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World bank to provide $145m to China pumped storage project

24 March 2003 – The World Bank’s Board of Executive Directors last week approved yesterday a $145m loan for the China Yixing Pumped Storage Project. The project will increase the overall efficiency of the power sector in Jiangsu Province through the design and implementation of a far reaching restructuring of the sector to further competition at the generation level and provide large consumers access to generators.

It will also ease acute peaking problems by constructing a pumped storage plant
(4 x 250 MW) in Yixing and improve the generation mix that would create the
conditions for more flexible dispatch and improved supply reliability, an
essential requirement for well functioning competitive markets. The Jiangsu
power grid faced major problems to meet peak demand during the summer of 2002
because of the very high growth of commercial and household demand.

This project is in line with the strategy developed in the World Bank’s Country
Assistance Strategy (CAS), as well as the Government’s strategy which aims to
gradually transform the power sector of provincial/regional systems into a
diversely owned market based industry through comprehensive restructuring, and
to create a comprehensive modern regulatory framework for the sector. “This
project is expected to boost the economic development of Jiangsu Province by
mitigating and eliminating institutional and technical constraints that have
prevented the power system from expanding and operating efficiently,” says World
Bank Task Manager for the project Jianping Zhao. “The project also contributes
to widespread state owned enterprise and governance reform as well as
development of the financial sector.”

Other benefits expected from the project include:

Implementation of the Government’s new power sector reform strategy will
benefit from international experience in power sector restructuring and the
development of power markets.
The pioneering work related to the commercialization of the transmission
and distribution segment in Jiangsu province will provide valuable inputs to the
central government decision-making process in developing a strategy to separate
and commercialize the transmission and distribution business.
The legal and commercial arrangements defining the relationship between
the pumped storage plant and the power market are appropriate in order to
maximize the benefits of the plant to the system.
Capacity building in areas such as the technical design, construction
practices and equipment selection for the pumped storage hydro plant will be in
accordance with leading international practice and standards.
The on-going policy dialogue to address the institutional aspects of
wholesale electricity pricing and transmission pricing is successfully
implemented in the major power systems that are likely to serve as models for
other regions/provinces.
The piloting of consumer direct participation in Jiangsu will provide a
key input to the central government in formulating restructuring strategy to
create competitive markets with multiple buyers.

For more information on this project:
http://www4.worldbank.org/sprojects/Project.asp?pid=P068058