1.Project Site

The Western Area of Yantai Port is situated in the west of the city proper, as well as besides the northeast sea of DajijiaVillage in Yantai Economic & Technological Development Zone (YETDZ), with a distance of 35 km on the sea and a distance of 30 km on land to ZhifuBay. The proposed liquid chemical products terminal is located in the northwest of the western port area.

2.Project Scope

This project comprises of one berth of 50,000 DWT for liquid chemical products, with an alongside water depth of -14.5 m and a wharf length of 450 m. The terminal now is under construction and is expected to be completed in the end of 2006, of which the designed throughput capacity is 1.9 million tons per annum. Within 1,000 m behind the terminal, there is tank zone with a storage capacity of 204,000 cubic meters. According to the long-term planning, 5 berths of 50,000-100,000 DWT shall be further built up, with a tanking capacity of 2 million cubic meters.

3.Project Progress

Up to now the Environment Impact Appraisal and Maritime Impact Appraisal of the project has been accomplished. The project implementation was commenced in 2005 following the approval by the Development and Reform Commission of Shandong Province.

4.Traffic Analysis

In a quite long period from now on, the liquid chemical industry will witness a fast growth in China. In the hinterland of YantaiPort, there are quite a few petro-chemical industrial bases in Weifang, Zibo, Dongying, etc. The liquid chemical products made in the hinterland are mainly delivered to the users in the east and the south of China. This terminal to be built in Yantai will provide quality services for the chemical plants in the hinterland. In the port-related industry zone in the backup area of the terminal, a liquid chemistry industry park is to be built up in cooperation with famous corporations from home and abroad. In the short term, the main cargoes consist of fuel oil, naphtha, chloroform, paraxylene and methyl alcohol, with an annual throughput of 1.9 million tons (including an import volume of 1.35 million tons and an export volume of 0.55 million tons).

5.Distribution and Transportation Conditions

Railway:The inner-port railway, connecting with the national railway network through Lancun-Yantai railway, possesses an outstanding transport capacity. Meanwhile two additional railway lines (i.e. Dezhou-Longkou-Yantai and Huanghua-Longkou-Yantai) are under construction and will be fully completed for operation in 2008.

Road: According to the planning, several port access roads will be integrated with the provincial road network by direct connection with Tongjiang-Sanya Expressway, Weihai-Wuhai Expressway and No. 206 National Road.

6.Investment and Economic Analysis

The total investment of the project is estimated to be RMB 707 million yuan. The Ecomomic Internal Return Ration of the project is evaluated as 18.22%, and the FIRR (after tax) turns out to be 8.54%. The investment recovery period is anticipated to be 10.7 years (including the construction period).

7.Cooperation Partners

For the purpose of this project, we are willing to cooperate with the famous chemical industries, logistic service providers, shipping companies, terminal operators and investment companies all over the world.

8.Cooperation Mode

The cooperation modes are proposed as follows:

-Terminal

A limited company shall be established by relevant parties for the construction and operation of the terminals.

-Tanks

• A limited company shall be established by relevant parties for the construction and operation of all or part of the storage/transportation facilities; or
• A limited company shall be solely established by the foreign partner for the construction and operation of all or part of the storage/transportation facilities.

9.Preferential Policies

According to the Catalogue for the Guidance of Foreign Investment Industries issued by the State Government, this project shall be included in the Catalogue of Encouraged Foreign Investment Industries. Foreign-funded enterprises which are engaged in the construction of public dock facilities of ports and scheduled to operate for a period of over 15 years shall, upon approval by relevant taxation administrations, be exempt form enterprise income tax for the first to the fifth profit-making years, and will be subject to a 50% reduction of enterprise income tax form the sixth to the tenth years.

In case a foreign-funded enterprise that is encouraged by the state to develop imports self-use equipment, it will be exempted from duties and value added tax. When a foreign invested enterprise procures domestically manufactured equipment and when the value of such purchase is within the total amount of investment, the full amount of value-added tax on such domestic equipment will be refunded and regarded as a creditable amount in business income tax.

Since the project site is within the jurisdiction of Yantai Economic & Technological Development Zone (YETDZ), in addition to the relevant preferential policies formulated by the State Government, the project will be granted more preferential treatments, which are stipulated for the national level Economic & Technological Development Zones, in terms of taxation, land utilization and infrastructure facilities.

To promote the development of WesternYantaiPort, Yantai Municipal Government has formulated a series of preferential policies in respect of the utilization of land and sea area as well as the construction of infrastructure.

10.Supporting Facilities & Conditions

• Water supply: There is a independent water supply system in this area, the capacity of which is 200,000 cubic meters per day and will be increased to 300,000 cubic meters per day according to the “11th Five-Year-Plan”.
• Power supply: In the project area, power is supplied by a dual circuit (i.e. Huabei Power Network and Shandong Power Network.) so that the power resource is sufficient. Now there are one substation of 220KV, 8 substations of 110KV and 5 substations of 35KV. According to the planning, another 3 substations of 110KV are to be built up specially for this project in the future.
• Heating: At present, there are two thermo-electric plants in Yantai Economic & Technological Development Zone (YETDZ), with a capacity of 360 tons per hour.
• Natural gas: The existing capacity of natural gas is 380,000 cubic meters per day.

11.Contact

For any further questions and information, please contact us at:

Strategic Planning Dept.

Yantai Port Group Co., Ltd.

155 Beima Road, Yantai 264000

Tel.:0086-535-6742151, 6743527Fax:0086-535-6742151

E-mail:liushaoli@yantaiport.com.cnalexsun1970@yahoo.com.cn