces that are

extensively adopted both locally in PRC as well as internationally in developed countries, i.e.

mechanical grate incinerator, fluidize bed incinerator, pyrolysis incinerator and rotary kiln

incinerator. Over the recent years, the technology of integrated cement kiln co-incineration

with domestic solid waste treatment also has experienced good development. Different

Incineration treatment technologies are presented in Appendix 9.

Table 3.4: Solid Waste Incineration Technology Comparison

Items Mechanical

Grate Incinerator

Fluidize Bed Incinerator

Pyrolysis Incinerator

Rotary kiln incinerator

Incinerator features

Grate area is larger, the

volume of the furnace is larger

Grate is fixed. grate area and furnace volume is smaller

Mostly vertical fixed grate, two

combustion chambers

No grate, waste is moved along with the rotation of the furnace

Pre-treatment Not necessary Necessary Necessary when

thermal value is low Not necessary

Equipment area Large Small Medium Medium

Clinker ignition loss

Easy to meet standards

Can meet standards under

continuous combustion

Difficult to meet standards

Difficult to meet standards

Retention time Relatively long Short Very long Long

Excess air ratio Large Medium Small Large

Max treatment amount

1200t/d 500t/d 200 t/d 500t/d

Air supply Easy to adjust Relatively easy to

adjust Difficult to adjust Difficult to adjust

Adaptability to water content

Can adapt to different

humidity by adjusting the drying section

Temperature fluctuates with

change of waste water content

By adjusting the retention time to

adapt the humidity of garbage

By adjusting the rotating speed to

adapt the humidity of

garbage

Adaptability to waste

inhomogeneity

Through the grate moving to

reach homogenization

Heavy waste in the bottom, difficult for

complete combustion

Difficult to reach homogenization,

difficult to burn out chunks of waste

Chunks of waste is difficult to

burn out due to insufficient air

supply

Flue gas dust content

Relatively low High Relatively low High

Combustion Medium

Not necessary Quartz sand is

needed Not necessary Not necessary

Combustion conditions control

Relatively easy Difficult Difficult Difficult

Operation cost Low Low Relatively high Relatively high

Flue gas treatment

Relatively easy Difficult Relatively difficult Relatively easy

Maintenance Less More Less Less

Application More Less Little More for

industrial waste

26 | P a g e





Items Mechanical

Grate Incinerator

Fluidize Bed Incinerator

Pyrolysis Incinerator

Rotary kiln incinerator

Comprehensive evaluation

Strong adaptability, less

failure, better treatment

performance and

environmental effect, lower

cost

Require pre-treatment and high failure rates, need

add additional combustion

medium, environmental compliance is

difficult to reach.

Clinker ignition loss is high, and

environmental compliance is

difficult to reach

Requires a higher thermal value of waste (2500kcal/kg

above), and has higher operating

costs

3.7 Analysis of Integrated Management of Municipal Solid Wastes

3.7.1 Components of Integrated Treatment Project

Based on the above analysis, the Integrated Solid Waste Management Project in Yongzhou

mainly includes the following four waste types (as projected according to the volume of

generation in 2020):

Domestic solid waste generated by the city on a daily basis: 570 t/d for Lengshuitan

District, 310 t/d for Lingling District, 125 t/d for the Middle New Town and 200 t/d for

the surrounding towns and townships, with a total of 1,200 t/d.

Kitchen waste generated by the city on a daily basis: 100 t/d for kitchen waste and 20

t/d for swill oil, with a total of 120 t/d.

Solid waste already disposed at the uncontrolled landfills: including 800,000 m3 at

Lengshuitan District Shanglingqiao Uncontrolled Landfill and 500,000 m3 at Lingling

District Zhugemiao Uncontrolled Landfill.

In addition, the municipal sludge generated by the municipal WWTP can be incorporated into

the scope of the Integrated Solid Waste Management Project and the municipal sludge

generation amount in the urban center is 90 t/d with a water content of 80%.

3.7.2 Integrated Management Options

Based on the current status of the domestic solid waste treatment facilities in Yongzhou and

in association with the aforesaid technical routes of municipal solid waste treatment, the

following two options of integrated treatment of domestic solid waste, kitchen waste and

municipal sludge were summarized, with consideration of the management and economic

perspectives: Option 1: Centralized Treatment (Incinerator); Option 2: Decentralized

Treatment (Cement Kiln). Based on the existing project experience and operational practices

in the PRC, the centralized treatment process (Option 1) is a more proven technology, and

Yongzhou government agrees to adopt the centralized treatment route.

Through technically analyzing these two options (Appendix 10), Option 1 will construct a new

incineration plant in Tantang, which has advantages in the utilization rate of existing facilities

and comprehensive management. Option 2 has advantages in terms of energy consumption

during operation, cost of operation and beneficial use. There are a relatively large number of

projects as well as case studies of domestic solid waste incineration and power generation in

27 | P a g e





the PRC for reference. However, although more successful cases are available overseas,

integrated cement kiln treatment of domestic solid wastes remains in the pilot stage in the

PRC and the operation efficiency and technology reliabilities are still to be validated. If option

2 is adopted, technical and commercial risks may arise. Table 3.5 compared these two

options in different perspectives.

Table 3.5: Comparison of Integrated Domestic Solid Wastes Treatment Options

Item Option 1

(Incinerator)

Option 2 (Cement

Kiln)

Feasibility Feasible Feasible

Technical reliability More application,

Reliable Less application, Relatively reliable

Land occupation Land area is

relatively large Land area is

relatively small

Cost of transportation Longer transport

distant Shorter transport

distance

Utilization rate of existing

facilities

Original landfill can be used for residual and incombustibles

Original facilities is basically useless

Energy consumption in

operation

Need to add new operation energy,

larger

Use original energy, smaller

Comprehensive

management Centralized Decentralized

Environmental impacts of

the operation process Larger Smaller

Secondary pollution Likely to cause air

pollution

Likely to cause air pollution, original

protection facility can be used

Reduction performance Relatively good Good

Harmless treatment

performance Good Good

Resource application

performance Good Relatively good

3.7.3 Centralized Treatment (Construct New Incinerator) Option Analysis

Since the existing domestic solid waste landfill and leachate treatment station are both

located at Tantang and considering the effective utilization of the newly constructed Tantang

Domestic Solid Waste Landfill, this option plans to place all the associated treatment

facilities at Tantang for effective management as well as good practices on environmental

protection.

The proposal includes that a new incineration and power generation plant and solid waste

sorting facilities will be constructed at Tantang. All the domestic solid wastes will be

transported to Tantang before sorting and the sorted combustibles will enter the incinerator

for incineration and power generation while the remaining parts will be disposal in the landfill;

the kitchen waste will adopt the anaerobic digestion process and the biomass as generated

will be used as fertilizers for beneficial reuse while the biogas generated in digestion will be

28 | P a g e





used for power generation. The residual heat will be used for thermal drying and integrated

treatment of municipal sludge before landfill disposal.

With this option, a 1,050 t/day solid waste incinerator is needed at Tantang Landfill with a

service life of 25 to 30 years. Based on the increase of solid waste production, the project

will be constructed in two phases. In Phase 1, the design treatment capacity of 700 t/day,

(two units, 350 t/day per unit), will be constructed and put into operation in 2016. Financial

calculation and analysis is based on a daily treatment capacity of 600 t/d. There is a certain

amount of surplus in the system in order to accommodate future economic growth and

urbanization. In addition, when one unit is performing routine annual maintenance, another

unit will be ensured with normal operation, so that the operation is more flexible.

Based on the solid waste characteristics, the incinerator will generate 280 kWh power per

ton of waste processed. Considering that the caloric value of the solid waste is not stable,

and the system reliability, the power generated is calculated at a rate of 80% - power

generation capacity is 224 kWh/ton.

In this option, the following treatment facilities need to be constructed (in two phases, with

the following facilities belonging to Phase I):

One 700 t/d (2 set X 350 t/d) solid waste incineration and power generation plant will

be constructed at Tantang involving an investment of approximately CNY240 million;

One 100 t/d kitchen waste treatment plant will be constructed involving an investment

of approximately CNY65 million;

One thermal drying municipal sludge pretreatment system will be constructed involving an

investment of approximately CNY 30 million.

Figure 3.4: Overall Plan of Centralized Incineration Treatment

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Figure 3.5: Technical Flowchart of Centralized Treatment

3.7.4 Social and Environmental Risks and Recommendations

The project will inevitably cause some negative effects to certain stakeholders. These

negative impacts would cause environmental and social risks to the construction and

operation of the project. If not controlled properly, these negative effects may degenerate

into a social conflict under certain circumstances. Table 3.6 presents suggestions in

response to the possible negative effects in the next feasibility study process.

Table 3.6: Environmental and Social Risks of the Project and Recommendations

Adverse environmental and social

impacts Recommendations

A – Domestic solid waste collection, sorting and transportation

(1) Construction of new transfer station could incur resistance by local residents.

S1: Environmental awareness education, careful siting and design optimization S2: Stakeholder participation, information disclosure S3: Setting up grievance redress

90 t

200 t

430 t

570 t Domestic solid wastes in

Lengshuitan District

Domestic solid wastes in Lingling District and Middle

New Town

So

rting

at la

nd

fill

New

Incin

era

tor

Municipal Sludge Thermal Drying

Tantang

Landfill

Furnace

Ash

Landfill

Kitchen waste

An

aero

bic

Dig

estio

n

Simple Landfill

On-site Landfill of Inorganic Matters

Domestic solid wastes in

Surrounding Towns and Townships

Biogas Slurry

Compostin

Biogas Power

Generation

700 t (+350 t

Phase II)

Residual Heat

100 t+20 t Phase II

Relocation

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Chapter 4 Project Cost Estimate and

Economic Analysis

system project channels for the Project

(2) Possibly resulting in loss of income for some rag pickers

S4: Providing APs with additional jobs generated by the project

(3) Collection of solid waste treatment fee will possibly increase cost of living for residents, in particular the vulnerable groups.


B – Abandoned landfill closure and pollution control project

(1) Impacts on ground water and soil environment after closure

S1: Environmental awareness education, careful siting and design optimization

(2) Affecting the income of rag pickers S4: Providing APs with additional jobs generated by the project

C – Kitchen wastes treatment and disposal project

(1) Increasing the environmental risks of Tantang Landfill, likely to threaten health of local residents, in particular the vulnerable groups


(2) Increasing the burden on catering businesses and bringing income losses. Economic interests decide behavior consciousness. Consequently, these businesses will possibly not actively participate in the recovery system of kitchen wastes.

S1: Environmental awareness education, careful siting and design optimization S7: Setting up kitchen wastes inspection, supervision and punishment and reward system

(3) Source of income of individual kitchen wastes collectors is cut off and their income affected.


D – Domestic solid waste incineration and treatment project

(1) Concerns about dioxin may incur public resistance against refuse incineration and power generation plant and even “Not-In-My-Back-Yard” effect.

S1: Environmental awareness education, careful siting and design optimization S2: Stakeholder participation, information disclosure S5: Conducting social stability assessment as a part of EIA

(2) Impacts of LAR S6: Public participation and developing LAR plan

31 | P a g e




Economic Analysis

4. PROJECT COST ESTIMATE AND ECONOMIC ANALYSIS

4.1 Project Components and Cost Estimate

4.1.1 Domestic Solid Waste Collection and Transfer System

Yongzhou produces approximately 650 tons of domestic solid waste per day, which are

collected and transported by sanitation workers with hand carts to the refuse transfer

stations, where the solid waste is compressed and transported with large trucks to the

landfills for sanitary disposal. The urban center of Yongzhou now has 100 environmental

sanitation vehicles (including 62 for Lengshuitan District, 9 for Tantang Landfill and 29 for

Lingling District).

Considering the objectives specified by Yongzhou in “Provisional methods for quality

inspection and appraisal of environmental sanitation operations in the urban center of

Yongzhou”, “Regulations on inspection, appraisal and patrol of environmental sanitation in

the urban center” and “Quality standards for environmental sanitation operations in the urban

center of Yongzhou”, for the purpose of properly implementing the urban center

environmental sanitation work, the following components will be adopted in the solid waste

collection and transferring system improvements with estimated total investment of CNY100

million, which will be funded by Yongzhou government through special fund.

(1) Appraisal, patrol and complaint hotlines

2 patrol teams to be set up in Lingling District and Lengshuitan District, respectively

comprising of 1 person each from the Municipal Solid Waste Disposal and Water

Supply and Drainage Affairs Center as well as the Patriotic Health Campaign

Committee Office and Environmental Sanitation Bureau (Department) of each district,

with each team provided with 1 patrol vehicle. Therefore, 2 patrol vehicles will be

purchased with a total cost of CNY600,000.

A service center will be set up to handle the citizens’ inquiries, advice, requests and

complaints about environmental sanitation affairs and a complaint hotline will be

provided. The supporting facilities are estimated to involve an investment of

CNY1,000,000 and the staff needed will be assigned from the existing staff.

(2) Street cleaning

The urban center of Yongzhou now has a 1,652-person street cleaning team

responsible for cleaning of key streets and alleys. For enhancing the operation

efficiency and cost reduction, 2 motorized street cleaners be purchased mainly to

clean the main roads and the guardrails in the median.

The 2 motorized street cleaners to be purchased are estimated to involve an

investment of CNY1,400,000.

(3) Refuse collection and transportation

10 large transfer vehicles with a capacity of 10 tons / each and compression and

leachate collection devices will be purchased, involving an estimated investment of

CNY10,000,000;

33 refuse transfer stations will be upgraded and odor removal and treatment facilities

32 | P a g e




Economic Analysis

and roller gate will be added, each involving an investment of CNY1,000,000, totally

CNY33,000,000.

18 new transfer stations (including 6 in the urban area and 12 in the rural area) will

be constructed, with the standardized transfer stations in the urban area and the rural

transfer stations respectively involving an investment of CNY5,000,000 and

2,000,000 each, totally involving an investment of CNY54,000,000.

4.1.2 Closure of Abandoned Landfills

Based on the technical analysis of the landfill components described in chapter 3, the site

closure option is estimated with initial investment of CNY72 million, which includes landfill

capping, leachate collection treatment and associated improvement features. This option

has advantages in technical feasibility, initial investment and overall economic benefits.

Yongzhou government decided to adopt this in-situ original site closure scheme. However,

from the perspectives of treatment effectiveness and environmental pollution risks, the

relocation options have considerable advantages (Option 1 landfill mining includes screening

and comprehensive utilization while Option 2 is direct relocation). According to Yongzhou

DRC, they are currently applying for the national special fund for the landfill closure project.

Table 4.1: Comparison of Original Site Closure and Relocation

Item

Original Site

Closure

(CNY10000)

Relocation

(CNY10000) Comparison

Option 1 Option 2

Capital

investment 7200 16000 8560

Original site closure involves a smaller investment.

Construction period

3 years 2 years 2 years Relocation has a shorter construction period.

Cost of operation

6200 1 0 0

Relocation involves no cost of operation.

Environmental risks

Persistently existing

Completely removed

Completely removed

Relocation has lower risks.

Note: 1. See Appendix 5; 4400(leachate treatment fee) + 1800(environmental monitoring fee); assume operates 30 years;

4.1.3 Kitchen Waste Treatment and Disposal

The Project involves a daily treatment capacity of 100 tons kitchen waste and is sited at

Tantang Comprehensive Solid Waste Treatment Plant using the “sorting and collection +

pretreatment + anaerobic fermentation” process. The total investment is estimated to be

CNY65 million with the average unit operation cost of CNY178 per ton of waste treated.

Existing case studies in the PRC show that anaerobic digestion process as proposed is one

of the feasible technologies and can accommodate the production capacity and generate the

expected economic benefits. In this comprehensive management proposal, the reuse of the

biogas generated from anaerobic digestion will be used as a heat source or power source to

provide energy needed for the sludge drying system to decrease the treatment cost.

4.1.4 Municipal WWTP Sludge Treatment and Disposal

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Economic Analysis

With a daily sludge treatment capacity of 90 tons, the treatment system is suggested to be

co-located in Tantang Solid Waste Landfill with the thermal process to be adopted for sludge

drying based on proposed process, this sludge component required an estimated investment

of CNY30 million.

Table 4.2 summarized the various technologies that can be considered in the drying process

with associated capital cost estimate. These viable technologies shall be further considered

in next Feasibility Study phase and the preliminary capital investment for all three

technologies is in the similar range. Biogas generated from anaerobic digestion of kitchen

waste component will be used to generate heat and power for the sludge drying process.

With the integrated approach, the operation cost can be reduced to CNY 90/ton which is

much effective than the current stand-alone sludge drying facilities in the market.

Table 4.2: Investment and Economic Comparisons of Sludge Drying Processes

Process Type Cost of

investment (CNY 10000)

Cost of

operation 1

(CNY/ton)

Product

moisture

content

Land occupation

(Workshop area)

Belt sludge drying system 3000 145 Dryness

adjustable 20x15=300 m

2

Low temperature sludge

carbonization 2794 120

Below 30%

30x18=540 m2

(Other sites:

25x8=200 m2)

Low temperature vacuum

dewatering and drying 2940

2 140 40% 10x24=240 m

2

Notes: 1. Calculated at a moisture content of 80%; 2. Excluding civil works and equipment installation and other costs.

4.1.5 Domestic Solid Waste Incineration Treatment and Disposal

Currently, all the domestic solid waste from Yongzhou urban area was delivered to Tantang

Solid Waste Landfill for disposal. This landfill has a land area of approximately 1,000 mu with

a daily capacity of 860 tons and a service life of 30 years. Based on the current status of

solid waste and the population development plan of Yongzhou, it is estimated that the daily

domestic solid waste quality will reach 1,000 tons and 1,200 tons by 2015 and 2020.

For Incineration scheme, the consultants proposed two options: (1) Construction of New

Incinerators (centralized scheme); and (2) Cement Kiln Incineration (decentralized scheme).

Through detail technical analysis, and considering the advantages of investment, economic

benefits, operation risks, etc., option (1) is selected (economic comparison for these two

options is found in Appendix 11).

Construction of new incinerators- Investment and operation cost estimation

The capital cost is estimated according to the recent and ongoing solid waste incineration

and power generation plant projects in Jiangsu and Guangdong provinces. The contents of

estimation include: the cost of a 700 t/d new incinerator to be built, cost of plant equipment

and devices imported from overseas, key production equipment made in the PRC, power

generation system, auxiliary production and service facilities, water supply and drainage

facilities, industrial buildings and installation works. The cost of automatic control system is

34 | P a g e




Economic Analysis

based on foreign equipment procurement including transportation fee, insurance and cost of

installation works. The prices of local PRC equipment are calculated based on the national

mechanical and electrical product prices and adjusted with reference to the actual prices

recently published by the industry. The installation works are calculated based on the

different indicators for machinery, electrical appliances and automatic control systems. The

costs mainly include the prices of installation, materials, pipes, electric wires, electric cables,

insulation and painting and also include the indirect expenses, profit, temporary facility,

business tax and city maintenance building tax calculated according to the respective

requirements.

Capital Cost

The capital cost includes the cost of foreign investment (imported equipment) and local PRC

equipment. The plant plans will require 25,000 m2 land with the estimated construction cost

of CNY210 million with the total project capital cost of CNY286 million.

Economic Analysis

Equipment and capital depreciation cost: Amortized in a period of 25 years, the

capital works with total investment of CNY286 million. The design treatment capacity

is 700 tons/day (actual treatment capacity is 600 tons/day based on Yongzhou’s

current situation) and operating 330 days per year. See Table 4.3 for a summary of

the total production and operation cost.

Treatment of leachate: The leachate treatment system of the existing Tantang Landfill

still has surplus capacity, thus requiring no further investment.

Table 4.3: Summary of Production and Operation Cost

S.N. Item Amount

(CNY10,000/year)

1

Consumption of chemicals (Including quick lime, active carbon and air pollution control system

etc.) 780

2 Auxiliary fuel, production water, etc. 320

3 Fly ash and slag landfill fee 60

4 Annual maintenance fee (including routine maintenance and major repair fund)

720

5 Salary and welfare 330

Total 2210

Assumed 330 operating days per year, the calculated unit operation cost is

CNY111.61/ton/day

Economic Return

Revenue from solid waste power generation: Based on the solid waste

characteristics, the incinerator will generate 280 kWh power per ton of waste

processed. Considering that the caloric value of the solid waste is not stable, and the

system reliability, the power generated is calculated at a rate of 80% - power

generation capacity is 224 kWh/ton. Assuming that the on-grid power price is

CNY0.65 per kWh (according to the Notice by the NDRC on improving policies on the

35 | P a g e




Economic Analysis

solid waste incineration and power generation price” NDRC Price Document [2012]

801), the revenue from power generation per ton of solid waste is CNY145.6/ton.

Considering part of the power generation is used in the incineration plant itself, the

total revenue of the power generation for a year is about CNY 23,680,800

(CNY119.6/ton •day).

After deducting the investment of the incineration equipment (if calculated at 25 years

back, without considering the return of investment, finance costs, tax and other

factors), the balance will be reached between the power generation revenue and

operation costs, and there is a slight surplus from the revenue of power generation.

If revenue from solid waste power generation not meeting the cost recovery, then

Yongzhou need to consider the amount and percentage of government subsidy for

solid waste treatment fee / tariff and implement the solid waste collection disposal fee

soon as possible to ensure financial sustainability in supporting this project, including

attracting potential qualified investors into this project.

4.1.6 Summary of Capital Investment and Operation Cost of Integrated Solid Waste

Management Facilities

The Integrated Solid Waste Management Facilities meant to integrate the treatment of MSW

incineration, kitchen waste and the sludge treatment together at Tantang Landfill. Table 4.4

and 4.5 summarize the capital investment and the operation costs are as follow:

Table 4.4: Summary of the estimated Capital Investment of the New Facilities

Project Investment (CNY)

Incineration facility 286 million 1

Leachate treatment 0 2

Anaerobic fermentation of kitchen wastes 65 million

Sludge drying 30 million

Estimation of investment cost (CNY million) (incineration + kitchen waste + sludge)

381 million

Note: 1. New incinerator with a daily capacity of 700 t/day. 2. The leachate treatment system of the existing Tantang Landfill still has surplus capacity, thus

requiring no further investment.

Table 4.5: Summary of Operation Cost of Integrated Treatment Facilities

Daily Operation Cost

(CNY/day) Yearly Operation

Cost (‘0000CNY/year)

MSW incineration 66,9661

2,2106

Landfill + Leachate treatment 30,8522 1,126

7

36 | P a g e




Economic Analysis

Anaerobic digestion of kitchen wastes 17,8003 650

7

Sludge drying 8,1004 295

7

Ash transportation cost

(CNY1.00/ton/km, round trip) 0

5 0

Note: 1. (CNY111.61/ton x 600 t/day); CNY111.61/ton is unit operation cost, 2. (CNY43.92/ton x 600 t/day)+(CNY30/m3 x 150 m3/d); 3. (CNY178/ton x 100 t/day); 4. (CNY90/ton x 90 t/day); 5. Incinerated ash will be disposed to Tantang landfill site; 6. The annual operation days of the incineration shall be 330 days. 7. The annual operation days of the landfill, kitchen waste and the sludge treatment shall be 365days.

The centralized treatment option is proposed and adopted, the revenue from sales of

electricity generated through refuse incineration will offsets portion the operation cost of the

incinerator. This scheme also has advantages of streamlined management operations – by

integrating all relevant treatment facilities in one place; co-location with existing Tantang

landfill with minimize environmental impacts; integrated benefits on power and heating

generated from sludge, kitchen waste and incinerator.

4.2 Initial Financing Plan

Based on functional requirements and separate institutional management, the integrated

solid waste management scheme are separated into (a) the collection and transfer system

management under the sanitation department and (b) the treatment system to be funded

and operated by the government or the private enterprise for long term effective operation.

a) The Yong Zhou city government Sanitation Department is responsible for invest

and operate for the refuse collection, transfer and transportation system;

b) The enterprise of a private company or joint venture with the government is

responsible for invest and operate the municipal solid waste incineration, kitchen

waste and the sludge treatment at Tantang Landfill is as the integrated treatment

facilities. Division of municipal administration and treatment facility operation

functional responsibilities are proposed, the sanitation department will be able to

focus on municipal administration and supervision while the various integrated

treatment facilities will be operated by the respective enterprises. The functional

approach will not only benefiting the supervision work of the sanitation

department, but also streamlining the operation framework of the treatment

facilities with best use of resources and promoting the operation and

management efficiency.

4.2.1 Financing Plan and Operation Management

(1) Government responsible for procurement and operation management

Closure of two abandoned landfills

At present, the two abandoned landfills have been closed and are planned as eco-parks.

With significant public benefits, the YZ government plans to apply for a national fund to

support the project investment including long term O&M expanses.

37 | P a g e




Economic Analysis

Urban environmental sanitation, solid waste collection and transfer

The urban environmental sanitation, including street cleaning, refuse collection and

transportation and operation and management of Tantang Landfill should preferably be

implemented in association with the municipal administration policies and on the basis of

tariff collection. The municipal finance should be utilized for procurement while Yongzhou

Municipal Administration and Law Enforcement Bureau (Municipal Solid Waste Center)

continue to be responsible for the operation and management of the new investment

components.

(2) Public-Private Partnership (PPP) in Financing and Operation and Management

Combining the refuse incineration, kitchen waste disposal, municipal sludge treatment and

Tantang Landfill into one integrated treatment project, Yongzhou can arrange the project to

be financed and constructed by the private enterprises; the following option may be

considered preliminarily:

BOT for new facilities plus contract operation of Tantang landfill

A professional company is engaged by Yongzhou for contract operation and management of

Tantang Landfill while the company perform BOT scheme on various new facilities. The

assets of Tantang Landfill are retained by the government department.

Figure 4.1: PPP Private Enterprise Partnership Financing Plan (PPP, BOT+Contract

Operation)

Note: Project management company: responsible for investment, financing and construction and operation and management of the Project; Sector supervision authority: Yongzhou Municipal Administration and Law Enforcement Bureau; Operation Company: joint venture between the special purpose vehicle and Yongzhou Tantang Solid Waste Treatment Co., Ltd. (responsible for operation and management).

Based on the suggested initial treatment fees (MSW incineration, kitchen waste and the

sludge treatment are the CNY100/t , CNY200/t and CNY200/t respectively) presented in

Table 4.6 for proposed PPP scheme, with the total investment of CNY381 million (50%

38 | P a g e




Economic Analysis

capital investment and 50% of bank loans with interest of 8%), the preliminary estimated

project IRR (internal rate of revenue) is about 10.8 %, .Financial analysis data is in Table 4.6

and 4.7. In considering the project economic feasibility and institutional business structure,

the Private Enterprise plan is recommended to apply. Detailed PPP options and financial

analysis are in Appendix 13.

Table 4.6. PPP (BOT + Contract Operation) Financial Data

Key Assumption

Contract Period 25

WACC 10.0%

Capital Investment CNY381,000,000

Loan (50%) CNY190,500,000

Bank Interest Rate 8% pa

Growth Rate of MSW 3%/year

Taxation First 3 years 0%

Year 4 to 6 12.50%

Remaining Year 25%

Profit and loss:

Income:

Treatment fee Revenue

Treatment amount

(t/d)

Initial treatment fee (CNYt)

Daily treatment fee (CNYd)

Tantang Landfill 600 100 60,000


Municipal sludge 90 200 18,000

MSW Incinerator 600 100 60,000

Total

158,000

Other Revenue

Treatment amount

(t/d) CNY/kWh

Daily power sale income

(CNY/d)

MSW incineration power generation

600 0.65 87,360

Expenditure:

Treatment amount

(t/d)

Operation cost (CNYt)

Daily expenditure

(CNY/d)

Tantang Landfill+leachate treatment

600 52 31,200


Sludge 90 90 8,100

MSW incinerator 600 111.6 66,960

Total

124,060

Note:

1. The ratio of capital investment bank loan: it is depends on the financial capability of the borrower, the

normal range is 70%-30%. In normal case, if the debt ratio is over 50%, then the bank may require to

set mortgage against the borrower’s assets and the right of fee collection of the project.

2. The interest rate: the current interest rate for infrastructure project is 6.5% to 8%pa.

Table 4.6: PPP (BOT + Contract Operation) Financial Indicator

含售电收入

39 | P a g e




Economic Analysis

Total Operating revenues

销售收入 3,948,233,815

Total costs (Opex) 运营费用 (2,359,071,455)

EBITDA 折旧摊销及息税前利

润 1,589,162,360

EBIT 息税前利润 1,208,162,360

Net income 税后利润 838,397,736

Dividends 分配股利 763,301,912

CAPEX 资本支出 381,000,000

ROE 资本金回报率 11.3%

ROCE 已动用资本回报率 23.8%

IRR ( Free cash flow) 项目内部回报率 10.8%

NPV ( Free cash flow) at WACC

净现值 26,942,389

4.2.2 Feasibility of Commercialization

Waste incineration with power generation has relatively stable incoming revenue, outgoing

operation cost, and enjoys certain tax incentives, which give investors stable and reasonable

returns. The feasibility of project commercialization shall also taking into consideration on

the market, operation and legal procedures.

(1) Market players

There are about 40-50 investors active in waste incineration power generation market in the

PRC, the market players include the Shanghai Environment Group, Beijing Golden State,

Tianjin Taida, Chongqing Sanfeng, Veolia, Xiamen Chuangguan, Shenzhen Energy,

Wenzhou Weiming, Chinese environmental protection company, China Everbright

International, Tsinghua Tongfang, Green Power, Shanghai Pudong Development Group,

Beijing China Science General Energy & Environment Co. Ltd., Jinjiang Group, Japan Ebara.

These enterprises are divided into three categories:

Government-led enterprises: The incinerator plant project is funded and constructed

by the local government, the enterprise served as a platform for the project.

Operations-oriented professional investment enterprises: These types of enterprises

introduce other technologies, focusing on the construction and operation of WTE

projects in the BOT model. These enterprises are mainly in operations and

management, such as Veolia Environmental Services (China) Co., Ltd., Golden State

Environmental Corporation, Beijing Sound Environmental Protection Group Limited,

Canadian resources (000826), China Everbright International Limited (00257.hk) and

so on.

Project investment-oriented enterprises: Based on technology developed , providing

services for the incinerator projects from construction to operation and management.

This type of enterprises mainly focuses on engineering construction.

(2) Operating Mode

On March 19, 2004, the Ministry of Housing and Rural-Urban Development (MOHURD)

issued the "Municipal Utility Concession Management Approach", specifying the concession

40 | P a g e




Economic Analysis

waste management model. The incinerator project has a large investment at initial stage,

relatively low operating costs, mainly adopting BOT (build - operate - transfer) and BOO

(build - own - operate) modes, the concession period is generally 25-30 years.

(3) Key Legal Documents

"Municipal Solid Waste Concession Agreement", "Power purchase agreement", “Grid

connection and scheduling agreement" are the most important three protocols for the

construction and operation of the waste incineration power project.

Municipal Solid Waste Concession Agreement:

As the waste industry has the nature of exclusivity, for a city, unless the waste production

greatly exceeds the processing capacity of the existing waste treatment plant, it is

impossible to build another treatment plant to handle incremental solid waste. If the original

treatment plants meet discharge standards stipulated in the contract, the original project

company is given priority to build a new WTE plant. Therefore, to obtain the concession of a

city’s solid waste treatment means a long-term monopoly of the city’s waste disposal

services. Therefore, increasing market share in the solid waste incineration power

generation industry has very important significance. Concession Agreement is the most

important legal authority in the incineration power generation projects, which is signed by the

operating companies and the local government or its authorized department. The main

contents include: concession period; service area, service time, quantity and quality; waste

subsidized prices, the price adjustment method, time and mode of payment. For the supply

of the daily waste, the concession contract generally use take or pay provisions. The actual

amount of the solid waste treatment amount is proved and certified by the local sanitation

department.

Power Purchase Agreement:

Under normal circumstances, the Price Bureau will approve the preferential tariffs of the

WTE projects; the agreement is signed by the operation company and the power grid

company.

Grid Connection and Scheduling Agreement:

This agreement is the grid of electricity and network protocols signed by operating company

and Power Grid Company. According to the "Reference National Development and Reform

Commission on improving waste incineration power price policy notice, NDRC Price [2012]

801", all electricity generate from waste to energy facilities will be fully connected online. In

considering the power generation from WTE projects is relatively small compared to

conventional power generation, the grid connection is relatively easy.

4.2.3 The Project's Ability to Repay

(1) The government is responsible for procurement, operation and management.

Currently Yongzhou city solid waste collection and transfer services are operated and

managed by the sanitation department, including street cleaning, solid waste collection and

transfer, the expenditure has been effectively supported by the government. The sanitation

department continuously improves the efficiency of solid waste service, increasing social and

economic indirect benefits to the public.

41 | P a g e




Economic Analysis

(2) Public-Private Partnership (PPP)

The main sources of income for waste incinerator project include MSW subsidies, power

tariffs, etc., among which the taxes of power tariffs will be refunded upon collection based on

relevant policy, the tax of solid waste subsidy will be exempted. In these revenue items, the

solid waste subsidy income, power tariff and tax incentives are the core sources of income.

1) Solid Waste Subsidies: While the top priority of incinerator BOT projects is solid waste

treatment, the power generation income is not sufficient to maintain operations of the project.

Therefore, the project should receive subsidies. This subsidy should be paid by the local

government to the project company, the government use administrative means to collect

garbage fees from the solid waste producers, and the insufficient part should be

supplemented through government budget. According to project estimation, the daily waste

processing capacity in Yongzhou is about 600 tons, and if the power tariff is 0.65 yuan/KWh,

the solid waste treatment fee will be 100 yuan/ton to allow the project to break even in about

9 years; the treatment fee will be confirmed after audited by the price bureau and then

approved by public hearing and municipality. Currently the solid waste treatment subsidy

amount across the country is closely related to the cost of the incineration equipment

(currently more than 200 yuan / ton in Shanghai).

2) Tax incentives: "Implementation Regulations of the PRC Enterprise Income Tax Law"

(2007) provides that enterprises engaged in projects which meet the qualifications of

environmental protection, energy and water conservation projects, from the first legal income

tax year to third year enjoy an exemption from corporate income tax, the 4th to 6th year only

need to pay half of the corporate income tax. On December 31, 2009, the Ministry of

Finance, State Administration of Taxation, the State Development and Reform Commission

jointly issued" Announcement on Environmental Protection, Energy and Water Conservation

projects CIT preferential [trial] notice" (Financial [2009] No. 166) explicitly listed MSW

incineration project in the catalogs. According to the "Comprehensive utilization of resources,

and other products VAT policy notice" (Financial [2008] No. 156) states that "the sale of the

following self-production goods implement the VAT refund upon collection policies,"

including the "production of electricity or heat using solid waste as fuel. The term solid waste

refers to urban garbage, crop straw, bark residues, wastewater sludge, and medical

garbage." According to the above provisions, waste incinerator WTE projects enjoy the tax

exemption and VAT-free preferential policies.

3) Security of solid waste supply. The consultants and Yongzhou government have

discussed and confirmed the amount of the solid waste generated (see 3.1.3), and agreed

the centralized treatment scheme. This assures the projection of solid waste supply.

In contractually, Yangzhou government and the operator are necessary to have consent for

the treated amount of solid waste by signing the "take or pay agreement" (see Chapter 5.2)

through the landfill O&M contract & BOT contracts as well as the concession agreement to

assure that during contract period, the government or its authorized agencies must to supply

the committed quantity of the solid waste as well as pay for treatment fees to operator (the

project company) in accordance with the agreement; If the Government or its authorized

agencies fails to supply the committed quantity of solid waste, they also has to pay the

treatment fee as agreed. Set the "minimum (yearly) supply of solid waste" is the key

measure of "take or pay agreement" principle.

42 | P a g e




Economic Analysis

4) Input-output analysis: Overall, the power tariff of the incinerator plant accounted for 55%

of the total income, and waste disposal fee accounted for about 45%, internal rate of return

account for 8-12%, the payback period is 8-12 years. Assuming the total service time is 25

years, which means its stable earning period will be up to 25 years.

According to relevant assumption and policies in Table 4.7, the consultant team provided the

financial calculations for the above two PPP plans (see Appendix 13). Considering the future

price increases in the financial model, assuming 5% annual growth, meanwhile taking into

account the average price inflation of 3% each year, corporate income tax exemption for first

3 years and reduction by 50% in the next 3 year, and other factors, though the income

before tax is not that high, it still can achieve a positive net present value. In other words, to

take Tantang landfill contract operation + BOT new facilities plan (Sole-proprietorship

Financing Plan) has a higher internal rate of return.

In addition, Yongzhou city has implemented BOT model for the wastewater treatment plants,

the government has certain procedures and operational experience on the implementation of

PPP model, the project's ability to repay the investors does not have significant risks.

43 | P a g e


Management Project in Yongzhou Chapter 5 Project Implementation

5. Project Implementation Plan

5.1 Project Structure

In order to achieve centralized treatment, it is necessary to integrate solid waste incineration,

kitchen waste treatment, municipal sludge treatment and Tantang Landfill into an integrated

treatment project. Having discussed with Yongzhou PMO, the Project may be operated and

managed by means of private enterprise investment (mandatory O&M of existing facilities +

investment in new facilities), where Tantang Landfill is operated and managed by a

professional enterprise mandated by Yongzhou Municipality while the enterprise provides

cash to address the financial needs of all new investments. By such means, the assets of

Tantang Landfill remain to the government in case of future financing plans.

As required by the “Methods for Management of Concession Operation of Municipal Public

Utilities” issued by the MOHURD on March 19, 2004, solid waste treatment utilities may be

operated in concession for a period of 25 to 30 years.

This Project covers the concession operation of solid waste incineration, kitchen waste

treatment, municipal sludge treatment and Tantang Landfill, which means that the

government may authorize the competent department to delegate, by means of concession

operation. The rights of construction and operation of the Project for a certain period of time

will be given to a professional investor (i.e. a project company), which is responsible for

financing, designing, procuring, constructing and commissioning and operation of all the new

components of the Project within the period of concession operation. Upon the completion of

the new components, the Project will provide treatment and operation services to the

government according to the agreement while the government will pay solid waste treatment

fee to the project company according to the agreement and assure that the residual

electricity of the solid waste incineration and power generation plant is sold on the power

grid so as to allow the investor to recover the cost of project investment, operation and

maintenance and obtain a reasonable return; upon the expiry of the concession operation,

the investor will hand over the ownership and right of operation of all project components to

the government free of charge according to the agreement.

5.2 Legal Framework

If the proposed BOT + O&M PPP scheme is adopted, the key legal documents involving the

Project will include, but not limited to, the following contracts and agreements, applicable

laws and standards, and the power generation preferential policies for the Project:

Concession Agreement

BOT Contract Agreement

Agreement of Landfill Contract Operation;

Contract of power purchase;

Agreement of grid connection and dispatching;

To assure the sustainability of the Project, the government shall take full account of the

following principles upon authorization of concession agreement:

44 | P a g e



“Take or Pay” Principle: This principle is an important means of credit security for

BOT and Contract O&M projects. During the operation period of this project, the

government or its authorized department to ensure solid wastes supply at the

minimum volume and receive solid waste treatment service, as well as pay solid

waste treatment / tipping fees to the investor (or Project Company) as stipulated in

the agreement. If the government or its authorized department fails to provide solid

wastes to the investor (or Project Company) at the agreed volume, the government

or its authorized department will still pay the agreed solid waste treatment fees.

Setting the “minimum (yearly) supply of solid waste” is a key approach to execute the

“Take or Pay” Principle.

Exclusivity: In order to abide by the “Take or Pay” Principle and “let all projects serve

their purposes”, the government usually develops a reasonable planning of solid

waste treatment facilities based on the actual circumstances to achieve the

exclusivity of solid waste incineration and treatment in a certain geographical area.

The exclusivity of BOT model is also reflected in the various rights of priority in

expansion of existing projects or construction of new treatment projects in the same

area.

Preferential policies: Solid waste incineration projects also receive a series of

preferential tax policies. For example, three-year exemption and three-year half

reduction of enterprise income tax are stipulated in the “Regulations of

Implementation of the ‘Enterprise Income Tax Law of the People’s Republic of

China’” (2007); domestic solid waste incineration projects are included in the

catalogue according to the “Notice on Publication of the Catalogue of Environmental

Protection, Energy and Water Saving Projects Enjoying Preferential Enterprise

Income Tax (Trial Version)” (Financial Tax [2009]166); solid waste incineration and

power generation projects also receive the preferential policies on exemption and

reduction of income tax and exemption of value-added tax according to the

stipulations of the “Notice on the Value-added Tax Policy for Comprehensive

Utilization of Resources and Other Products” (Financial Tax [2008]156).

Price adjustment formula: Since the power grid-connection price upon bid invitation is

an assumed parameter, the price adjustment formula for the solid waste treatment

fees should be linked with the actual grid-connection price. In addition, the operating

costs should adjusted with the price index and adopt the progressive method instead

of a year-to-year adjustment.

Since Yongzhou has implemented the urban WWTPs using the BOT model, the government

has experiences in the implementation procedure and operation of the PPP model; therefore,

there will not be significant risks to the investors in terms of the adoption of this PPP scheme.

5.3 Risks of BOT Projects and Their Control

(1) Risk Category

From the government’s perspective, the key risks to address are social and

environmental risks. The government will have to address increasing pressure in

terms of solid waste treatment needs if the selected investor does not have the

required capability to complete the project on time. Additionally, during the period of

operation and management, serious environmental pollution may result from failure

45 | P a g e



to follow the strict national environmental protection standards.

From the investor’s perspective, the key risks include technical risks (in terms of

construction and operation), solid waste supply risks (in terms of quantity and

quality), payment risks (concerning solid waste treatment fee and electricity fee), and

policy risks (e.g. more stringent national environmental protection standard and

changes of urban planning).

(2) Principle of Risk Sharing

The following principle of risk sharing will be adopted to enable the more competent party to

undertake the respective category of risks. For example:

The technical risks concerning the engineering design, operation, and maintenance

of the solid waste incineration plants and facilities should be undertaken by the

investors (or project companies) since they have more professional staff and

expertise than the government in addressing such risks;

The solid waste supply risks, payment risks, and policy risks should be undertaken

by the government or its authorized department who have certain abilities of

administrative coordination;

Unpredictable risks (e.g. force majeure) should be shared by the government and the

investor following the relevant stipulations of the Concession Agreement.

(3) Key Approaches of Risk Control

The following approaches and methods may be adopted for control of the above risks:

The project requirements that the government raises to the project investor including

the technical requirements of the incineration plant and the various treatment

facilities should be clearly specified in the bidding documents. In addition, the project

terms and conditions provided by the government should also be made available to

the investor for the purpose of risk appraisal and economic analysis;

The Concession Agreement should be included as part of the bidding documents to

clearly specify the responsibility, rights, and interests of the government and the

investor to avoid unnecessary disputes;

Various performance assurance mechanisms should be established based on the

project requirements and its implementation stages, such as “bid security” for the

bidding period, “project completion security” for the construction period, “operation

security”, “payment security” for the operation period, and “hand-over security” for the

hand-over of the Project.

5.4 Project Preparation Works

5.4.1 Organization Activities

(1) The government authorizes the lead department to perform project planning based

on integrated approach and delegate the right of Concession Agreement on behalf

of the government;

(2) Surveys should be organized to identify the quality and quantity and future growth

of solid wastes;

46 | P a g e



(3) An experienced consultant should be recruited as the financial consultant and

investment / bidding agent of the Project;

(4) Market sounding should be conducted to identify potential investors and

technologies.

5.4.2 Procedure of Project Execution

(1) The government selects an investor for the Project through public bidding or by

other means;

(2) The investor sets up a special project company based on the relevant

requirements of the bidding document;

(3) The government delegates an authorized department for the Project;

(4) The authorized government department signs and performs, on behalf of the

government, the Concession Agreement with the project company;

(5) The project company signs an agreement of solid waste delivery with the solid

waste suppliers;

(6) The project company signs an agreement of electricity sales with the electricity

authority;

(7) The project company signs agreements of project financing with the loan banks;

(8) The project company signs project implementation contracts with the design

institute, equipment suppliers and construction and installation companies; in-

depth discussions will be conducted over the publications of project manager

associations.

5.4.3 Project Preparation and Tendering Schedule

The following table lists the time schedule during the project preparation period.

Table 5.1: Project Preparation and Tendering Schedule

Implementation Stage

Implementation Actions Duration

Preparation Stage

The government delegates an authorized department and grant concessions for representing the government in the future;

Hire the consultants as the project financing consultants and tender agent;

Investigate the potential investor and technology.

3-6 Months

Tender and Financing Stage

Issue the tender notice;

Field investigation;

Evaluation of the bidders;

Contract negotiation.

Contract signing;

Establish special project company;

Financing from the financial institution.

6-8 Months

Design Stage Signing contract with design institutes,

equipment suppliers, engineering and installation companies, etc..

2-3 Months

47 | P a g e

Chapter 6 Environmental Impact Assessment



6. ENVIRONMENTAL IMPACT ASSESSMENT

6.1 Background and Needs

The current scope of Yongzhou integrated solid waste management project includes the

treatment of municipal solid waste, kitchen waste and wastewater sludge. The total kitchen

waste produced from Yongzhou downtown hotels and restaurants is about 70 tons per day.

In the urban area of Yongzhou city, there is no kitchen waste recycling system; therefore the

kitchen waste collection and its flow direction have not been controlled. The wastewater

sludge in Yongzhou (80% moisture content) is currently transported to the existing sanitary

landfill for disposal. The 80% moisture content does not meet the requirements of mixed

landfill, which will increase the landfill leachate and landfill gas generation, resulting in the

operating costs to increase.

6.2 Solid Waste Management Technologies Routes and Possible

Environmental Impact

For the current problems in waste management, taking into account the technical capabilities,

expenditure, management ability and socio-economic conditions of Yongzhou city, the

current proposed solid waste management plan include: 1) Conduct landfill closure plan to

the two abandoned landfills. 2) Kitchen waste fermentation - biogas utilization scheme. 3)

Wastewater sludge to be disposed in Tantang after thermal drying treatment; 4) Combustible

materials from the municipal solid waste will be treated following sorting – incineration –

landfill route, the incombustible materials is transported to Tantang landfill for disposal

directly.

The consultant team analyzed the possible negative environmental impacts during the

construction and operation period based on the proposed technical plan. See Table 6.1 for

the detail analyze.

The positive environmental benefits of the project are summarized in Table 6.2.

6.3 Environmental Impact Mitigation Measures Already Planned and

Proposed

Currently, the environmental impact assessment reports for the kitchen waste management

project and the landfill closure project have already been completed. The two EIA reports

provide a preliminary analysis on the environmental impact during the construction and

operation period, and also provide some mitigation measures. The mitigation measures that

need to consider are listed in Table 6.3.

6.4 Monitoring Plans and Requirements

For the municipal solid waste, kitchen waste, and wastewater sludge, there is no routine

monitoring for these sectors, registration measures arrangements and requirements existed

yet. Therefore, the solid waste composition and biomass, thermal value, moisture and oil

content, heavy metals and other harmful substances in the waste are still not clear. Even

though some sample testing were done before the planning and treatment project, it was not

adequate. So for the Yongzhou solid waste management projects, monitoring requirements

include two aspects: First, the necessary monitoring requirement of the daily management;

48 | P a g e

Chapter 6 Environmental Impact Assessment



and the other is the monitoring plan and requirements during project construction and

operation period.

6.5 Management Improvement

Although Yongzhou city government has already begun planning the municipal solid waste

management projects, however, the daily management of municipal solid waste is still very

weak. For the comprehensive management, the following aspects need to be considered:

Policies and Regulations Implementation: the implementation of the national and local

(including Yongzhou) management regulations and policies.

Comprehensive Consideration: The general considerations are mainly reflected in two

aspects: on one hand, the comprehensive management of collection and transportation

systems; on the other hand, for the treatment and disposal of different types of solid waste

(municipal solid waste, kitchen waste, wastewater sludge etc.), an integrated planning is

needed based on the local conditions and requirements, including different technologies,

scales, comprehensive utilization, cycling production and so on.

Financial Capacity Strengthen and Sustainability: the comprehensive utilization of solid

waste should be considered, increasing the financial benefits (lower the costs and financial

expense). In addition, the solid waste treatment fees, as well as the government financial

support should be included in the financial plan for comprehensive consideration.

Realization of Environmental and Poverty Alleviation Objectives: once the project is

finished, it will reduce the environmental pollution and hazards, promote and maintain the

environmental objectives. At the same time, this project will reduce health problems, in

particular reducing the likelihood of infectious diseases, which have a positive effect on

poverty reduction.

Strengthening of Public Participation: strengthening the public participation is of great

importance to the solid waste management project in Yongzhou. Information disclosure is

the basis for public participation. Without the disclosure of information, it is difficult to make

effective participation of the public, which will result in difficulties to have a wide and in-depth

public negotiation. Project owners and environmental management department has the

responsibility to create conditions to facilitate public participation.

Establishment of Grievance Redress Mechanism for Environmental Impacts: the

purpose of the mechanism is to understand the environmental impact concerns and

grievances from the affected people, seeking a better solution, and to ensure the affected

people to play a supervisory role throughout the project preparation and implementation

process. The design of the grievance redress mechanism needs to consider the possible

risks and levels of impacts of the project.

49 | P a g e


Management Project in Yongzhou Chapter 6 Environmental Impact Assessment

Table 6.1: Solid Waste Management Sub-Projects and Possible Negative Environmental Impacts

Sub-projects Possible Impact during Construction Period Possible Impact during Operating Period

Abandoned Uncontrolled landfill closure

Construction dust and construction machinery vehicle exhaust; wastewater and noise production; construction and living waste generated during the period; vegetation damage and soil erosion effects

Landfill gas effects; landfill leachate contamination;

Anaerobic fermentation of kitchen waste

Construction site dust; wastewater and sewage production during construction period; noise production from transport vehicles and construction machinery and equipment; waste muck produced during this period

Sewage and wastewater; noise from boiler room, belt conveyors, crushers, pumps and other equipment; operation waste and living garbage

Solid waste incinerator treatment in Tantang landfill

Construction site dust; wastewater and sewage production during construction period; noise production from transport vehicles and construction machinery and equipment; waste muck produced during this period

Leachate from solid waste storage; the noise production from the sorting and transportation system and other equipment; odor effects; atmospheric pollutants from incineration; leachate effects to the groundwater quality,

Sanitary landfill Construction site dust; wastewater and sewage production during construction period; noise production from transport vehicles and construction machinery and equipment; waste muck produced during this period

Landfill gas and solid waste leachate effects; odor effects; noise; leachate effects to groundwater; landfill soil effects to land and ecological environment.

50 | P a g e



Table 6.2: Positive Environmental Benefits of Solid Waste Technology Solution

Sub-project Positive Environmental Benefits

Abandoned Uncontrolled

Landfills Closure

（1） After the closure of the landfill, the leachate pollution to the surface water and groundwater will be

reduced. The annual amount emissions reduction of COD, BOD5, ammonia, SS will be 130 tons,

52 tons, 39 tons and 26 tons, respectively.

（2） Reduce the leachate pollution to the surrounding soil.

（3） Reduce the negative impact from the landfill gas, with annual emission reduction of 0.527 tons

H2S and 2.722 tons NH3.

（4） Improve the sanitation and public health conditions of the surrounding communities.

（5） After landfill closure, the surface will be greened which will improve the ecological environment of

the surrounding areas.

Anaerobic fermentation of

kitchen waste

（1） Reduce the illegal use of waste oil, improve public health.

（2） Fermentation will produce biogas, reducing the use of fossil fuels. 1058 tons of oil can be

separated each year, and used resourcefully, while reducing environmental pollution.

（3） Solid waste is collected and transported in a closed condition, improving the sanitation condition

of the solid waste collection.

Solid waste incinerator

treatment in Tantang landfill

（1） Maximizing the reduction of solid waste, reducing the occupation of landfill space, and improving

the conservation of land resources.

（2） Thermal value of solid waste can be taken full advantage of, the amount of fossil fuels and carbon

emissions will be reduced (carbon emissions from incineration + heat utilization are 1/6 of that

from landfill disposal).

（3） Household waste pathogens will be completely eliminated, reducing the adverse effects on the

environment and public health.

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Table 6.3: Environmental Mitigation Measures and Proposed Measures

Sub-projects Construction Period Operation Period Proposed measures for improvements

Abandoned landfill closure

Dust control; sewage collection and treatment; noise prevention; water and soil conservation.

Landfill gas collection and treatment measures; leachate pollution control measures; groundwater pollution prevention measures

Detailed analysis for soil volume and soil sites; leachate treatment monitoring; improve the environmental management and monitoring plan; supplement security incident contingency plans (contingency plan)

Anaerobic fermentation

of kitchen waste

Dust control; sewage

collection and

treatment; noise

prevention.

Dust control; noise

canceling; spills control

measures; leachate

pollution control

measures

Supplement methane leakage protection measures,

environmental emergency plan, environmental management

and monitoring plan; increase monitoring, evaluation

indicators (factors)

Solid waste incinerator treatment in Tantang landfill

Proposed mitigation measures: the impact of garbage collection system; burning atmospheric pollution mitigation; odor pollution control; wastewater pollution control; solid waste disposal; noise impact control.

For detailed environmental impact assessment, please see Appendix 14; for recommendations to the existing EIA, please see Appendix 15.

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Management Project in Yongzhou Chapter 7 Project Social Impact Assessment

7. PROJECT SOCIAL IMPACT ASSESSMENT

7.1 Social Impact Analysis

Implementation of the project will provide more income-generating opportunities to local

residents, promote the health of women, children and the elderly, and effectively improve the

local ecological environment. At the same time, it may lead to some adverse social impacts,

resulting in the loss of interests of some certain groups. Through the analysis of the social

impact of each subproject, the social impact analysis matrix is shown in Table 7.1.

Table 7.1: Social Impact Analysis Matrix

Project component

Social impact analysis

Positive impacts Adverse impacts

Domestic solid waste collection, sorting and transportation system project

(1) Benefiting more people and

effectively improving local ecological

environment

(2) Significantly reducing solid waste

removal and disposal fee, simplifying

solid waste treatment technology and

promoting solid waste treatment

efficiency

(3) Promoting resource recycling

(4) Improving the health condition of

women, children and the elderly

(1) Construction of new transfer station

could incur resistance by local

residents.

(2) Possibly resulting in loss of income

for some rag pickers

(3) Collection of solid waste treatment

fee will possibly increase cost of living

for residents, in particular the

vulnerable groups.

Domestic solid waste incineration and treatment project

(1) Promoting socioeconomic

development in the region and

improving environmental quality

(2) Contributing to improvement of

living conditions and public health

(1) Concerns about dioxin may incur

public resistance against solid waste

incineration and power generation

plant and even “Not-In-My-Back-Yard”

effect.

(2) Impacts of LAR

(3) Likely to affect health of local

residents

Abandoned landfill closure and pollution control project

(1) Improving and standardizing

environmental sanitation facilities in the

area

(2) Facilitating the settlement of

outstanding pollution problems in the

region

(3) Improving living environment and

health condition of local residents

(4) Improving agricultural production

conditions of local residents

(5) Bringing more opportunities of

revenue generation for local residents

(1) Affecting the income of rag pickers

Kitchen waste treatment and disposal project

(1) Fundamentally addressing

environmental pollution caused by

kitchen waste in Yongzhou urban

center and effectively controlling the

impacts of kitchen waste on ecological

environment and significantly

improving urban environment

(2) Realizing beneficial use of kitchen

wastes and benefiting local residents

(1) Increasing the environmental risks

of Tantang Landfill, likely to threaten

health of local residents, in particular

the vulnerable groups

(2) Increasing the burden on catering

businesses and bringing income losses

(3) Source of income of individual

kitchen waste collectors is cut off and

their income affected.

53 | P a g e


Management Project in Yongzhou Chapter 7 Project Social Impact Assessment

7.2 Stakeholder Analysis

The main stakeholders of this Project include Yongzhou Municipal Government, the Urban

Investment, Construction and Development Corporation, other government departments of

Yongzhou, town and township governments, residential committees in the Project Area,

residents in the beneficiary areas and affected residents. Different stakeholders’ needs from

the project vary. To better understand of the stakeholders’ needs and interests, as well as

their impact to the project, a special analysis was carried out as shown in Table 7.2. In the

next step of the feasibility study process, further communication and consultation should be

made with these stakeholders, and public participation results should be incorporated into

the design optimization.

Table 7.2: Key Stakeholder Analysis Matrix

Stakeholder

Role in

the

Project

Function

Attitude

toward the

Project

Impacts

on the

Project

YMG Indirect

beneficiary

Steering,

coordinating Supportive Big

Subproject owner Indirect

beneficiary

Organizing,

implementing Supportive Big

Other government departments Indirect

beneficiary

Coordinating,

supporting Average Big

Cities Development Initiative in

Asia (CDIA) and AECOM

Indirect

beneficiary

Providing

consulting and

assistance

Supportive Moderate

Town and township

governments and community

committees

Indirect

beneficiary Coordination Positive Big

Residents in beneficiary areas Direct

beneficiary Beneficiary Supportive Small

Residents affected by LAR

Direct

interests

affected

Affected but also

beneficiary Uncertain Big

Persons affected by income

and employment (rag pickers,

kitchen waste collectors)

Direct

interests

affected

Affected but also

beneficiary Uncertain small

Details social impact assessment is in Appendix 16; related social field investigation is

summarized in Appendix 17.

54 | P a g e


Management Project in Yongzhou Chapter 8 Recommendations to the Next

Feasibility Study

8. RECOMMENDATIONS TO THE NEXT FEASIBILITY STUDY

8.1 Technical Aspect

For municipal waste incineration project, the related departments should initiate the

preparation of "Feasibility Study Report of Municipal Waste Incineration Power Generation

Project ", through on-site determination of thermal value of waste and other basic data to

further demonstrate the feasibility of waste incineration power generation projects. Yongzhou

government also need to issues policies and documents related to municipal waste subsidy

and grid-connect power generation subsidy.

For the abandoned landfill closure project, the consultant team proposed to further compare

of the two options in next stage of feasibility study, supplement the detailed hydrogeological

and geotechnical data of the landfill area; demonstrate the feasibility of in situ landfill closure,

while discussing the necessity of relocation options, as well as the trace of the waste and the

land use value after landfill relocation.

For sludge treatment project, after the sludge component, thermal value and other basic

information are determined, the feasibility of integrated treatment and co-processing of

wastewater sludge with municipal waste or kitchen waste need to be demonstrated in detail.

8.2 Social & Environmental Aspects

Except for the recommendations listed in table 3.5, more aspects on kitchen waste need to

be addressed in the following stages. Based on the "Solid Waste Pollution Prevention Law in

PRC", "City Appearance and Environmental Sanitation Regulations" and other laws and

regulations, combined with the city’s actual situation, Yongzhou government should develop

some appropriate measures, the approach should cover at least the following elements:

Identify the city's administrative departments of kitchen waste management, and the

responsibilities of food safety, environmental protection, industry and commerce, food

and drug supervision, quality supervision, public health, animal husbandry,

agriculture, finance, pricing and other departments in the kitchen waste management

projects;

Subsidies and tariff system, as well as reward systems;

Kitchen waste generating units, collection and transportation units, disposal units and

ledger system, inspection system;

Information disclosure system, including: the type and quantity of kitchen waste

generated, collection and transportation, disposal services permit, kitchen waste

treatment situations, waste resource utilization of edible oils and fats, as well as the

illegal cases of kitchen waste generation, collection and transportation units;

Penalties and reporting systems.