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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 64561-CN
PROJECT PAPER
ON A
PROPOSED ADDITIONAL LOAN
IN THE AMOUNT OF US$100 MILLION
TO THE
PEOPLE’S REPUBLIC OF CHINA
FOR AN
ENERGY EFFICIENCY FINANCING PROJECT
September 28, 2011
China and Mongolia Sustainable Development Unit
Sustainable Development Department
East Asia and Pacific Region
This document has a restricted distribution and may be used by recipients only in the
performance of their official duties. Its contents may not otherwise be disclosed without World
Bank authorization.
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CURRENCY EQUIVALENTS
(Exchange Rate Effective September 8, 2011)
Currency Unit = RMB Yuan
RMB Yuan 1.00 = US$0.16
US$ = RMB Yuan 6.39
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AF Additional Financing HVAC Heating, Ventilation, Air conditioning
CHEEF China Energy Efficiency Financing
Project
IBRD International Bank for Reconstruction and
Development
CO2 Carbon dioxide ICB International Competitive Bidding
EAF Environmental Assessment Framework IDP Institutional Development Plan
EE Energy Efficiency IFR Interim Financial Report
EIA Environmental Impact Assessment MOF Ministry of Finance
EIRR Economic Internal Rate of Return NDRC National Development and Reform
Commission
EMC Energy Management Company NECC National Energy Conservation Center
EMP Environmental Management Plan OM Operational Manual
ESCO Energy Service Company OP Operational Policies
EXIM Export-Import Bank of China O&M Operation and Maintenance
FI Financial Intermediary PCN Project Concept Note
FIL Financial Intermediary Lending PDO Project Development Objective
FIRR Financial Internal Rate of Return PFI Participating Financial Institution
FM Financial Management PMO Project Management Office
FYP Five-Year Plan PSC Project Steering Committee
GDP Gross Domestic Product RPF Resettlement Policy Framework
GEF Global Environment Facility SME Small- and Medium-Sized Enterprises
GHG Greenhouse gas TA Technical Assistance
GOC Government of China tce Tons of Coal Equivalent
Vice President: James W. Adams
Country Director: Klaus Rohland
Sector Managers: Ede Jorge Ijjasz-Vasquez and
Vijay Jagannathan
Task Team Leader: Xiaodong Wang
COUNTRY
PROJECT NAME
CONTENTS
Project Paper Data Sheet
Project Paper
I. Introduction ..............................................................................................................1
II. Background and Rationale for Additional Financing ..............................................1
III. Proposed Changes ....................................................................................................3
IV. Appraisal Summary .................................................................................................5
Annex 1: Results Framework and Monitoring.................................................................8
Annex 2: Operational Risk Assessment Framework (ORAF) .......................................14
COUNTRY
PROJECT NAME
ADDITIONAL FINANCING DATA SHEET
Basic Information - Additional Financing (AF)
Country Director: Klaus Rohland
Sector Managers: Ede Jorge Ijjasz-
Vasquez/ Vijay Jagannathan
Team Leader: Xiaodong Wang
Project ID: P123239
Expected Effectiveness Date: January
31, 2012
Lending Instrument: Financial
Intermediary Loan
Additional Financing Type: Financial
Intermediary Loan
Sectors: District heating and energy
efficiency services (90%); Banking
(10%)
Themes: Climate change (P)
Environmental category: Financial
Intermediary Assessment
Expected Closing Date: December 31,
2016
Joint IFC:
Joint Level:
Basic Information - Original Project
Project ID: P084874 Environmental category: Financial
Intermediary Assessment
Project Name: Energy Efficiency
Financing Project
Expected Closing Date: December 31,
2013
Lending Instrument: Financial
Intermediary Loan
Joint IFC:
Joint Level:
AF Project Financing Data
[X ] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:
Proposed terms: Fixed-spread loan, recovered over a period of 18 years, inclusive of a
grade period of five years.
AF Financing Plan (US$m)
Source Total Amount (US $m)
Total Project Cost:
Co-financing from sub-borrowers:
Borrower:
Total Bank Financing:
IBRD
New
Recommitted
428
128
200
100
Client Information
Recipient: The People’s Republic of China
Responsible Agency: The Export-Import Bank of China (EXIM)
Contact Person: Mr. Zhou Anyue, Director General, On-lending Department
Telephone No.:86-10-8357 8536
Fax No.: 86-10-8357 8568
Email: [email protected]
AF Estimated Disbursements (Bank FY/US$m)
FY 2012 2013 2014 2015 2016 2017
Annual 5 20 30 30 10 5
Cumulative 5 25 55 85 95 100
Project Development Objective and Description
Original project development objective:
Improve energy efficiency of medium and large-sized industrial enterprises in China, and
thereby reduce their adverse environmental impacts on climate.
Revised project development objective [if applicable]
Improve energy efficiency of selected energy end-users in key energy-consuming
sectors, thereby reducing their adverse environmental impacts on climate.
Project description [one-sentence summary of each component]:
Component A: Energy Efficiency Investment Sub-loans to Beneficiaries.
Component B: Technical Assistance and Capacity Building.
Safeguard and Exception to Policies
Safeguard policies triggered:
Environmental Assessment (OP/BP 4.01)
Natural Habitats (OP/BP 4.04)
Forests (OP/BP 4.36)
Pest Management (OP 4.09)
Physical Cultural Resources (OP/BP 4.11)
Indigenous Peoples (OP/BP 4.10)
Involuntary Resettlement (OP/BP 4.12)
Safety of Dams (OP/BP 4.37)
Projects on International Waters (OP/BP 7.50)
Projects in Disputed Areas (OP/BP 7.60)
[X]Yes [ ] No
[ ]Yes [X] No
[ ]Yes [X] No
[ ]Yes [X] No
[ ]Yes [X] No
[ ]Yes [X] No
[X]Yes [ ] No
[ ]Yes [X] No
[ ]Yes [X] No
[ ]Yes [X] No
Does the project require any exceptions from Bank policies?
Have these been approved by Bank management?
[ ]Yes [X] No
[ ]Yes [ ] No
Conditions and Legal Covenants:
Financing
Agreement
Reference
Description of Condition/Covenant Date Due
Section I.1 and
Section I.2.01 of the
Schedule of the
Project Agreement.
EXIM Bank shall maintain a project team with
adequate staff and resources and apply the
Operational Manual, satisfactory to the Bank.
Throughout the entire
project implementation
period.
1
I. Introduction
1. This Project Paper seeks the approval of the Executive Directors to:
a) provide an additional loan in an amount of US$100 million to the People’s Republic of
China to scale-up the Energy Efficiency Financing Project (Project ID P084874) through
EXIM Bank (Loan No. 7529-CN); and
b) fund expanded activities by broadening the group of beneficiaries through both EXIM
Bank and Huaxia Bank (Loan No. 7530–CN) under the CHEEF Project and the
Additional Financing Project. The PDO of the original Project (the CHEEF Project) is
modified to be consistent with the PDO of the Additional Financing, concurrently
seeking Board approval.
The project development objective and the project outcome indicators have been revised to
reflect these changes.
II. Background and Rationale for Additional Financing
2. Background. The development objective of the China Energy Efficiency Financing
Project (CHEEF) is to improve energy efficiency (EE) of medium and large-sized industrial
enterprises in China, and thereby reduce their adverse environmental impacts on climate. This is
to be achieved through: (a) two IBRD Loans of US$100 million each (Loan No. 7529-CN to
EXIM Bank and Loan No. 7530-CN to Huaxia Bank); and (b) a GEF Grant (TF 090719) of
US$13.5 million for technical assistance to the government and two participating banks. The
CHEEF project was approved by the Board in May 2008 and became effective in October 2008.
In June 2010 the Bank approved the CHEEF II Project of an IBRD loan of US$100 million to
Minsheng Bank, to improve the EE of selected enterprises, and thereby reduce their adverse
global environmental impacts through scaling-up commercial lending for EE investment.
3. Project Implementation Performance. The overall performance of the CHEEF Project,
including the two separate loans being implemented by EXIM Bank and Huaxia Bank, as well as
the GEF Grant, has been satisfactory. Project management, procurement, financial management,
and safeguards are all rated satisfactory. The project is playing a significant role in increasing
the participating banks’ capacity, interest, and confidence in mainstreaming the EE financing
business line.
4. Performance of EXIM Bank (Loan 7529-CN). EXIM Bank has disbursed more than
half of the allocated IBRD funds (US$57.4 million), and leveraged US$265 million (US$137
million from EXIM Bank and US$128 million from industrial enterprises). It has also exceeded
the agreed matching funds of US$100 million from its own sources. These investments are
expected to save 1.1 million tons coal equivalent (tce) of energy and reduce CO2 emissions by
2.8 million tons per year. In addition, the CHEEF Project has played a catalytic role in
leveraging additional financing for EE to EXIM Bank from KfW and EIB.
5. Performance of Huaxia Bank (Loan 7530-CN). Huaxia Bank has disbursed US$48.4
million of IBRD funds; these have leveraged US$165 million (US$62 million from Huaxia Bank
2
and US$103 million from industrial enterprises and other funding sources). These investments
are expected to save energy of 533,000 tce and reduce CO2 emissions of 1.3 million tons per
year. Huaxia Bank has developed concrete action plans for business development and for
developing new financial products for EE lending.
6. Performance of GEF Grant (TF090719). After a slow start, both components of the
GEF-financed TA are now progressing well:
The national policy support and capacity building component is supporting the
government in development and implementation of the priority EE programs for the 12th
Five-Year Plan (FYP), and building capacity for the National Energy Conservation
Center; and
The building capacity of participating banks component is assisting the participating
banks in market development and new financial products.
7. Lessons Learned from CHEEF. Experience to date of the on-going CHEEF Project
demonstrates that a dedicated EE credit line, together with TA, can contribute significantly to
increasing the capacity of participating financial institutions (PFIs) and their confidence in EE
investments through a learning-by-doing process. The TA program has been critical. However,
changing PFIs’ underwriting criteria from balance sheet financing that relies heavily on sub-
borrowers’ credit rating (favoring large-scale industrial enterprises) to project-based financing
that focuses on energy savings (increasing access to financing for energy service companies –
ESCOs - and SMEs) has been a major challenge. PFIs have focused narrowly on a few main
heavy industries (iron & steel, cement, and chemical) and a few EE technologies (predominantly
waste heat recovery). As a result, they are facing increasing difficulties in finding projects.
However, market needs and opportunities exist (as confirmed by an NDRC study) to expand
lending to a wider range of energy user sectors and EE technologies.
8. Rationale for Additional Financing. The Government of China (GoC) has made energy
conservation one of the highest national priorities, and is targeting to reduce energy intensity by
16 percent during the 12th
FYP (2011-2015). GoC has also committed to reduce the carbon
intensity of GDP by 40-45 percent from 2005 to 2020, and energy conservation will play an
essential role to achieve this target.
9. The use of market-based mechanisms to promote EE is expected to increase during the
12th
FYP. The State Council recently issued new policies to strongly support growth of the ESCO
industry, which offers subsidies, awards, and generous tax incentives for ESCOs, and encourages
bank lending to ESCOs by allowing banks to use and recognize ESCO project assets, contracts
and revenues as loan security. In addition, GoC plans to expand the focus of its energy
conservation efforts from the industry sector to the building and transport sectors, as energy
demand from buildings and transport will increase rapidly - tripling for buildings and more than
quadrupling for the transport sector - over the next two decades.
10. The proposed additional financing (AF) for CHEEF supports the government’s
commitment to EE and endeavors to meet the huge needs of EE investments in China. The
expanded scope for the proposed AF for CHEEF to scale up the project’s impact and
3
development effectiveness takes into account the government’s new EE policies and priorities,
and lessons learned from CHEEF implementation so far, in particular the success of EXIM Bank
in implementing the project. The proposed AF is the most effective way of achieving the above
objectives, especially when compared to a new free standing project.
11. The expanded scope for the proposed AF is fully consistent with the Country Partnership
Strategy for 2006-10 (Report No. 35435-CN) and directly supports a major pillar: managing
resource scarcity and environmental challenges. The objective of the proposed AF is also
expected to be consistent with the new CPS for 2011-2015, which is under preparation, in
alignment with China’s 12th
FYP. In addition, the proposed AF would support the World Bank
Group’s corporate commitment to increasing energy efficiency and renewable energy lending.
III. Proposed Changes
12. Changes in the project development objective (PDO). The AF intends to expand the
target market segments of CHEEF, and hence the PDO of the CHEEF Project and the AF Project
is to “improve energy efficiency of selected energy end-users in key energy-consuming sectors,
thereby reducing their adverse environmental impacts on climate.” Board approval is
concurrently being sought to modify the PDO of the CHEEF Project to be consistent with the
PDO of the AF Project.
13. Changes in project scope. The AF has three improved or expanded features, compared
to CHEEF: (a) piloting innovative ESCO lending, under which end-users pay for ESCOs’ EE
services from the demonstrated energy savings under performance-based contracts, and
broadening the sub-borrowers from large and medium-sized industrial enterprises to energy end-
users of all sizes and ESCOs; (b) expanding the target market segments from the industrial to the
building sector, given the rapid growth in energy demand for buildings, and government’s plan
to expand the range of priority energy conservation programs; and (c) increasing the leverage
ratio of the IBRD loan to EXIM Bank contribution from 1:1 in CHEEF to 1:2 in the AF.
14. Energy Conservation Investment Lending to be financed by the proposed AF. The
proposed AF loan will be on-lent through EXIM Bank to energy end-users of all sizes and to
ESCOs in key energy-consuming sectors, primarily the industrial and building sectors. At least
US$60 million of EE lending from the total AF project of $300 million (both IBRD and EXIM
Bank contributions) will be provided to ESCOs and building EE sub-projects. Sub-project
investments will be limited to renovation and rehabilitation. The AF will not finance any coal-
fired power plants. Detailed eligibility criteria, appraisal guidelines, and risk management
strategies are outlined in the project Operational Manual (OM). Table 1 shows the costs of the
parent loan and the AF by component.
4
Table 1. Costs by Component of the Parent Project and the Additional Financing
Component Original cost
($m)
Changes
with AF($m)
Revised
cost ($m)
1. Promotion of EE financing 18.7 0 18.7
2. Energy conservation investment lending 571.0 428.0 999.0
3. National policy and institutional
support
2.8 0 2.8
4. Project implementation support,
monitoring, and reporting
1.1 0 1.1
Total 593.6 428.0 1021.6
15. TA and capacity building to support the AF loan. The GEF grant associated with
CHEEF will continue to provide TA to EXIM Bank for AF activities. In particular, the TA will
support: (a) developing new financial products for ESCO lending and adaptation of loan
appraisal and underwriting criteria tailored to EE investments; (b) conducting specific market
segment studies to broaden the end-user sectors and EE technologies in the portfolio; (c) building
partnerships and engaging selected EXIM bank branches for marketing development and
generating deal flows; (d) developing market aggregation tools for small and medium-scale
enterprises and projects; (e) strengthening EXIM Bank’s capacity; and (f) exploring a low-
carbon lending business.
16. Changes in project outcome indicators. Because of the expanded scope of the AF, a
fourth Key Performance Indicator (KPI) will be added to the three KPIs of CHEEF. This
indicator will measure the amount of incremental EE investment to ESCOs and building EE
projects supported and leveraged by the project. Table 2 compares the original and revised
project outcome indicators.
Table 2. Project Outcome Indicators
Indicator Original target Changes with
AF
Revised
target
Cumulative amount of incremental
EE investments supported by the
project (US$ million)
900.0 428.00 1,328.00
Associated total annual energy
savings (million tons of coal
equivalent)
2.07 0.59 2.66
Associated total annual reductions of
GHGs (million tons of CO2)
5.05 1.44 6.49
Cumulative amount of incremental
EE investments to ESCOs and
building EE projects (US$ million)
-- 60.00 60.00
5
17. Closing date. The AF loan (Loan No. 8092-CN) closing date will be December 31, 2016.
The closing date of the two loans under CHEEF (Loan No. 7529-CN and Loan No. 7530-CN)
and the associated GEF grant (TF 090719) will be extended from December 31, 2013 to
December 31, 2016.
18. Changes in procurement framework. Based on the experience with CHEEF
implementation and because most supply and installation of EE renovation investments are
widely and commercially available in the Chinese market, the international competitive bidding
(ICB) threshold is proposed to be raised from US$10 million to US$20 million for supply and
installation contracts, and from US$7 million to US$10 million for goods contracts.
19. Changes in environment and social safeguard frameworks. As in the case of the
original CHEEF loan, sub-projects under the proposed AF are expected to be Category B or C.
The Environmental Assessment Framework (EAF) screening procedures of the CHEEF Project,
which equated Chinese screening categories with the World Bank categories, have been updated
to bring out the difference between the two screening systems. EXIM Bank will be responsible
for: (a) environmental safeguard screening; (b) reviewing and approving the Environmental
Management Plan (EMP) prepared by sub-borrowers (end-users or ESCOs) and ensuring that
sub-borrowers (end-users or ESCOs) have properly conducted consultations and disclosure in
compliance of the EAF; and (c) supervising implementation by sub-borrowers (end-users or
ESCOs). The AF will trigger the Involuntary Resettlement Policy (OP/BP 4.12) and a
Resettlement Policy Framework (RPF) has been prepared.
IV. Appraisal Summary
Economic and financial analysis 20. Economic and Financial Due Diligence of the Participating Financial Institution.
CHEEF Project was subject to, and compliant with, Bank policies on financial intermediary
lending, Operational Policy 8.30. EXIM Bank has completed all actions required to comply with
the Corrective Action Plan under the CHEEF Project (which primarily address accounting and
management weaknesses identified) which were agreed with the Bank in December 2007. The
Bank team reviewed the documentation provided by EXIM Bank in relation to each of the issues
of the Plan, and satisfied that EXIM Bank has met the requirements for the time-bound Action
Plan.
21. Economic and Financial Analysis of the AF. Economic and financial analyses were
carried out on two representative sub-projects, which are part of the first batch of sub-projects
envisaged for financing under the proposed AF Project: EE rehabilitation in existing buildings;
and waste heat recovery for power generation in a glass factory. The FIRRs and EIRRs are
shown in Table 3. Both EIRRs exceeded the 12.0 percent economic discount rate that is
normally applied to Bank projects in China. However, the EIRRs of the AF project investments
are lower compared to the original project as: the investment costs of industrial EE renovations
have shown an upward trend in China; and building EE retrofit projects tend to have much
longer payback periods than industrial EE renovation projects.
6
Table 3. Economic and Financial Analysis of Representative Sub-projects
FIRR
(without carbon
finance)
FIRR
(with carbon finance)
EIRR
Subproject 1: building
EE rehabilitation
10.3% 11.2% 12.4%
Subproject 2: waste
heat recovery
32.9% 40.8% 42.9%
22. Technical. The Operational Manual, prepared by EXIM Bank and approved by the
Bank, stipulates that the CHEEF Project team will include energy efficiency experts responsible
for technical due diligence and measurement & verification of energy savings. EXIM Bank will
ensure that sub-projects: are in compliance with Chinese technical policies and regulations for
EE in the industrial and building sectors, as well as ESCO definition; fully satisfy the technical
eligibility criteria; and are technically feasible. The PMO is responsible for reviewing and
approving all subprojects, on behalf of the government, to ensure that they comply with the
eligibility criteria in the OM. TA to build capacity for project technical due diligence will
continue to be provided to EXIM Bank from the GEF Grant associated with CHEEF.
23. Procurement. Procurement capacity will be further strengthened, particularly for close
supervision and timely guidance of sub-borrowers, through additional procurement training and
by hiring individual consultants. The OM has been updated to incorporate Bank procurement
requirements and procedures for Goods, and for Supply and Installation. Based on these
arrangements, the procurement capacity in EXIM Bank is acceptable. Procurement for the
proposed loan would be carried out in accordance with the World Bank’s “Guidelines:
Procurement under IBRD Loans and Credits” dated May 2004 and revised in October 2006 and
May 2010; and “Guidelines: Selection and Employment of Consultants by World Bank
Borrowers” dated May 2004 and revised in October 2006 and May 2010, and provisions
stipulated in the Legal Agreement.
24. Financial Management. The AF project will have the same financial management and
disbursement arrangements as the ongoing CHEEF Project. No outstanding audit issues exist
with the CHEEF project. The assessment for the AF project concluded that the project will
continue to meet the Bank’s minimum financial management requirements, as stipulated in
BP/OP 10.02. The Financial Management Framework in the OM has been updated to integrate
the specific requirements of the AF.
25. Social. As in the case of the CHEEF Project, most sub-projects under the AF loan will
be located within existing premises. However, a small number of sub-projects might involve
limited land acquisition or resettlement. The Resettlement Policy Framework developed for such
sub-projects specifies the procedures and responsibilities for identifying potential resettlement
impacts, preparing and approving relevant resettlement instruments, and monitoring their
implementation. Since EXIM Bank does not have previous experience with land acquisition and
resettlement, all sub-projects that trigger RPF will require prior Bank review.
7
26. Environment. Sub-projects of the CHEEF Project did not indicate any major
environmental issues. The updated EAF describes procedures to be followed by EXIM Bank
and sub-borrowers (end-users or ESCOs) to satisfy both Chinese and World Bank EIA
regulations and policies. EXIM Bank will hire additional qualified consultants and build in-
house capacity to handle the new responsibilities and the increased volume of safeguards work
under the AF.
8
ANNEX 1: RESULTS FRAMEWORK AND MONITORING
CHINA: Additional Financing for Energy Efficiency Financing Project
Results Framework
Revisions to the Results Framework Comments/
Rationale for Change
PDO
Current (PAD) Proposed
Improve energy efficiency of
medium and large-sized
industrial enterprises in China,
thereby reducing their adverse
environmental impacts on
climate.
Improve energy efficiency
of selected energy end-
users in key energy-
consuming sectors, thereby
reducing their adverse
environmental impacts on
climate.
The AF intends to expand the
targeted market segments from
only the industrial sector under
CHEEF to the building sector
and beyond, and broaden the
sub-borrowers from large and
medium-sized industrial
enterprises only under CHEEF
to end-users of all sizes and
ESCOs.
PDO indicators
Current (PAD) Proposed change*
Cumulative amount of
incremental EE investments
supported by the project (US$
million).
Revised from US$900
million to US$1,328
million.
Modified to reflect the
additional financing of US$100
million of IBRD loans, US$
200 million of EXIM’s co-
financing, and US$128 million
from sub-borrowers.
Associated total annual energy
savings (million tons of coal
equivalent).
Revised from 2.07 Mtce to
2.66 Mtce.
Modified to reflect the
additional EE investments of
US$428 million supported by
the AF Project.
Associated total annual
reductions of GHGs (million
tons of CO2).
Revised from 5.05 Mt-CO2
to 6.49 Mt-CO2.
Modified to reflect the
additional EE investments of
US$428 million supported by
the AF Project.
New: Cumulative amount
of incremental EE
investments to ESCOs and
building EE projects (US$
million): US$60 million.
Added to measure the expanded
activities under the AF.
9
Intermediate Results indicators
Current (PAD) Proposed change*
1.1. EE financing amount
demanded by projects in the
pipeline.
Continued.
1.2. EE investment preparation
procedures and financing
modalities piloted.
Continued.
1.3. EE investment monitoring
and evaluation procedures
developed.
Continued.
2.1. Cumulative amount of EE
lending of participating banks.
Revised from US$400
million to US$700 million.
Modified to reflect the
additional financing of US$100
million of IBRD loans and US$
200 million of EXIM’s co-
financing.
2.2. Annual energy
consumption avoided as a
result of EE lending of
participating banks.
Revised from 1.58 Mtce to
2.17 Mtce.
Modified to reflect the
additional financing of US$100
million of IBRD loans and US$
200 million of EXIM’s co-
financing.
2.3. Annual avoided CO2
emissions as a result of EE
lending of participating banks.
Revised from 3.84 Mt-CO2
to 5.28 Mt-CO2.
Modified to reflect the
additional financing of US$100
million of IBRD loans and US$
200 million of EXIM’s co-
financing.
New: Cumulative amount
of incremental EE
investments to ESCOs and
building EE projects (US$
million): US$60 million.
Added to measure the expanded
activities under the AF.
3.1. NECC business plan and
initial work program
developed.
Continued. Target was met.
3.2. NECC established and
becomes fully operational.
Continued. Target was met.
3.3. Mid-term review of 11th
FYP programs conducted and
recommendations made.
Necessary actions taken to
enhance results.
Revised to final evaluation
of 11th
FYP programs
conducted, and
recommendations and
inputs provided to the 12th
FYP.
Because 2010 is the last year of
the 11th
FYP, and 2011 is the
first year of the 12th
FYP.
4.1. Project targets and
delivery schedule met.
Continued.
* Indicate if the indicator is Dropped, Continued, New, Revised, or if there is a change in the end of project target value.
10
REVISED PROJECT RESULTS FRAMEWORK
Project Development Objective (PDO): Improve energy efficiency of selected energy end-users in key energy-consuming sectors, thereby reducing
their adverse environmental impacts on climate.
PDO Level Results
Indicators1
Co
re UOM2
Baseline
Original
Project
Start
(10/08)
Progress
To Date
(2011)3
Cumulative Target Values4
Frequency
Data
Source/
Methodol
ogy
Responsibi
lity for
Data
Collection
Comments 2012 2013 2014 2015 2016
1. Cumulative amount of
incremental EC
investments supported by
the project.
US$
million 0 536 672 1007 1135 1263 1328
Annual
report
Reports of
banks and
NDRC
reports
PMO
2. Associated annual
energy savings capacity.
million
tons of
coal
equivalent
0 1.6 1.89 2.22 2.39 2.57 2.66 Annual
report
Reports of
banks and
NDRC
reports.
PMO
The investment costs of
industrial EE subprojects
are assumed as $290/tce
under CHEEF and
$405/tce under CHEEF II.
Given the upward trend of
investment costs based on
CHEEF experience to
date, and the pipeline for
the AF Project, investment
costs of EE projects under
the AF Project are
assumed as $606/tce for
industrial subprojects and
$3,463/tce for building EE
subprojects.
3. Associated CO2
emission reduction
capacity.
million
tons of
CO2
0 4.1 4.61 5.41 5.84 6.27 6.49 Annual
report
Reports of
banks and
NDRC
reports.
PMO
The estimates are based on
the assumed factor of 2.44
CO2/tce.
1 Please indicate whether the indicator is a Core Sector Indicator (for additional guidance – please see http://coreindicators).
2 UOM = Unit of Measurement.
3 For new indicators introduced as part of the additional financing, the progress to date column is used to reflect the baseline value.
4 Target values should be entered for the years data will be available, not necessarily annually. Target values should normally be cumulative. If targets
refer to annual values, please indicate this in the indicator name and in the “Comments” column.
11
4. Cumulative amount of
EE lending to ESCOs and
building projects.
US$
million 0 0 5 15 30 45 60
Annual
report
Reports of
banks and
NDRC
reports.
PMO
Beneficiaries5
Project beneficiaries.
Number
0 17 23 30 37 44 50
Annual
report
Reports of
banks and
NDRC
reports.
PMO
Estimates are based on the
assumed average project
size of $20 million.
Of which female
beneficiaries.
Number
NA NA NA NA NA NA NA
Intermediate Results and Indicators
Intermediate Results
Indicators
Co
re
Unit of
Measur
ement
Baseline
Original
Project
Start
(10/08)
Progress
To Date
(2010)
Target Values
Frequency
Data
Source/
Methodolo
gy
Responsibili
ty for Data
Collection
Comments 2011 2012 2013 2014 2015
Intermediate Result 1: Promotion of EE Financing
EE financing demand of
projects in the project
pipeline.
US$
million 0 150 250 250 250 150 150
Annual
report PFI records PFI
EE investment
preparation procedures
and financing
modalities piloted.
NA
1-2 pilot
projects
prepared
1-2 pilot
projects
completed
Annual
report
Project
reports PMO
EE investment
monitoring and
evaluation procedures
developed.
NA Draft Final draft Annual
report
Project
reports PMO
5 All projects are encouraged to identify and measure the number of project beneficiaries. The adoption and reporting on this indicator is required for
investment projects which have an approval date of July 1, 2009 or later (for additional guidance – please see http://coreindicators).
12
Intermediate Result 2: EC Investment Lending
Cumulative amount of
EE lending of PFI.
US$
million 0 305 365 475 565 650 700
Annual
report PFI records PFI
Cumulative amount of
EE lending to ESCOs
and building projects.
US$
million 0 0 5 15 30 45 60
Annual
report PFI records PFI
Annual energy
consumption avoided
from the EE lending of
PFI.
million
tons of
coal
equival
ent
0 1.6 1.65 1.73 1.90 2.08 2.17 Annual
report PFI records PFI
Annual avoided CO2
emissions from EE
lending of PFI.
million
tons of
CO2
0
4.1
4.15 4.20 4.63 5.06 5.28 Annual
report PFI records PFI
Intermediate Result 3: National Policy Support and Capacity Building
Establishment and
functional operation of
NECC.
NA
NECC
formed
and
staffed
Annual
report
NDRC
documents
PMO
NECC business plan
and initial work
program developed.
NA
Final Annual
report
Project
reports PMO
Mid-term review of 11th
FYP programs
conducted and
recommendations made.
Necessary actions taken
to enhance results.
NA
Final
evaluation
of 11th
FYP
programs
conducted
and
recommend
ations and
inputs
provided to
the 12th
FYP.
Annual
report
Project
reports PMO
13
Intermediate Result 4: Project Implementation Support and Reporting
Project targets and
delivery schedule met. NA
NA
Mid-term
review
completed.
Semi-
annual
report.
Project
reports. PMO
14
ANNEX 2: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF)
CHINA: Additional Financing for Energy Efficiency Financing Project
Project Development Objective(s)
The Project Development Objective (PDO) is to improve energy efficiency of selected energy end-users in key energy-consuming sectors, thereby reducing their adverse environmental impacts on climate.
PDO Level Results Indicators:
1. The amount of incremental EE investment supported and leveraged by the project. 2. The amount of energy saved through investments financed and leveraged by the project. 3. Associated reduction of green house gases. 4. The amount of incremental EE investment to ESCOs and building EE projects supported and
leveraged by the project.
Risk Category Risk Rating Risk Description
Proposed Mitigation Measure
Project Stakeholder Risks
Low Likelihood/ Low Impact
The CHEEF project’s key stakeholders - the PFIs and their sub-borrowers - have supported the project. Government is encouraging energy conservation related bank lending to the new stakeholders - ESCOs and to the building and transport sectors.
See “Design” below for mitigation measures to ensure adequate participation by the new stakeholders.
Implementing Agency Risks
High Likelihood/ Low Impact
EXIM Bank, its branches, and sub-borrowers (particularly ESCOs) may not have enough capacity to identify, evaluate and supervise EE investments, safeguard procedures, procurement, and ineligible expenditures of sub-borrowers. This could lead to possible misuse of loan funds, loss of project assets, improper reporting, and insufficient funds.
EXIM Bank will conduct more training and hire consultants to improve capacity in technical, safeguards, procurement and financial management, and credit control. EXIM Bank plans to more actively engage the branches by requiring EE lending targets and link EE lending with performance evaluation. EXIM Bank headquarters plans to co-finance EE investments with the branches to share risks in order to improve portfolio quality.
15
EXIM Bank will conduct targeted market studies to broader market segments and build partnerships for more aggressive business development. An updated OM, including the FM and credit control arrangements, acceptable to the Bank, has been prepared by EXIM Bank and agreed by the Bank. It will be circulated to all branches that will execute the project and to project financial staff. Annual project audit will be conducted as external monitoring mechanism to safeguard Bank loan proceeds and project assets.
Project Risks
Design
High Likelihood/ Low Impact
EXIM Bank may not be able to provide
sufficient lending to ESCOs and building EE
investments.
TA will be provided to EXIM Bank to conduct market studies and develop new financial products for ESCO lending and building EE investments. EXIM Bank has developed a pipeline for ESCO and building EE lending. The project sets a target of US$60 million of the total loan amount to ESCO lending and building EE projects.
Social and Environmental
Low Likelihood/ Low Impact
A few EE subprojects might have minor negative environmental impacts and require land acquisition. Sub-borrowers may not follow the safeguard procedures outlined in the frameworks.
EXIM Bank will hire additional environmental
experts and build in-house capacity for
environmental safeguards.
TA will be provided to EXIM Bank to
strengthen its capacity and help it manage
environmental and social risks of the EE lending
program.
All sub-projects that trigger the RPF will
require Bank prior review.
16
Program and Donor
N/A
Delivery Quality
Low Likelihood/ Low Impact EXIM Bank is committed to developing EE
and green financing as one of its major business lines.
Overall Risk Rating at Preparation
Overall Risk Rating During Implementation Comments
High Likelihood/ Low Impact
High Likelihood/ Low Impact
Much has been learned during the preparation and implementation of the CHEEF and CHEEF II Projects. However, the major challenge is whether EXIM Bank can provide lending to ESCOs and building EE. TA to EXIM Bank and setting a target of the loan amount to ESCO lending and building EE projects will mitigate this major risk.