CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 03 - in effect as of: 28 July 2006 CONTENTS. Annexes

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1 Page 1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-PDD) Version 03 - in effect as of: 28 Jul 2006 CONTENTS A. General description of project activit B. Application of a baseline and monitoring methodolog C. Duration of the project activit / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the project activit Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring plan

2 Page 2 SECTION A. General description of project activit A.1. Title of the project activit: Title : Mulei Count Yuanheng Coal Chemical Industr Co., Ltd. Semi-coke Waste Gas for Power Generation Project Version : 03.4 Date: 05/08/2013 A.2. Description of the project activit: Mulei Count Yuanheng Coal Chemical Industr Co.,Ltd. Semi-coke Waste Gas for Power Generation Project (hereinafter referred to as the Project ) is located Ji-Ji-Hu Coal Chemical Industrial Area, Mulei Count, Changji State, Xinjiang Ugur Autonomous Regions, and People s Republic of China. The purpose of the proposed project is to recover waste gas from the semi-coke plant for electricit generation which will be delivered to Northwest China Power Grid (NWPG) which is dominated b coal production power. The project will be constructed and operated b Mulei Count Yuanheng Coal Chemical Industr Co.,Ltd. The waste semi-coke gas recovered is generated b five existing semi-coke production plants including Mulei Count Yuanheng Coal Chemical Industr Co.,Ltd. (hereinafter referred to as Yuanheng Compan ), Xinjiang Jixin Coal Chemical Industr Co.,Ltd., Mulei Count Tiani Coal Chemical Industr Co.,Ltd., Mulei Count Dongsheng Coal Chemical Industr Co.,Ltd., and Mulei Count Ruitai Mining Co.,Ltd. The proposed project is supposed to consume Nm 3 /ear, as the onl fuel source, from the five semi-coke companies above annuall. In the absence of the proposed project activit, the waste gas would be flared and released into the atmosphere.the baseline scenario is the same as the scenario existing prior to the start of implementation of the project activit. The proposed project is to utilize Nm 3 /ear waste gases with calorific value 7,307 KJ/Nm 3 for electricit generation, and involves installation of t/h gas fired boilers, 4 25MW condensing steam turbines and 4 25MW generators with expected 6,500 operating hours per ear based on the runtime of semi-coke production. The annual electricit generation from the proposed project is expected to be 650,000 MWh per ear with the plant load factor of 74.20% 1, and annual net electricit suppl is 579,800 MWh 2 to the NWPG, resulting in estimated emission reduction of 406,447 tco 2 e per ear for the fixed 10 ears crediting period. The Project, which utilizes the waste gas from semi-coke production line for power generation, will bring significant environmental and social benefits. It will contribute to the local sustainable in the following aspects: Promoting the deploment and spread of energ efficienc technolog (waste gas based power generation) to other Chinese semi-coke plants. Reducing the reliance on fossil fuels and reducing the emission of local pollutants caused b the burning fossil fuel and the associated adverse health impact. Reducing the environmental pollution caused b the existing open flaring sstem. Reducing the greenhouse gas emission caused b displaing part of fossil fuel-fired power in the NWPG, reducing environmental pollutionscaused b burning fossil fuels. 1 The PLF of the project is calculated as: 650,000 MWh/100 MW*8760 hours = 74.20% 2 Based on the Feasibilit Stud Report (FSR), the rate of power consumption b the project is estimated to be 10.8% of annual power generation of the project. Therefore, the annual net power suppl b the project is 650,000*(1-10.8%) =579,800 MWh.

3 Page 3 A.3. Meanwhile, the project will provide job opportunities for local communit during the project construction and operation stages. Project participants: Name of Part involved(*) ((host) indicates a host Part) P. R. China (Host) The Netherlands Private and/or public entit(ies) project participants (*) (as applicable) Mulei Count Yuanheng Coal Chemical Industr Co., Ltd. Vattenfall Energ Trading Netherlands N.V Kindl indicate if the Part involved wishes to be considered as project participants (Yes/No) No No (*) In accordance with the CDM modalities and procedures, at the time of making the CDM-PDD public at the stage of validation, a Part involved ma or ma not have provided its approval. At the time of requesting registration, the approval b the Part(ies) involved is required. A.4. Technical description of the project activit: A.4.1. Location of the project activit: A Host Part(ies): People s Republic of China A Region/State/Province etc.: Xinjiang Ugur Autonomous Region A Cit/Town/Communit etc.: Ji-Ji-Hu Coal Chemical Industrial Area, Mulei Count, Changji State A Details of phsical location, including information allowing the unique identification of this project activit (maximum one page):

4 Page 4 The project site is located in Ji-Ji-Hu Coal Chemical Industrial Area, Mulei Count, Changji State, Xinjiang Ugur Autonomous Region, and People s Republic of China with east longitude and north latitude. The location of the Project is shown in Figure A.1 as follow: Figure A.1The location of the Project Xinjiang Ugur Autonomous Region Changji State Project Site Urumqi Cit Mulei Count

5 NWPG CDM Executive Board Page 5 A.4.2. Categor(ies) of project activit: The categories applicable of the project activit are: Sectoral scope 1: Energ industries (renewable - / non-renewable sources) Sectoral scope 4: Manufacturing industries A.4.3. Technolog to be emploed b the project activit: Baseline Scenario The baseline scenario is the continuation of the situation existing prior to the implementation of the project activit. That is the waste gas from semi-coke production is flared and released into the atmosphere, and the electricit consumed is provided b the NWPG. Therefore, there is no equipment for waste gas generation and recover is installed before the implementation of the project activit. Project Scenario The project scenario is that to recover the waste gas from semi-coke production process for electricit generation and the electricit generated b the project will be delivered to the NWPG. The project activit involves the installation of 4 25MW condensing steam turbines and 4 25MW generators which will combust Nm 3 /r waste gas. The net electricit suppl to the NWPG b the project is expected to be 579,800 MWh. The technical process of project activit is shown in FigureA.2. t Figure A.2 The technical processes of project activit Waste gas 130t/h gas fired boiler Steam 25MW condensing turbine/generator 2400kt/ semicoke production Waste gas 130t/h gas fired boiler Steam 25MW condensing turbine/generator Power Waste gas 130t/h gas fired boiler Steam 25MW condensing turbine/generator Waste gas 130t/h gas fired boiler Steam 25MW condensing turbine/generator Auxiliar demand

6 Page 6 The project activit includes installation of 4 sets of gas fired boiler, condensing steam turbines and generators made in China as listed in Table A.1. Therefore, the implementation of the project will demonstrate and promote the application of waste gas based power generation technolog in China. Table A.1 The ke technical indicators of the main equipments Equipment Tpe Quantit Ke characteristics Gas Fired Boiler Condensing Steam turbine RQG-130/9.8-Q2 4 N /535 4 Generator QFW Rated steam generation capacit: 130t/h Rated steam temperature: 540 C Rated steam pressure: 9.8MPa Designed operation pressure: 11.28MPa Feed-water temperature: 215 C Vented smoke temperature: 140 C Hot-air temperature: 316 C Discharge rate: 2% Boiler efficienc: 91% Lifetime: 20 ears Age: 0 ear Annual running time: 6500h Rated inlet steam pressure: 8.83MPa Rated inlet steam temperature: 535 C Rated inlet steam capacit: 118t/h Vented steam pressure: MPa Vented steam temperature: 49 C Rated power capacit: 25MW Lifetime: 20 ears Age: 0 ear Annual running time: 6500h Rate power capacit: 25MW Rated voltage: 10.5kv Rated current 1031A Frequenc: 50Hz Power factor: 0.80 Excitation voltage: 177.5v Excitation current:183.5a Lifetime: 20 ears Age: 0 ear Annual running time: 6500h There is no technolog transfer involved b the project. The technolog implemented b the project activit is environmentall safe as the purpose of project is to recover waste energ and thus reduce the pollution on local environment.

7 Page 7 A.4.4. Estimated amount of emission reductions over the chosen crediting period: The proposed project activit is estimated to reduce an average of 406,447 tco 2 e annuall. The total reduction of the fixed 10 ears crediting period (01/01/ /12/2023) is estimated to be 4,064,470 tco 2 e as shown in the Table A.2. Table A.2 Estimated amounts of emission reductions for the project Years Annual estimated of emission reductions in tonnes of CO 2 e 01/ / ,447 01/ / ,447 01/ / ,447 01/ / ,447 01/ / ,447 01/ / ,447 01/ / ,447 01/ / ,447 01/ / ,447 01/ / ,447 Total estimated reductions 4,064,470 (tonnes of CO 2 e) Total number of crediting ears 10 Annual average over the crediting period of 406,447 estimated reductions (tonnes of CO 2 e/r) A.4.5. Public funding of the project activit: The financial plans for the Project activit do not involve an public funding from Annex I parties. SECTION B. Application of a baseline and monitoring methodolog

8 Page 8 B.1. Title and reference of the approved baseline and monitoring methodolog applied to the project activit: The following approved baseline and monitoring methodolog is applied to this project: ACM0012 (Version ) at EB60 meeting Consolidated baseline methodolog for GHG emission reductions from waste energ recover projects. According to the recommendation of this methodolog, the following tools were applied in elaboration of the present CDM-PDD as indicated in the methodolog: Tool for the demonstration and assessment of additionalit ; Version Tool to calculate the emission factor for an electricit sstem ; Version Tool to determine the remaining lifetime of equipment ;Version 01 Tool to determine the baseline efficienc of thermal or electric energ generation sstems ; Version 01 Tool to calculate project or leakage CO 2 emissions from fossil fuel combustion ; Version 02 More information about the methodolog and the tool can be found on the website: B.2. Justification of the choice of the methodolog and wh it is applicable to the project activit: Applicabilit The proposed project is to combust waste gas from the semi-coke production to generate electricit. Therefore, the consolidated methodolog ACM0012 (Version ) is applicable. As ACM0012is applicable for the following tpes of project activities: Methodolog applicabilit criteria Project activit in accordance with the applicabilit criteria The project utilizes waste gas as an energ source for generation of electricit onl. The consolidated methodolog is applicable to project activities implemented in an existing or Greenfield facilit converting waste energ carried in identified WECM stream(s) into useful energ. The WECM stream ma be an energ source for: Generation of electricit; Cogeneration; Direct use as process heat source; Generation of heat in element process; Generation of mechanical energ; or Suppl of heat of reaction with or without process heating. In the absence of the project activit, the WECM stream: a) Would not be recovered and therefore would be flared, released to atmosphere, or Applicable: The proposed project will recover the semi-coke gas for generation of electricit Aapplicable: In the absence of the project activit, all the semi-coke gas in identified WECM streams would be released to atmosphere.

9 Page 9 remain unutilized in the absence of the project activit at the existing or Greenfield project facilit; or b) Would be partiall recovered, and the unrecovered portion of WECM stream would be flared, vented or remained unutilized at the existing or Greenfield project facilit. Project activities improving the WECM recover ma (i) capture and utilize a larger quantit of WECM stream as compared to the historical situation in existing facilit, or capture and utilize a larger quantit of WECM stream as compared to a reference waste energ generating facilit ; and/or (ii) appl more energ efficient equipment to replace/modif/expand 3 waste energ recover equipment, or implement a more energ efficient equipment than the reference waste energ generating facilit. For project activities which recover waste pressure, the methodolog is applicable where waste pressure is used to generate electricit onl and the electricit generated from waste pressure is measurable; Regulations do not require the project facilit to recover and/or utilize the waste energ prior to the implementation of the project activit; The methodolog is applicable to both Greenfield and existing waste energ generation facilities. If the production capacit of the project facilit is expanded as a result of the project activit, the added production capacit must be treated as a Greenfield facilit; Waste energ that is released under abnormal operation (for example, emergencies, shut down) of the project facilit shall not be included in the emission reduction calculations. If multiple waste gas streams are available in the project facilit and can be used interchangeabl for Not applicable: There is no WECM recover of semi-coke gas prior to the implementation of the project activit. Not applicable: The project activit does not recover the waste pressure, so this criterion is not applicable for the project. Applicable: There are no regulations to require the project facilit to recover and/or utilize the waste energ prior to the implementation of the project activit. Applicable: The project utilizes waste gas generated b five existing facilities (the semi-coke production process) for power generation. For the five existing facilities, there is no capacit expansion planned during the crediting period. Applicable: The emission reductions are onl claimed b actual net output electricit and no electricit can be generated under abnormal conditions, an waste gas flared under abnormal operation (emergencies, shut down) of the project plants will not be accounted for. Not applicable: There is no multiple waste gas 3 The expansion of existing equipment also covers the situation where old equipment is maintained and new capacit is built up based on additional waste energ captured in the project scenario.

10 Page 10 various applications as part of the energ sources in the facilit, the recover of an waste gas stream, which would be totall or partiall recovered in the absence of the project activit, shall not be reduced due to the implementation of CDM project activit. For such situations, the guidance provided in Annex 3 shall be followed. The methodolog is not applicable to the cases where a WECM stream is partiall recovered in the absence of the CDM project activit to suppl the heat of reaction, and the recover of this WECM stream is increased under the project activit to replace fossil fuels used for the purpose of suppling heat of reaction. This methodolog is also not applicable to project activities where the waste gas/heat recover project is implemented in a single-ccle power plant (e.g. gas turbine or diesel generator) to generate power. However, the projects recovering waste energ from single ccle and/or combined ccle power plants for the purpose of generation of heat onl can appl this methodolog. The emission reduction credits can be claimed up to the end of the lifetime of the waste energ generation equipment. The remaining lifetime of the equipment should be determined using the latest version of the Tool to determine the remaining lifetime of equipment. The extent of use of waste energ from the waste energ generation facilities in the absence of the CDM project activit will be determined in accordance with the procedures provided in Annex 1 (for Greenfield project facilities) and in Annex 2 (for existing project facilities) to this methodolog. The applicabilit conditions included in the tools referred to above appl. streams involved in the project activit. Not applicable: There is no waste energ recover in the absence of the CDM project activit. Not applicable: The Project is a newl-built electricit generation project with waste gas from the five compan s semi-coke production process, which is not implemented in a single-ccle power plant to generate power. Applicable: The lifetime of the waste energ generation equipment is estimated as 25 ears, and the fixed credits period (10 ears) is applied b the project activit, therefore, the emission reduction credits can be claimed up to the end of the lifetime of the waste generation equipment. Applicable: The project activit applies Annex 2 guidelines to prove the extent of use of waste energ in the absence of the waste energ generation facilities. Applicable: The applicabilit conditions included in the tools can satisf above applicabilit. The project activit meets the applicabilit criteria specified in ACM0012 (Version ), the methodolog is applicable to the project.

11 Page 11 B.3. Description of the sources and gases included in the project boundar: As per ACM0012, the geographical extent project boundar shall include the relevant WECM stream(s), equipment and energ distribution sstem in the following facilities: 1) The project facilit ; 2) The recipient facilit (ies), which ma be the same as the project facilit. The spatial extent of the grid is as defined in the Tool to calculate the emission factor for an electricit sstem. The relevant equipment and energ distribution sstem cover: In a project facilit, the WECM stream(s), waste energ recover and useful energ generation equipment, and distribution sstem(s) for useful project energ; In a recipient facilit, the equipment which receives useful energ supplied b the project and distribution sstem(s) for useful project energ. Therefore, for the project, the project boundar can be concluded as: In a project facilit, the facilit mainl includes the boilers, the turbine and the generator and all other auxiliar equipment of the project where the electricit generated. In a recipient facilit, the electricit will be supplied to the NWPG. As per the Tool to calculate the emission factor for an electricit sstem (Version ), the spatial extent of the project is the power plants that are phsicall connected through transmission and distribution line to the project activit. It is Northwest China Power Grid, according to the officiall published source b the Chinese DNA 4, the boundar within the Northwest China Power Grid includes Shaanxi Province, Gansu Province, Qinghai Province, Ningxia Autonomous and Xinjiang Ugur Autonomous Region. For the purpose of determining both project and baseline emissions, Table B.3 illustrates which emission sources and GHG are included in the project boundar: Baseline Emission Factors for Regional Power Grids in China Source:

12 Project Activit Baseline CDM Executive Board Page 12 Table B.3 Sources and gases included in the project boundar Source Gas Included? Justification / Explanation CO 2 Included Main emission source Electricit generation, grid or Excluded for simplification. This is captive source CH 4 Excluded conservative. Excluded for simplification. This is N 2 O Excluded conservative. CO Fossil fuel consumption in boiler 2 Excluded Not applicable. CH for thermal energ 4 Excluded Not applicable. N 2 O Excluded Not applicable. CO 2 Excluded Not applicable. Fossil fuel consumption in CH 4 Excluded Not applicable. cogeneration plant N 2 O Excluded Not applicable. Baseline emissions from generation of steam used in the flaring process, if an Supplemental fossil fuel consumption at the project plant CO 2 Excluded CH 4 Excluded N 2 O Excluded CO 2 Excluded CH 4 Excluded N 2 O Excluded Not applicable. Not applicable. Not applicable. There is no fossil fuel consumption in the proposed project activit. There is no fossil fuel consumption in the proposed project activit. There is no fossil fuel consumption in the proposed project activit. Supplemental consumption electricit CO 2 Included CH 4 Excluded Main emission source. Excluded for simplification. N 2 O Excluded Excluded for simplification. Electricit import to replace captive electricit, which was generated using waste gas in absence of project activit Project emissions from cleaning of gas CO 2 Excluded CH 4 Excluded N 2 O Excluded CO 2 Excluded CH 4 Excluded N 2 O Excluded Not applicable. Not applicable. Not applicable. No cleaning of gas is required. No cleaning of gas is required. No cleaning of gas is required.

13 NWPG CDM Executive Board Page 13 The Project boundar is shown in the Figure B.3. Figure B.3 The project boundar Waste gas 130t/h gas fired boiler Steam 25MW condensing turbine/generator CO 2 emissions 2400kt/ semicoke production Waste gas Waste gas 130t/h gas fired boiler 130t/h gas fired boiler Steam Steam 25MW condensing turbine/generator 25MW condensing turbine/generator Power Waste gas 130t/h gas fired boiler Steam 25MW condensing turbine/generator Auxiliar demand Project boundar CO 2 emissions B.4. Description of how the baseline scenario is identified and description of the identified baseline scenario: The consolidated methodolog ACM0012 (Version ) describes that a baseline scenario is identified as the most plausible baseline scenario among all realistic and credible alternative(s). Realistic and credible alternatives should be determined for: Waste energ use in the absence of the project activit; Power generation in the absence of the project activit for each recipient facilit if the project activit involves electricit generation for that recipient facilit; Heat generation (process heat and/or heat of reaction) in the absence of the project activit, for each recipient facilit if the project activit involves generation of useful heat for that recipient facilit; and Mechanical energ generation in the absence of the project activit, for each recipient facilit if the project activit involves generation of useful mechanical energ for that recipient facilit. The proposed project activit does not generate heat or mechanical energ and therefore the latter two options are not applicable. Consequentl, for the proposed project, the most plausible baseline scenarios among all realistic and credible alternatives are determined for: Waste energ use in the absence of the project activit; and

14 Page 14 Power generation in the absence of the project activit for each recipient facilit if the project activit involves electricit generation for that recipient facilit; Step 1: Define the most plausible baseline scenario for the generation of heat and electricit using the following baseline options and combinations The baseline candidates should be considered for the following facilities: For the waste energ generation facilit(ies) where the waste energ is generated; and For the recipient facilit(ies) where the energ is consumed. For the use of waste energ, the realistic and credible alternative(s) ma include, inter alia: Table B.4The realistic and credible alternatives for the use of waste energ Baseline alternative for the use of waste energ W1: WECM is directl vented to atmosphere without incineration; W2: WECM is released to the atmosphere (for example after incineration) or waste heat is released(or vented) to the atmosphere or waste pressure energ is not utilized; W3: Waste energ is sold as an energ source; Comments According to Safet Code for Gas of Industr Enterprises (GB ) 5, the waste gas device should install incineration equipment and the waste gas must be incinerated. Therefore, the scenario W1 is not a possible baseline scenario. Waste gas is directl released to the atmosphere after incineration. Therefore, the scenario W2 is a possible baseline scenario. Residential users are forbidden to use semi-coke waste gas directl for safet reasons, because: The carbon monoxide concentration of Semi-coke gas is 17.5% 6, which is higher than its upper limit10% listed in the National Manufactured Gas Standard 7 ; The low calorific value of waste semi-coke gas is MJ/Nm 3. Considering that its much higher temperature, its heating values is lower than its lower limit 14 MJ/m 3 as listed in the National Manufactured Gas Standard. For industrial users, there is no waste gas consumer near to the project site. Therefore, the scenario W3 is not a possible baseline scenario. 5 Safet Code for Gas of Industr Enterprises, GB Feasibilit Stud Report, page National Manufactured Gas Standard,GB/T

15 Page 15 W4: Waste energ is used for meeting energ demand at the recipient facilit(ies); W5: A portion of the quantit or energ of WECM is recovered for generation of heat and/or electricit and/or mechanical energ, while the rest of the waste energ produced at the project facilit is flared/released to atmosphere/utilized; W6: All the waste energ produced at the facilit is captured and used for export electricit generation or steam. This scenario complies with the present laws and regulations and it is not the mandator project. The common treatment method of waste in the region is to flare the waste gas as the semi coke plants do not have an demand to use the energ content. Therefore, the scenario W4 is not a possible baseline scenario. In the absence of the project activit, all the waste energ will be directl released into the atmosphere because the waste energ generated cannot be utilized. Therefore, the scenario W5 is not a possible baseline scenario. This is also in compliance with Chinese laws and regulations and this option is interpreted as the project not undertaken as a CDM project activit. Therefore, the scenario W6 is a possible baseline scenario. From the above analsis we can conclude that the scenario W2 and W6 are possible baseline scenarios for the use of waste gas. For power generation, the realistic and credible alternative(s) ma include, inter alia: Table B.5 The realistic and credible alternatives for power generation Baseline alternatives for power generation P1: Proposed project activit not undertaken as a CDM project activit; P2: On-site or off-site existing/new fossil fuel fired cogeneration plant; P3: On-site or off-site Greenfield fossil fuel fired cogeneration plant; P4: On-site or off-site existing renewable energ based cogeneration plant; P5: On-site or off-site Greenfield renewable energ based cogeneration plant; P6: On-site or off-site existing fossil fuel based existing identified captive Comments This alternative is in compliance with all applicable legal and regulator requirements. It is the realistic and credible alternative. It is not a realistic and credible baseline scenario. Because the proposed project generates electricit onl, not a cogeneration plant. It is not a realistic and credible baseline scenario. Because the proposed project generates electricit onl, not a cogeneration plant. It is not a realistic and credible baseline scenario. Because the proposed project generates electricit onl, not a cogeneration plant. It is not a realistic and credible baseline scenario. Because the proposed project generates electricit onl, not a cogeneration plant. There is no existing fossil fuel based existing identified captive power plant. The power demand can be purchased

16 CDM Executive Board Page 16 power plant; P7: On-site or off-site existing identified renewable energ or other waste energ based captive power plant; P8: On-site or off-site Greenfield fossil fuel based captive plant; P9: On-site or off-site Greenfield renewable energ or other waste energ based captive plant P10: Sourced Grid-connected power plants; P11: Existing captive Electricit generation using waste energ (if project activit is captive generation using waste energ, this scenario represents captive generation with lower efficienc or low recover than the project activit); from NWPG. Therefore, it is not a realistic and credible baseline scenario. To building on-site or off-site existing identified renewable energ or other waste energ based captive power plant, it is in compliance with all applicable legal and regulator requirements, but there is no economical attractive renewable resources (e.g. solar, wind, tide, geothermal etc.) for suppling the equivalent amount electricit demand of the project plant. In addition, there is no existing captive or identified plant based on other waste energ and using the waste energ for power generation. Therefore, it is not a realistic and credible baseline scenario. According to the State Council office s directive on prohibiting construction of thermal power plants with installed capacit under 135 MW, the Chinese government restricts construction of thermal power plants which have generation capacit of less than 135MW 8 Thus building a new 100 MW thermal power plant is not in compliance with the regulation and law of China. Therefore, it is not a realistic and credible baseline scenario. The project location does not have sufficient renewable resources such as hdro and wind to establish a power plant using these resources. For solar and biomass power, the cost is extremel high and thus not feasible 910.Therefore, it is not a realistic and credible baseline scenario. The project activit is connected with NWPG. This is in compliance with the Chinese existing laws and regulations and it is economicall feasible. Therefore, it is a realistic and credible baseline scenario. There is no existing captive electricit generation using waste energ in the project site.it is economic unattractive to build a new captive plant for suppling the equivalent electricit which utilizes waste energ as fuel and is with lower efficienc, as it will encounter the same investment barriers as discussed in Section B.5, and it needs the support from the CDM to overcome these barriers. Most importantl, this scenario is it is not consistent with China s current national energ saving and emission reductions polic to utilize the waste energ for power generation with lower efficienc 11. Therefore, it is not a realistic and credible baseline scenario. 8 The State Council office s directive on prohibiting construction of thermal power plants with installed capacit under 135 MW, the Chinese government restricts construction of thermal power plants which have generation capacit of less than 135MW. Source: 9 High collection cost of biomass power generation. Source: 10 Solar PV is not financiall viable in China due to high cost. Source:

17 Page 17 P12: Existing cogeneration using waste energ, but at a lower efficienc or lower recover. It is not a realistic and credible baseline scenario. Because the proposed project generates electricit onl, not a cogeneration plant. According to the above analsis, it is concluded that alternative P1 and P10 are realistic and credible baseline scenarios for the use of waste energ. The final conclusions ma be summarized in the following matrix, which provides the possible alternative baseline combinations. Table B.6 The plausible baseline scenario combinations For power generation/for the use of waste energ W2 W6 P1 Not applicable This scenario is not internall consistent if the waste gas is released to the atmosphere, it is not available for power generation. Applicable This scenario uses the waste gas to generate power to substitute power that would have been supplied b the grid, without the support of CDM. P10 Applicable This scenario corresponds to the current practice at semi-coke production facilities in the project area: power suppl b the grid, and non-utilization of the waste gas. Not applicable This scenario is not internall consistent there would be no energ use for the waste gas. According to Step 1, the combination of W2/P10 and W6/P1 are possible baseline scenarios. As waste gas produced b the semi-coke production lines is the energ source in W6 and it is sufficient on-site, the fuel is not taken into account in W6/P1. In P10, the energ sources is NWPG, one of the regional grids in China which has abundant fossil fuel, therefore there is no suppl constraint in W6/P1 12. Step 2: Step 2 and/or Step 3 of the latest approved version of the Tool for the demonstration and assessment of additionalit shall be used to identif the most plausible baseline scenarios b eliminating non-feasible options (e.g. alternatives where barriers are prohibitive or which are clearl economicall unattractive). As argued in Step 1, onl two alternative combinations of the use of waste gas and power suppl options cannot be rejected. These are: the current situation of non-utilization of the waste gas and power suppl b the grid (W2/P10) and the proposed project activit without the support of CDM (W6/P1). A detailed investment analsis and barrier analsis based on the Tool for the demonstration and assessment of additionalit (Version ) is performed in Section B.5 of this PDD to which are referred for details. 12 Some Opinions of the State Council on Promoting the Sound Development of the Coal Industr, June 07, 2005 No.18 (2005) of the State Council. Source:

18 Page 18 Below we present the summar of the results of the investment analsis, summarizing wh different scenarios are eliminated during the investment analsis. W2/P10 is not eliminated. It corresponds to current practice at semi-coke production facilities in the project area. W6/P1 is eliminated, because the proposed project activit, without the support of CDM, is not to be financiall attractive and faces barriers that will prevent the implementation of the proposed project. Step 3: If more than one credible and plausible alternative scenario remain, the alternative with the lowest baseline emissions shall be considered as the most likel baseline scenario. Not applicable. Conclusion: The baseline scenario of the proposed project is the combined scenario of W2 and P10, see as table B.7: Table B.7 Combinations of baseline options and scenarios applicable to this project Baseline options Description Scenario Waste energ Power Waste gas is flared and released to the atmosphere, and the electricit is imported from the Northwest China 1 W2 P10 Grid B.5. Description of how the anthropogenic emissions of GHG b sources are reduced below those that would have occurred in the absence of the registered CDM project activit (assessment and demonstration of additionalit): The additionalit of the project activit is demonstrated b using the steps described in the Tool for the demonstration and assessment of additionalit (Version ) as follows: Step 1: Identification of alternatives to the project activit consistent with current laws and regulations Step 2: Investment analsis Step 3: Barrier analsis Step 4: Common practice analsis Step 1: Identification of alternatives to the project activit consistent with current laws and regulations Sub step 1a: Define alternatives to the project activit: This methodological step requires a number of sub-steps, the first of which is the identification of realistic and credible alternatives to the project activit. The alternatives to the project are analzed in section B.4, the credible and reasonable alternative of this project would be: Alternative W2/P10: the continuation of the current situation - W2 (waste gas is released into the atmosphere) /P10 (sourced grid-connected power plants); Alternative W6/P1: the proposed project activit undertaken without being registered as a CDM project activit W6 (all the waste energ produced at the facilit is captured and used for export electricit generation or steam) /P1 (proposed project activit not undertaken as a CDM project activit).

19 Page 19 Sub-step1b: Consistenc with mandator laws and regulations: The second sub-step involves the confrontation of the alternatives with China s applicable laws and regulations. Use of waste gas Both alternatives (W2 and W6) are in compliance with Chinese laws and regulations. In the case of the non-utilization of the waste energ, this ma require some further explanation. China has several policies, laws and regulations in place (see below), and this ma raise the question of whether use of the waste energ is mandator. The ke policies / regulations /laws to encourage improvements in energ efficienc which bear relevance to the proposed project activit are the Cleaner Production Promotion Law 13, the Energ Conservation Law, the Policies Outline of Energ Conservation Technologies 14, and the China Medium and Long Term Energ Conservation Plan 15. The above-mentioned policies encourage the utilization of waste energ but do not include specific measures which would involve mandator implementation of waste energ utilization 16. Therefore, atmospheric release of the waste energ, although not encouraged b the Chinese authorities, is in compliance with existing policies and regulations. Power suppl options Alternative P1, the proposed project activit without the support of CDM, is in accordance with applicable laws and regulations and will be considered a realistic alternative. Alternative P10, sourced from grid-connected power plant, corresponds to the present situation and is in line with the Chinese regulations. Based on the above analsis, both alternatives W6/P1 and W2/P10 are remaining and the all compl with Chinese laws and regulations. Alternative option W6/P1 is not the onl alternative of the project activit and the following steps will show that the proposed project in the absence of CDM is not financiall attractive (Step 2). 13 Cleaner Production Promotion Law approved b standing committee of the National People s Congress of the People s Republic of China on June 29,2002. Source: for Source: 14 The Policies Outline of Energ Conservation Technologies approved b standing committee of the National People s Congress of the People s Republic of China on October 28 th Source: or 15 The China Medium and Long Term Energ Conservation Plan issued b National Development and Reform Commission on November 25, Source: or 16 See for more information on energ efficienc promotion policies: Global Environment Institute (2005), Financing of Energ Efficienc Improvement for Industr in China, GEI Report, Januar Source:

20 Page 20 Step 2: Investment analsis The purpose of this step is to determine whether the proposed project activit is not financiall attractive than other alternatives without CDM revenue. The investment analsis is conducted through following steps as defined in the latest Tool for the demonstration and assessment of additionalit. Sub-step 2a: Determine appropriate analsis method Three options can be applied to conduct the investment analsis. These are (Option I) the simple cost analsis, (Option II) the investment comparison analsis and (Option III) the benchmark analsis. Option I: Simple cost analsis, it does not appl as the project generates economic returns through the sales of electricit to the grid. Option II: Investment comparison analsis is not used, because according to EB51 meeting Annex 58 Guidance on the Assessment of Investment Analsis (Version 03.1) paragraph 16: if the alternative to the project activit is the suppl of electricit from a grid this is not to be considered an specific investment project. Option III: Benchmark analsis is applicable, as the analsis in Step 2. Conclusion: We conclude that Option III is considered appropriate for the analsis of the additionalit of the project activit. Sub-step 2b Option III: Appl benchmark analsis The investment analsis is conducted through a calculation of the Internal Rate of Return (IRR) of the project and IRR is compared with a benchmark stated in the Interim Rules on Economic Assessment of Electrical Engineering Retrofit Projects issued b former State Power Corporation of China. The internal rate of return (IRR) of total investment after income tax 8% is regarded as benchmark in China s power industr 17. Nowadas it is widel used in China. Therefore, 8% is selected as the benchmark for the proposed project activit. Sub-step 2c: Calculation and comparison of financial indicators All the input parameters used in the financial analsis are derived from the Feasibilit Stud Report (FSR) developed b Shandong Province Engineering Consulting Institute in Oct.2010, the independent third part authorized b National Development Reform Commission (NDRC) of P.R. China. The FSR was approved on 18/05/2011 b Xinjiang Ugur Autonomous Region econom and information technolog Committee. The input parameters used in the financial analsis can thus be considered information provided b an independent and recognized source. The main financial parameters used in the financial analsis are as follows: Table B.8 Ke financial figures of the Project Parameter Unit Value Source Installed capacit MW 100 FSR 17 Interim Rules on Economic Assessment of Electrical Engineering Retrofit Projects, published b the Operations Department of Power Generation and Power Transmission of the State Power Corporation of China, specifies in Section 1.1, 1.11 and 1.15 that the benchmark for the power industr is 8%.

21 Page 21 Construction investment 53,563 FSR Annual Operation & Maintenance 10 4 Yuan 7,380 FSR (O&M) cost Annual power generation MWh 650,000 FSR Expected annual power suppl MWh 579,800 FSR Power tariff (exclude VAT) Yuan/kWh National tariff polic, Fagaijiage (2006) No.1232 Value Added Tax (VAT) 17% FSR, in accordance with The interim regulations on Value Added Tax of People s Republic of China 18 Urban maintenance and construction tax rate 5% FSR, in accordance with The interim regulations of People s Republic of China on Cit Maintenance and Construction Tax 19 Education surcharges rate 3% FSR, in accordance with The decision issued b the State Council on revising the Interim Provisions for Lev of the Surcharge for Education 20 Income tax rate 25% FSR, in accordance with Regulations on Enterprise Income Tax of the People s Republic of China, issued b State Council 21 Period of depreciation Year 15 FSR Salvage value rate 4% FSR Project life Year 20 (exclude construction period) The results of financial analsis are shown in Table B.9; the project IRR (after tax) is 5.64% without CDM revenue, which is obviousl lower than the benchmark rate of 8%. Therefore, the project is not financiall attractive. With the CDM revenue, the project IRR will reach to 11.78% (after tax). It shows that CDM is essential to the proposed project activit. Table B.9 Financial indicator of the Project Without CDM Benchmark With CDM Project IRR (after tax) 5.64% 8% 11.78% 18 The interim regulations on Value Added Tax of People s Republic of China Source: 19 The interim regulations of People s Republic of China on Cit Maintenance and Construction Tax Source: 20 The decision issued b the State Council on revising the Interim Provisions for Lev of the Surcharge for Education Source: 21 Regulations on Enterprise Income Tax of the People s Republic of China, issued b State Council Source: FSR

22 Page 22 Sub-step 2d. Sensitivit analsis The objective of sensitivit analsis is to show whether the conclusion regarding the financial attractiveness is robust to reasonable variations in the critical assumptions. The investment analsis provides a valid argument in support of additionalit onl if it consistentl supports (for a realistic range of assumptions) the conclusion that the project activit is unlikel to be the most financiall attractive or is unlikel to be financiall attractive. For the Project, the following financial parameters were taken as uncertain factors for sensitivit analsisof financial attractiveness: Power tariff Annual power generation O&M cost Construction investment The sensitivit analsis is based on four main indicators, which are Power tariff, annual electricit output, annual O & M cost and fixed asset investment. When the parameters var in the range of -10% to +10%, the IRR (without CDM revenue) will change accordingl. Variations in project IRR are shown in table and figure below. Table B.10 Impact of variations in critical assumptions on IRR (after tax) Range -10% 0 +10% Factor Annual power generation 3.07% 5.64% 7.93% Power tariff 3.07% 5.64% 7.93% Construction investment 6.94% 5.64% 4.52% O&M cost 7.46% 5.64% 3.63% Figure B.4 The sensitivit analsis of project IRR without CDM revenue IRR 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -10% -5% 0% 5% 10% Annual power generation Power tariff Construction investment Annual O&M cost

23 Page 23 Annual power generation The project IRR cannot reach the benchmark of 8% when electricit output is increased b 10%. The electricit has to increase b 10.33% in order to reach the benchmark of 8%. The electricit output equals the power generation is based on the waste gas energ suppl which is based on the annual operation hours of the semi coke production lines. According to the FSR, the project installed capacit is 100 MW with total electricit generation of 650,000 MWh per ear in theor. This amount of electricit is equal to 6,500 hours of operation. In order for the electricit output to increase b 10.33% the operation hours has to increase to 7,171 hours per ear. Therefore, this scenario cannot happen as a mean to improve the economic attractiveness b increasing electricit output. Power tariff The project IRR cannot reach the 8% benchmark when power tariff is increased b 10%. The power tariff has to increase b 10.29% in order to reach the benchmark of 8%. In China, the power price is strictl regulated b the Chinese government and it is established on strict regulation rather than the market mechanism, so it is hard to forecast the future power price for the project owner. As the power price is related tightl to the national econom and livelihood of people, the government of China has to keep the power price stead. For the electricit tariff in Xinjiang province set b official document of Municipal Price Bureau should compl with the national industrial regulations and guide rules. Document Guide of Implementing Tariff Reform published b NDRC indicates that the tariff should be kept in relativel stable 22. Therefore, it is unlikel for the project to become commerciall attractive through increasing more than 10% of power tariff. Construction investment If the construction investment of the project decreased b 10% the project IRR (after tax) will be 6.94% and cannot reach the benchmark. If the project IRR has to reach the benchmark of 8%, the construction investment shall decrease b 17.05%. Investment is mainl subject to the price of industrial products and according to the chart of Ex-factor Price Indices of Industrial Products of China Statistics Yearbook 2007 that is published b the China Statistics Press in 2007, the price index increased 5.53% from 1999 to , which is equal to an 0.69% annual increase rate. This trend will not change much in the future; therefore it is unlikel for the construction investment to decrease enough to reach the benchmark b the IRR of the project. Annual O&M costs O&M cost includes raw material expense, fuel and power consumption including water charge, emploee salar, maintenance cost, manufacturing cost, management fee and operating expense. The project IRR is still below the benchmark of 8% when the annual O&M costs is decreased b 10%. If the project IRR has to reach the benchmark of 8%, the annual O&M costs shall decrease b 13.12%. This critical assumption is highl unlikel because the raw materials and emploee salar etc. is most likel to be increased and therefore O&M costs for the project will be increased. Therefore, it is unlikel for the project to become commerciall attractive through decreasing of annual O&M costs. Step3. Barrier analsis 22 Guide of Implementing Tariff Reform published b NDRC. Refer to the Article 16 in the document. Source: 23 The chart of Ex-factor Price Indices of Industrial Products of China Statistics Yearbook 2007 that is published b the China Statistics Press in Source:

24 Page 24 The project does not face other barriers besides the investment barrier described under Step 2. Investment analsis. Therefore, Step 3 of Tool for the Demonstration and Assessment of Additionalit (Version ) is skipped. Step 4. Common practice analsis Sub-step 4a Analze other activities similar to the proposed project activit: According to the Tool for the Demonstration and Assessment of Additionalit (Version ), four tpes of measures are currentl covered in the framework: (a) Fuel and feedstock switch; (b) Switch of technolog with or without change of energ source (including energ efficienc improvement as well as use of renewable energies); (c) Methane destruction; (d) Methane formation avoidance. The purpose of the proposed project is to recover the waste gas from the process of semi-coke production for electricit generation and is place equivalent amount of electricit produced fossil-fuel plants connected to NWPG, so the proposed project is an energ efficienc improvement activit, which falls into measure (b). In line with the tool, if the project activit is one of four tpes of measures, the common practice analsis is carried out in four steps identified in paragraph 47 of the tool: Step 1: Calculate applicable output range as +/-50% of the design output or capacit of the proposed project activit. The Project is a power generation project with installed capacit of 100 MW. Based on the applicable output range is calculate as +/-50% of the designed output or capacit, the applicable output range of the proposed project is the installed capacit from 50 MW to 150 MW. Step 2: In the applicable geographical area, identif all plants that deliver the same output or capacit, within the applicable output range calculated in Step 1, as the proposed project activit and have started commercial operation before the start date of the project. Note their number N all. Registered CDM project activities shall not be included in this step. According to the Tool for the Demonstration and Assessment of Additionalit (Version ), applicable geographical area covers the entire host countr as a default. Project participants ma provide justification that the applicable geographical area is smaller than the host countr for technologies that var considerabl from location to location depending on local conditions. China is a ver large countr, the regulator framework and investment environment for each province is different, the available natural resources including coal, level of socio-economic development, industrial structure, fundamental infrastructure, development strateg, and polic framework. These all affect the demand for products in term of amount as well as the tpes of products and technologies. In addition, the ke economic factors for semi-coke industr var from province to province as well. These include tariff rates of products, the cost of materials, the cost of electricit and other utilities such as water, the cost of labor and services and the tpes of loan that can be obtained. So the applicable geographical area for common practice analsis of proposed project is limited to a smaller area (i.e. The Northwest Power Grid