(May 31, 1994)

Some Issues Regarding the Preliminary Design of the Three Gorges Project

Approved by the State Council Examination Committee of Experts on May 26, 1993

As reported in the People’s Daily (April 4, 1992):

I. Construction Period

Based on the proposal for launching construction in 1993.

In the second year (1994), excavation of the dam base will begin.

In the third year (1995), pouring of reinforced concrete will begin. (This is considered the beginning of the main project).

In the fifth year (1997), the project to block the river channel will begin. The method of transportation through diversion channels will be adopted and the temporary shiplocks will be in operation in the next year.

In the 13th year (2006), the water in the diversion channels will be blocked and a cofferdam will be constructed to maintain a water level at 135 meters. Generation of electricity will begin and the shiplock lifters will start operation.

In the 15th year (2007), the initial stage of raising the water to a level of 156 meters will be completed and will temporarily remain that way for six years and the buildup of sediment will be observed and measured.

In the 17th year (2009), all 26 turbine power generators will be installed.

In the 21st year (2013), the water will be increased to the 175-meter level and the dam will assume normal operation.

II. Estimated Investment

1. A comparison of the current static investment to the past:

a. According to the assessment report, in 1986 prices, total cost will be Y36.1 billion (the central project will cost Y18.8 billion, population relocation Y11.1 billion, and electricity transfer Y6.3 billion).

b. According to the YVPO feasibility report, the cost in 1990 prices is Y57 billion (in the same order as above: 29.8 + 18.5 + 8.7).

c. According to the preliminary design, the cost in 1992 prices is Y75.1 billion (38.3 + 23.7 + 13.1)

2. Taking interest on capital and price increases into consideration:

a. The static investment in 1992 prices, without consideration of interest costs and price increases, is Y75.1 billion (Y38.2 billion prior to the generation of power).

b. If 70 percent of the investment is based on an 8.82 percent annual interest rate, total cost will be Y117.0 billion after adding on the interest incurred during the construction period (Y53 billion prior to the generation of power).

c. Assuming a 6 percent annual inflation rate, the total capital needed during the 20-year construction period will be Y224 billion (Y81.6 billion prior to the generation of power).

III. Sources of capital

1. Revenue from power generation by the Gezhouba dam is now Y0.39 per kWh. Starting in 1993, it will be raised one* fen*^{270} a year, so that by 1996, it will be 8 *fen* higher, and the total amount of funds generated during the construction period will come to Y14.2 billion (Y7.1 billion prior to power generation by the Three Gorges dam).

2. Regarding the construction fund for the Three Gorges project, the premier’s office under the State Council has decided that the State Price Bureau would issue a document in 1992 that Y0.003 would be drawn from each kWh on the national power network to be put into a construction fund for the Three Gorges project, with a total amount of Y40 billion to be raised during the construction period (Y22.3 billion prior to power generation by the Three Gorges dam).

3. Revenue from power generation by the Three Gorges dam will produce 507.9 billion kWh, and based on the state-regulated price in 1992 of 19.4* fen* per kWh, the total profit will be Y54.8 billion. Adding on a depreciation fee of Y8.6 billion and the return on tax-exempt loans of Y3.2 billion, the total will come to Y66.6 billion. Assuming a 6 percent annual increase in the price of electricity, the total will reach Y169.6 billion.

4. Foreign loans will be used to import equipment, including four turbine power generators, and direct power switch equipment along with major equipment for shiplifts, which will total $1.59 billion, equivalent to Y8.6 billion (Y0.7 billion prior to power generation).

5. Domestic bank loans will come to Y15.3 billion prior to power generation. Assuming a 6 percent annual increase in prices, the total will come to Y45.5 billion.

6. Issuing of Three Gorges Project construction bonds (two years before power generation) will raise Y2 billion. Assuming 6 percent annual increase, the total will come to Y4 billion.

In summary, the total amount of funds raised in the 20 years will be Y147.6 billion (Y52.9 billion prior to power generation). Assuming a 6 percent price increase, the total will come to Y281.9 billion (Y81.5 billion prior to power generation).

IV. Submerging of Land and Population Relocation

1. Land submerged: Based on an investigation conducted from 1991 to 1992, the area of dry land below the 175-meter line has dropped in comparison to the amount found during the 1985 investigation. However, paddy fields have increased from 110,700 mu to 128,600 *mu*, while the area composed of orange groves has increased from 74,400 mu to 100,400 *mu*.

2. Factories: According to a recent investigation, there are 1,602 factories with fixed capital assets of Y2.277 billion, while according to a prior investigation, there were 657 factories with fixed assets of Y819 million.

3. Population relocation: The 1991 investigation showed that 844,600 people lived below the proposed water line, a 16.4 percent increase from the 1985 investigation of 725,500 people.

4. An additional preliminary design has yet to be proposed to deal with management of land submersion and population relocation. The investment estimate is based only on an economic evaluation of the project. The number of residents to be relocated in addition to the estimated total of 1.13 million people has yet to be made. And the exact amount of the relocation compensation cost can only be calculated after the completion of the preliminary design report regarding population relocation.

Categories: Three Gorges Probe