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 Break-bulk Cargo Terminal is located in the northwest of the western port area.

2. Project Scope

Two berths of 200,000 DWT and 70,000 DWT respectively will be built up, with an alongside depth of –20.5 m and –16.5 m. The wharf length totals 700 m and a storage yard covers an area of 550,000 square meters. The designed traffic capacity is 15 million tons. The construction period is 18 months.

3. Project Progress

The project has been approved by the State Council as a part of the Port Construction Planning (2004-2010) for Yangtze River Delta, Zhujiang Delta and Bohai Sea Area. Now the preparation of the Feasibility Report has been completed. An application report has been submitted to higher authorities for review and approval.

4.Traffic Analysis

(i)Iron Ore

Along with the fast economic growth in China, the iron & steel industry is witnessing a rapid development and calling for an increasing import volume of iron ore. This momentum is anticipated to be continuing, and the import volume will be 300 million tons in 2006. Iron ore is one of the most important cargo handled in YantaiPort, accounting for the largest part among the others and increasing fast in the past years. In the hinterland of the port, there are quite a few large steel works, which are utilizing Yantai as a port for iron ore import business. By 2009, the Huanghua-Yantai Railway will be completed and put into operation, which will enable YantaiPort to deliver the imported iron ore even further to the steel works in the northwest of China. Hence it can be anticipated that the traffic of iron ore in YantaiPort will continue to grow at a stable ratio. According to the forecast, the iron ore traffic in YantaiPort will be 20 million tons in 2010 and 30 million tons in 2020.

(ii)Coal

At present, the traffic of exported coal in YantaiPort is usually from the mines in the hinterland, for example, the mines in Yanzhou, Xinwen, Longkou and Shanxi. Moreover, during the 11thFive-Year Plan of Yantai City, two power supply plants in Yantai and Longkou are to be expanded and a certain part of the coal for power generation shall be transported through YantaiPort. In the surrounding area of Yantai, the cement industry has been booming up, with a big quantity of coal consumption. With the further development of cement industry, the coal exported through YantaiPort is expected to be of continuous growth. According to the forecast, the coal traffic will be up to 3 million tons in 2010, 5 million tons in 2015. and 10 million tons in 2020.

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 1.7 Billion yuan. The Economic Internal Return Ration of the project is evaluated as 17.23%, and the FIRR (after tax) turns out to be 8.41%. Therefore the project is profitable and the investment recovery period is anticipated to be 11.8 years (including the construction period).

7.Cooperation Partners

For the purpose of this project, we are willing to cooperate with the famous iron & steel works, power suppliers, logistic service providers, shipping companies, terminal operators and investment companies all over the world.

8.Cooperation Mode

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

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