FOR OFFICIAL USE ONLY Report No: RES52268 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT RESTRUCTURING PAPER ON A PROPOSED PROGRAM RESTRUCTURING OF INNOVATIVE FINANCING FOR AIR POLLUTION CONTROL IN JING-JIN-JI APPROVED ON MARCH 22, 2016 TO THE PEOPLE'S REPUBLIC OF CHINA Energy & Extractives Global Practice East Asia And Pacific Region The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) Regional Vice President: Manuela V. Ferro Country Director: Martin Raiser Regional Director: Ranjit J. Lamech Practice Manager: Jie Tang Task Team Leader: Ximing Peng Page 1 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) DATA SHEET (Innovative Financing for Air Pollution Control in Jing-Jin-Ji - P154669) BASIC DATA Project ID Financing Instrument IPF Component P154669 Program-for-Results Financing No Approval Date Current Closing Date 22-Mar-2016 30-Jun-2022 Organizations Borrower Responsible Agency People's Republic of China Program Development Objective(s) To reduce air pollutant and carbon emissions through increasing energy efficiency and clean energy, with a focus in Beijing-Tianjin-Hebei (Jing-Jin-Ji) and neighboring regions. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Approval Effectiveness Closing Ln/Cr/TF Signing Date Commitment Disbursed Undisbursed Date Date Date 22-Mar- IBRD-85920 20-May-2016 18-Aug-2016 30-Jun-2022 500.00 411.06 108.67 2016 Policy Waiver(s) Does the Program require any waivers of Bank policies applicable to Program-for-Results operations? No Page 2 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) I. PROGRAM STATUS AND RATIONALE FOR RESTRUCTURING The overall implementation progress of the Program is summarized as follows based on the mission in May 2022: (a) continuous progress has been made since the previous mission, building on the previous successful program implementation: in the past six months, three more investment projects (two pollution control projects and one wind farm project) were financed by Huaxia Bank under the Program so the number of sub-projects increases from 29 to 32 in energy efficiency (EE), Renewable Energy (RE), and emission control, of which US$226 million is from IBRD, US$ 524 million from HXB counterpart funds, and the remaining US$ 1,016 from equity and other local banks. The leverage ratio of IBRD loan to HXB counterpart funds is 2.3, way exceeding the originally planned 1:1 leverage ratio. (b) one more financial product is verified (DLI5) so total number of verified financial products increases from 3 to 4, exceeding the target of 3; and (c) continuous business development has been conducted, and a pipeline of 10 sub-projects was discussed in the mission but all of them will not be included in the P4R Program due the its closing in June 2022; (d) total disbursement of IBRD loan is kept at US$ 411 million and Huaxia Bank will submit a new request in July 2022 to claim for additional disbursement after the completion of verification for two new subprojects that completed before the closing date; (e) Huaxia Bank will prepare a summary of program implementation experience and lessons, and related dissemination activities (e.g. workshop, publications) in the next six months till December 2022, with support from the parallel GEF project (P132748 GEF Developing Market-based EE Program in China). Achievement of Program outcome, indicators and DLIs is summaried as follows: with the enforcement of the government programs (Air Pollution Prevention and Control program and subsequent Three-Year Action Plan for fighting for the Blue Sky program), the severe air pollution in the project area has been mitigated substantially over the program period, the number of polluted days was reduced by 86% from 2015 to 2020 as documented by the Ministry of Ecology and Environment. The P4R Program is an integral part of the government program to contribute to reduce air pollutant and carbon emission in the project area. The program indicators: (a) both grouped local pollutants and global climate change related PDO level indicators have been fully achieved, of which the grouped local pollutants indicator (combined PDO indicator 1,2 and 3) exceeds the planned target by 7%, and GHG emission reduction indicator (PDO Indicator 4) exceeds by 16%; (b) out of total six DLIs, four have been fully achieved, and the remaining two are not met yet, including “sub-loan disbursed to sub-borrowers” (DLI-1), and “number of ESCOs receiving loans” (DLI-6). HXB used less than expected funds to leverage more capital and achieve higher program indicators of the P4R program. Considering the program is to be closed on June 30, 2022 and Huaxia Bank will not include any new sub-loans under the Program, Huaxia Bank proposes to cancel the undisbursed loan balance and this proposal is supported by the Ministry of Finance (MOF). A request letter, dated June 27, 2022 was submitted from MOF to the Bank. II. DESCRIPTION OF PROPOSED CHANGES The proposed change is to cancel 80 million euros from the undisbursed loan balance. A request letter, dated June 27, 2022 was submitted from MOF to the Bank. The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) III. SUMMARY OF CHANGES Changed Not Changed Change in Cancellations Proposed ✔ Reallocation between and/or Change in DLI ✔ Change in Disbursements Arrangements ✔ Change in Disbursement Estimates ✔ Change in Implementing Agency ✔ Change in Program's Development Objectives ✔ Change in Program Scope ✔ Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Change in Systematic Operations Risk-Rating Tool ✔ (SORT) Change in Safeguard Policies Triggered ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Technical Method ✔ Change in Fiduciary ✔ Change in Environmental and Social Aspects ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_COMPONENTS_TABLE OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) CANCELLATIONS PROPOSED Value Current Cancellation New Reason for Ln/Cr/TF Status Currency Date of Amount Amount Amount Cancellation Cancellation UNDISBURSED IBRD- Disburs 460,000,000.0 380,000,000. EUR 80,000,000.00 27-Jun-2022 BALANCE AT 85920-001 ing 0 00 CLOSING OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Year Current Proposed 2016 0.00 0.00 2017 152,000,000.00 152,000,000.00 2018 43,000,000.00 43,000,000.00 2019 69,000,000.00 69,000,000.00 2020 112,000,000.00 112,000,000.00 2021 124,000,000.00 40,000,000.00 OPS_DETAILEDCHANGES_EA_TABLE . The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) ANNEX 1: RESULTS FRAMEWORK . . Results framework Program Development Objectives(s) To reduce air pollutant and carbon emissions through increasing energy efficiency and clean energy, with a focus in Beijing-Tianjin-Hebei (Jing-Jin-Ji) and neighboring regions. Program Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target Reduction in particulate emissions from eligible EE and RE subprojects (thousand tons) PDO Indicator 1: Reduction in particulate emmisions from eligible 0.00 3.60 EE and RE subprojects (thousand tons) (Number (Thousand)) Reduction in SO2 emmissions from eligible EE, RE, and desulfurization subprojects (thousand tons) PDO 2 Reduction in SO2 emmissions from eligible EE, RE, and 0.00 16.90 desulfurization subprojects (thousand tons) (Metric tons/year) Reduction of NOX emission from EE, RE and Denitrification subprojects (thousand tons) PDO Indicator 3: Reduction in NOx emmissions from eligible EE, RE, and desulfurization subprojects (thousand tons) (Number 0.00 12.70 (Thousand)) Reduction in CO2 emissions from eligible EE and RE subprojects (thousand tons) Page 6 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline End Target PDO Indicator 4: Reduction in CO2 emissions from eligible EE and 0.00 2,461.00 RE subprojects (thousand tons) (Number (Thousand)) PDO Table SPACE Intermediate Results Indicators by Result Areas RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Intermediate Result Indicator 1: Total investments in eligible EE, RE and pollution abatement subprojects Intermeidate Result Indicator 1: Total investments in eligible EE, RE and pollution abatement subprojects (million USD) 0.00 1,400.00 (Amount(USD)) Intermediate Result Indicator 2: Subloans (for eligilbe EE, RE, and pollution abatement subprojects) disbursed to sub-borrowers Intermediate Result Indicator 2: Subloans(for eligible EE, RE, and pollution abatement subprojects) disbursed to sub-borrowers 0.00 1,000.00 (million USD) (Amount(USD)) Intermediate Result Indicator 3: Coal reduction from eligible EE and RE subprojects Intermediate Result Indicator 3: Coal reduction from eligible EE 0.00 1,000.00 and RE subprojects (thousand tce) (Number (Thousand)) Intermediate Result Indicator 4: Reduction of SO2 emissions from desulfurization subprojects Intermediate Result Indicator 4: Reduction of SO2 emissions from desulffurization subprojects (thousand tons) (Number 0.00 10.80 (Thousand)) Intermediate Result Indicator 5: Reduction of NOx emissions from denitrification subprojects Page 7 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline End Target Intermediate Result Indicator 5: Reduction of NOx emissions from denitrification subprojects (thousand tons) (Number 0.00 7.40 (Thousand)) Intermediate Result Indicator 6: Establishment of a Green Finance Center at the HXB and adoption of internal procedures for the identification, risk assessment, appraisal, and approval of green lendin Intermediate Result Indicator 6: Establishment of a Green Finance Center at the HXB and adoption of internal procedures 0.00 1.00 for the identification, risk assessment, appraisal, and approval of green lednin (Number) Intermediate Results Indicator 7: Number of different eligible innovative financial products for green financing deployed Intermediate Result Indicator 7: Number of different eligible innovative financial products for green financing deployed 0.00 3.00 (number of products) (Number) Intermediate Result Indicator 8: Number of different ESCOs receiving subloans (for eligible EE and RE subprojects) Intermediate Result Indicator 8: Number of different ESCOs receiving subloans (for eligible EE and RE subprojects) (number 0.00 10.00 of ESCOs) (Number) Intermediate Result Indicator 9: Number of subprojects financed by syndicated loans Intermediate Result Indicator 9: Number of subprojects financed 0.00 2.00 by syndicated loans ( number of projects) (Number) IO Table SPACE Page 8 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) Disbursement Linked Indicators Matrix DLI IN01165403 ACTION DLI 1 DLI-1: Subloans (for eligible EE, RE, and pollution abatement subprojects) disbursed to sub-borrowers (million USD) Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome Yes Amount(USD) 540.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 0.00 December 2016 0.00 CY2016 50.00 15.00 CY2017 100.00 30.00 CY2018 150.00 45.00 CY2019 250.00 75.00 CY2020 250.00 75.00 CY2021 1,000.00 300.00 Page 9 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) DLI IN01165404 ACTION DLI 2 DLI-2: Coal reduction from eligible EE and RE subprojects (thousand tons of coal equivalent) Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Number Intermediate Outcome Yes 195.00 0.00 (Thousand) Period Value Allocated Amount (USD) Formula Baseline 0.00 December 2016 0.00 0.00 CY2016 0.00 0.00 CY2017 5.00 1.00 CY2018 50.00 11.00 CY2019 100.00 23.00 CY2020 155.00 35.00 CY2021 550.00 125.00 DLI IN01165405 ACTION DLI 3 DLI-3a: Reduction of SO2 emissions from desulfurization subprojects (thousand tons) Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Number Intermediate Outcome Yes 16.90 0.00 (Thousand) Period Value Allocated Amount (USD) Formula Page 10 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) Baseline 0.00 December 2016 0.00 0.00 CY2016 0.00 0.00 CY2017 0.50 0.60 CY2018 1.10 1.30 CY2019 1.60 1.90 CY2020 2.70 3.10 CY2021 8.60 10.00 DLI IN01165406 ACTION DLI 4 DLI-3b: Reduction of NOx emissions from denitrification subprojects (thousand tons) Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Number Intermediate Outcome Yes 25.30 0.00 (Thousand) Period Value Allocated Amount (USD) Formula Baseline 0.00 December 2016 0.00 0.00 CY2016 0.00 0.00 CY2017 0.40 0.90 Page 11 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) CY2018 0.70 1.90 CY2019 1.10 2.80 CY2020 1.90 4.70 CY2021 5.90 15.00 DLI IN01165407 ACTION DLI-4: Establishment of a Green Finance Center and adoption of internal procedures for the identification, risk assessment, DLI 5 appraisal, and approval of green lending Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome No Number 21.50 0.00 Period Value Allocated Amount (USD) Formula Baseline 0.00 December 2016 0.00 0.00 CY2016 1.00 10.75 CY2017 0.00 CY2018 0.00 CY2019 0.00 CY2020 0.00 CY2021 1.00 10.75 Page 12 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) DLI IN01165408 ACTION DLI 6 DLI-5: Number of different eligible innovative financial products for green financing deployed (# of products) Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome Yes Number 36.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 0.00 December 2016 0.00 0.00 CY2016 0.00 0.00 CY2017 1.00 6.00 CY2018 1.00 6.00 CY2019 1.00 6.00 CY2020 0.00 0.00 CY2021 3.00 18.00 DLI IN01165409 ACTION DLI 7 DLI-6: Number of different ESCOs receiving subloans (for eligible EE, RE, and pollution abatement subprojects) (# of ESCOs) Type of DLI Scalability Unit of Measure Total Allocated Amount (USD) As % of Total Financing Amount Intermediate Outcome Yes Number 36.00 0.00 Period Value Allocated Amount (USD) Formula Baseline 0.00 Page 13 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) December 2016 0.00 0.00 CY2016 0.00 0.00 CY2017 2.00 4.00 CY2018 2.00 4.00 CY2019 2.00 4.00 CY2020 2.00 4.00 CY2021 10.00 20.00 Page 14 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) ANNEX 2: PROGRAM ACTION PLAN . . PAP_NOT_CHANGE_TBL Action Description Source DLI# Responsibility Timing Completion Measurement The HXB to provide extensive training to its staff at HQ and branches on technical, results M&V, environmental and social, procurement, and FM areas Client Recurrent Continuous The HXB to designate specific staff to be responsible for technical, fiduciary, and environmental and social aspects Client Due Date 29-Nov-2016 HXB to engage experts for technical, fiduciary, and environmental and social support as needed Client Due Date 31-May-2018 HXB to specify the fiduciary and environmental and social requirements and procedures in the OM Client Due Date 16-Dec-2015 HXB to specify the fiduciary and environmental and social requirements and procedures in the subloan agreements with sub-borrowers Client Recurrent Continuous Page 15 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) HXB to report required actions taken to the Bank in program reports Client Recurrent Yearly Techncial: HXB to engage independent third-party IVAs for results M&V Client Recurrent Continuous Technical: The HXB to report portfolio composition and quality to the Bank to ensure transparency and quality of the portfolio Client Recurrent Yearly Procurement: In line with Article 34 of the Regulation on the Implementation of the Tendering and Bidding Law of the People’s Republic of China, the sub- project application and the sub-loan agreement with beneficiaries include a mandatory provision Client Recurrent Continuous Procurement: HXB to set up a complaints handling mechanism and reporting procedures, details of which will be included in the subproject application package and on the HXB’s website. Client Due Date 31-Aug-2016 Procurement: The HXB and the subloan beneficiaries shall cooperate fully Client Recurrent Continuous Page 16 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) with representatives of the Bank in any inquiry conducted by the Bank into allegations or other indications of F&C in connection with the program. Procurement: The OM and subloan agreement to include that sub- borrowers will not award contracts to firms and individuals on temporary suspension or debarment by the Bank and other MDBs. Client Due Date 15-Dec-2016 Procurement: HXB to strengthen its capacity to assess the capacity of beneficiaries to carry out procurement and contract management efficiently as part of subproject appraisal and provide guidance to beneficiaries with weak procurement capacity. Client Recurrent Continuous Procurement: The HXB will hire expertise as needed to strengthen procurement and contract management. Client Due Date 31-May-2018 Financial Management: HXB to set up the memorandum Client Recurrent Continuous Page 17 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) records for the program to record each subloan released and related reference information for ease of tracking the record in the corporate accounting system and the original supporting documents. Financial Management: HXB to conduct reconciliation between the CBD and the accounting division on a quarterly basis. Client Recurrent Quarterly Financial Management: Annually, HXB to prepare the program-specific financial report according to the specifically tailored format agreed with the Bank for the program and submit report to the Bank Client Recurrent Yearly Environmental and Social: HXB to strengthen environment and social impact management within the bank by specifying the requirements and procedures in the OM. Client Due Date 16-Dec-2015 Environmental and Social: Enhance capacity of the HXB staff by designating staff, allocating Client Due Date 30-Dec-2016 Page 18 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) adequate resources, and specifying operating arrangements and coordination with other departments in the bank. Achievement of DLI4:to establish a Green Finance Center, and disburse $10.75. Client Due Date 31-Jan-2017 Achievement of DLI1: to approve sub-projects with no less than $50m, and disburse of $15m by the end of 2016. Client Due Date 30-Dec-2016 Submit all candidate sub- projects involving “ building large- scale efficient facilities to replace small inefficient ones” to WB for screening. Client Recurrent Continuous A screening table covering all key social requirements in OM should be developed as part of subproject document requirement, and be attached to the subproject application package in the review process within the Hua Xia Bank. Client Due Date 31-May-2018 A social monitoring report should be prepared, based on desk review of compliance of OM Client Due Date 31-May-2018 Page 19 of !Syntax Error The World Bank Innovative Financing for Air Pollution Control in Jing-Jin-Ji (P154669) by all subprojects before loan approval, and field visit reporting of all subprojects after the loan approval. Submit verification report on the results of DLI-1, issued by a third-party, to WB Client Due Date 30-Jun-2017 Submit an annual report to WB. Client Recurrent Yearly The Bank to provide training to the HXB in technical, results M&V, environmental and social, procurement, and FM areas Bank Due Date 29-Nov-2016 . Page 20 of !Syntax Error